P&G's Connect + Develop: A New Model For Innovation

Procter & Gamble's Larry Huston, VP Innovation, spoke about the firm's efforts to reinvent product design and development.

Q:  How do you move beyond the silos of a 9,000 person R&D organization while driving US$5 billion in growth annually?
A:  Simple.  You create a networked innovation model.

P&G faced a number of issues in 2000:  50% reduction in market capitalization, stalled top line growth, innovation success rate of 35%, only 10% of in-market ideas from outside the company.

To resolve this do-or-die situation, the firm put three innovation mandates into place:  growth (create US$5 billion in annual growth); do more with less (desired innovation budgets were higher than sales and profit); and be more external to overcome the internally-oriented culture (tap into a global network of 1.5 million high quality and available scientists).

Guiding principle:  "if you chase everything, you'll find nothing."  So here's P&G's strategy:

• Ready to go:  applications in products, devices, packages, and game changing technology
• Target adjacent opportunities:  extend brand equity elements into new spaces
• Identify top 10 needs:  determine for each business and integrate finding solutions into the strategy process.  "We believe there is a solution for all our top technology needs."
• Look across domains to find disruption.  Toys + Personal Care.  Autos + Makeup.  Military + Hard Surface Care.

These strategies drove implementation tactics:

• Built external innovation networks.  Over 3 million contacts with a physical hub and node structure.
• Established the P&G technology entrepreneur network.  Refocused global internal staff to help facilitate innovation.
• Leverage suppliers’ innovation assets. Don’t just have them take orders, tell them what you’re working on so they can supply your business strategically.
• Created E-R&D Networks.  Yet2.  Alibaba.  Yourencore. Innocentive.

Here's how to get started.

1. Vision. Leverage the world to drive innovation in marketing and commercialization. Ultimately, 50% of marketing ideas and capability will be insourced via shared risk/reward.
2. Identify consumer needs that will drive your business. Capture holistic consumer experience (mind, body, soul, task). Identify top ten needs – experience maps lead to discovery.
3. Focus on the 7 touchpoints. Consumer surrounded by: Awareness. Browse or trial. Purchase. Usage. Remembering. Repurchase. Advocacy. Build asset maps around these.
4. Develop your marketing innovation asset network. Where will the next big idea come from? Develop an information ecosystem across touchpoints (awareness, trial, purchase, usage, remembering, repurchase, advocacy).

The results:  Over past 4 years, P&G has seen share price double, free cash flow double, profit double, R&D productivity increase 60%, and innovation success rate top 75%.  Pretty convincing.

Comments

[Steffen Hoellinger]

Nice summary of P&G's Connect & Develop, in my opinion especially interesting with regard to Open Innovation for P&G probably being the largest R&D department in the world.

http://www.openeur.com/blog/en/2006/12/03/pg-%e2%80%93-probably-the-largest-rd-department-in-the-world/