Why P&G No Longer Leads Open Innovation
Several people mentioned that P&G and their Connect+Develop program should have been on my Top 5 Companies for Open Innovation list.
Well, I really like P&G and their past efforts, but I don’t think P&G has developed or delivered recently and in this post, I share my arguments why I don’t think P&G leads open innovation anymore. I look forward to a good discussion.
Corporate turmoil:
It is no secret that P&G is struggling in many ways. Such corporate turmoil is poison for the implementation of open innovation and even though P&G is one of the companies in which the organization has embraced open innovation the most, they still have lots of work to do.
Solution: No clear answer on this. Big challenge…
Losing good people: As a result of the corporate turmoil, P&G is losing good people. Some left for other companies while others have retired. It is difficult to put a value on the experience and insights of those leaving the company, but it is definitely significant.
Solution: The could put more focus on internal training to upgrade people. They need to give their people time to develop relationships. They could also activate their alumni network. The latter could be one of the best resources of open innovation knowledge in the world. Should it stay untapped?
No progress: When I look at the open innovation efforts of P&G in the last couple of years, I wonder where the drive, the vision and the progress has gone. The last time P&G prompted me to give a nod of approval was in 2010 when they launched several language versions including Chinese and Portugese for the Connect+Develop site. This was a great move as you need to adapt to local markets, but not much has happened since then.
Solution: Ok, the Connect+Develop site got an overhaul not so long ago, but why not take it even further (see below).
Too much focus on P&G: Open innovation is moving towards communities and they will not only be physical. They will also be virtually. I have heard that P&G acknowledges that the Internet and social media will be key drivers for open innovation. In my world, this translates to better use of social media and the development of virtual communities.
Why has P&G not picked up on this yet? They have hundreds of thousands of people in their systems. Why not bring them together and thus focus on the needs of stakeholders in those ecosystems rather than just on the needs (and assets) of P&G?
Solution: Get a better understanding of social media and communities and activate their own networks.
Competitors are catching up:
P&G has a strong reputation for their open innovation efforts. Such a position can serve a company well for many years, but it can also be dangerous. You can get complacent or you might start protecting your position too much. The latter could result in a behavior that is too defensive, which could lead to not investing enough in staying ahead of the competition. To some extent, this is what P&G is experiencing right now and to make things worse, the competition is learning fast and they are catching up on P&G.
Solution: P&G need to take more chances again and when they are back on the right track again, they should make full use of their communication platform. Did you know they have dedicated PR/marketing people for the Connect+Develop platform? This is much better than having to rely on the corporate communication team.
Final remarks
They have great people at P&G and they have a strong foundation for open innovation. However, they need to be careful. Open innovation is very much about perception and if people start to doubt the open innovation capabilities of P&G, it will only intensify the competition for the best innovation partners and thus erode the lead that P&G still holds within their business areas.
I think P&G can turn this around and get back on top. They kind of deserve this as they have lead the way for so many years, but you cannot dwell on the past. It will be interesting to see what happens in the coming years.
You have to admire P&G, they continue but there is a real danger they go back into a trough before they emerge again. They have exceptional clout and respect but the internal tensions hold them back. They may return to moving slowly at the very time they are being urged to "speed up" to achieve the results. "Slow constrains the quick".
This idea comes from Robert V. O'Neill's A Hierarchical Concept of Ecosystems. O'Neill and his co-authors noted that ecosystems could be better understood by observing the rates of change of different components. Hummingbirds and flowers are quick, redwood trees slow, and whole redwood forests even slower. Most interaction is within the same pace level – hummingbirds and flowers pay attention to each other, oblivious to redwoods, who are oblivious to them. Meanwhile the forest is attentive to climate change but not to the hasty fate of individual trees. The insight is this: “The dynamics of the system will be dominated by the slow components, with the rapid components simply following along.” Slow constrains quick; slow controls quick.
P&G are locked into their (self imposed) ecosystem and the above is likely to apply
Very nice – makes the point very clearly.
I'd add the pressure of Wall Street's need for predictability rather than excitement – as Stefan and I mused on twitter earlier today.
Nicely put!
BTW I really do admire and respect P&G and I hope they get through this soon. I hope my "feelings" for P&G show in the post : – )
Hi Stefan – traditionally P&G have had a very strong alumni network which they have also used for C&D, it would be good to hear from alumni on the situation today. It would also be good to hear about progress on the new C&D targets set at the end of 2010, aiming for an additional $3bn per year revenue, and becoming the partner of choice. P&G were always good at communicating progress towards the "50%" target, I haven't seen anything about the 2010 targets.
Agreed.
As do Unilever and Mars (I'm an alumnus of both).
Worth looking at P&G's latest results though – steady as she goes "a time-tested business model — we discover meaningful insights into what consumers need and want; we translate those insights into noticeably superior products focused on those needs; we communicate that superiority through advertising that includes compelling claims, performance demonstrations, and superior benefi t visuals; and we price our products at a point where consumers experience superior overall value."
Then "We also increased the dividend by 7%. This was the 56th consecutive year we have increased the dividend, one of only six companies to have done this".
They do recognise recent underperformance but, to be fair, that has followed a period of investing strongly in OI. http://annualreport.pg.com/annualreport2012/index…
I suspect that P&G is still quite active at C&D, but is more likely de-emphasizing the "public" nature of it…that is, it isn't promoting that "anyone can play (and win)". Instead, they are more likely focusing on closed open innovation (ie practice among suppliers and self scouted leads). If this is so, it is a radical departure from how it previously marketed its C&D efforts. That wouldn't necessarily make it less effective. This lack of relative visibility could also be a reflection of Chris Thoen's departure (he's now a senior exec at Givaudan). Chris was terrific at championing and marketing C&D. His replacement may or may not have this flair (or desire) to put a public face on C&D.
I think that is a good assessment, Michael.
Thanks Sandra. I'm still learning the "like/dislike" button on my iPhone. I didn't mean to dislike your comment!
I agree that P&G doe snotlead open innovation. In general smaller companies who are much more flexible can pioneer, but even among the fortune 500 companies P&G is not in the lead in my opinion. One of my collegues has had a job interview for a management trainee at P&G, but he was not execpted for the program because "he was too much into open innovation and other 'new things', and these things were not of importance to them". Strange…
As it's coming to the end of another week I'm reduced to doing things like searching the P&G 2012 annual report for the words "connect" "develop" and "open". Not a single mention of C&D or open innovation. Surely a symptom? Caution – not a scientific survey……
Just a growing recognition that P&G are in some change, what emerges, what is lost is yet to 'translate' itself, so Stefan was right to keep them off his top list but they become one to go on a real 'watch list'. Unfreeze > Change > Refreeze takes time