This blogpost provides information about the Connect+Develop platform created by Procter & Gamble (P&G). The blogpost by 441485DG (linked below) has also touched upon this subject, however, this post is a more up-to-date and in-depth analysis of how P&G has been successful in value co-creation through their online platform website.
P&G is one of the largest consumer goods manufacturers, distributors and advertisers worldwide, with more than 65 products and a global reach of 180 countries (Procter & Gamble, 2006).
A short history
P&G was established in 1837 by William Procter and James Gamble, a candle maker and soap maker, respectively (Procter & Gamble, 2006). The company became successful soon: in the 19th century, P&G had several contracts to supply soap and candles to the Union Army during the American Civil War (Procter & Gamble, 2006). In 1930, P&G acquired Thomas Hedley Co, a company based in the UK, which was also the beginning of P&G’s international expansion. After this, P&G made several acquisitions, expanding to a number of different business divisions (Procter & Gamble, 2006). Furthermore, P&G launched a successful range of personal health, grooming, beauty and home care brands (Procter & Gamble, 2006).
However, during the 1990s, the company encountered a reduction in sales growth (Agafitei & Avasilcai, 2015). This was mainly due to their closed business model, where there was no communication with outside partners about the development of novel products (Agafitei & Avasilcai, 2015). Moreover, the company considered its technology a secret, and licensing was rarely done (Agafitei & Avasilcai, 2015). Because of the rise in global competition and the increase in R&D costs, the company decided to switch to a business model with more proactivity (Ozkan, 2015).
In order to switch to a more proactive business model, P&G considered co-creation and open innovation. Co-creation occurs when a company brings different people (and parties) together to cooperatively produce a mutually desired outcome (Agafitei & Avasilcai, 2015). With co-creation, the key focus is on the interests of all stakeholders, creating value by continually improving experiences of all stakeholders. The advantage is that co-creation increases engagement with all stakeholders, and that it continuously builds on new interactions and experiences, leading to increased creativity, productivity, lower risks and costs.
According to Lawer (2017), open innovation is a standalone form of co-creation, because it is more distributed and because companies give more control to parties joining the platform. More specifically, open innovation is a way for firms to use the strengths and ideas of people outside their company, in order to improve products or internal processes of the firm (Ozkan, 2015).
In order to become more proactive, the company launched the Connect+Develop platform in 2001 (Procter & Gamble, 2019). This is an open innovation platform where the company engages with the most innovative minds to deliver on P&G’s opportunities (Procter & Gamble, 2019). The main idea behind Connect+Develop is to create an opportunity for people outside the company to improve current products, and to create innovative ideas for P&G (Agafitei & Avasilcai, 2015). Moreover, outside parties are also able to contribute by solving tricky problems within the company (Ozkan, 2015). In order to simplify and increase engagement with outside parties, P&G launched a Connect+Develop website in 2013 (Ozkan, 2015). The platform can be accessed via https://www.pgconnectdevelop.com/. The website directly links outside parties to the top needs of the company, and P&G management and evaluators directly to user submissions. More specifically, the “current needs” button shows all different needs for different categories. This way, the evaluation process becomes faster, increasing overall efficiency of the platform (Ozkan, 2015). For example, when a user clicks on the current need category “beauty and grooming innovations”, it shows an explanation of the category, and it shows that there are no current needs for it. However, every user is still able to submit his/her innovative idea by clicking on “click here to submit your innovation” (see figure 1).
Furthermore, there are several criteria that a user should consider before he/she is able to submit his/her idea, which is also explicitly shown on their website (see figure 2). P&G also states which type of solutions they are not interested in, which can also be found on the “submission criteria” page.
Through this online platform, P&G receives a great number of open innovation submissions. These proposals need to be managed and reviewed. In order for this process to work efficiently, the online platform helps P&G by collecting additional data the company needs. Then, the submissions are reviewed by a specific team within Connect+Develop. Approved submissions are then distributed to their relevant business departments for further review (Ozkan, 2015).
Efficiency of the model
Looking at it from a joint profitability perspective, the model works. According to Huston & Sakkab (2006), more than 35% of the company’s new products have elements of the open innovation submissions. Moreover, the success rate of P&G’s innovation has more than doubled and the costs of innovation have reduced (Huston & Sakkab, 2006). Lastly, since 2000, P&G’s stock price had doubled as well (Huston & Sakkab, 2006). From the customer perspective, the Connect+Develop platform has also been beneficial. By co-creating and using the open innovation platform, customers are able to define products they will eventually want to purchase, and they do not have to wait for firms to decide the key elements of a product (Agafitei & Avasilcai, 2015).
Considering the feasibility aspect, the model is a bit less efficient. According to Veer et al. (2015), process coordination costs and implementation costs are high for an open innovation platform. Furthermore, open innovation requires adapting the culture of the company, as there might be a feeling of loss of knowledge control among employees (Veer et al., 2013). Lastly, from a legal point of view, an effect of open innovation might be intellectual property spillovers (Veer et al., 2013). Because of these costs and risks, open innovation requires a lot of research and planning prior to its implementation, which might not be feasible for smaller companies or startups for example (compared to P&G).
All in all, P&G has been able to create an effective value co-creating, open innovation platform. By becoming more customer-centric, the company has increased its number of new products, and doubled its stock price. However, the risks of open innovation should be taken into account before implementing it.
Agafitei, G. and Avasilcai, S. (2015). A case study on open innovation on Procter & Gamble. Part II: Co-creation and digital involvement. IOP Conference Series: Materials Science and Engineering, 95.
Huston, L., and Sakkab, N. (2006). Connect and develop: inside Procter & Gamble’s new model for Innovation. Harvard Business Review. Retrieved from https://hbr.org/2006/03/connect-and-develop-inside-procter-gambles-new-model-for-innovation
Lawer, C. (2017). Eight Styles of Customer Value Co-Creation. Retrieved from https://www.umiohealth.com/media/2309/eight-styles-of-customer-value-co-creation.pdf
Ozkan, N. N. 2015. An example of open innovation: P&G. Procedia—Social and Behavioral Sciences 195:1496–502
Procter & Gamble. (2006). A company history. Retrieved from https://www.pg.com/translations/history_pdf/english_history.pdf
Procter & Gamble. (2019). What is connect and develop? Retrieved from https://www.pgconnectdevelop.com/what-is-connect-develop/
Veer, T., Lorenz, A., and Blind, K. (2013). How Open Is Too Open? The “Dark Side” of Openness along the Innovation Value Chain. Paper Presented at the 35th DRUID Celebration Conference, Barcelona, Spain, June 17–19.
Name: Berna Hizli
Student number: 408455