Open Innovation @ P&G

Open Innovation @ P&G
Talk By: Mr. Ashish Chatterjee, Head- Bangalore Innovation Center,
Director- Asia Connect + Develop & Beauty Care,
Proctor &Gamble India
@ CII-Innovation forum – IIM Bangalore
7th May 2009
Scribe: Lokesh V.



Becoming the Partner of Choice for Open Innovation
Introduction
This is a concept of joining hands between the potential players in the market by collaborating among themselves with innovation and technology process. P&G started this, 7-8 years ago, when it found that the Top-Line growth was not happening. This was started under the inspiration, leadership and guidance of their CEO, A G Lafley. The words of the CEO were “if we don’t innovate we don’t grow,” since P&G is a consumer product manufacture i.e. mostly dealing with FMGC products and “touching life & improving life” as their underling concept, P&G had to put more effort on coming up with new product innovation.

This gave rise to a new method of development in P&G called “Open Innovation.” The need for welcoming open innovation has an important plus point that, there may have a good R&D within the organization but the population outside the organization may hold a greater potential in innovating and developing new products. So understanding these potential makers or players and joining hands with them is called Open Innovation.

The creation of network in business with others like customers, retailers and suppliers, etc helps to develop and achieve 50% innovation. But as benefits are always associated with challenges, the greatest challenge in this approach is making the in-house R&D researchers understand the values and merits of this approach. As when the organization goes for open innovations it may give a negative impact to its R&D researchers as ineffective people and take open innovation as a competing concept for their existence. So they may build a negative attitude towards the acceptance of open innovation approach.

One of the best ways to develop is by making Suppliers not just Vendors but a “Business Partners” in market. So to make the suppliers follow in line with the innovation strategy of the organization, make a change in the traditional culture of business relationship and treat the suppliers as business partners.

The other way is joining hands with Business Competitor in a new product line and starting a new business while being competitors in the existing business. This could be a mutual growth for both.
This will help in gaining their maximum support and cooperation in business. This is not a cost cutting exercise, but it’s a value adding exercise.

Success Stories

1. P&G with Clorox
P&G had developed an innovative plastic food wrapping product and wanted to implement it into market. Since they were not having the technology for mass production and the financial analysis gave a negative result for starting it from zero level, they joined hands with North American leading brand in this space called “Clorox” for the marketing of the product with their new technology. P&G supported with the technology of the new product and Clorox implemented it through their production system. This is marketed with the brand name “Impress”. This product became a big hit in the consumer market in North America.

2. Swiffer Dusters
This is a product that P&G marked in America, Europe and Africa by joining hands with a Japanese company. As we know that dusters are not flexible to be used at ever corner. But one of the Japanese Company which had a strong brand value in Japan came up with a new product which is a flexible duster. Since the inventor company had a market only in Japan, P&G joined hands with them and used their technology for marketing the product in other parts of the world while the Japanese company controlled the market are in Asia. Thus, P&G used a technology of their competitor in Japan by connecting with them and made a brand in the rest of the world, which stands as a win-win situation for both.

3. Olay
This is one of the best wrinkle treatment creams available in the U.S market and is a reputed brand name produced under P&G. They got this technology from a SME in France called “Sederma” which had this formula and were a market leader in France. By connecting with this SME, P&G could capture and emerge as one on of the best brand in U.S market. Thus, even joining hands with small-medium enterprises can be a helping hand in the open innovation approach.

All these examples are the success stories of P&G by the adopting the “Connect + Develop approach”.
Learning from Downfalls
“Be flexible with IP Rights & deal structure” because every deal is unique. Sometimes some deals may stand good on paper but its actual implementation may not have such an effect as it was thought off. When being a bigger company like P&G and getting in deal with a SME or an individual (innovator), one of the great things to remember is to get an answer for this question “would you sign if you were the party?” before proceeding with the deal or contract agreement with the other party. This is because while being a bigger player in market when compared to the other party the organization may try to dominate the deal. This actually de-motivates the innovator to join hands for the deal and subsequently he joins hand with ones business competitor, which could be a bigger loss for the organization.

To have a better cooperation with ones partner (SME or innovator) don’t try to carve the biggest part from the deal but try to make a big pie for all to share. This creates a Win-Win situation and the partner won’t feel he is being treated as “Second Class.”
Thus, this points to one though i.e. “Love the one you are with.” This will build and maintain a greater degree of trust in the mutual relationship put forward. Thus developing products with the existing or earlier know company or dealers will build higher degree of trust and cooperation than that with a new comer. “The second deal with the same partner takes half as long and is worth twice as much as the first.”

Open for Business
In the concept of open innovation one must
· welcome unsolicited ideas
· be smartly proactive
· have a “robust” vetting/ rapid response, internal system

Connect + Develop
It’s all about “collaborating for value creation.” It’s not the number of connection that matters but the value of the connection which matters. These values can be generally divided as:
· Monetary Value created by Partner and Innovation.
· Scale and Global reach.
· Trusted Brands and winning track record.

C+D begins from home i.e. the systematic organization should be done from within the organizational desk to find the business mid spot where the innovation will fit in the market space. In collaboration and connection, one must understand what one can do internally and what one needs from external source. C+D is all about relationship built on shared understanding of capacity and a clear connection to innovation strategy and also value creation & number of connection.

Focus Areas

1. SMEs – in early days the multinational companies with huge R&D labs hold the 70% of the patent rights in the world but today it has reversed and SMEs hold 70% of the patent rights in the world while the rest is in the hands of MNCs.
2. Capabilities & Service – one should be able to locate the IP resources and must know whom to connect with and when.
3. Knowledge Partners – this is all about institutional support from research institutions like NASA, CSIR.
4. C+D with Universities – this is gathering information from research project works done by students under various Universities. Ecological sustainability can be brought with working with University.

Learning Points:
1. Establish, Nurture & Maintain the relationships with all whom you get connected.
2. Build Confidence & Trust.
3. Find the right deal structure.
4. Effective collaboration framework – this can be achieved by internally developing and making the organization’s employees understand the value of partners and developing them with the growth of the organization.
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