Managing Partner, 4INNO
Back in 2001, Larry Huston, Procter & Gamble’s Vice President of R&D Innovation and Knowledge, was given a lofty goal by CEO A.G. Lafley – source 50% of the company’s innovation externally. Huston has been driving hard to meet that mandate and today, he greets a steady stream of visitors looking to benchmark his initiatives.
To help harvest the requested crop of external ideas, Huston developed a program to tap into a variety of networks consisting of the smartest scientists and business folks around. In the academic world, they call it ‘open innovation’. At P&G, it’s ‘Connect and Develop’.
Through the ‘Connect and Develop’ program, P&G’s external networking capability now links the R&D operation with venture capitalists, individuals, other companies [even competitors!], national laboratories, P&G’s huge supplier base and still other sources of innovation.
“Imagine opening your borders for free trade,” says Huston. P&G employs 7,500 people in its R&D division, but there are 1.5 million scientists throughout the world with expertise in P&G’s areas of interest. “It doesn’t take a genius to figure out that if you can engage the brains of your 7,500, plus the key ones from that 1.5 million, you can build better products,” Huston says.
MATCHING WHAT’S NEEDED WITH WHAT’S POSSIBLE
Huston describes P&G’s strategy as “matching what’s needed with what’s possible and doing fact-finding in between”. P&G’s ‘Connect and Develop’ program represents a cultural shift from in-house advances toward external collaboration of all kinds.
“It’s one big activity system,” says Huston. Taking the lead is a group called the technology entrepreneurs. “They tend to be very senior scientists – seen it all, done it all.”
For instance, it was a technology entrepreneur who started the chain of events to create the Mr. Clean Magic Eraser, an easy way to clean scuff marks. The technology entrepreneur found the product on a grocery store shelf in Japan, marketed by a small Japanese company that had discovered the cleaning properties of a packing foam made by Germany’s BASF AG – which, coincidentally, was a major P&G supplier. Within a year, the product found its way to market and the company had a valuable extension to its well-known brand.
FINDING SUCCESS IN HIGH-LEVERAGE NODES
“Companies need more new ideas than ever before,” says Huston. The trick however is figuring out how to tap into the right minds to generate the right ideas. Huston picks “high-leverage nodes” where a lot of smart people congregate and have contract mechanisms in place. For instance, Huston has put out chemistry challenges on a particular innovation website and has received solutions from a patent lawyer in Georgia, a grad student in Spain and a chemist in Bangalore, India.
In July, 2005, Huston joined the Research Advisory Board of the Business Innovation Factory [BIF]. “BIF is a great example of a high-leverage node,” explains Huston. “You can say you’re doing open innovation at one level, but until you really elevate it to strategy, it’s piecemeal. That’s what BIF represents – a place to accelerate the pace of innovation in a real-world strategic laboratory that sidesteps the costs and risks of in-house research.”
Huston estimates that P&G now gets over 35% of its innovations from outside. The goal now, Huston says is to move beyond the point where a couple of corporate-level organizations are providing the leadership, to a situation where looking outside the company’s walls for new ideas about products, marketing, technology or anything else is standard behavior. “This is the future,” says Huston. “People just don’t realize it yet.”