Level 3 Innovation

The knowledge your company needs exists, it just has to be found.

Location: Longmeadow, Massachusetts, United States

Wednesday, May 17, 2006

Innovation in the 21st century

Following the lead of Proctor & Gamble, Eli Lilly and IBM, manufacturers are finally starting to realize that they cannot achieve their revenue growth targets on their own. Companies need to look outside their company and even outside their industry for the next generation of their products and services.

Nobody understands this more than A.G. Lafley, CEO of Proctor and Gamble. In 2000, he challenged P & G's management to come up with a process to acquire 50% of P & G's innovations outside the company. This challenge led to the development of Connect and Develop, P & G's approach to outside innovation.

Here's an excerpt from a recent HBR article, Connect and Develop . . .

According to Larry Huston, P & G's vice president of innovation, most companies are still clinging to what we call the invention model, centered on bricks and mortar R & D infrastructure and the idea that innovation must reside within theor own for walls. To be sure, these companies are increasingly trying to buttress their laboring R & D departments with acquisitions, licensing, and selective innovation outsourcing. And they are launching Skunk Works, improving collaboration between marketing and R & D, tightening go-to-market criteria, and strengthening product portfolio management.

Bute these are incremental changes, bandages on a broken model . . . the world's innovation landscape has changed.

Huston makes a bold statement decaring traditional R & D processes "broken." But he's RIGHT. The new mantra within innovation circles is borderless thinking, open innovation, outside innovation and networked R & D.

In a short period of time, the big players in the R & D business have proven that they don't have all the answers, but they know how to develop a process and network that can find the answers, enabling their internal R & D departments to innovate faster and at a lower aggregate cost. Internal R & D is not being replaced, they are becoming more connected and more efficient giving their company a distinct competitive advantage.

Huston makes one final bold statement at the end of the HBR article. He says, "companies that do not adopt this method will not survive". Is he really being bold or is the future of product development that obvious to individuals that use distributed R & D?