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.
- 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.
- 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.
- Focus on the 7 touchpoints. Consumer surrounded by: Awareness. Browse or trial. Purchase. Usage. Remembering. Repurchase. Advocacy. Build asset maps around these.
- 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.