For Proctor and Gamble, Innovation is our life blood
Mar 3, 2006
By: Amy Rowell
Innovate Forum

This brief summary is rich with insight on how a major corporation is driving growth through innovation. It all starts from the top!!

Happy holidays to all!




Leading consumer packaged goods manufacturer Procter & Gamble has an impressive history of successfully launching -- and profiting from -- a vast array of new products every year. And, until recently, the company itself might argue that these products were the result of the diligent research efforts of an especially well-honed internal R&D team. But CEO A.G. Lafley brought a different mindset to the company when he arrived in 2000. Under his leadership, the company has shifted from a product development strategy that once relied on a high-powered R&D organization to one that capitalizes on a new approach, appropriately called, ”Connect and Develop”, or C&D.

First – some background on the “open innovation” model, which forms the basis for P&G’s Connect and Develop strategy. Several years ago, Harvard Business School professor Henry W. Chesbrough unveiled a rather unorthodox view regarding traditional product development in his book, Open Innovation: The New Imperative for Creating and Profiting from Technology. According to Chesbrough, in today’s information-rich environment, companies can no longer afford to rely entirely on their own ideas to advance their business. Instead, they can – and indeed, must – leverage both internal AND external sources of ideas, tapping into the rich knowledge base of information available not only outside the walls of R&D, but outside the walls of the company itself.

Based on this philosophy, Lafley has since taken the bold stance that P&G should strive to acquire 50 percent of its innovations outside the company. To accomplish this, today the company collaborates with organizations around the world, “systematically searching for proven technologies, packages and products that we can improve, scale up, and market, either on our own or in partnership with other companies,” (CRITICAL CONCEPT) says Larry Huston, P&G’s vice president for innovation and knowledge. Indeed, through Connect and Develop, P&G has successfully brought to market a number of new products already, including: Olay Regenerist, Swiffer Dusters, and the Crest Spinbrush, according a recent article in the Harvard Business Review.

As Jeff Weedman, vice president of external business development at P&G explained in a recent interview, “for Procter & Gamble, innovation is our life blood. Our senior management says it, repeats it, and our organization lives it.(IT HAS TO START FROM THE TOP) A lot of times, I hear about organizations that have set up innovation incubators. At P&G, we’ve clearly set the tone that innovation is everybody’s work. When you do that, you not only have people looking at the work that they do, but they’re also more receptive to ideas coming from other places, whether it’s inside P&G, or outside P&G.”(A CRITICAL ISSUE – HOW TO ORGANIZE FOR INNOVATION AND GROWTH)

Another important lesson that P&G has learned about innovation? Be careful about what you measure.(SEARCH YOUR CORPORATE SOUL FOR THE TRULY MEANINGFUL METRICS YOU GET WHAT YOU MEASURE) Advises Weedman, “If you use metrics that measure, for example, the number of patents you’ve got, then you can get an awful lot of patents, but patents don’t pay the bills. They don’t drive the revenue. So, it’s the conversion of ideas to commercially marketable, consumer-accepted products that P&G focuses on.”

Real words of wisdom from a truly innovative market leader.