South-Western - Management  
P&G Asks: What’s the Big Idea?
Topic Technology, Innovation, and Change
Key Words Innovation, research and development, breakthrough ideas
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News Story

Procter & Gamble (P&G), once famous for its insular culture, is now better known for its open approach to innovation. As research and development becomes more global, many are adopting P&G’s strategy, which it calls “Connect and Develop,” for bringing outside ideas into their companies. P&G has been working on its approach to innovation for seven years and has revamped its employee reward systems, created new creative leadership positions, and helped establish networks of outside scientists and inventors it can use on its global innovation searches.

CEO A.G. Lafley believes that 50% of the company’s product innovations should come from outside the company’s walls. Recently, Lafley has been pushing to ramp up the number of truly breakthrough ideas. The company has also expanded its innovation model to areas other than research and development.

After years of searching the world for new ideas, innovation scouts at P&G know what strengths each country of the world has. For example, they have determined that Brazil has natural extracts that might be used in personal care products and Venezuela is strong in chemicals that can be used in laundry detergent, while Russia is ground zero for solving scientific problems.

The P&G innovation strategy was traditionally focused on research and development, but the model is increasingly being applied to other areas of the company as well. R&D leaders have been training employees in other areas of the company to look for innovative ways to work faster and smarter. The program, called “Know How,” helps P&G’s corporate functions apply innovative processes to unearth new ideas.

A new technology that has application for the corporate functions is called “layered voice analysis,” a technology that examines the emotional tone of people’s reactions. Market researchers believe this tool could be useful when gauging customer feedback on products or pricing.

P&G is looking to improve its ratio of true breakthrough ideas to more incremental ideas to about one in every four or five. As part of this new mandate, the company is using new mandates to measure success. One of these mandates is a series of questions about the idea: “Does the idea make a difference in somebody’s life? Could a consumer do something now that they couldn’t do before that was really meaningful?” Answering these questions in the affirmative is a clue that the idea is a big one.

Questions
1.

What is an “era of ferment” and how must companies manage innovation differently during eras of ferment versus eras of incremental improvement and innovation following a new dominant design?

2.

Why is innovation so important to the health of even giant and successful companies like Procter & Gamble?

3.

How can multifunctional teams support and accelerate innovation in a company?

4.

What are the differences between managing innovation in times of discontinuous change versus times of incremental change?

Source “P&G Asks: What’s the Big Idea?” Business Week Online, May 7, 2007, pNA
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