"Connect and Develop: Inside Procter & Gamble's New Model for Innovation"
Harvard Business Review
March 2006, pp. 58-66
Procter & Gamble has traditionally relied on innovating from within its own organization, but in the past few years they have developed a new model that they call Connect and Develop innovation: "With a clear sense of consumers' needs, we could identify promising ideas throughout the world and apply our own R&D, manufacturing, marketing, and purchasing capabilities to them to create better and cheaper products, faster." Procter & Gamble has redefined its R&D organization from 7,500 people inside the organization to "7,500 people inside plus 1.5 million outside, with a permeable boundary between them." More than 35% of Procter & Gamble's new products have elements that originated from outside the organization. This number was only 15% in the year 2000. R&D productivity has increased by about 60%. Innovation success rate has doubled. R&D investment as a percentage of sales is 3.4% as compared to 4.8% in the year 2000. Share price has doubled.
Procter & Gamble systematically searches the world for proven technologies, packages, and products that P&G's own resources can add value to. The organization utilizes both proprietary networks and open networks.
From the five years of experience with Connect and Develop, the authors glean three core requirements for successful usage of this strategy:
- Never assume that 'ready to go' ideas found outside are truly ready to go. There will always be development work to do, including risky scale-up"
- Don't underestimate the internal resources required. You'll need a full-time, senior executive to run any connect-and-develop initiative"
- Never launch without a mandate from the CEO. Connect and develop cannot succeed if it's cordoned off in R&D. It must be a top-down, companywide strategy."
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