How Can Organizations Respond to Disruption in Their Industries?
P&G offers us a tsunami of an example!
A few weeks ago, an ad for P&G’s EC30 flooded my social media feed. EC stands for Enlightened Clean, their new entrant into the liquidless detergent category. Being a university instructor in innovation and disruption, I am always looking for great examples of how established, mature companies respond to disruption. I double-clicked the side of my iPhone and immediately ordered the $35 sample pack.
Liquid soap has been all the rage for years now. I have some liquid soap at home, but as an avid gardener, I wash filthy hands constantly, so I have bars of Dial soap all over the house. There are environmental issues associated with liquid soap that are of concern, namely, discarded plastic containers filling up landfills, detergents that do not completely biodegrade and the energy associated with shipping a product that is primarily water weight, etc. so, I am tugging on my bathing cap and diving into the topic of liquidless detergent.
Does this Innovative Product for Liquidless Soap Stand Up to Practical Application?
EC30 showed up in a compostable box with different soap “disks” for hands, body, shampoo, laundry, and toilet bowls packaged in small separate compostable boxes. The hand and body soap had lots of lather, but the disks are tough to grab with dripping wet hands. They were clumsy compared to bar soap and a disaster compared to liquid soap. Where to put these little disks is going to be a challenge too. People who have switched completely to liquid soap don’t have a need for soap dishes anymore. Besides, soap dishes usually get wet and can start to dissolve the little disks. The body wash disks are an even bigger challenge. Where are we going to put those in the steamy, wet shower? In a world of innovation and diffusion, this lack of “compatibility” with existing cleaning processes is a real problem. People are creatures of habit and habits are good for us as they reduce the stress of thinking, especially for processes like washing our hands. That should be pretty automatic, right?
5 Characteristics that Influence Diffusion
Everett Rogers, one of the seminal writers on innovation, tells us that there are five important characteristics for a new innovation to diffuse through a community: relative advantage, compatibility, complexity, trialability and observability. Here are the characteristics of EC30 based on my experience:
Relative advantage – EC30 has a clear environmental advantage over the existing liquid or pod laundry detergent options. The liquidless disks are a fraction of the size of their hydrated cousins. As far as a cleaning advantage, I have not experienced that yet, except with the toilet bowl cleaning product–that was incredible!
Compatibility with existing processes or cultural norms – EC30 is not compatible with how I wash my hands nor is it compatible with my showering experience. My hands and body are wet when I reach for soap or shampoo, so dissolving disks are not going to work for me. The whole pile is going to start dissolving the first time my hands drip on them. Laundry detergent use seems fine and follows the same process: drop in a disk or drop in a pod. The toilet bowl cleaner is much easier to use than my current multi-product regime so no problem there either.
Complexity is about ease of use of the product – EC30 is very easy to use, with no complicated instructions needed.
Trialability – Can we try EC30 first before we buy it? I don’t think so. In fact, the sample pack was very expensive, and I doubt my friends are going to shell out that kind of money for a product they don’t even know they want yet.
Observability – Can we see EC30 results before we buy it? As with trialability, I am not seeing an option currently to see it working before buying, but P&G is a trusted cleaning brand so people might be okay with giving them the benefit of the doubt. In addition, EC30 is aimed at reducing our carbon footprint, which would be observable in the store before you buy it.
What Can Companies and Their Customers Expect as They Wade Into Disruption with a New Product?
Interestingly, while it is much cheaper to ship soap without the ~80% water, the EC30 price doesn’t reflect any savings.
What’s up with this? The new EC30 disks are almost five times the cost of the cheapest detergent from P&G. This pricing challenge is a natural part of the diffusion process. When products first come out, the design is very fluid. As innovators and early adopters provide feedback, the product changes to suit customer needs. This is an expensive phase of production as there is no process efficiency. As more customers adopt, the company becomes confident that the product design is acceptable. The company then moves from product design to process design. They work out the kinks and the process becomes efficient and rigid. The efficiency of the process provides cost savings that drive down the price.
How Do Companies Get People to Adopt Their New Products?
Let’s go back to P&G. According to non-academic data sources in 2020, laundry detergent is about a $60 billion dollar industry. Liquid detergent makes up about a third of the market, powdered detergents make up the other two-thirds. The liquidless laundry sheets don’t register on any of the charts which would lead us to believe that we are serving the first 2.5% of the customers, the innovators. This makes me an innovator. Innovators are people with high levels of innovativeness who are comfortable with change and very curious. Their friends, however, think of them as the nutty professor. They try too many things, failing frequently. They are typically not credible except to their early adopter friends.
Early adopters are credible, rational people who have a lot of influence in their community and have a critical impact on diffusion. They start the upward slope of the adoption curve by being the next 13.5% of customers. For example, I have 10 friends in a book club. I told them about EC30, and one friend called to investigate. She is our early adopter. She is interested in environmental ideas but is never the first to try things out. If I succeed, she is likely to try it. If she adopts EC30 and tells the book club about her success, there is a good chance that three more will adopt because she is more credible than me. The next three would be considered the early majority, which makes up the next 34% of customers. Now, half the book club is successfully using the laundry disks.
By now, P&G is well into process standardization and the price is normalizing. The remaining holdouts are starting to look like polluters! Once the next three adopt (the late majority) from sheer guilt, we would have 84% of the book club on board. The one remaining laggard will not be bullied into change unless they run out of Tide PODS at Walmart! Typically, the laggards will only adopt if their current options go away.
A key to successful diffusion is in the early adopters. As the new products get over 2.5%, start paying close attention to feedback. These people are influencing the next 34% of the market! Once you get to the top of the curve, the product work is done, and we are moving to the process side to improve production so we can lower costs and climb aboard the profitability waterslide.
Can Our Best Customers Help with Diffusion?
Clearly, P&G is capable of efficiently producing any type of laundry detergent. Tide leads the way as the favorite in the industry. P&G wants to make sure that if the liquidless detergents diffuse that they are on the forefront. It is unusual, but visionary, for leading vendors to respond to a disruption early on. Caught in the net of mature products and rigid processes, they typically bury their heads in the sand and pretend the disruption is irrelevant. P&G, on the other hand, is paddling out to catch the wave. Their best customers (my nine book club friends) have no interest in liquidless detergent. If P&G were to call them and ask if they would like to try EC30, they would tell them that they love their Tide PODS, liquid Dial soap and Pantene shampoo and no, they are not interested in expensive soap disks.
These well-known products are also in a stable process category (often known as a Cash Cow) where the product is very profitable for P&G to produce. People like me who would be switching from the very profitable PODS to the unprofitable disks are a nightmare for the brand managers. P&G has a very unique approach to innovation and they talk about it openly. You can see for yourself here. Their “start-up spirit keeps fluidity in product development”. Hint: Don’t ask your best customers. They will lead you off the plank into shark-infested waters. They are very happy with the current product and will find everything wrong with the new disruption. The flaws they point out will eventually improve through product development leaving their favorite old product washed up on the shore.
Can Newcomers Beat Existing Players?
Newcomers win when the existing players take too long to enter the disrupted market with a response to the disruption. Since P&G is the 800lb gorilla in the laundry detergent market, they are fairly impossible to compete with head-to-head if they decide to adopt the disruption. They have established supply chains, distribution channels, marketing expertise, and process experience to create the best product in the market at the most competitive price. The little guys will be liquified and EC30 will likely become the “dominant design” or winner of the liquidless, environmentally friendly detergent category.
