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Most companies rely on internal innovation. This is a process in which innovation is created in-house. However P&G has developed a better approach to innovation. This is by the "connect and develop" strategy. This is a process in which innovation from external sources are welcomed and used. Innovation from external sources are connected and developed by the company into profitable ideas. This involved tapping into the creative ideas of inventors and others on the outside. This model is believed to work according to statistics which shows that more than 35 percent of new products in market have elements that originated from outside P&G, up from about 15 percent in 2000. And 45% of the initiatives in product development portfolio have key elements that were discovered externally. Through connect and develop-along with improvements in other aspects of innovation related to product cost, design, and marketing-our R&D productivity has increased by nearly 60 percent. The innovation success rate has more than doubled, while the cost of innovation has fallen. R&D investment as a percentage of sales is down from 4.8 percent in 2000 to 3.4% today. And, in the last two years, P&G has launched more than 100 new products for which some aspect of execution came from outside the company. Five years after the company's stock collapse in 2000, shares price and have a portfolio of twenty-two billion-dollar brands (Huston and Sakkab, 2006).
SEARCH Although most of P&G innovation had come from internal sources, external sources have produced very profitable innovation. The method of innovation of P&G is to acquire 50% of their innovation from outside the company. The aim of this strategy was not to replace the capabilities of their internal sources but to leverage them by giving them competition from external sources. The connect and develop strategy is however different from the out-sourcing strategy. This is about finding good ideas and bringing them in to enhance and capitalise internal capabilities. The strategy involves searching for proven technologies that can be improved and make them profitable, example of this is the crest spin brush (Huston and Sakkab, 2006).
The method of innovation of P&G is to transfer consumers' desires into new products. The company invest more than $350 million a year in consumers understanding. This results in insights that tell where innovation opportunities are and how to serve and communicate with consumers. The search of innovation is through collaboration of both internal and external sources.
Before a company can select an innovation, it has to know what it is looking for and where to play. There has to be set and carefully defined targets. P&G usually select or seek ideas that have some degree of success already. There must be a presence of a working product, prototype and also evidence of consumers' interest. The selection is also based on ideas and products that would benefit specifically from the application of P&G marketing, distribution or other capabilities. Proctor and Gamble method of selection innovation is via the organisational structure which is based around that brand manager functions, promoting internal horizontal competition and vertical co-operation. The management places an emphasis upon meticulous of the R&D Department and based on customer feedback which is co-produced with costumer. The lead users approach is also used whereby selected consumers are introduced to a product and feedbacks are received from them. This is in conjunction to the company's saying that "COSTUMER IS THE BOSS"
Selection is said to be completed after the internal innovation triggered in the organisation has have been explored and well studied. The product has to meet the organisation capabilities and business strategy. The R& D department would have to come up with a prototype of the product to see if such innovation is one that works. The next stage is the implementation of the innovation. Ethics and moral principles play a major role in the selection of innovation. Consumers may feel or sense unethical behaviours in the output innovation and thus may lead to failure and waste scare resources (Dominic. A, 2007).
IMPLEMENTATION OF INNOVATION
Implementing is the process of gaining targeted and committed use of innovation. Innovation implementation presupposes innovation adoption. A company failure to achieve the intended benefits of implementation it has adopted may reflect either a failure if implementation or innovation. Innovation and implementation have to work together. Company innovation starts from the searching for the innovation. This is due to the fact that all stages from searching to selecting all involves implementation
In implementing innovation, Proctor and Gamble requires a lot team to manage work. Innovation cuts across every strategic business unit, to experimentation and prototype testing, marketing and product launching. This is done stage by stage.
Selected ideas flow through the 'funnel' of innovation. During this process, they become constrained and aligned by different organizational factors such as goals, models of change, resources: the further an idea progresses, the more developed and precise it becomes. The most suitable ideas are approved for implementation, while others are reworked, rejected or merged to re-enter the process (Cagan & Vogel, 2001).
P&G is the innovation leader in the industry. The strength of the company innovation capability is by investing two or more times on average than its major competitors. Most companies are still using internal sources in searching for innovation. These companies are doing this by way of alliances, outsourcing, licensing in a way to buttress their labouring R&D. But all these methods are incremental changes which was more suitable when companies were smaller and the world was less competitive. Radical innovation is important to companies concerned with long run growth and renewal. Companies continuously seek to innovate more quickly and more effectively both within and beyond their core market and products lines. P&G is still leading in the domestic product industry because of its consumer's participation and its aggressive innovation to meet their needs. This can be seen in the introduction of diapers (pampers) to replaced cloth diapers (Kinick.A, 2007). This was a radical innovation.
Due to globalisation, international competition and spread of information technology organisation are factors that are making companies more innovative. This has resulted in the practice of open innovation. The first step is becoming an open organisation. In implementing innovation certain fundamental principles must be met in order to ensure successful implementation. Innovation starts when groups and individuals convert problems to ideas.
According to the CTO of P&G, the company innovation strategy has been sustained to date by innovating innovation. The focus is on using technology and innovation to compete on multiple fronts simultaneously without spreading the corporate structure too thin (G. Gil Cloyd n.d). By innovating innovation P&G has notably increased the efficiency of its R&D investment.
Goldsmith and Clutterbuck (1984) Analysis of British Industry, The Winning Streak
Connect and Develop: Inside Procter & Gamble's New Model for Innovation," Harvard Business Review, Vol. 84, No. 3, March 2006.