Why Procter & Gamble gets 50% of its innovation from outside
In 2017, Helbling was awarded the prize of Europeans Most Productive Connect + Develop Partnership of Procter & Gamble (P&G). So, what is Connect + Develop, exactly, and why would a company like P&G outsource its innovation?
Fortunately, we don’t have to guess. P&G’s Larry Huston and Nabil Sakkab wrote a 2006 piece in Harvard Business Review outlining the reasons for the initiative. It all started in the year 2000. P&G had lost almost half of its market value, and the company knew it needed to transform its processes if it were to rebound. Recently hired as CEO, A.G. Lafley challenged his staff to reinvent the company’s innovation business model.
At the time, P&G had 7’500 internal researchers. Not bad, right? Except that for a company of this size, maintaining a 4-6% annual growth means building several billions worth of new business every year – in other words, close to one million dollars per R&D employee. How can you do that? How can anyone do that?
What P&G realized was that there was so much talent outside of their organization. By their estimate, there were for each one of their researchers 200 external scientists or engineers, somewhere in the world, who were as good – a total of 1.5 million people. The question was then how it was possible to harness this talent and ensure its ideas were put to use in P&G products. The answer to that question was the Connect + Develop program.
Connect + Develop aims at identifying promising ideas to fulfill needs of P&G customers, wherever they are, and using them to create better products. While products based on outside ideas would not be exclusively the product of P&G, they would still benefit from the marketing, purchasing and manufacturing capabilities of the company to get them to the market – in the words of A.G. Lafley, they would no longer come from P&G’s labs, but through them.
This model has proven its merits. P&G is now close to its goal of 50% of new products having elements that originated from outside the organization.
We at Helbling are firm believers in this model. Even within our organization, we see every day how great ideas come from connecting diverse people, teams and ideas. Whatever the problem you’re working on, chances are someone, somewhere in the world already gave it some thought. It should be the goal of any company to try and seek how to capture these ideas from the outside – and realize that, no matter how big your internal R&D department is, it pales in comparison to the talent out of it.