Strategy Operations and Entrepreneurship Group Assignment Sample
Introduction
The primary objective of the research is to observe the way the open innovation model is adopted by P&G. Initially it will discuss the open innovation model in brief and its benefits in today’s innovative environment. Further, it will describe the story of P&G in adopting the open innovation model and its impact on the company’s performance. The challenges faced by the company in its adoption will be described through the help of secondary data collected from the company’s website and other online pre-published sources. Lastly, it will discuss the learning from the P&G case in adopting the open innovation model.
Objectives
- To identify the theory of the open innovation model and the way it can be adopted.
- To analyze the case of P&G in adopting the open innovation model and the challenges they have faced while its implementation.
- To observe the learnings from the case of P&G and the benefits of its implementation in today’s changing environment.
Open innovation model
According to Chesbrough et. al. (2018) Open innovation is defined as a business management model adopted for innovation that helps promote collaboration with people and companies in the external environment. The importance of the innovation model becomes essential when a company identifies that there are diverse opportunities and greater knowledge outside the company. To attract these talents and opportunities organizations adopt open innovation practices in diverse ways. It is necessary to consider that companies must adopt an open innovation model as per their external market circumstance; thereby, it also offers great scope for innovation and modification in this model.
Furthermore, for making open innovation a sustainable approach it is must to develop a culture of innovation internally. There are five primary tenets of adopting open innovation model including robust evaluation and monitoring that the company should embrace nature innovation in the workplace. The first principle for the open innovation model stated by Chesbrough (2018) is that “Not all talented people work for the company”. While adopting open innovation, it is necessary to know that many talented professionals work at other companies and for this purpose, companies have to look at the external environment in their industry so they can leverage the ideas to optimize the innovation process. Another tenet of the open innovation model suggests that an organization must have an effective combination of external and internal R&D as it can generate tremendous value (Bogers et. al. 2018). Some of the benefits that a company can have from this combination include reduced costs, shorter product life, utilization of innovative technologies, and optimize innovation outcomes.
The open innovation model suggests that companies can generate profits by implementing new technologies into the existing business operations as it will help in improving the organisation’s productivity. Other than that, open innovation is all about making the best use of external and internal ideas (Aziz and Mustapha, 2020). In simpler terms, organisations must aim at using the ideas discovered and tested by a different organisation. Using this aspect of collaboration means that different parts contribute to the project’s development. It means that the organisation can get diverse opinions and innovation ideas from various domains along with sharing the innovation burden as well.
At last, open innovation doesn’t conflict with intellectual proper rights. It is necessary to manage intellectual property rights carefully and by protecting cooperative alliances. For gaining profitability, these rights must be available to others with the help of licensing or cooperation (Bogers et. al. 2019). These are fice major principles of the open innovation model that must be used by the organisation while implementing open innovation practices.
Open innovation in P&G
Procter & Gamble (P&G) serves millions of customers worldwide and its brand is trusted by millions and was established 181 years back. They have challenged convention, brought innovations, and shaped the culture as well. Open innovation practices are being adopted by P&G that help them in utilising strengths & ideas from the people outside the organisation and bring enhancements to the internal company’s process. P&G leads the organisations that have applied the open innovation concept successfully worldwide (Han et. al. 2019). As the global competition and challenges are increasing around the globe along with increased R&D costs, companies are not capable of sustaining their R&D efforts.
Research & Development to Connect & Develop at P&G
According to Lee and Lim, (2018) P&G has brought transformation from research & Development (R&D) to connect & Develop (C&D) through the help of open innovation principles. Therefore, the primary aim of P&G is to change the company’s belief from resistance to innovation to enthusiasm through outside innovations. They wanted to change their R&D Company from 7500 people inside to 7500+1.5 million outside having effective transparency between them.
Currently, around 35% and more products of P&Gs originated from outside P&G. With the help of the C&D strategy, P&G’s R&D productivity has increased by around 60%. The open innovation model has also helped them in increasing their innovation success rate along with the decreased cost of innovation. P&G’s open innovation strategy has helped them in establishing around 2000 successful agreements with different innovation partners around the globe (Lei and Haibing, 2022). They have also allowed innovators to share their ideas on their website as it has served as an “open front door to the world”. After this development, they have received around 20 submissions weekly.
Academic Partnerships
Furthermore, their C&D program has also focused on academia partnerships to bring open innovation. For instance, University partnerships have played a crucial role. Their partnership with the University of Leeds has established a strategic relationship and their primary aim was to direct academic research so they can develop high-tech products. They have also recruited final-year Ph.D. students from different fields to work 20-hours every week (Park and Hong, 2019). They have also built a relationship with Fraunhofer in Germany, CSIR in India, and Durham University in the UK. These collaborations have helped P&G to identify experts and build technologies praised by consumers.
Trademark Licensing
They have also been involved in Trademark Licensing with CoverGirl Eyewear and this helped the company in reaching the #1 position among all the retailers. Similarly, they have established partnerships under trademark licensing with downy Wrinkle Releaser, Disney and Oral-B stages, and Honewell Febreze Freshness cool. P&G was also involved in In-Out Licensing with Dunkin Donuts, Bounce Fabric Softener, and many more (Gupta, 2018). Bounce Fabric Softener was working from home and has developed an innovative fabric care solution that delivered fabric softener for clothes in the dryer. They have licensed their patented products and combined them with existing P&G.
Other open-innovation strategies
Further, P&G was in search of anti-wrinkle technology so they have partnered with Olay Regenerist. Therefore, the company has transformed its R&D into C&D for bringing open innovations, and through various partnerships, licensing agreements, and more they have achieved enormous success.
Challenges faced by P&G while adopting the open innovation model
During their research for analysing outside sources of innovation, P&G found there were about 2000 engineers or scientists around the globe that can help them bring innovation. It was a count of around 1.5 million people whose talents and skills can be used by the company. They have identified that it will come with diverse operational changes in the entire functioning of an organisation that can affect their employees and executives as well. According to Pourrahmani and Jaller, (2021) operational changes can be described as a change in any process that has the potential to impact business procedure, already planned schedules, output/input functioning of the common business model, and many more. It is essential to deal with such operational changes; otherwise, it can affect the entire business. Resolving these challenges is crucial for adapting to successful open innovation strategy.
At this time, P&G has realised that they need to move the company’s attitude from resistance to innovations. Other than that, there is also a requirement of bringing changes in their organisation’s thinking about R&D so they can establish a permeable boundary between inside and outside the organisation. During this time, they have developed connect & develop innovation model, a massive transformation from a research & development organisation (Popov, 2018). It has helped them in gaining a clear sense of consumer demands and market trends. Further, they have effectively managed these changes among their employees so they can get effective benefits from this innovative business model. Hence, the strategies used by the company in dealing with these operational changes were implemented efficiently, and currently, they have around 35% of new products that have developed through outside P&G innovations.
Furthermore, they have also faced challenges while bringing these ideas through developing an effective connection with outsiders. They have faced issues in collaborating with outsiders and establishing effective licensing and partnerships agreement. It is due to the demands and needs of an outsider and for this; they have to use effective negotiation techniques. On the other hand, it is necessary to bring adequate and demanded innovations rather than collaborating with all ideas (de Mattos et. al. 2018). They realised that it is critical to identify the things they are looking for and the innovations that will work. For this purpose, they aim at setting out effective targets and seeking ideas that have some potential to achieve success and growth in the market. They have to observe working products, technologies, or prototypes along with evidence of customer interest in developing a successful product. Therefore, these are several challenges they have faced while bringing open innovation.
Learning’s from P&Gs open innovation case
From the entire analysis, it can be seen that bringing innovation in today’s competitive environment is must to secure a competitive position in the market. Utilizing open innovation which means taking advantage of both inside and outside innovation professionals is beneficial in comparison with using traditional R&D. From the case of P&G, it can be seen that while thinking of taking advantage of different outsider’s professionals it is necessary to analyse customer demands and market trends (Day and Shea, 2021). It is because several ideas and innovations are coming from outside professionals but it must choose the idea that relates to the organization’s set targets along with its potential to achieve success.
Furthermore, while bringing open innovation there come diverse operational changes that need to be managed effectively. Otherwise; it can affect the success, growth, and brand reputation of the company. Managing operation changes helps the company in identifying the issues faced by employees in adopting a new procedure of bringing innovation along with the business procedure that will require changes effectively. Other than that, partnering and licensing with other organizations requires proper research so the strengths and innovations of partnered organization’s can be patented and used effectively which could help P&G to grow and enhance its potential consumer base (Leach, 2022). Not all the companies aiming to adopt open innovation practices can achieve success. From the analysis, it has been learned that identifying an excellent idea, negotiating, and partnering with an effective firm is must for the implementation of successful open innovation practices.
Conclusion
It has been concluded from the analysis that currently organizations are aiming at adopting open innovation model instead of traditional R&D. The cost of R&D is increasing and with the help of open innovation practices it can be resolved effectively. The case of P&G has taken and the way they have implemented open innovation. They have observed the need of bringing innovation and planned to transform their research & development to connect & develop innovation mode.
Through this, they have collaborated with different outside organizations and professional that has helped them in bringing innovation. Currently, they have around 35% of new products developed under this innovation model. They have established trademark licensing, collaboration, academia partnerships, and many more with firms and outside professionals to achieve growth and success. During this process, they have realised that not all ideas can bring success and it is necessary to select the best idea that relates to organisational targets. Further, there is the necessity of bringing operational changes effectively so the likelihood of growth and success increase.
References
Aziz, E. and Mustapha, H., (2020). A bibliometric study of the recent advances in open innovation concept. Procedia Computer Science, 175, pp.683-688.
Bogers, M., Chesbrough, H., Heaton, S. and Teece, D.J., (2019). Strategic management of open innovation: A dynamic capabilities perspective. California Management Review, 62(1), pp.77-94.
Chesbrough, H., Lettl, C. and Ritter, T., (2018). Value creation and value capture in open innovation. Journal of Product Innovation Management, 35(6), pp.930-938.
Day, G.S. and Shea, G.P., (2021). Innovating how innovation works at Procter & Gamble. Strategy & Leadership.
de Mattos, C.A., Kissimoto, K.O. and Laurindo, F.J.B., (2018). The role of information technology for building virtual environments to integrate crowdsourcing mechanisms into the open innovation process. Technological forecasting and social change, 129, pp.143-153.
Gupta, S., (2018). Driving digital strategy: A guide to reimagining your business. Harvard Business Press.
Han, C., Thomas, S., Yang, M. and Cui, Y., (2019). The ups and downs of open innovation efficiency: the case of Procter & Gamble. European Journal of Innovation Management.
Leach, C., (2022). Introduction: Why Do We Need to Look Again at Collaboration?. In How to Save the FMCG Industry (pp. 1-9). Palgrave Macmillan, Cham.
Lee, S.M. and Lim, S., (2018). Evolution of Innovation. In Living Innovation. Emerald Publishing Limited.
Lei, Y. and Haibing, L., (2022). Evolution of open innovation paths from the perspective of innovation situation. Science Research Management, 43(2), p.9.
Park, Y.W. and Hong, P., (2019). Innovator Companies in the USA. In Creative Innovative Firms from Japan (pp. 91-106). Springer, Singapore.
Popov, A., (2018). Overcoming firm-level challenges in Open Innovation. Business Administration MSc, Department of Business and Management Aalborg University, Denmark.
Pourrahmani, E. and Jaller, M., (2021). Crowdshipping in last mile deliveries: Operational challenges and research opportunities. Socio-Economic Planning Sciences, 78, p.101063.
Online
Strickland. M. (2018). P&G’s open innovation business model. [Online]. Accessed through: <https://slideplayer.com/slide/4375592/>
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