By John Karolefski
Through a special arrangement, what follows is an excerpt of a current article from CPGmatters, a monthly e-zine, presented here for discussion.
P&G's new product process now relies on Internet-based, interactive, collaborative communication internally and with its own suppliers and retail customers. Deploying these concepts has resulted in a doubling of the innovation success rate at P&G. Innovation productivity has increased by 60 percent for the CPG giant due to a reduction in internal R&D from 4.8 percent in 2000 to 3.4 percent today. It is targeting 50 percent external innovation by 2010.
"Product innovation is a pre-requisite for sustained retail growth. It's critically important that manufacturers bring innovation to retailers," said Thomas Kinder, vice president of customer development, global innovation and strategic alliances for P&G, in a session at the recent annual National Retail Federation (NRF) convention.
Innovation is a big global business, Mr. Kinder said, but it is not limited to new products. It also includes new business models, new ways to go to market, and other facets of the operation.
What's driving innovation at P&G today? Mr. Kinder said joint value creation with retailers, technology innovation, and the Web 2.0 process.
The Innovation Execution Framework concepts that P&G has deployed consist of three elements:
- Consumer Insight Network: Internet-based social network that encourages and enables consumer-originated interactive content devoted to issues relevant to CPG brand categories.
- Open Innovation Network: An open-source, Internet-based, social network that encourages and enables interaction aimed at developing ideas, solving problems, or formulating disruption opportunities.
- Operational Agility Network: Internet-based, collaborative network that overlaps and loops through the other networks to add knowledge and improve responsiveness.
"The rapidly growing phenomenon of Internet-based, interactive, collaborative communication has created an opportunity for the CPG industry to shift from a traditional, linear process to one that creates a virtualized innovation process that originates from, and centers on, the consumer," stated a white paper on improving innovation productivity distributed by its technology partner, the Cisco Internet Business Group, at the NRF session.
According to the report, innovation can be accelerated only if an organization is able to implement multi-dimensional mass collaboration. "This means simultaneous downstream collaboration with retailers and customers, upstream collaboration with vendors, horizontal collaboration internally, and collaboration with other ecosystem partners and outside communities of common interest, including freelancers and academicians.
"In order to change the outcome," the report continued, "the industry needs to transform its approach by including Web 2.0 technologies and processes that achieve higher results."
Discussion Question: What do you think of P&G'S goal to reach 50 percent external innovation by 2010? What do you think of the potential of Web 2.0 to drive innovation and explore ideas internally as well as externally with consumers, retailers and other partners?