For generations, Procter & Gamble generated most of its phenomenal growth by innovating from within. They hired the best global talent and built huge research facilities. And for a long time, that strategy worked just fine. But in 2000, newly appointed CEO A.G. Lafley dispensed with the company’s age-old “invent it ourselves” philosophy and created a “connect and develop” approach – which uses the world as a giant idea factory.
Today the company searches everywhere for proven technologies, packages, and products it can improve, scale up, and market. Now the company collaborates on a massive, geography-defying scale with suppliers, competitors, scientists, and entrepreneurs. In fact, R&D productivity at Procter & Gamble has increased by nearly 60%. In the past two years, P&G launched more than 100 new products for which some aspect of development came from outside the company.
Procter & Gamble isn’t the only organization looking outward. According to IBM’s Global CEO Study 2006, leaders today are increasingly seeking innovative ideas beyond company walls. While CEOs in the study ranked employees (especially those in sales and marketing) as the major source of new ideas, they also stressed the overwhelming importance of collaborative innovation from customers and trading partners.
The study also highlights the link between external collaboration and financial performance. Top performing organizations used external sources 30% more than under-performers. Of this kind of collaboration, one CEO stated that, “We need third parties as benchmarks and sparring partners. This also helps our staff broaden their views.” While another simply said, “If you think you have all of the answers internally, you are wrong.”
In direct contrast to past corporate doctrine, where innovation was considered too critical and proprietary to involve outsiders, major strategic alliances are quickly becoming the new competitive edge. As a client of mine put it, “The competition can hire away individual talent and they can duplicate our processes – but our intricate networks of relationships with employees, customers, global partners, regulatory bodies, and suppliers is ours alone. It can’t be copied. Every organization has to start theirs from scratch.”
Today the company searches everywhere for proven technologies, packages, and products it can improve, scale up, and market. Now the company collaborates on a massive, geography-defying scale with suppliers, competitors, scientists, and entrepreneurs. In fact, R&D productivity at Procter & Gamble has increased by nearly 60%. In the past two years, P&G launched more than 100 new products for which some aspect of development came from outside the company.
Procter & Gamble isn’t the only organization looking outward. According to IBM’s Global CEO Study 2006, leaders today are increasingly seeking innovative ideas beyond company walls. While CEOs in the study ranked employees (especially those in sales and marketing) as the major source of new ideas, they also stressed the overwhelming importance of collaborative innovation from customers and trading partners.
The study also highlights the link between external collaboration and financial performance. Top performing organizations used external sources 30% more than under-performers. Of this kind of collaboration, one CEO stated that, “We need third parties as benchmarks and sparring partners. This also helps our staff broaden their views.” While another simply said, “If you think you have all of the answers internally, you are wrong.”
In direct contrast to past corporate doctrine, where innovation was considered too critical and proprietary to involve outsiders, major strategic alliances are quickly becoming the new competitive edge. As a client of mine put it, “The competition can hire away individual talent and they can duplicate our processes – but our intricate networks of relationships with employees, customers, global partners, regulatory bodies, and suppliers is ours alone. It can’t be copied. Every organization has to start theirs from scratch.”
posted by ckg @ 12:06 PM
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