Open Innovation: The Case of P&G
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| source : https://www.pgconnectdevelop.com/ |
In today’s economy, “innovation” has become the most critical driving force for sustained corporate growth. Among various types of innovation, Open Innovation—a model that actively leverages external resources and ideas—has been increasingly highlighted for its significance.
In an era where it is challenging to keep pace with the speed and scope of technological advancements, how can organizations effectively utilize external resources for innovation? The answer lies in open innovation.
To summarize, open innovation is a methodology that accelerates the innovation process and disperses risk by integrating external knowledge, technology, and creative ideas, rather than relying solely on internal research and development (R&D).
Henry Chesbrough
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| source : https://haas.berkeley.edu/faculty/chesbrough-henry/ |
Henry Chesbrough, who earned his PhD from UC Berkeley and served as a professor at Harvard Business School, is now a faculty member at UC Berkeley’s Haas School of Business. He has been a strong proponent of open innovation, defining it as follows:
“Innovation is not merely an internal process but also involves incorporating external knowledge and technology into the organization.”
The Definition and Core Concepts of Open Innovation
Traditional innovation models typically involved companies developing new products or technologies through internal R&D and maintaining exclusive control over them. However, as information and technology became globalized and knowledge flows accelerated, it became increasingly difficult for companies to maintain competitiveness with internal resources alone. Open innovation emerged as a response, encouraging businesses to adopt creative ideas and technologies from outside, while also sharing their own technologies with others.
The core of open innovation is the flow of ideas and technologies beyond corporate boundaries. Companies must collaborate not only within their internal structures but also with external research institutes, startups, universities, and even competitors. This enables organizations to identify innovative technologies early and quickly commercialize them. Additionally, open innovation allows businesses to commercialize ideas and technologies in various ways, not limited to their own product development.
P&G’s Open Innovation Model
P&G (Procter & Gamble) serves as a prime example of a company that successfully implemented open innovation through its “Connect and Develop” program.
Connect + Develop Platform
P&G launched its Connect + Develop program in 2001 to enhance its global R&D network and actively incorporate external ideas and technologies. This platform integrates innovative external technologies or ideas into P&G’s products and processes. P&G collaborates with diverse external sources, including universities, research institutes, startups, corporations, and individual inventors.
By doing so, P&G accelerates the pace of innovation, reduces reliance on internal development models, and responds swiftly to market changes.
Major Programs within Connect + Develop
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| source : https://www.pgconnectdevelop.com/innovation-roadmap |
Technology Partnerships
P&G collaborates with companies and research institutions across various industries to drive technological innovation. These partnerships enable the company to quickly bridge technological gaps and apply cutting-edge advancements to its products.Open Idea and Technology Sharing
The Connect + Develop platform provides an online portal for external innovators to share their ideas or technologies with P&G. This allows P&G to evaluate diverse external ideas and incorporate suitable technologies into its R&D efforts.Innovation Competitions
P&G regularly hosts innovation competitions to gather creative ideas and technologies from around the world for product or service improvements. Selected ideas are directly reflected in P&G’s product development and commercialization processes.Joint Ventures
Through joint ventures, P&G partners with external organizations to co-invest in innovation projects. This model helps distribute risks and efficiently utilize resources.Licensing Proprietary Technologies
P&G also licenses its innovative technologies and product ideas to other companies, generating additional revenue while enabling its technologies to be applied across various industries.
Examples of P&G’s Open Innovation Successes
Olay Regenerist
Olay Regenerist, an innovative skincare product with regenerative properties, was developed in collaboration with external research institutes.- At a European conference, P&G discovered peptide technology from a small French cosmetics company and integrated it into its product. This resulted in a $2 billion brand.
- At a European conference, P&G discovered peptide technology from a small French cosmetics company and integrated it into its product. This resulted in a $2 billion brand.
Swiffer
Swiffer cleaning products were born from collaboration under the Connect + Develop program, introducing revolutionary changes in cleaning methods.
- P&G worked with the design firm Continuum to develop the Swiffer product line. Launched in 1999 with the principle of “quick cleaning,” the Swiffer achieved first-year sales of $100 million and became a household favorite..
- P&G worked with the design firm Continuum to develop the Swiffer product line. Launched in 1999 with the principle of “quick cleaning,” the Swiffer achieved first-year sales of $100 million and became a household favorite..
Tide Pods
Tide Pods, a flagship laundry detergent product, were created by adopting innovative technology through Connect + Develop..jpg)
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- P&G collaborated with MonoSol to develop dissolvable film technology, enabling the creation of capsule-based detergents. From 2013 to 2018, Tide Pods sales grew by 136%, contributing to 25% of P&G’s total laundry detergent revenue.
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Impact of Connect + Develop
The program has accelerated innovation, reduced costs, and strengthened P&G’s competitive edge. By effectively leveraging external resources and rapidly commercializing new ideas, P&G has been able to innovate its products and business models, meeting diverse consumer demands and maintaining market leadership.
The Benefits of Open Innovation: Competitiveness and Risk Management
Enhanced Competitiveness
By collaborating with external resources, companies can accelerate innovation, adopt diverse ideas and technologies, and respond flexibly to rapid market changes.Risk Management
Open innovation reduces the risks associated with traditional in-house innovation. Collaborative projects distribute risks among partners, minimizing financial losses even in case of failure.
The Future of Open Innovation
The importance of open innovation will continue to grow, driven by three major trends: digitalization, globalization, and sustainability.
Digitalization
Technologies like AI, big data, and cloud computing offer opportunities for rapid integration of external data and technologies.Globalization
Competing in diverse international markets requires embracing external ideas and technologies to stay ahead.Sustainability
To address environmental and societal challenges, companies must develop sustainable products and services, which often require collaboration with external partners.
Conclusion
Open innovation is no longer optional—it is essential. Companies must adopt an open mindset, actively embrace external ideas and technologies, and collaborate to thrive in a competitive landscape. Open innovation not only enhances competitiveness but also provides effective risk management strategies, ensuring long-term success.
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