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The Idea in Cursory

To stay competitive, your company must drive top-line growth. And innovation is the engine for that growth. But if you're relying solely on internal innovation—new products and services adult past your own R&D team—your engine may be sputtering. Why? For many firms, R&D productivity is flattening while innovation budgets are climbing faster than revenues.

A better approach to innovation? The connect and develop method. Through this radical alternative, you connect with external sources of new ideas: university and government labs, Web-based talent markets, suppliers, even competitors. Then you develop those ideas into assisting new or refined products—swiftly and cheaply—using your house'due south R&D, manufacturing, and marketing prowess.

Procter & Adventure used connect and develop to launch Pringles Prints—a line of potato crisps printed with entertaining pictures and words—in record fourth dimension and at a fraction of the normal toll. Instead of looking inside for solutions to the problem of how to print images on crisps, P&G searched its global networks of individuals and institutions. It discovered a small baker in Italy, run by a academy professor who had invented an ink-jet method for printing edible images on cakes and cookies. P&G adapted the method—and its North American Pringles business scored double-digit growth.

The Idea in Practice

To employ connect and develop:

Know Where to Look

Before scouring the world for ideas you might develop into assisting products, analyze what you're looking for:

  • Identify consumer needs. Ask business unit leaders which consumer needs, when satisfied, will drive their brands' growth. Translate needs into briefs describing bug to solve. Consider where yous might seek solutions.

Example:

P&Yard unit managers identified a demand for laundry detergent that cleans effectively in cold water. They decided to search for relevant innovations in chemical science and biotechnology solutions that enable products to work well at low temperatures. Possibilities included labs studying enzymatic reactions in microbes that thrive under polar caps.

  • Identify adjacencies. Ask which new product categories, related to your current categories, can enhance your existing brand equity. Then seek innovative ideas in those categories.

Example:

P&Chiliad expanded its Crest brand beyond toothpaste to include whitening strips, power toothbrushes, and flosses.

Leverage Your Networks

Cultivate both proprietary and open networks whose members may have promising ideas. Example:

P&Chiliad's proprietary networks include its acme fifteen suppliers, who collectively have 50,000 R&D staff. Information technology created a secure Information technology platform to share problem briefs with these suppliers—who can't see others' responses to briefs. Ane chemic supplier, for case, may have ideas for making detergent perfume last longer subsequently clothes terminate drying.

P&G'southward open networks include NineSigma, a company that connects interested corporations with universities, government and private labs, and consultants that tin can develop solutions to science and technology problems. NineSigma creates briefs describing contracting companies' bug and sends them to thousands of possible solution providers worldwide.

Distribute and Screen Ideas

Y'all've identified ideas for refining and further commercializing existing products or for employing technology solutions to create new products. Now distribute these ideas internally—ensuring that managers screen them for potential. Example:

At P&M, product ideas are logged on P&G'southward online "eureka catalog," through a template documenting pertinent facts—such every bit current sales of existing products or patent availability for a new applied science. The document goes to P&G general managers, brand managers, and R&D teams worldwide. Production ideas are besides promoted to relevant business line managers, who gauge their business potential and place possible obstacles to development.

Promote Openness to External Ideas

Encourage utilise of outside ideas. For example, P&Chiliad rewards employees for speed of product development. Incentives thus favor innovation adult from exterior ideas, since these often move more speedily from concept to marketplace.
Andy Roberts/Getty Images

Procter & Hazard launched a new line of Pringles potato crisps in 2004 with pictures and words—trivia questions, beast facts, jokes—printed on each crisp. They were an firsthand hit. In the old days, information technology might take taken the states two years to bring this product to market, and we would take shouldered all of the investment and risk internally. Merely by applying a fundamentally new arroyo to innovation, we were able to accelerate Pringles Prints from concept to launch in less than a twelvemonth and at a fraction of what it would have otherwise cost. Hither'southward how we did it.

Back in 2002, every bit we were brainstorming about means to make snacks more than novel and fun, someone suggested that we print pop civilisation images on Pringles. It was a not bad idea, merely how would nosotros practice it? One of our researchers idea we should try ink-jetting pictures onto the potato dough, and she used the printer in her office for a test run. (Yous tin imagine her call to our computer help desk.) Nosotros apace realized that every crisp would have to be printed as it came out of frying, when it was withal at a high humidity and temperature. And somehow, we'd have to produce sharp images, in multiple colors, even as nosotros printed thousands upon thousands of crisps each minute. Moreover, creating edible dyes that could meet these needs would require tremendous development.

Traditionally, nosotros would have spent the bulk of our investment just on developing a workable process. An internal team would have hooked upwardly with an ink-jet printer visitor that could devise the procedure, and and so we would have entered into complex negotiations over the rights to utilize it.

Instead, we created a engineering science brief that defined the bug we needed to solve, and we circulated it throughout our global networks of individuals and institutions to find if anyone in the world had a ready-made solution. It was through our European network that we discovered a pocket-size bakery in Bologna, Italy, run by a university professor who also manufactured blistering equipment. He had invented an ink-jet method for printing edible images on cakes and cookies that we rapidly adapted to solve our problem. This innovation has helped the North America Pringles business reach double-digit growth over the past two years.

From R&D to C&D

Near companies are notwithstanding clinging to what we call the invention model, centered on a bricks-and-mortar R&D infrastructure and the idea that their innovation must principally reside within their ain four walls. To exist sure, these companies are increasingly trying to buttress their laboring R&D departments with acquisitions, alliances, licensing, and selective innovation outsourcing. And they're launching Skunk Works, improving collaboration between marketing and R&D, tightening go-to-market criteria, and strengthening product portfolio management.

About companies are nonetheless clinging to a bricks-and-mortar R&D infrastructure and the idea that their innovation must principally reside within their own 4 walls.

But these are incremental changes, bandages on a cleaved model. Stiff words, perhaps, but consider the facts: Nigh mature companies have to create organic growth of four% to 6% year in, year out. How are they going to do it? For P&G, that'southward the equivalent of building a $4 billion business this yr alone. Non long ago, when companies were smaller and the globe was less competitive, firms could rely on internal R&D to drive that kind of growth. For generations, in fact, P&Chiliad created about of its phenomenal growth past innovating from within—building global inquiry facilities and hiring and holding on to the best talent in the world. That worked well when we were a $25 billion company; today, we're an almost $seventy billion company.

By 2000, information technology was clear to usa that our invent-it-ourselves model was not capable of sustaining loftier levels of top-line growth. The explosion of new technologies was putting ever more pressure on our innovation budgets. Our R&D productivity had leveled off, and our innovation success charge per unit—the pct of new products that met financial objectives—had stagnated at virtually 35%. Squeezed by nimble competitors, flattening sales, lackluster new launches, and a quarterly earnings miss, we lost more than half our marketplace cap when our stock slid from $118 to $52 a share. Talk about a wake-up call.

The globe's innovation landscape had changed, nonetheless we hadn't changed our own innovation model since the tardily 1980s, when nosotros moved from a centralized approach to a globally networked internal model—what Christopher Bartlett and Sumantra Ghoshal phone call the transnational model in Managing Across Borders.

Nosotros discovered that of import innovation was increasingly being done at modest and midsize entrepreneurial companies. Even individuals were eager to license and sell their intellectual belongings. University and government labs had become more interested in forming industry partnerships, and they were hungry for ways to monetize their research. The Internet had opened up access to talent markets throughout the globe. And a few frontward-looking companies like IBM and Eli Lilly were start to experiment with the new concept of open innovation, leveraging i another'due south (even competitors') innovation avails—products, intellectual property, and people.

Every bit was the example for P&M in 2000, R&D productivity at most mature, innovation-based companies today is flat while innovation costs are climbing faster than top-line growth. (Not many CEOs are going to their CTOs and saying, "Here, accept some more than money for innovation.") Meanwhile, these companies are facing a growth mandate that their existing innovation models tin can't possibly support. In 2000, realizing that P&1000 couldn't meet its growth objectives past spending more and more on R&D for less and less payoff, our newly appointed CEO, A.Yard. Lafley, challenged us to reinvent the visitor's innovation business model.

We knew that virtually of P&M's all-time innovations had come from connecting ideas across internal businesses. And after studying the performance of a modest number of products we'd acquired across our ain labs, we knew that external connections could produce highly profitable innovations, as well. Betting that these connections were the cardinal to future growth, Lafley made it our goal to acquire 50% of our innovations outside the company. The strategy wasn't to replace the capabilities of our vii,500 researchers and support staff, simply to amend leverage them. Half of our new products, Lafley said, would come from our own labs, and half would come through them.

It was, and still is, a radical thought. Equally we studied outside sources of innovation, we estimated that for every P&G researcher in that location were 200 scientists or engineers elsewhere in the world who were just as good—a full of perhaps one.v meg people whose talents we could potentially use. But tapping into the creative thinking of inventors and others on the exterior would require massive operational changes. We needed to move the company's attitude from resistance to innovations "not invented here" to enthusiasm for those "proudly found elsewhere." And we needed to change how nosotros divers, and perceived, our R&D organization—from 7,500 people inside to vii,500 plus one.five million exterior, with a permeable boundary between them.

It was confronting this properties that we created our connect and develop innovation model. With a articulate sense of consumers' needs, we could identify promising ideas throughout the earth and employ our own R&D, manufacturing, marketing, and purchasing capabilities to them to create improve and cheaper products, faster.

The model works. Today, more than 35% of our new products in market have elements that originated from exterior P&Thousand, up from about 15% in 2000. And 45% of the initiatives in our production evolution portfolio have key elements that were discovered externally. Through connect and develop—forth with improvements in other aspects of innovation related to product price, blueprint, and marketing—our R&D productivity has increased by well-nigh lx%. Our innovation success rate has more than doubled, while the toll of innovation has fallen. R&D investment as a percentage of sales is down from 4.8% in 2000 to 3.4% today. And, in the last 2 years, nosotros've launched more than 100 new products for which some attribute of execution came from outside the company. 5 years after the company's stock plummet in 2000, we have doubled our share cost and have a portfolio of 22 billion-dollar brands.

Co-ordinate to a recent Conference Board survey of CEOs and board chairs, executives' number one concern is "sustained and steady summit-line growth." CEOs understand the importance of innovation to growth, yet how many have overhauled their basic arroyo to innovation? Until companies realize that the innovation landscape has inverse and acknowledge that their current model is unsustainable, most will find that the height-line growth they require volition elude them.

Where to Play

When people first hear about connect and develop, they often call back information technology's the same as outsourcing innovation—contracting with outsiders to develop innovations for P&1000. Just it's non. Outsourcing strategies typically but transfer work to lower-toll providers. Connect and develop, by contrast, is well-nigh finding practiced ideas and bringing them in to enhance and capitalize on internal capabilities.

To practice this, we collaborate with organizations and individuals around the globe, systematically searching for proven technologies, packages, and products that we tin improve, scale up, and market, either on our own or in partnership with other companies. Among the most successful products we've brought to market through connect and develop are Olay Regenerist, Swiffer Dusters, and the Crest SpinBrush.

For connect and develop to work, we realized, information technology was crucial to know exactly what we were looking for, or where to play. If nosotros'd gear up out without advisedly defined targets, we'd have found loads of ideas but perhaps none that were useful to us. So we established from the start that we would seek ideas that had some degree of success already; nosotros needed to run across, at least, working products, prototypes, or technologies, and (for products) testify of consumer interest. And nosotros would focus on ideas and products that would benefit specifically from the application of P&G engineering science, marketing, distribution, or other capabilities.

And then we determined the areas in which we would look for these proven ideas. P&G is perhaps best known for its personal hygiene and household-cleaning products—brands like Crest, Charmin, Pampers, Tide, and Downy. Nevertheless we produce more than 300 brands that span, in addition to hygiene and cleaning, snacks and beverages, pet nutrition, prescription drugs, fragrances, cosmetics, and many other categories. And we spend almost $2 billion a year on R&D across 150 science areas, including materials, biotechnology, imaging, diet, veterinary medicine, and even robotics.

To focus our idea search, we directed our surveillance to three environments:

Meridian ten consumer needs.

Once a year, nosotros enquire our businesses what consumer needs, when addressed, will drive the growth of their brands. This may seem like an obvious question, but in nearly companies, researchers are working on the problems that they find interesting rather than those that might contribute to make growth. This inquiry produces a top-ten-needs list for each business concern and one for the company overall. The visitor list, for instance, includes needs such every bit "reduce wrinkles, improve skin texture and tone," "improve soil repellency and restoration of difficult surfaces," "create softer paper products with lower lint and higher wet strength," and "prevent or minimize the severity and elapsing of common cold symptoms."

These needs lists are then developed into science issues to be solved. The problems are often spelled out in technology briefs, like the i we sent out to find an ink-jet process for Pringles Prints. To take another case, a major laundry need is for products that make clean effectively using common cold water. So, in our search for relevant innovations, we're looking for chemical science and biotechnology solutions that permit products to piece of work well at low temperatures. Maybe the respond to our cold-h2o-cleaning problem is in a lab that's studying enzymatic reactions in microbes that thrive under polar water ice caps, and nosotros demand merely to find the lab.

Adjacencies.

We too identify adjacencies—that is, new products or concepts that tin can assistance u.s. have advantage of existing brand equity. We might, for case, inquire which baby care items—such as wipes and changing pads—are adjacent to our Pampers disposable diapers, and so seek out innovative emerging products or relevant technologies in those categories. By targeting adjacencies in oral care, nosotros've expanded the Crest brand across toothpaste to include whitening strips, ability toothbrushes, and flosses.

Engineering game boards.

Finally, in some areas, nosotros use what we call technology game boards to evaluate how technology acquisition moves in one area might affect products in other categories. Conceptually, working with these planning tools is like playing a multilevel game of chess. They help us explore questions such equally "Which of our primal technologies practice we desire to strengthen?" "Which technologies do we want to acquire to assist usa better compete with rivals?" and "Of those that we already own, which do we want to license, sell, or codevelop further?" The answers provide an array of broad targets for our innovation searches and, as of import, tell the states where we shouldn't be looking.

How to Network

Our global networks are the platform for the activities that, together, constitute the connect-and-develop strategy. Simply networks themselves don't provide competitive advantage whatsoever more than the telephone arrangement does. It'south how you build and apply them that matters.

Inside the boundaries defined past our needs lists, adjacency maps, and technology game boards, no source of ideas is off-limits. Nosotros tap closed proprietary networks and open up networks of individuals and organizations available to any company. Using these networks, we look for ideas in government and private labs, every bit well as academic and other inquiry institutions; we tap suppliers, retailers, competitors, development and trade partners, VC firms, and private entrepreneurs.

Here are several core networks that we use to seek out new ideas. This is not an exhaustive list; rather, it is a snapshot of the networking capabilities that we've plant most useful.

Proprietary networks.

Nosotros rely on several proprietary networks adult specifically to facilitate connect-and-develop activities. Here are two of the largest ones.

Engineering science entrepreneurs.

Much of the operation and momentum of connect and develop depends on our network of 70 technology entrepreneurs based around the globe. These senior P&G people lead the development of our needs lists, create adjacency maps and engineering science game boards, and write the technology briefs that ascertain the problems we are trying to solve. They create external connections by, for example, meeting with university and manufacture researchers and forming supplier networks, and they actively promote these connections to decision makers in P&G's business units.

The technology entrepreneurs combine aggressive mining of the scientific literature, patent databases, and other data sources with physical prospecting for ideas—say, surveying the shelves of a store in Rome or combing product and technology fairs. Although information technology's effective and necessary to sentry for ideas electronically, it'southward non sufficient. It was a technology entrepreneur who, exploring a local market place in Japan, discovered what ultimately became the Mr. Make clean Magic Eraser. We surely wouldn't have found it otherwise. (Run across the exhibit "The Osaka Connection.")

In the connect-and-develop world, chance favors the prepared mind. When one of P&Chiliad'south technology entrepreneurs discovered a stain-removing sponge in a market in Osaka, Japan, he sent it to the company for evaluation. The resulting production, the Mr. Clean Magic Eraser, is now in third-generation evolution and has accomplished double its projected revenues.

High german chemic company BASF articles a melamine resin foam called Basotect for soundproofing and insulation in the construction and automotive industries.

LEC, a Tokyo-based consumer-products visitor, markets Basotect foam in Japan as a household sponge called Cleenpro.

2001

Discover

Nihon-based applied science entrepreneur with P&G discovers the production in an Osaka grocery store, evaluates its market performance in Japan, and establishes its fit with the P&Yard habitation-care product development and marketing criteria.

2002

Evaluate

The technology entrepreneur sends samples to R&D product researchers in Cincinnati for performance evaluation and posts a product clarification and evaluation of market potential on P&G'southward internal "eureka catalog" network.

Market research confirms enthusiasm for the product. Product is moved into portfolio for evolution; P&K negotiates buy of Basotect from BASF and terms for further collaboration.

2003

Launch

Basotect is packaged as-is and launched nationally as Mr. Clean Magic Eraser.

Mr. Clean Magic Eraser is launched in Europe.

BASF and P&G researchers collaborate in shared labs to improve Basotect's cleaning backdrop, immovability, and versatility.

2004

Cocreate

The first cocreated Basotect product, the Magic Eraser Duo, is launched nationally in the The states.

The cocreated Magic Eraser Wheel & Tire is launched nationally in the U.s.a..

BASF and P&G interact on next-generation Magic Eraser products.

The technology entrepreneurs work out of six connect-and-develop hubs, in People's republic of china, India, Nippon, Western Europe, Latin America, and the United States. Each hub focuses on finding products and technologies that, in a sense, are specialties of its region: The China hub, for example, looks in particular for new high-quality materials and cost innovations (products that exploit Mainland china'south unique ability to make things at depression toll). The Republic of india hub seeks out local talent in the sciences to solve problems—in our manufacturing processes, for instance—using tools like reckoner modeling.

Thus far, our technology entrepreneurs take identified more than ten,000 products, product ideas, and promising technologies. Each of these discoveries has undergone a formal evaluation, every bit we'll draw further on.

Suppliers.

Our top 15 suppliers have an estimated combined R&D staff of 50,000. Equally we built connect and develop, it didn't have us long to realize that they represented a huge potential source of innovation. So we created a secure IT platform that would allow usa to share technology briefs with our suppliers. If we're trying to find ways to make detergent perfume last longer subsequently clothes come up out of the dryer, for instance, one of our chemic suppliers may well have the solution. (Suppliers can't see others' responses, of course.) Since creating our supplier network, we've seen a 30% increment in innovation projects jointly staffed with P&One thousand's and suppliers' researchers. In some cases, suppliers' researchers come to work in our labs, and in others, we work in theirs—an example of what we call "cocreation," a type of collaboration that goes well across typical joint development.

We likewise agree top-to-top meetings with suppliers and so our senior leaders can interact with theirs. These meetings, along with our shared-staff arrangements, ameliorate relationships, increase the flow of ideas, and strengthen each company's agreement of the other's capabilities—all of which helps us innovate.

Open networks.

A complement to our proprietary networks are open up networks. The following four are specially fruitful connect-and-develop resources.

The connect-and-develop strategy requires that a senior executive have day-to-day accountability for its vision, operations, and performance. At P&G, the vice president for innovation and knowledge has this responsibleness. Connect-and-develop leaders from each of the business units at P&G have dotted-line reporting relationships with the VP. The managers for our virtual R&D networks (such as NineSigma and our supplier network), the technology entrepreneur and hub network, our connect-and-develop legal resources, and our preparation resources report directly.

The VP oversees the development of networks and new programs, manages a corporate budget, and monitors the productivity of networks and activities. This includes tracking the operation of talent markets similar NineSigma and InnoCentive too equally measuring connect-and-develop productivity by region—evaluating, for example, the costs and output (as measured by products in market) of strange hubs. Productivity measurements for the entire plan are reported annually.

NineSigma.

P&One thousand helped create NineSigma, one of several firms connecting companies that have science and technology problems with companies, universities, government and private labs, and consultants that tin develop solutions. Say you have a technical trouble you want to crack—for P&Thou, as you'll remember, 1 such problem is common cold-temperature washing. NineSigma creates a technology brief that describes the trouble, and sends this to its network of thousands of possible solution providers worldwide. Any solver can submit a nonconfidential proposal back to NineSigma, which is transmitted to the contracting company. If the company likes the proposal, NineSigma connects the visitor and solver, and the projection proceeds from there. We've distributed engineering briefs to more than 700,000 people through NineSigma and have as a issue completed over 100 projects, with 45% of them leading to agreements for farther collaboration.

InnoCentive.

Founded by Eli Lilly, InnoCentive is similar to NineSigma—simply rather than connect companies with contract partners to solve broad bug across many disciplines, InnoCentive brokers solutions to more narrowly defined scientific problems. For case, nosotros might have an industrial chemic reaction that takes five steps to achieve and want to know if it can exist done in three. We'll put the question to InnoCentive'due south 75,000 contract scientists and meet what we get dorsum. We've had problems solved past a graduate educatee in Kingdom of spain, a chemist in India, a freelance chemical science consultant in the United States, and an agricultural pharmacist in Italia. About a tertiary of the problems we've posted through InnoCentive take been solved.

YourEncore.

In 2003, we laid the groundwork for a business chosen YourEncore. Now operated independently, it connects near 800 high-performing retired scientists and engineers from 150 companies with client businesses. By using YourEncore, companies can bring people with deep feel and new ways of thinking from other organizations and industries into their own.

Through YourEncore, you tin can contract with a retiree who has relevant experience for a specific, short-term assignment (bounty is based on the person's preretirement bacon, adjusted for inflation). For case, we might tap a former Boeing engineer with expertise in virtual aircraft design to employ his or her skills in virtual product prototyping and manufacturing design at P&Chiliad, fifty-fifty though our projects take nothing to exercise with aviation. What makes this model then powerful is that customer companies tin can experiment at depression cost and with petty take chances on cross-disciplinary approaches to problem solving. At any betoken, we might take 20 retirees from YourEncore working on P&G problems.

Yet2.com.

Half dozen years ago, P&G joined a grouping of Fortune 100 companies as an initial investor in Yet2.com, an online marketplace for intellectual property exchange. Unlike NineSigma and InnoCentive, which focus on helping companies find solutions to technology problems, Yet2.com brokers engineering transfer both into and out of companies, universities, and government labs. Yet2.com works with clients to write briefs describing the technology that they're seeking or making available for license or buy, and distributes these briefs throughout a global network of businesses, labs, and institutions. Network members interested in posted briefs contact Yet2.com and request an introduction to the relevant client. One time introduced, the parties negotiate directly with each other. Through Yet2.com, P&Yard was able to license its low-cost microneedle technology to a company specializing in drug delivery. Equally a event of this human relationship, nosotros have ourselves licensed applied science that has applications in some of our core businesses.

When to Appoint

One time products and ideas are identified past our networks around the world, we need to screen them internally. All the screening methods are driven past a core agreement, pushed downwards through the entire organization, of what we're looking for. Information technology's beyond the scope of this article to describe all of the processes nosotros use to evaluate ideas from outside. But a look at how we might screen a new product found by a technology entrepreneur illustrates one common approach.

When our engineering science entrepreneurs are coming together with lab heads, scanning patents, or selecting products off store shelves, they're conducting an initial screening in real time: Which products, technologies, or ideas run into P&G's where-to-play criteria? Allow's assume a technology entrepreneur finds a promising product on a store shelf that passes this initial screening. His or her next pace will be to log the product into our online "eureka catalog," using a template that helps organize sure facts about the product: What is it? How does information technology come across our business needs? Are its patents available? What are its current sales? The catalog's descriptions and pictures (which take a kind of Sharper Image experience) are distributed to general managers, brand managers, R&D teams, and others throughout the company worldwide, according to their interests, for evaluation.

Meanwhile, the technology entrepreneur may actively promote the product to specific managers in relevant lines of business. If an item captures the attending of, say, the managing director of the babe care business, she volition appraise its alignment with the goals of the business organization and subject information technology to a bombardment of applied questions—such as whether P&Chiliad has the technical infrastructure needed to develop the product—meant to identify any showstopping impediments to evolution. The managing director will also gauge the product'due south business potential. If the detail continues to await promising, it may be tested in consumer panels and, if the response is positive, moved into our production development portfolio. Then we'll engage our external business development (EBD) group to contact the product'south manufacturer and begin negotiating licensing, collaboration, or other deal structures. (The EBD group is also responsible for licensing P&G's intellectual property to third parties. Often, we find that the most assisting arrangements are ones where we both license to and license from the aforementioned company.) At this point, the product found on the exterior has entered a development pipeline similar in many ways to that for any production adult in-house.

The procedure, of course, is more complex and rigorous than this thumbnail sketch suggests. In the end, for every 100 ideas constitute on the exterior, only one ends up in the market place.

Push the Culture

No amount of idea hunting on the outside volition pay off if, internally, the organization isn't behind the plan. In one case an idea gets into the development pipeline, it needs R&D, manufacturing, market enquiry, marketing, and other functions pulling for it. Merely, as you know, until very recently, P&One thousand was securely centralized and internally focused. For connect and develop to work, nosotros've had to nurture an internal civilisation change while developing systems for making connections. And that has involved not merely opening the company's floodgates to ideas from the outside but actively promoting internal idea exchanges too.

For any production development program, we tell R&D staff that they should start by finding out whether related work is being done elsewhere in the company; and then they should encounter if an external source—a partner or supplier, for instance—has a solution. Simply if those two avenues yield nothing should nosotros consider inventing a solution from scratch. Wherever the solution comes from (inside or out), if the end product succeeds in the marketplace, the rewards for employees involved in its development are the aforementioned. In fact, to the extent that employees get recognition for the speed of product evolution, our reward systems actually favor innovations developed from outside ideas since, like Pringles Prints, these often motion more than quickly from concept to market place.

Procter & Gamble's development and implementation of connect and develop has unfolded over many years. At that place take been some hiccups along the way, only largely it has been a methodical process of learning by doing, abandoning what doesn't piece of work and expanding what does. Over v years in, nosotros've identified three core requirements for a successful connect-and-develop strategy.

  • Never assume that "ready to go" ideas institute exterior are truly ready to go. There will ever be development work to do, including risky scale-up.
  • Don't underestimate the internal resources required. You lot'll need a full-time, senior executive to run any connect-and-develop initiative.
  • Never launch without a mandate from the CEO. Connect and develop cannot succeed if it'south cordoned off in R&D. It must exist a top-downwardly, companywide strategy.

We have 2 broad goals for this reward structure. 1 is to make sure that the best ideas, wherever they come from, rise to the surface. The other is to exert steady pressure on the culture, to go on to shift mind-sets away from resistance to "not invented hither." Early on, employees were broken-hearted that connect and develop might eliminate jobs or that P&One thousand would lose capabilities. That stands to reason, since equally you lot increase the ideas coming in from the outside yous might wait an equivalent decrease in the demand for internal ideas. But with our growth objectives, there is no limit to our need for solid business-building ideas. Connect and develop has not eliminated R&D jobs, and information technology has actually required the company to develop new skills. There are nevertheless pockets within P&G that have not embraced connect and develop, but the trend has been toward accepting the approach, fifty-fifty championing it, equally its benefits have accrued and people accept seen that it reinforces their ain work.

Adapt or Die

Nosotros believe that connect and develop will get the dominant innovation model in the twenty-first century. For most companies, every bit we've argued, the alternative invent-it-ourselves model is a sure path to diminishing returns.

To succeed, connect and develop must be driven past the top leaders in the system. It is destined to fail if it is seen as solely an R&D strategy or isolated as an experiment in some other corner of the visitor. As Lafley did at P&G, the CEO of whatever organisation must make it an explicit company strategy and priority to capture a certain amount of innovation externally. In our example, the target is a enervating—even radical—50%, only we're well on our manner to achieving it.

Don't postpone crafting a connect-and-develop strategy, and don't approach the procedure incrementally. Companies that fail to adapt to this model won't survive the competition.

A version of this article appeared in the March 2006 consequence of Harvard Business Review.