Can Gillette Disrupt Itself?
On the surface, Gillette looks like a model of innovation success. A flagship brand of innovation champ P&G, Gillette’s achieved a remarkable ~70% share of the global men’s razor market, all while maintaining huge margins. The secret to getting so many men to pay so much is a series of new-and-improved razors that – despite making Gillette the butt of endless jokes – has carefully targeted areas of consumer dissatisfaction. Last year’s new Fusion ProGlide was a perfect example: it built on a key insight – men get post-shave irritation due to facial hair “tug and pull” – by using finer blades to slice through tough beard hair more effortlessly. Despite blade cartridges retailing for roughly $4 each, ProGlide sales since launching last summer – backed by a massive marketing campaign – were some of Gillette’s best ever for a new product. They’ve followed their innovation playbook for so long that it looks easy: a great business model + big market research + big R&D + big marketing = huge profits.
The Bigger They Are, the Harder They Fall
To a student of Clay Christensen’s theory of disruptive innovation, however, Gillette’s core business looks intensely vulnerable. All the signs are there:
- A clear consumer “job-to-be-done” (hair removal)
- A dominant, likely overconfident incumbent
- Ongoing “sustaining” technological improvement (in blades, lubrication, battery-powered vibration, etc.) that vastly outpaces the rate of change in consumer needs
- Resulting innovations (next-generation razors) that primarily serve a profitable segment of demanding customers willing to pay ever-higher prices (affluent Western men who shave frequently)
- An unknown but presumably large number of “overserved” consumers and untapped nonconsumers (those who don’t shave frequently – or at all – because of cost or inconvenience)
The theory’s prediction is clear: some entrant will develop a less effective but simpler and/or cheaper solution to hair removal. It may initially capture only a small – and relatively less profitable – portion of the bottom of the market, but will likely improve its technology over time and relentlessly advance up-market. Gillette would find itself in the innovator’s dilemma, choosing (rationally) to cede less profitable business at the market’s low end and retreat to ever-higher ground, ultimately ending up with only a niche specialty market, if it’s not forced to exit altogether. If a fall from such a lofty position as Gillette’s sounds unlikely, consider the fate of Bethlehem Steel in the 1980s, IBM in the 1990s, Kodak in the 2000s, and, most recently, HP.
Reversing the Process
Fortunately, there are ways to escape this trap. In one prominent 2009 article, Tuck professors Vijay Govindarajan and Chris Trimble, along with CEO Jeff Immelt, described GE’s plan to disrupt itself via “reverse innovation.” Rather than develop products for the affluent U.S. market and try to sell them in the developing world, GE’s business units have begun to develop products specifically for the mass Chinese and Indian markets, such as a portable ultrasound device with lower quality and fewer features – but a price tag 80% below a conventional one. To pull this off, the key for GE was, as the authors put it, “shifting the center of gravity” to the overserved emerging market – in customer research, R&D, and organizational decision-making. Even more remarkably, GE has advanced its low-end technology to the point where a version can be sold competitively in the developed world, completing the reverse innovation cycle. GE Healthcare’s PC-based ultrasounds, for example, were developed for rural China but have been introduced into the U.S., where they may have cannibalized sales of GE’s traditional machines – but have also disrupted competitors, as well as preempted other potential developing-world entrants.
P&G isn’t stupid either. Since Gillette was acquired by the global conglomerate in 2005, its approach to market research and product development has been slowly but dramatically transformed. The razor business’s far less visible but perhaps more important 2010 product launch was the Gillette Guard, its first razor developed entirely in and for the Indian and other emerging markets. Through thousands of hours of in-person study, Gillette researchers learned that Indian men primarily sought a safe razor that could be easily rinsed in a bowl of still water, and that was cheap enough to be a reasonable alternative to a barber – or to not shaving at all. The Guard was developed (from a “clean sheet” design) with a safety comb, easy-to-rinse blade cartridges, and a single blade in a plastic housing with 80% fewer parts. Compared with the ProGlide, this simple design likely yields a relatively worse shaving experience by American standards, but the Guard’s replacement blades cost a mere 5 rupees – 95% less than the Indian version of Gillette’s Mach3.
Disrupt or Be Disrupted
But does Gillette’s emerging-market razor solve its innovator’s dilemma? For one thing, Gillette has shown no interest in importing even an improved version of its ultra-cheap, “good enough” product back to the U.S. It’s perfectly reasonable to point out that, in the developed world, Gillette’s share is so dominant (and margins so huge) that the cost of cannibalizing its sales of premium razors would be much higher than GE’s. Competitors won’t care, however, which is why Govindarajan argues that, unless it is willing to risk much of its core business itself, someone else will eventually do it for them. And lest Gillette think it can wait until it spies a potential disruptor before developing a U.S. version, it might do well to remember the lessons of Seagate, which developed its own 3.5″ computer hard drive but ignored its unattractive business case relative to its core 5.25s – only to be disrupted by Conner Peripherals, a former Seagate spinoff which focused on 3.5″ drives and rapidly left Seagate behind. As Christensen put it,
“[W]hen established firms wait until a new technology has become commercially mature in its new applications and launch their own version of the technology only in response to an attack on their home markets, the fear of cannibalization can become a self-fulfilling prophecy.”
A deeper question is whether a redesigned low-end razor is really what will ultimately disrupt this market. After all, a durable handle with disposable snap-on blades, scraped across a lathered face every day, is a rather clumsy solution to the job of hair removal (especially when defined broadly). The Gillette Guard made a radical trade-off in relative performance and price attributes, but didn’t fundamentally change Gillette’s model, entrenched as it is by decades of pervasive marketing. It’s easy to imagine how a chemist might develop a cheap cream that stops hair growth entirely, but has some negative side effects or other factors that cause traditional shaving consumers – and therefore Gillette – to ignore it. Until, that is, the kinks begin to be ironed out, and its inexorable march up-market causes Gillette to flee rather than fight.
By then it will be too late. The key question, therefore, is whether Gillette has the courage to truly disrupt its own seemingly invincible core business. If not, disruption will eventually come from without. It’s just a matter of when.
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John R. Moran is a consultant at L.E.K. Consulting and writes about strategy and innovation at rampantinnovation.com (all opinions are his own). Follow him on Twitter at @JohnRMoran.
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Great article! The background makes the text incredibly hard to read though…
Hello Steve,
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Please try refreshing the page if something ever happens like that on the site.
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Very strange – the first time I loaded it it was fine. Reloading brought out the dark-grey graphics on light gray background, which doesn’t go away on reload.
Well structured article on the dilemma of Gillette if it was disrupted. For me I constantly seek alternatives that offer a good shave for lower prices and there are blades around that provide that. I think I have six different types and the only reason I can think off is each time I go to purchase replacement blades for Gillette I ‘react’ to the high price, so I try alternatives.
The crazy thing is I still eventually come back to Gillette, which ever version but always reluctantly, more to spread out the cost and bored with shaving every day with the same shaver. Yes, for me, I’m open to disruption as the price premium for a shave using Gillette is too high so I consistently cast around.
Personal care is certainly an interesting market to manage well in and P&G, alongside Unilever has been really adapt at understanding it.
As P&G ‘control’ this global market it will need some high commitments of investment, infrastructure and retailer support if it is about to be disrupted and the margins earned along the supply chain will make it hard to break. I can’t see themselves wanting to disrupt their own market unless they ‘dabble’ and fracture the franchise. It will come from advances in hair growth or retarding and P&G I’m sure are watching this carefully.
Are these innovations really better? Some people are returning to using double edge blades / shaving soap and saftey razors. They are lower in cost, reusable, less packaging/ewaste and with the right technique actually give a better shave. It’s like driving a stick you actually have a better feel and it can be more enjoyable. In my opinion these are marketing innovations not really better products or better for our planet.
Great article. One thing missing (based on Clay Christensen’s theory of disruptive innovation) very few to none large companies are able to create disruption. So my suggestion is for Gillette to create a start up, separate from its corporate structure and funding, that would create the disruption.
Guys,
I think we are agreed that even when everything that points to an immediate improvement version of today’s job to be done (simpler to use, reduced price for good enough performance), although that may look like low-end disruption (which would be consistent with marketing in developing countries) – it is not necessarily so for the incumbent. For the incumbent it is sustaining innvoation unless associated with a very different business model and in this case, there’s no difference in pursuing a give-away-the-razor-and-charge-for-the-blade strategy in India than there is in the US.
(Yes, I know that CC classified the Celeron as self-disruption, but when some one, some thing comes along with a new-market disruption that disrupts traditional CISC computing (perhaps like the move to mobile combined with massively distributed utility computing as described in https://www.infoworld.com/t/cringely/just-in-the-tablet-era-over-170534), it will take the Celeron with it just as it will disrupt the rest of the (Intel and AMD) CISC CPU industry.
More importantly, just because a dominant incumbent exists doesn’t mean disruption is imminent (seems strongly implied in your article). After all, the incumbent is right (and making a lot more money) all the way until the time that they’re wrong. They are betting – correctly, that most entrants will fail – even if they have the approach that turns out (for the successful entrants) to be effective, because they won’t necessarily have the correct business model.
I would submit that even when all the plantets appear aligned in favor of disruption doesn’t mean its going to happen any time soon. People have been waiting for a long time for Microsoft to be disrupted and I doubt that many predicted that it would come from the failure to become mobile rather than by way of a low-end soluition like Firefox or PC Linux. Another example: The planets have been aligned for a very long time to disrupt commercial hub-based airline service, but that hasn’t happened yet either – and until then, the incumbents are still on the right side of the ledger.
Disruption may be inevitable, but the art of determining when and who is yet to be developed – and unless you know something that you haven’t said, there’s no reason to think that Gillette is any close to being disrupted than any one else.
Rick Mueller
https://www.linkedin.com/in/decisionscience
Although I very much enjoyed reading your piece I am a little confused as to why reversed innovation, (Gillette bringing in a cheaper product into the western market originally designed for the developing world) would be seen as Gillette disrupting itself.
Since cheaper solutions to Gillette already exist in the western market, launching a cheaper product would in my opinion be less about disruption and more about extending their product range to expand the customer base to include people who are happy to accept a lesser performing product, as long as it is cheaper.
Also, the act of going from an expensive product to a cheaper very similar one is not disruptive, it is a common strategy for organisations when competition intensifies and technology gets cheaper, think videos, printer, computers etc
However, at the end of he article you hit the nail on the head. If Gillette were to develop an alternative way of shaving, one that does not already exist and does not involve razors, an alternative that may even be a more expensive, or one that in the short term proves less powerful in terms of performance, but has the potential of becoming even better than razors…. If Gillette were to launch such a product, then they would not only be disrupting themselves, but the entire market.
Thank you for your article and for challenging my mind.
Interesting article but not so sure about the conclusion.
The missed point is that there are large barriers to entry in this market – both technological and psychological. Everybody knows about their formidable margins but coming up with an answer is hard – even for the B-brands, or the electrical shaving competitors.
Gilette knows this and masters the art of profit maximalization as no other.
As a n=1 focus group I can just say that I have chosen for good = good enough and chose one of their mid-range models – which is still better than most competitors.
But disrupting the category is a whole different challenge – same solution for a lower price is unlikely (or else the competitors would have done it by now). Similar result with a different technology – Braun guards their back in the electric world. New technologies…. have not yet shown a huge demand – hair removal creams have been around and have never attracted men for facial hair, laser/light etc…. technologically tricky and unclear if men are pychologically ready…
Last but not least I believe P7G/Gilette’s channel and communication skills are second to none for mainstream goods.
So for at least the next 5 years I would ‘bet on Gilette’