Proctor and Gamble
From Networked Advocacy
Extracted directly from "We are Smarter than Me", pp 26-28
For generations, the research and development (R&D) team at Proctor & Gamble, 9,000-strong, had been the stuff of business legend, cranking out dozens of high-profile, high-profit new products year after year. But in 2000, A.G. Lafley, the company's newly arrived chairman and chief executive officer, stunned his prideful researchers. They were not, he announced, producing winners big enough or fast enough to significantly boost corporate revenues. His solution was drastic: By the end of the decade, fully half of all new P&G products and technologies would have to come from outside the company.
The object, Lafley insisted, was not to supplant the mighty in-house R&D effort, but to supplement it. That turned out to be a vastly different venture, though, and no wonder, given the company's size and complexity. For one thing, the internal communication systems had to be reinvented to make it possible for all parts of the company to exchange data and brainstorm. Then that information had to be made available to noncompany entities, including suppliers and distributors.
Another stumbling block was the resistance of many of P&G's key researchers. Some complained that the proposed changes in their way of doing things would stifle creativity. Others feared a loss of power and prestige if their information and work had to be shared.
Lafley persevered. His most drastic move was a giant step into crowdsourcing. P&G put together a global community made up of high-tech entrepreneurs and open networks such as NineSigma, and including the retired scientists and engineers of YourEncore and the marketplace for intellectual property exchange called Yet2.com. P&G has also gone to Innocentive, a network of 120,000 self-selected technical people from more than 175 countries who receive cash awards if their ideas prove out.
In seeking help from its extended community, P&G submits so-called "science problems" for solutions. Sometimes the problems come from in-house R&D, representing blind alleys those researchers have come up against. Sometimes the company asks its online partners for help in adapting a feature of a competitor's product to one of its own. The right answers have greatly benefited P&G. In the case of Innocentive, for example, a third of the dozens of problems posed have been solved...
As of 2006, the company was deriving 35 percent of its ideas from outsiders. Meanwhile, R&D productivity has soared 60 percent. A whopping 80 percent of its product launches are successful, compared to 30 percent for the consumer-products industry as a whole. And it spends 3.1 percent, or about $2.1 billion, of its more than $68 billion in annual worldwide revenue on research and development, much more than others in the industry.
