P&G Connect and Develop Innovation Model

The connect and develop innovation model is one we whole-heartedly embrace since it blends ideas from inside and outside of the organization. We call them mashups. We've been helping business managers and team members establish those models for the last four years using what we learned working with open source software communities and using website services..

The sad thing is that most businesses continue to hold fast to the "invented here" assumptions. This is not going to work much more because the dynamics of economies have changed from: land, labor, materials to people, ideas and things.

Take a look at myspace. Sure, it is wild and messy but look at the connections to what people love - music. Myspace has spawned more successful indie bands in the last 2 years than any time in the entire record industry history! Check out youtube as well.

My hat is off to P&G!

P&G's New Innovation Model, from an article published in Harvard Business Review.

"Most companies are still clinging to what we call the invention model,centered on a bricks-and-mortar R&D infrastructure and the idea that their innovation must principally reside within their own four walls. To be sure, these companies are increasingly trying to buttress their laboring R&D departments with acquisitions, alliances, licensing, and selective innovation outsourcing. And they're launching Skunk Works, improving collaboration between marketing and R&D, tightening go-to-market criteria, and strengthening product portfolio management."

"It was clear to us that our invent-it-ourselves model was not capable of sustaining high levels of top-line growth."

"It was, and still is, a radical idea. As we studied outside sources of innovation, we estimated that for every P&G researcher there were 200 scientists or engineers elsewhere in the world who were just as good a total of perhaps 1.5 million people whose talents we could potentially use. But tapping into the creative thinking of inventors and others on the outside would require massive operational changes. We needed to move the company's attitude from resistance to innovations "not invented here" to enthusiasm for those "proudly found elsewhere." And we needed to change how we defined, and perceived, our R&D organization from 7,500 people inside to 7,500 plus 1.5 million outside, with a permeable boundary between them.

It was against this backdrop that we created our connect and develop
innovation model. 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.

The model works. Today, more than 35 percent of our new products in market have elements that originated from outside P&G, up from
about 15 percent in 2000. And 45 percent of the initiatives in our product development portfolio have key elements that were discovered externally. Through connect and develop along with improvements in other aspects of innovation related to product cost, design, and marketing our R&D productivity has increased by nearly 60 percent. Our innovation success rate has more than doubled, while the cost of innovation has fallen. R&D investment as a percentage of sales is down from 4.8 percent in 2000 to 3.4 percent today. And, in the last two years, we've launched more than 100 new products for which some aspect of execution came from outside the company. Five years after the company's stock collapse in 2000, we have doubled our share price and
have a portfolio of twenty-two billion-dollar brands."

Bonus links: Lead users and tossing pots and "User innovation toolkits and continuous improvement" by Jon Udell - Inforworld.