Connect + Develop Innovation Strategy: Procter & Gamble case

Spread the love

Since the early 2000s,  P&G  has been  asking  its  businesses,  “What
consumer needs, when addressed, will drive the growth of your
brands?” This perennial exercise—managed by a large team of in-house
technology entrepreneurs—is an obvious yet significant step in the
ongoing innovation culture P&G lives by called Connect + Develop.
“Reduce wrinkles, improve skin texture and tone.” “Improve soil
repellency and restoration of hard surfaces.” “Create softer paper
products with lower lint and higher wet strength.”
These layperson descriptions are a part of what P&G dubs a top-
ten-needs list, one of which is created annually for each of its businesses
by the businesses themselves. All the divisions’ top-ten-needs lists
together form P&G’s uber list, which informs future innovation paths.
Connect + Develop was the strategy to revitalize P&G which, in
2000, self-described its operations as a “mature innovation-based
company with rapidly expanding innovation costs, flat R&D –
productivity, and shriveling top-line growth.”
Like so many companies in the 1980s that had moved from a –
centralized approach to what Bartlett and Ghoshal call the transnational
model,2 P&G woke up in the 21st century to find the competitive
landscape had changed dramatically, spurred by technology –
convergence and the new-styled global economy, in which barriers were
lower—or obliterated—and competitors abound. The firm’s –
innovation success rates, the percentage of new products that met P&G’s
financial objectives, had stagnated at about 35 percent.
A.G. Lafley, the firm’s then newly appointed CEO, assessed the
business and decided only a radical new approach would bring the
company back to its previous stature: Acquire 50 percent of P&G’s
innovations from outside the company.
The cultural and process transformations required to make this
happen were significant if not daunting. For one thing, bench –
scientists and researchers do not like to be told they are not innovating fast
enough, and even the most confident employee might feel a twinge of
insecurity about a plan to look externally for good ideas.
But P&G’s strategy wasn’t to replace the capabilities of “our 7,500
researchers and support staff, but to better leverage them,” wrote
Larry Huston and Nabil Sakkab in their seminal 2006 HBR article.
Better leverage, indeed, is a central theme of the entire Connect +
Develop strategy.
Huston was tagged as Connect + Develop’s chief architect and
driver; however, he firmly contends that the CEO of any organization
must make Connect + Develop an explicit company strategy to drive
the necessary cultural and business changes.
For P&G, two key factors underpinned its Connect + Develop
strategy: First was the belief that finding good ideas and bringing
them in-house to enhance and capitalize on internal capabilities was the right approach. It also felt it was crucial to know exactly what it
was looking for—customer needs—hence the annual, systematic
drafting and honing of the top-ten-needs lists.
Second is P&G’s approach around how to tap the vast outside
world of innovators to meet its 50 percent target. In a radical move at
the time, P&G took a wide view to developing a productive network,
scouring the globe for adjacent products and innovations through its
network of in-house technology entrepreneurs and its own vast net-
work of suppliers, with its top 15 suppliers representing an estimated
50,000 researchers (in 2006).
Some of its biggest successes in recent years were established
through Connect + Develop, including Mr. Clean Magic Eraser,
which came from technology licensed from German chemical com-
competipany BASF, and Swiffer Dusters, adapted from a Japanese –
tor called Unicharm Corp. P&G negotiated the rights to sell the
product outside of Japan.
Arguably, though, the most innovative aspects of Connect +
Develop center on how P&G views and leverages networks beyond
its own employees and suppliers using open networks. To complement-
its proprietary networks, P&G invested in and engages with an
entire ecosystem of external partners and networks to source patents,
partners, and solutions. For example, as far back as 2000, P&G was an
early investor in Yet2.com, which is an online marketplace for intellectual-
property exchange.
Also in 2000, P&G helped create NineSigma, which crafts technical-
briefs (succinct problem statements) on behalf of its customers
and then sends the briefs to its network of thousands of possible solution-
providers including individuals, companies, universities, and –
government and private labs for potential solutions. In 2003, the
company, together with Eli Lilly and Company, established –
YourEncore, now operated independently, which connects a network of
5,000 retired experts with client businesses.

The next level of P&G’s commitment to Connect + Develop is
leading the way in developing the infrastructure to systematically
measure the value of its open innovation practices.