Although we previously discussed several co-creation examples in class, focusing on emerging business models introduced by different startups, we partially ignored the struggle of established industry players to engage in co-creation. A great deal of startup funding ultimately comes from the more established class of corporates. Most of these companies engage in uncoordinated efforts to integrate new business ventures, however only a few corporations manage to build a coordinated platform for open innovation integrating various stakeholders.
Procter and Gamble (P&G) however, has drastically changed its innovation approach over the last decade. The ‘Connect+Develop’ initiative is an innovation model by P&G, which goes beyond pure consumer value co-creation and extends to a more holistic innovation model. Traditionally, companies like P&G relied on in-house research and development (R&D) labs to develop new innovations known as bricks-and-mortar R&D. This open innovation approach exemplifies the shift in integrating stakeholders into the process of co-creation and making use of more external resources and capabilities.
Open innovation, which relates to concepts of co-creation and crowdsourcing, makes use of a technology enabled platform to innovate with consumers, universities, startups and important network partners. Throught the starting phase of the platform, P&G realized that the important innovations come from small-medium sized enterprises (SMEs) and even individuals wanted to license their patented innovations. With the Connect+Develop Platform P&G creates mechanisms to gain multi-stakeholder input. One major example of P&G’s Connect+Develop results is ‘Live Well Collaborative”, which develops products for the aging population actively incorporating consumers, corporates and universities (Raisch et al, 2014). End-consumers provided a first-hand knowledge of the limitations and were able to find solutions with experts from universities and P&G’s network partners.
The cost vs. innovation paradox (Heller, 2012) exemplifies the problem corporations face in challenging times of innovation. However, P&G realised that spending more on internal R&D would not increase payoffs (Huston, 2006) and therefore reinvented the company’s innovation business model to open innovation with ‘Connect+Develop’ at its centre. The effectiveness of this open innovation model can be observed by 35% of products originating from outside P&G. According to the company’s CIO, R&D productivity has increased by 60 percent (Raisch et al, 2014) and innovation success rate has doubled, while the cost of innovation has fallen. The early realization of the need to re-define innovation and its underlying business model enabled P&G to become a pioneer in the field of open innovation and to continue to boost industry firsts. The success of Procter & Gamble is not only due its innovation model but also accelerated its aim to be even more customer-centric by providing a platform that can act as a coordination mechanisms for its new ecosystem (Tiwana, 2013). In conclusion, this example of P&G shows the impact of co-creating innovation can take a more holistic stakeholder approach and increase agility of innovation and time-to-market.
For more see: http://www.pgconnectdevelop.com/home/stories.html
Heller, M. (2012). The CIO paradox: Battling the contradictions of it leadership. Brookline, MA: Bibliomotion Books Media.
Huston, & Sakkab. (2006). Connect and Develop: Inside Procter & Gamble’s New Model for Innovation. Harvard Business Review. Retrieved March 11, 2016, from https://hbr.org/2006/03/connect-and-develop-inside-procter-gambles-new-model-for-innovation.
Raisch, S., Probst, G., Gomez, P., & Zimmermann, A. (2014). Creating societal benefits and corporate profits. MIT Sloan Management Review, 55(3) Retrieved from http://archive-ouverte.unige.ch/unige:47598
Procter&Gamble. (2015). Stories of Successful Open Innovation Partnerships – P&G Connect Develop. Retrieved March 11, 2016, from http://www.pgconnectdevelop.com/home/stories.html
Tiwana, A. (2013). Platform ecosystems: aligning architecture, governance, and strategy.