P&G's Lessons from a Century of Open Innovation
Suffice it to say I was honored my friend Chris Thoen would agree to talk about P&G‘s Open Innovation history at the 3rd Open Innovation (OI) Summit at Baldwin Wallace College‘s Center for Innovation & Growth: Practical Challenges of Global Open Innovation. Chris has been interviewed, quoted, written about extensively as a leader in OI, including on these pages, and for good reason.
Some of you may know P&G’s history, some may not. 175 years ago, two brother-in-laws, William Procter (candle maker) and James Gamble (soap maker), using the same raw material, fats, were encouraged by their father-in-law to collaborate to get better ‘fat’ pricing! This was the start of P&G. They grew the company with their own innovations and through (un-named at the time) open innovation with other technology makers and companies. These partnerships were the foundation of P&G’s growth into 300 brands in over 180 countries, 24 billion dollar brands and most importantly, one of the most trusted names in the world.
About 10 years ago, CEO A. G. Lafley transformed P&G’s open innovation heritage into a key cultural component of the company – Connect+Develop (C+D). This wasn’t just a way to come up with new products, but a fundamentally new way to do business. Lafley challenged P&G to source at least 50% of their innovation from outside its hallowed R&D halls.
Chris clearly described OI as an ongoing journey requiring recognition and investment in top talent and external synergies. When done well, OI is all about value creation for both partners, with both sets of interests in mind. It’s about sharing your expertise and strategic needs of your brands, businesses, even corporately. To do this, P&G has developed and put 70+ C+D leaders around the globe with 11 regional hubs (e.g., NA, LA, Europe, Israel, China, India, Japan), 100s of networks and academic partnerships.
Several products you may know are a result of OI: Swiffer, Tide, Mr. Clean eraser (one of my favorites). Clorox’s Glad ForceFlex™ product is based on a P&G licensed technology. Sometimes, you can even collaborate with your competitors! P&G’s technology and IP have created $3B in sales for their OI partners.
So what has P&G learned on this journey?
- Drive from the Top: Without Lafley’s challenge, commitment and leadership as CEO, it couldn’t have taken hold corporate-wide.
- Build an OI culture: You have to support and learn from failure, communicate openly (and often) to build trust, help your people understand the innovation process and consistently reward partnerships and results, not just patents.
- Focus the Hunt: Keep your eyes on the strategy at all times! It’s what guides you; build internal relationships by sharing needs and goals; manage leadership’s expectations for reality, not for fantasy; create and communicate clear innovation selection and filtering criteria.
- Be Where the Action Is: get out of Cincinnati (or wherever)! You need to be where the innovation is happening and the markets exist – like developing markets, areas of VC activity, Social Media, SMEs, Academia/Universities and places with diverse expertise, cultures, ideas.
- Build Efficient and Effective Knowledge Management Systems: Track connections among your own people, capturing their knowledge and experience partnership nuances, deals so they are not repeated, saving time and money. Include your partners, networks, and competitors while protecting your IP and create a way to visualize and analyze these intertwined relationships.
- Obey the Law of the Land: Take what you need, only what you need, and leave the rest. Share what you’re not using because it may find a great application in another home
- Staff for Success: Hire and train a unique blend of Hunter-Gatherer. This is not a typical person, but you may already have them – people who have expertise in a technology with business acumen with the ability to develop relationships, influence people, inside and outside your company. Deliberately hire for this. And, keep investing in R&D – doing OI doesn’t mean closing down your own R&D.
- Be the Partner You’re Looking For: The Golden Rule! Celebrate your partners, look beyond the first deal with them, facilitate more connections for you and them, keep that Win:Win mindset front and center and be transparent because a second (third, fourth…) deal with the same partner takes about half the time while creating twice the value. Remember, strong partners make you stronger as well.
Bottom line? P&G has created more value together with their OI partners than they ever could have alone. It is a real ecosystem that creates value on a global scale to accomplish P&G’s mission:
“…improve the lives of the world’s consumers, now and for generations to come.”
Okay, so maybe you’re not P&G, but you can still start the journey. What do you need? What do you have to offer? Who could you partner with?
Just start small, doesn’t have to be huge, just a step. Give it a try.
Deb, founder of Mills-Scofield LLC, is an innovator, entrepreneur and non-traditional strategist with 20 years experience in industries ranging from the Internet to Manufacturing with multinationals to start ups. She is also a partner at Glengary LLC, a Venture Capital Firm.