Wednesday, June 20, 2012

Innovation ~ 175 years of Success! ~John J Arent

I was doing some research on innovation and came across the following list of companies who are considered some of the greatest innovators in our time….


The interesting thing about these companies is that one stands out as quite different from all the others.  P&G.  I worked for P&G for several years early in my career and I am particularly proud of the fact that this company was on this list.  Primarily started as a consumer product company, it has branched out with broad exposures beyond its founding soap products.  Today, sales have reached  82.6B compared to the 10B that the company was doing when I first arrived in 1979….Some incredible growth for a company that continually reinvents itself.  One of the amazing statistics is that each and every day, there are over 3B usages of P&G products worldwide!

How has this company survived since it was founded back in 1837?   Simply put, Imagination and Innovation!  When I was an employee, the R&D was extraordinary.  P&G’s growth came from “in-house” research and development of it’s existing product line.  There was a book written in the early 80’s, “Eyes on Tomorrow” by Oscar Schisgall.  This book was eye-opening about the first 150 years of success that P&G created.   When I was an employee from 1979 until 1985, a proud theme of the executive management of the company was that our company had doubled revenues each decade.

P&G’s growth in the following decade began to slow and they had to once again re-invent themselves. Since then, the company transformed itself and developed it’s open source innovation strategy which it called “connect & develop”.  Rather than rely solely on it’s in-house innovations, the company expanded to embrace the world of business outside P&G.  It’s goal was to gain acceleration by growing 50% internally and the other 50% from products that they would acquire outside of the company and then work feverishly to develop innovation from those products

 It created new job classifications, such as "technology entrepreneurs," or TEs, who acted as scouts, looking for the latest breakthroughs from places such as university labs. TEs also helped to develop "technology game boards" that mapped out where technology opportunities existed and helped it’s inside team gain valuable insight from  inside the minds of its competitors.

Each business unit, from household care to family health, were charged with driving cultural change around the new products and industries that were acquired. As has been seen with the “rules of innovation”, the goal was to have a coherent strategy across the organization. As P&G studied outside sources of innovation, it was 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 P&G could potentially use. But tapping into the creative thinking of inventors and others on the outside would required massive operational changes. To reinvent themselves as a company, they  needed to move the company's attitude from resistance to innovations "not invented here" to enthusiasm for those "proudly found elsewhere.”  The company maintained it’s very large R&D group  and how they thought of themselves from  7,500 people inside to 7,500 plus 1.5 million outside, without silos or boundaries  between them.  This is certainly not an easy undertaking but it definitely has defined P&G’s success in the past 10 years. 

The model works. Today, more than 35 percent of P&G's 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 their product development portfolio have key elements that were discovered externally. A model of innovation with major roots from external sources for the past 12 years.  Great job, P&G!

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