The continuous striving for innovation has become an integral part of the modern business. No matter whether a company favors innovation or not, today innovation is key not only to high productivity and growth, but to the mere survival in the highly competitive environment. The example of Procter & Gamble (P&G), an American multinational consumer goods corporation, clearly shows the paradigm shift in the attitudes to innovation and offers a radically new approach to developing innovative ideas for companies.
The story of P&G demonstrates that no matter how strong organization’s internal capabilities are, the traditional invention model of innovation, which suggests that R&D should only be done internally, at some point faces its limits. By the year 2000 P&G has realized that their high level of growth can no longer be sustained by internal R&D. Moreover, innovative products and technology have become increasingly developed in small and medium enterprises. This discovery led to the creation of the open innovation concept, the practice of sharing ideas among partners and even competitors, which was referred to as connect and develop (C&D). Such approach required a significant cultural shift within the company from “not invented here” attitudes to “proudly found elsewhere” ones. Although C&D may at first resemble outsourcing, in fact they have very little in common. While the latter merely aims to find cheaper providers, the former tries to establish collaboration with external innovators in order to leverage each other’s internal capabilities.
The C&D process starts with a clear definition of objectives and the areas to look for the new ideas, which could contribute to the company growth. This exercise should lead to the creation of a few key goals, which can then be communicated to all the involved employees and partners. The in-depth analysis of adjacencies, the products which could help to leverage the brand, as well as some tools to analyze the impact of a new technology on the existing products (e.g. technology game boards) may be very helpful in setting priorities for the development of innovation.
Another approach to innovation suggested by the P&G example is their network development. The company relies on proprietary and open networks in their continuous search for innovative ideas for their business. In particular, they use technology entrepreneurs and even own suppliers for acquiring new ideas and technology. While entrepreneurs provide continuous monitoring of the current scientific development worldwide together with physical search for ideas, suppliers may get involved in “cocreation”, or the process of joining efforts, staff and facilities in order to conduct research together. Open networks represent a more novel “connect-and-develop” approach to innovation. Connecting companies and developers offers cost-effective opportunities to employ cross-functional talents from different parts of the world in order to solve a specific problem within a company.
The final step in P&C is internalizing innovation and evaluating its benefits for the company. Cataloguing and distributing new ideas across the organization should capture attention of the managers, who then explore the business potential of the presented innovations. Only after a technology has been approved, it is possible to start negotiations with the developer.
Adopting C&D thinking requires much more than adjusting company processes. Such shift demands a change in the mindset of both employees and managers. They should understand early on that the companies, which have not embraced C&D, may not survive the competition with successful and innovation-oriented companies, such as P&G.