By: James Joia
At the heart of P&G’s design for growth is their capability to innovate. Over 50 % of innovation should be acquired from outside the company, according to CEO A G Lafley. Read more about how P&G works with open innovation through the concept of Connect + Develop.
10 years ago Procter & Gamble used to be a very closed organization. “We invented Not invented here” as Jeff Weedman, P&G’s Vice President for external business development expressed it. This led to slower growth in 2000 and the CEO at the time resigned. Since then P&G has developed a very successful strategy for growing through innovation. The new goal of P&G is to “become the open innovation partner of choice”.
In this article you can read more about how P&G has used the open innovation concept and developed a very successful way of increasing the company growth through innovation.
We invented Not invented here
Connect + Develop? with Procter & Gamble
How well do you know The Procter & Gamble Company? P&G, founded in Cincinnati, Ohio, USA in 1837, has grown to be a nearly $84 billion USD consumer goods leader, but is known more for its brands than the company itself. Can you guess which of the following is not true about P&G?
a) P&G has 23 brands that each generate more than $1 billion USD annually
b) P&G has 4,278 acronyms (and growing)
c) P&G’s brands include Braun®, Pampers®, Ariel®, Gillette®, Pringles®, and Dawn®
d) Over 50% of P&G’s innovation comes from outside the company
Ready? Here goes… P&G has 23 billion dollar brands, up from ten in 2000. And P&G did have 4,278 company acronyms – the company loves tracking numbers perhaps too much! – as of April 28th. It’s also true that those well known and trusted brands are all part of P&G’s portfolio. If you selected “d”, you may be surprised to learn that’s actually true too. And here begins P&G’s “Connect + Develop” journey.
Seeks external sources of innovation
P&G was once an insular society, a culture of “not invented here.” That’s not the case anymore. Now P&G aggressively and pro-actively seeks external sources of innovation for everything from concepts to how we go-to-market. P&G calls its version of open innovation “Connect + Develop.” Perhaps you’ve read about it; it’s been written about quite broadly.
Why not tap into knowledge outside the company?
What if P&G could tap into their know-how?
Connect + Develop is about accelerating innovation to develop products that improve consumers’ lives. P&G has about 9,300 researchers working globally. Over 1,100 of these are PhDs, operating across 150 areas of science. But in these same fields there are nearly 2 million scientists and engineers at other companies, large and small, universities, and working out of their homes. Why not collaborate? What if P&G could tap into their know-how?
Active search for collaborators
Finding them requires a robust pro-search effort across the globe, looking at every region, every country, every company, every university, and identifying what expertise exists where. Example: the country with the second highest number of dentists per capita is Israel, so it follows that the oral care industry may be developed there. What about Sweden? Or Denmark? Or Norway and Finland?
Just like universities are known for specializing in certain fields, every country has its expertise. So P&G develops a “needs list” of what the company seeks for new innovation to add to its brand portfolio – things like new packaging, design, green technologies. It’s a broad list that encompasses everything from concepting to go-to-market.
This list is then shopped around the globe
This list is then shopped around the globe, primarily by P&G’s Technology Entrepreneurs, of which there are more than 75 based around the world. That’s the pro-active search piece.
Connecting through the web
On the reactive side, over 300 innovations are submitted to P&G every month via the innovation website, www.pgconnectdevelop.com. The website is the best portal into P&G to ensure an innovation is seen by “the right people.”
The website is the best portal into P&G to ensure an innovation is seen by “the right people”
Today, every single business unit at P&G is working on something that came unsolicited through this website. The company continues to improve the website and has just launched two new versions in Japanese and Chinese.Last year, nearly 3,800 submissions came into P&G unsolicited. Each gets an initial review, and about 40% are distributed to the various P&G businesses for a more thorough look. Ultimately, about 5% are judged to be “of interest.” It’s important when submitting to P&G to know the company’s businesses and where it might be strategically inclined to have innovation needs.
Looking for long term relationships
The results? About 1,000 active contracts are under management, at P&G, and the company is proud to say that about 40% of its deals lead to repeat business. P&G looks at innovation collaboration as a relationship, not a one-time-deal.
P&G looks at innovation collaboratioin as a relationship
Multiple deals create more value for everyone and deliver more innovation to the consumer, so while an individual deal has merit, it’s the long-term relationship and joint development opportunities that can really drive value to both parties.
Here are some tips P&G offers for approaching the company about a collaboration.
Do your homework
1) Do your homework. Know P&G’s businesses, brands, and interests. With a company operating in 150 areas of science, there are plenty of opportunities for synergy in areas like lasers, plastics, modeling, and chemistry. But P&G doesn’t produce clothing or shoes, so a new clothing design is likely to be off-strategy and not a good fit.
2) Think strategically. What can you offer P&G that the company doesn’t already do well itself. So, rather than trying to improve P&G’s core expertise, think about extending it. Example: Mr. Clean is a household cleaner, but P&G does not make durable goods. If your company makes mops, you might want to consider partnering with P&G to make a Mr. Clean mop. How can you extend P&G’s brands to deliver a more complete solution to the consumer?
Use the website
3) Use the website. P&G’s innovation portal, www.pgconnectdevelop.com is the best way to reach the “right people.” Sure, you may want to talk to someone. That’s understandable. The best way to get to that phone call is to use the website and submit your innovation. Website submissions are reviewed daily, distributed to R&D and business leaders, and P&G strives to be responsive as timely as possible.
In this high-speed connected world, know-who is just as important as know-how. P&G wants to connect with you, and believes that together there is much more that can be accomplished than by doing it all alone.
If you wish to learn more regarding Connect +Develop and connect in person with one of our European managers, please contact: James Joia, External Business Development, E-mail [email protected].