• Business Week, Monday, April 6, 2009 11 AM

Procter & Gamble CEO A.G. Lafley tells Roger O. Crockett that the company has improved its new-product success rate from the industry average of 15% to 20% in the '90s to 50% today by clarifying and simplifying its processes, and quickly dropping products that don't look promising. "You learn more from failure than you do from success but the key is to fail early, fail cheaply, and don't make the same mistake twice," Lafely says.

Innovation has to be tied to a product or a service that meaningfully changes consumers' lives, according to Lafley. P&G invented a material in the '60s that would absorb a lot of water but it wasn't meaningful until it converted the innovation into Pampers disposable baby diaper, for example.

Lafley says P&G will continue to invest in its core strengths of understanding the consumer, innovating and branding. Capital spending will go up in 2009 for new engineering and manufacturing technology. And while it's spending fewer dollars on advertising because the price of media has gone down, it's actually delivering more messages to consumers.

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