Published on: Friday, September 23, 2011
Opening Innovation, Creating Opportunity
Comments
What if you were charged with delivering $100 million per week in growth with a staff of 9,000? And the only way you could reach your goals was to add more than 1.8 million people worldwide to your team and enlist them to work for free?
That's the challenge Larry Huston faced while serving as Innovation Officer at P&G. The company needed to maintain 7 percent organic growth per year — $5 billion — but when sales started to flatten, Huston had to find solutions to what P&G saw as an innovation problem.
P&G had to change the way they innovate, and as Bas Burger, President of Global Commerce for BT, said in his introduction of Huston, now Managing Director of 4iNNO, "They had to go from 'the laboratory is our world' to 'the world is our laboratory'" and open innovation was their pathway.
"There are two ways to talk about open innovation," Huston began at the 2011 World Innovation Forum, where ExecuNet exclusively reported for attendees. "Where the rubber meets the sky and where the rubber meets the road." Where the rubber meets the road is figuring out how to grow profitability at the top line.
Open innovation is a major business-building strategy, yet, "You would think the world is doing this because of all the business press," said Huston. "I can tell you the number of people who are doing this well is pretty limited. The companies who have done so have made a lot of progress and got good results from it."
Huston gave the example of Goldcorp in Canada, which was spending more to mine gold at $355 per ounce than it could sell it ($325). Robert McEwen, who was chairman and CEO, went to an industry conference and issued a challenge: In an unprecedented move, Goldcorp would post their database — one of their most valuable and protected assets — online, giving others a chance to virtually prospect for a $500,000 reward.
Using open source technology and knowledge, Goldcorp engaged the creativity and intellectual capital of all the geologists in the world, encouraging researchers to leverage the data and innovate. "The web economy is a gift economy," said McEwen, "and we can give away value and expect to see it many times in return."
The high-risk experiment was a success, with Goldcorp discovering new mining opportunities and several winners earning cash rewards.
Even the iPod, Huston explained, was a product driven by open innovation with Napster, Phillips, IBM and Toshiba each having some role. As a result, the iPod was brought to market in only eight months. "How long would it take your company to develop the iPod?"
Huston didn't mirror the iPod's quick success at P&G, unable to add one new product to the company's average 250 major innovations per year. Eventually, he brought four products to market, building up to 125 by his fourth year.
However, for bigger achievements, Huston needed more than a team of 9,000. A headcount of the qualified and accessible talent pool yielded 1,800,900 people, and with an open innovation model, those skills can be insourced, which P&G CEO AG Lafley said would account for 50 percent of innovation.
"There is an amazing amount of innovation going on. Your world isn't what's inside your walls. It's outside, and you need to start redefining things in that way," said Huston. This model has led to more than 3,000 deals with 186 companies linking with P&G to put products in the market. "Seventy percent of those companies are ones that were new to P&G and never did business with them before."
Now, P&G's innovation success rate is greater than 75 percent, up from around 35 percent; R&D productivity increased by 60 percent; and $14 billion in sales are due to open innovation. Huston attributes P&G's growth to the integrated approach the company took to innovation, following a disciplined stream of work activity:
- Mandates
- Vision
- Where to play
- How to win
- Capabilities needed
- Management governance
Despite the complexity of the process, innovation comes down to knowing the unsolved customer problems, connecting with the people who can solve them and staying focused. "It's all theory in innovation. This is where rubber meets the road. Do you know who your customers are?" Not only who they are, but what you can do for them. "There's a tremendous amount of money to be made in just knowing the total experience."
Huston said to capture the total customer experience, you must know and understand:
- Mind = logic they associate with product
- Soul = emotional associations
- Body = sensorial associations
- Tasks = jobs they need to do
"The basics of innovation are four or five things, but we fuzz it up with other stuff and get bogged down."
Robyn Greenspan
Lessons learned from and about six-figure leadership and executive career management
