Breaking Innovation Barriers by Looking Beyond
If you are a scientist or an engineer, you know firsthand that innovation is neither inexpensive nor straightforward. It is a long convoluted process that starts with investing copious amounts of money into scientific and market research. Furthermore, the desired end result is not always guaranteed. Several projects, if proven less than commercially viable, are halted before they even reach the developmental stage. Others that make it through the new product life cycle take years to be completed.
The importance of innovation is apparent everywhere. Companies need to constantly be in innovation-mode to remain competitive and become more productive. Government and non-government organizations, too, need to embrace innovation to progress forward.
So when innovation doesn't come easy, what can a company do? What can large multinationals manufacturing hosts of products do to prevent being "out-innovated"?
Proctor and Gamble was in a serious situation. At the turn of the millennium, its R&D productivity had somewhat stabilized, yet costs were increasing beyond top-line growth. Inflationary effects were being seen in everything, from labor costs to prices of equipment and raw materials Their existing innovation model, where pretty much everything from conceptualization to development was done in-house in their global research facilities, was proving to be costly.
The P&G management made a bold but wise move. It broke through its "invent-it-ourselves" model and started looking for innovation beyond its walls. It started actively tapping into the open innovation marketplace for patentable research projects. By offering prizes for valuable research data, inventions and other milestones to innovation, P&G was suddenly attracting qualified scientists all over the world.
Open innovation sounds like a rosy concept, but there are several challenges in adopting that model. For one, building awareness and reaching out to the right crowd of industry leaders with total credibility cannot happen overnight. Even for a Fortune 500 company such as P&G, building a global network of professionals in itself requires time and resources. It took P&G years to identify and grow its network of technology entrepreneurs, suppliers and scientists. Not only that, P&G was also tapping into other R&D companies to license research studies which did not get carried to the developmental stage.
To make things easier, P&G approached a third party agent, InnoCentive. The poster child of open innovation and crowdsourcing, InnoCentive provides research and development driven companies with an avenue to leverage its global pool of talent. With over 150,000 members possessing a variety of backgrounds and expertise, InnoCentive was an incredibly powerful tool for P&G to find solutions.
InnoCentive gave P&G the ability to post challenges at any stage of the development lifecycle. Hence, it can engage outside solvers across four different stages of the product development process - ideation, design, product prototype and final product delivery.
Partnering InnoCentive enabled P&G to circulate its technology briefs around in its network and receive hundreds of proposals for each. After careful evaluation, if a solutions is found, P&G's business development team contacts the producer to begin negotiations for licensing, collaboration or other deals.
A number of successful innovations have resulted from the P&G’s open innovation efforts. Here are some remarkable ones:
- P&G wanted to boost sales of Pringles potato chips. Its executives came up with a unique idea- to print trivia questions right on the chips and lure consumers into buying them for more than just the taste. To do that, however, they needed ink which wasn’t only edible, but that did not break or change the taste of the chips. They did not know if it was worth investing into R&D for this unproven idea. So P&G sought solutions through global networks of scientists, academia and researchers. Eventually, an Italian professor came forth. He already had the ink-jet technology to printing images on cookies and cakes with edible dyes. P&G engaged him and adapted his technology to Pringles potato chips at a much smaller price and time scale.
- In 2006, there was another product upgrade P&G wanted to develop. It wanted to product a “smart†dishwashing detergent, one that effectively displays when the amount of soap dropped into to a sink full of dirty plates is optimal. As with the first challenge, the in-house research required for this project was colossal. Through InnoCentive, P&G found a solution. Another Italian came up with a whole new invention. Right from her home laboratory, she created a dye that would turn the dishwater blue when the right amount of soap is added. For this ingenious solution, P&G awarded her $30,000 in prize money.
- Another successful product was invented when an open innovation technology entrepreneur recommended a special material to P&G. The material, a type of foam produced by a German chemical giant is used for soundproofing and insulation in factories. Seeing that it was being sold in Japan, the entrepreneur contacted P&G wondering if it could be of any other use. P&G, recognizing its potential, approached the German firm to license the material. What followed was incredible- P&G and the German firm co-developed a hit product, the Magic Eraser.
In 2000, only 15% of P&G's new products had elements that came from outside the company. Today, the figure has gone up to 35%. Academia, subject matter experts, government laboratories, and research institutes all over the world are working with P&G to create and license their product innovations. By reaching out to a global pool of talent, P&G has truly overcome several barriers to innovation.
References
http://www.federicibusiness.com/images/Federici_PG0208.pdf
http://hbswk.hbs.edu/archive/5258.html
http://www.reuters.com/article/pressRelease/idUS215811+22-Apr-2008+MW20080422
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