For P&G , before 2000 and AG Lafley becoming company CEO, Research and Development has always been an internal matter : For generations, in fact, P&G created most of its phenomenal growth by innovating from within—building global research facilities and hiring and holding on to the best talent in the world. That worked well for a $25 billion company but more difficult to achieve with a $70 billion company. At that time, the financial results were also dramatic, R&D investment were under pressure and the new appointed CEO decided to externalize P&G sources of innovation but also better integrate the innovation process within the organization.
AG Lafley vision was that in the future, P&G should stop looking externally for breakthrough innovation as success rate became lower and lower (around 15% ) but definitely look outside the company to find new and innovative sources of growth .
Objective has been set that in the future 50% of the innovations should come from better connection with external environment . It was quite a radical change in P&G way of working but is worked actually really well as 45 % of the innovations pipeline are now coming from external sources with a decreased R&D budget : from 4,8% of the TO in 2000 to 3,4% today .P&G also managed to double their innovation success rate and increase their R&D productivity .
What I like in that example ?
This clearly shows how a complete company philosophy change create a business turnaround through a better connection to the external environment . P&G is enjoying now very high success rate for it’s innovations together with a more efficient R&D investment.
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