PG_Open_Innovation

UNIVERSITYOFBATH,MSCININNOVATIONANDTECHNOLOGYMANAGEMENTConnectandDevelopP&G'sbigstakeinopeninnovationLimaliPanduwawalaSuvidhaVenkateshPedroParraguezXiajingZhang27/11/2009Abstract:ThisreportexploresP&G'sConnectandDevelopopeninnovationinitiative.Itsfocusistoanalysethisinnovationstrategyinthecontextoftheformalacademictheory,otherP&G'sprogrammesandthecompanysituation.Itsobjectiveistounderstandtheimpacts,challengesandproblemsofimplementingalargeopeninnovationinitiativeinsideacorporategiantsuchasP&G.Keywords:Procter&Gamble,P&G,OpenInnovation,ConnectandDevelop,InnovationNetworks2ConnectandDevelop,P&G'sbigstakeinopeninnovation1IntroductionInnovationisthemaindriverforeconomicgrowthandprogressofcompanies.Intheageoftheinternet,itassumesevengreaterimportanceasmaintainingcompetitiveadvantagebecomestougherwithtechnologythatbringstheworldcloserandcollapsestheconceptoftimeandspace.Procter&Gambleisacompanythathasbeenapioneerinthisfieldofinnovation.Theyareglobalmanufacturersandmarketersofconsumerproductswithcomplexoperationalnetworks.P&Ghavebeenabletomaintaintheirpositioninthemarketbyadoptingvariousinnovationtechniquesandstrategies.ThisreportlooksattheinnovationstrategiesadoptedbyP&G,particularlywithafocusonOpenInnovation.ThereportdescribesthetheoreticalframeworkoftheinnovationmodelthecompanyhasusedalongwithitsInnovationstrategyanditsmanagement,followedbyananalysisoftheP&GOpenInnovationmodel,itsproblemsandchallengesandourconclusions.2TheoreticalFramework2.1InnovationnetworksOneassumesthatinnovationisastand-aloneconceptwhichworkswellindependently.Inrealitythisisnottrue.Toconvertagoodideaintoaprofitableproduct/servicealotmoreinputfromdifferentpeopleanddifferentperspectivesisrequired.Makinginnovationhappenisaboutbringpeopleorteamstogetherinacreativeandproductivemanner.Intheeraofglobalisationwithaccesstohigh-speedinfrastructureandwithteamsonthemoveallthetime,building,maintaininganddevelopingnetworksbecomesthekeyissueintheprocessofinnovation.Usuallyinnovationisseenascoreprocesswithadefinedarchitecturewithexternalinfluencesactingonit.However,inrealityitisnotsuchasimplifiedstructure.Itisfarmorecomplexthanthat.Thepathofknowledgearoundaninnovationprojectismorecomplexandinteractive,appearinglikesomekindof‘socialspaghetti’wheredifferentpeopletalkatdifferenttimesaboutdifferentissues.(TiddandBessant,2008)Anetworkcanbedefinedasacomplexinterconnectedsystemorstructure,whichisusedtogetworkdone.Anetworkconsistsofnodesorpointsofactionwhichareoccupiedby3ConnectandDevelop,P&G'sbigstakeinopeninnovationindividuals,companies,researchinstitutions,universities,governments,customersandsoon.Thesenetworksaregreatlyaffectedbyhoweconomicactivitiesareinfluencedbythesocialsetupandthepositionthatthenodesorpointsoccupyinthenetwork.Therefore,anetworkcanbeinfluencedintwoways,i.e.bytheinteractionwithinthenetworkandthroughthedifferencesinpositionofthenodalplayers,whichcancausepowerandcontrolimbalance.NetworksworkbestwhentheadvantagesofCo-specialisation,sharinginfrastructureandstandardsandotherbenefitsoutweighthecostsofnetworkgovernanceandmaintenance.(TiddandBessant,2008)Theabovementionedinnovationnetworks,aretheconceptualgroundswheretheOpenInnovation(OI)modelemerges,thustheyareacriticalstructuretounderstandP&G'sConnectandDevelopmodel.2.2OpeninnovationInthetraditionalmodelofinnovation,thefocuswasmainlyonresearchanddevelopmentlaboratories,whereinventionofnewconceptsandtechnologieswerecarriedoutusinginternalandexternalsourcesofinformation.TheseR&Dlabsusuallyconcentratedonbringingoutnewtechnologiesforself-commercialisation.Thisprocesscanbeviewedintheformofafunnel,wherealargenumberofvariedideasandconceptscanbetrimmeddowntofewofthoseconceptsandideasthatbestmeettherequirementsofthecompany.(OECD,2008)Inrecenttimes,companieshavebecomemoreopenwiththeirinnovationprocess,leadingtorevolutiondescribedas“OpenInnovation”byChesbrough(2003).This‘openinnovation’modelisamoredynamicmodelwhencomparedthetraditionalmodelasthereismuchmoreinteractionbetweenknowledgeassetsoutsidethecompanyaswellasinside.HenryChesbrough(2003)inhisbook“OpenInnovation:NewImperativeforcreatingandprofitingfromtechnology”definesopeninnovationasaconceptinwhichcompaniesmustuseideasfrominsideaswellasoutsidesourcesandfindinternalandexternalwaystoreachthemarketinordertoadvancetheirtechnologicalcapabilities.Openinnovationcombinesthese4ConnectandDevelop,P&G'sbigstakeinopeninnovationconceptsofinsideandoutsideideasintosystemsandstructuressothatthereissomeorderinthechaos.Inanotherbook“OpenBusinessModels:HowtoThriveintheNewInnovativeLandscape”hedefinesopeninnovationastheflowofknowledgeinternallyandexternallysuchthatitmovestheprocessofinnovationatamuchfasterpaceandsothatnewmarketscanbefoundfortheuseofthisinnovation.Openinnovationmeansthatfirmsshouldstartusingideasandtechnologiesfromexternalsourcesandknowledgeassetstocreatenewandimprovedproducts/services.Intheprocess,theyshouldletothersusetheirunusedideaswhichinturncanbecomeaprofitableventurebyitself.Thisprocesswouldrequireanopenbusinessmodeltobeinplace.3InnovationStrategyat