Introduction
In 2003, Chesbrough came up with a revolutionary idea labeled the open innovation model. It marked a sharp contrast to the conventional procedure of innovation by describing a different system in the innovation management processes. The open innovation model involves diverse inceptions of knowledge that can be rounded up to create a new innovation dynamic in organizations. The sources of knowledge can either be inbound or, more importantly, outbound. The new model is a sharp contrast to the vertical integration norm concentrated on internal research and development (R&D). Furthermore, it negates the closed innovation technique that is primarily premised on the use of internal knowledge. The open innovation model is centered on four key features, which are innovation networks, innovation entrepreneurship, innovation clusters, and ecosystems, along with innovation cooperation and partnership. In principle, the open innovation model is driven by actions under entrepreneurial innovation. The activities cover all phases and tracts of system innovation that are dependent on the management, technology, society, market, and empowering ingenious advancement of an organization.
Innovative collaboration pertains to the parties involved in the innovation process. They are empowered by the use of information exchange, technology transfer, retail interchange of inventive products, research studies, and academic programs. Innovation partnership blends the innovative activities and resources of plastics through setting up resourceful associations and joint commissioning of creative ventures. In the present day, innovation collaboration and partnership emerge at the level of firms, enterprises, and economic sectors on a national or international scale. This tenet depends on the appearance and stature of design ecosystems as the tool of open innovations. The development of innovative ideas is induced by global factors, based on the tendency of internationalization of innovation activities facilitated by cooperation at the international scale among groups of many nations.
The development of innovation causes human capital to be transformed and results in a higher level of innovativeness and invention. Human capital becomes internationally recognized based on the development of multinational scientific and technological affiliation and the enactment of social, humanitarian strategies. According to Bašić (2022), the open innovation model is developed in the direction of innovation networks, innovation entrepreneurship, innovation cooperation and partnership, innovation ecosystems, and clusters, which are at the center of human capital innovation progress.
The scientific ingenuity of research made it feasible to define the circumstances and components for the innovation structures to reach varying levels of open nature and substantiation of their organs and expanses in internationalization. This paper covers a practical application of the open innovation model to the Procter & Gamble (P&G) company, an American transnational consumer goods enterprise. The conglomerate was founded in 1837 by two contemporaries, William Procter and James Gamble. Its global headquarters are located in Cincinnati, Ohio, United States of America. Additionally, the paper examines the success factors and impact of the new development on the company’s performance. Innovation is bound to be affected by several challenges that are discussed in light of P&G. In addition, the last part covers the lessons learned and the conclusion to the discussion. In general, the open innovation model has revolutionized modern R&D operations despite the different challenges that organizations have to encounter in the process.
Open Innovation in P&G: Working, Success Factors, and Impact on the Company Performance
The open innovation model offers many success factors to organizations that work within the framework of the concept of global cooperation. These factors include: the reduction of R&D costs, connecting different clients at the beginning of the R&D process; and potential for improved efficiency development. Among other factors, one can name the improvement of the accuracy of marketing research and customer/customer orientation; and potential for synergy between external and internal developments.
The open innovation model was principally tested across different large American firms. One major company that succeeded in implementing a new innovative model was P&G. The company largely succeeded in innovation aimed at creating fresh solutions to different challenges. For over one and a half centuries, P&G was successful in developing in-house innovations through its R&D investments. However, as of the year 2000 clear indications emerged that the R&D activities were not yielding much to the bend it of the organization. In 2002, a conscious decision was made by the management to shift embrace an open innovation model labelled Connect + Develop or C+D.
The C+D conception entailed spotting and leveraging on internal and external invention possessions to expand the company’s innovation power. The platform involved maximizing its cooperation with researchers, suppliers, investors, and business adversaries, from across the globe to provide solutions to sticking hardships and questions. Through the proprietary networks and outside open structures, P&G sought to actively find openings to engage and work together with inventors from all over the world. Han et al. (2019) state that the company considered that the partnerships would enable it to uncover the ensuing inventive products, technologies, packaging techniques, processes, along with the required business relations to help enrich the lives of the its global clientele.
P&G proceeded to create the position of C+D leaders, also called technology entrepreneurs in support of the new idea. The new pool of workers was mandated to collaborate with the business leaders in defining the top priority needs of the customers. The outcome provided a guide for seeking and inferring with the established C+D structures across the planet. Consequently, C+D Hubs were created in India, Japan, China, North America, Latin America, and Europe. Proprietary networks were established with chosen suppliers and a few exterior open networks.
In addition, P&G created a dedicated C+D website (www.pgconnectdevelop.com) to support the C+D program. The site, which could be translated to different major languages including Spanish, Japanese, Chinese and Portuguese, could receive around 20 submissions every day of the week that averaged to over 4,000 in a year. It acted as a center of connecting scientists, innovators, investors, engineers, and experimenters seeking to develop ingenious technologies, products, packaging, trademarks, business models, or designs. The ultimate goal was to engender fresh products and services to enrich the living standards of consumers of across the world. The company continues to seek new business openings for the existing products and brands.
In less than five years of the new approach involving the open innovation approach, the company had developed over 35 percent of its product portfolio under the C+D platform. The trend continues to increase across new products and service developments and in motivating higher employee productivity. Additionally, P&G was able to create over 2,000 successful pacts with innovation partners across the world. C+D was considered successful in delivering strategic value in all divisions and levels of the company, which was unprecedented in consumer innovations. After investing over $2 billion in innovation in the year 2012, P&G won the 2013 New Product Pacesetters award after launching 7 of the top 10 most prosperous none-food merchandises of the year. Some of the successful product listings by P&G include Swiffer Dusters, Olay Regenerist, and the Crest SpinBrush. Other successful product listings were Vidal Sassoon Pro Series, ZzzQuil, Always/Tampax Radiant, Downy Infusions, Secret Outlast, Tide Pods, and Puffs Basic.
Challenges Facing P&G in Adopting the Open Innovation Model and the Solutions
The open innovation model is highly advantageous and beneficial to companies especially in providing access to a large knowledge pool. Aside from the gains, innovations come along with diverse challenges that companies have to handle. Open innovation model is no exception as organizations have to deal with firm-level challenges. One such challenge that P&G encountered is the selection of the most suitable partners. Innovation is characterized by numerous risks and face an uncertain future while implementing new systems and technologies. A company has to choose the right partners to collaborate with in the midst of incredibly high rates of failure in the initial steps of forming partnerships. P&G is a global conglomerate that would perceive the collaborating firms as an expansion of their own strategies and the firm in general. The thinking enabled the company to search for and choose potential partners with whom to establish strategic alliances with caution. Another best alternative is to work with partners who seek to reduce the risks while at the same time desiring to maximize the gains for all interested parties.
New innovations and the use of technology faces a major impediment in the name of protecting the intellectual property rights (IPRs). There are no adequate legal provisions that guide the development of new ideas given the slow pace of legislation. Consequently, it is not possible to have all ideas covered under a firm’s IPRs catalogue. This means that a lot of ideas that P&G could wish to protect remain unprotected. Additionally, IPRs cover a wide scope of copyrights, patents, trade marks and trade secrets belonging to the company. The multiplicity of IPRs present an additional challenge for P&G in committing to an open innovation process. The process itself involves transitioning from the creation of knowledge, its ownership and preservation towards sharing the knowledge, trading in the outcome, and co-development.
P&G grappled with the concerns embroiled in sharing existing and planned intellectual properties (IPs) that could reduce its competitiveness and impinge on the company’s core competencies. The main fear is that the IPs can be diffused to a wider audience, which is not desirable. Additionally, if the collaboration involves companies with different size, for example a large corporation and SME, this leads to uneven balance of power and consequently adds to the complexity of the open innovation process. Turon (2022) states that the collaboration and co-development in open innovation are supposed to bring new intellectual property, which opens up another problem that companies could face. From this, the challenge of effective IP distribution between the stakeholders arises. The solution to this challenge presupposes finding the right balance and striking a fair IP agreement between firms.
P&G has been involved in product development for a stretched span of time within which it has created standards and proficiency in entering into collaborative engagements. A judicious possession of IPRs may be quite challenging, but it is necessary in managing the concerns on IP safety and security. The worries can be abridged by entering into agreements supported by the desire for the company to feel a sense of protection in sharing knowledge and co-develop of ingenious products.
Additionally, the company ought to shun parties that evade sharing all pertinent information. In such an instance, the partnership may not be effective but will be injurious to the parties involved. Even as trust and mutual commitment are exceptionally delicate topics, they are indispensable in open innovation. It is on the basis of trust that parties interact freely and confidently and share risks. In addition, trust bolsters the alliance between two or more entities. It is an element of high value needed in the smooth operation of the open innovation process. There may be difficulty in executing an open innovation process without first collaborating on trust and mutual commitment and trust. However, P&G could deal with the challenge by establishing collective trust through repeated cooperation with the same partners. Trust can further be enhanced by establishing groups that bring together internal and external partners working on similar challenges in open innovation.
Conclusion and Lessons Learned
In conclusion, the new open innovation model transformed the science and art of innovation floor the closed system. The new development underlines the need for cooperation among parties and business partnerships in innovation. Furthermore, the success of open innovation model as applied by P&G shows the success that can emerge by embracing new innovation tools, systems and techniques. It emphasizes the need to deviate from old practices and put more effort in developing new business models. The case of P&G allowed to learn how to apply open innovation model in practice, what challenges the company may face and the ways to overcome them. The case shows what benefits P&G enjoyed through new product listings and awards obtained out of the innovation efforts. Nonetheless, challenges are bound to emerge in the innovation space. In particular, the case clearly shows that choosing the suitable partners can be difficult since innovation involves sharing of knowledge and technologies. Organizations need to formulate fair agreements that cement trust relations. Concerns involving IPRs cannot escape the attention of cooperating companies considering the level of investment dedicated to developing new technologies. Not all IPs can be protected, which requires companies to invest in trust and mutual cooperation as a way of future success.
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