Product innovation is a cultural phenomenon. According to P&G's A.G. Laffley, companies must make the "consumer the boss." Laffley explained,
The people who buy and use P&G products are valued not just for their money, but as a rich source of information and direction. If we can develop better ways of learning from them—by listening to them, observing them in their daily lives, and even living with them—then our mission is more likely to succeed. "The consumer is boss" became far more than a slogan to us. It was a clear, simple, and inclusive cultural priority.
When innovation becomes a cultural priority, it is easier to follow McKinsey & Co.'s Kenichi Ohmae's advice: "First comes the willingness to rethink, fundamentally, what products are & what they do." Deep customer insight will help you envision how your product solves customers' problems. A collaborative end-to-end NPD process will then help you translate great ideas into profitable new products. By making innovation a cultural priority, an entrepreneurial edge emerges, driving a virtuous cycle of satisfaction—and success. New products become the lifeblood of your company.
How well do you know the Rubbermaid story? If you turn the clock back to the mid 1990s, Rubbermaid was Fortune Magazine's most admired company (1994 and 1995).
What made Rubbermaid special? Rubbermaid had mastered innovation, bringing a cool new product to market every day of the year. Then, according to CEO Wolfgang Schmitt, Rubbermaid lost its "entrepreneurial edge."2 In 1999 the unthinkable happened—Newell Corp. acquired Rubbermaid. Having lost the entrepreneurial edge, Rubbermaid lost control of its fate.
Every company runs the risk of losing the entrepreneurial spirit. Recognizing this risk, AG Laffley, CEO of Procter & Gamble in the early 2000s, launched an unprecedented new product strategy, setting a "goal to get half of our innovation from outside."
Laffley asked the P&G team why almost all of P&G's new product ideas came from 8,000 R&D staff when 100,000 people worked for P&G. Laffley explained, "At least 85 percent of the people in our organization thought they weren't working on innovation. . . We had to redefine our social system to get everybody into the innovation game." When P&G launched a crowdsourcing initiative called Connect + Develop to attract the best ideas, everybody included suppliers, customers, and rivals. Over the next few years, P&G achieved the following.
The business development group received and reviewed over 1,500 external ideas each year—that's 42% of all new product ideas (with 40% coming from outside the U.S.).
The commercialization success rate jumped from 20% to over 50%—even as R&D spending decreased by 40%.
By almost any standard, these are outstanding results! But, that is not the end of the story. The innovation challenge never ends—even at P&G. Consider P&G's Tide brand. Its last megahit was Tide Pods in 2012. What do you do when your NPD pipeline "dies" and you begin to struggle with scant growth? Decision makers at P&G decided to convince consumers to use more Tide Pods per wash.3 Sales may go up in the short run, but at what cost—a loss of consumer loyalty?