OPEN INNOVATION

Kimberly-Clark turns to outsiders on R&D
Company opens up its operations for fast innovation
11:17 PM CDT on Tuesday, August 8, 2006
By KATHERINE YUNG / The Dallas Morning News

Open Innovation offers a huge potential to leverage the knowledge outside you company. It is at its infancy and we will keep you abreast of developments as more and more companies experiment with it.

NEENAH, Wis. – Since its inception 134 years ago in this town along the Fox River, Kimberly-Clark Corp. has relied on its own scientists and engineers to create products.

But this spring, the Irving-based consumer products giant known for Huggies diapers and Kleenex tissues made a radical change, looking outside its research labs for innovation.

A Florida company, SunHealth Solutions LLC, helped Kimberly-Clark roll out SunSignals, self-adhesive, water-resistant sensors that change color when the wearer is in danger of sunburn.
The promotional items, distributed inside packages of Huggies Little Swimmers disposable swim pants, proved to be such a hit that Kimberly-Clark is looking at selling the sensors as a stand-alone product.

Developed in just six months, SunSignals represents one of a growing number of agreements that Kimberly-Clark is forming in a dramatic overhaul of its research and development operations.

The effort is part of a broader business movement called "open innovation," which seeks to do away with the vertically integrated model of product development that's existed for decades.

Faster development

By turning to outsiders and giving them key roles in bringing concepts to market, companies from Kraft Foods Inc. to International Business Machines Corp. hope to debut more hits faster, boosting sales and profits.

The movement is made possible in part by improved tools for communication, including the Internet, which make long-distance collaboration much easier. Last year, Kimberly-Clark slashed the time it takes to bring out new products by 30 percent, largely through open innovation. "It saves us so much time," said Cheryl Perkins, Kimberly-Clark's senior vice president and chief innovation officer.

Relying on outsiders can also be cheaper, said Henry Chesbrough, executive director of the Center for Open Innovation at the University of California at Berkeley's Haas School of Business.
"Innovation is becoming expensive," he said.
"Developing new technology is taking more and more money."

Open innovation is also growing in popularity because shorter product life cycles make it harder to recoup R&D investments.

Open innovation helped Kimberly-Clark develop new products faster last year, said chief innovation officer Cheryl Perkins.

For all of its benefits, open innovation presents challenges, said Walter Herbst, director of a product development program at Northwestern University and chairman of Herbst LaZar Bell Inc., a product design firm. "It's tricky, it's hard, and most company cultures can't deal with it," he said. Though he supports open innovation, Mr. Herbst said only a few companies, such as Procter & Gamble Co., have much to show for it.

At P&G, a major Kimberly-Clark rival in personal care products, open innovation has led to such hits as Mr. Clean Magic Eraser and Pringles Prints. A year ago, the consumer products behemoth estimated that 35 percent of its products, designs, technologies and processes were not invented at the company. Its goal: 50 percent.
"We've been very pleased with it," P&G spokesman Jeff LeRoy said.

Calling in help

A quarter of current R&D spending is devoted to new businesses, compared with just 10 percent in 2003.

Kimberly-Clark says that to reach its goals, the company will have to engage outside parties in the development and launch of products.

Last year, Kimberly-Clark formed more than 30 partnerships with firms big and small. They took the form of joint-development agreements, joint ventures, co-distribution and supply agreements, and licensing deals. Today, a few results of these changes are starting to appear.
Huggies Cleanteam, a line of toddler toiletries, took only 12 months to hit store shelves, not the typical two to three years, thanks in large part to partnerships with other firms.