Innovate to innovate

It's been said that Procter & Gamble (P&G) has "innovated innovation." Indeed if it wasn't for P&G, we may not have things like vegetable shortening (Crisco, 1911), synthetic detergent (Dreft, 1933), disposable diapers (Pampers, 1961) or shampoo and conditioner in one (Pert 1986) -- not to mention the revolutionary advances to the company's portfolio and other existing products. Being the leading consumer goods (CG) company in the world, P&G is renowned for product development, but behind that and across functions at the company, innovation drives this innovation.

Transformation in business processes, creative packaging and design, and inventive marketing also compel research and development (R&D), helping to bring products to fruition and success. Innovation is simply a part of the culture at P&G. "Just as you are expected to know how to work your telephone, you would be expected to manage your work in a way that produces breakthrough results," says Keith Caserta, Ph.D., associate director and head of health care R&D information & decision solutions, P&G. "Our focus is innovation and it is all funneled towards innovation in products. But in order to do that, you have to innovate within your own function."

Freedom To Innovate

Innovation at P&G starts with its people and their environment. "It's been my experience over a relatively long career, if you give people the right environment and you give them the freedom, they will innovate," explains Caserta. And he has been at either end of the spectrum here, both working in and providing this environment. His career spans 32 years with P&G, with nearly 15 years in R&D (his doctorate is in analytical chemistry) and 17 years on the IT side.

Caserta notes that this type of open atmosphere requires a certain mindset on the part of management. "In particular," he says, "it requires a lot of trust in those individuals [who are creating the innovation]."

Sometimes people bring him an idea that may seem off the wall and would require months of time to discover its validity or value. Caserta says he has to be willing to trust the judgment of his people who are close to the business bringing him these ideas, and know that they are doing the right things to move the business forward.

Something in his area of R&D that also fosters this philosophy and makes it different from a typical IT department are the dual backgrounds of the staff. Like Caserta, approximately one-third of the people have a scientific background, such as an undergrad degree in chemistry or biology, and a master's or Ph.D. in an information systems area. He says this has been especially important to P&G with regards to innovation. A mutual understanding exists between the company's IT staff and their R&D associates. "Because they have a rapport with our R&D partners, they are able to see, or sometimes have insights that we would miss otherwise," he explains.

Innovative business processes seem to be the next layer in the foundation of P&G's overall innovation strategy. Caserta says P&G has to model, engineer and reengineer business processes before implementing new technologies and systems, the results of which it had not realized before (see sidebar). Often the case in R&D, six labs (for example) may be doing the same type of work, but with entirely different business processes.

Before putting in an information system Caserta says the labs have to "agree" on the right BP for what they want to automate. "The innovation here," he explains, "is that it takes a lot of creativity to see your way through how you can change six different processes into a common one to do the same thing." This technology helps improve the innovation process as well.

He also adds, "Since a successful product requires a successful launch, it is critically important that the R&D, supply chain network and marketing systems which touch the launch point are robustly integrated." Otherwise integration can become a problem for large companies. "Leading-edge work we've done with integrated informatics in upstream research has contributed to increased product success rate, through better initial leads, resulting in higher success probabilities throughout the R&D process."

Levels Of It

Incidentally, Caserta talks about where an IT organization needs to be to facilitate innovation. There are three levels to this: 4Level 1 is where most companies start by putting in computers and LANS to give people access to things in order to run their business day to day. 4Level 2 is where you begin to look at the BP and think of the kind of systems that might enhance those processes or automate the BP in a way that moves the business forward.

At Level 3, IT becomes a strategic part of the company's business and the IT staff act like "business owners." Here, he says, "They understand the business to the point where they can understand how to apply technology to move the business forward."

In many areas Caserta indicates that P&G is moving to Level 3. "We have a CIO who understands this and has set this direction for the company," he explains. It goes without saying that they plan to provide IT benefits in the most cost effective manner.

IT also plays a significant role in speed and efficiency when it comes to new product development. Improving those elements is part of his key strategy. Caserta says, "Obviously, you can't start making money until your product gets through the R&D pipeline. Therefore, we have IT projects focused on shortening development times." Additionally, he says, since they are not in the "IT commodities" business, he expects almost all of the projects in his organization to have a very large innovation component.

This relates to Caserta's belief in outsourcing functions that are not strategic such as back-office structure, hardware infrastructure and so on. In R&D, this can apply to routine analysis. Since P&G considers these to be "commodities" businesses, they are better or more efficiently operated by a company whose strategic focus is on these functions.

He explains, "In businesses like ours, which are consumers of IT and not IT developers, I strongly believe that our long-term future is directly tied to our ability to innovate, with the clear goal of moving our business (consumer products and pharmaceuticals) ahead. If your shop isn't set up to do that -- if you remain a Level 1 IT organization -- you are destined to be outsourced."

Plm Implementation

Caserta previously mentioned IT projects to shorten development time, several of which benefit from P&G's utilization of product lifecycle management (PLM). One project, electronic lab notebooks (ELNs), is projected to deliver a 12 percent rise in productivity. P&G took the successful experience it had with PLM in other areas of its business and applied it to R&D. P&G had used a suite of tools based on a PLM platform to cultivate innovation in the packaging and design progress. Developers who are in different global locations can now work together. Caserta notes, "This has eliminated technological barriers to collaboration, allowing the designers to focus on the creative process."

Yet, they were a bit skeptical putting this to work in R&D: many were doubtful it could positively impact the information requirements and workflow for chemistry or biology research.

"Early on, with significant help from our PLM vendor, UGS, we were able to automate eight labs in upstream R&D, at one-third the projected cost, with significant value to the business. That set us on the path to look for other places to apply PLM," says Caserta.

One of the "other places" was the ELN system, which will eventually be rolled out to 5,000 scientists. The biggest challenges here have been getting the business processes stable and efficient. This is where an expected increase in productivity is slated. Caserta says, "There is no reason why we shouldn't meet our goals of a 5 percent overall R&D productivity boost based on faster notebook entry, and a 7 percent improvement in R&D productivity by eliminating repeat experiments, through good notebook searching capabilities. In addition, we'll significantly improve IP protection and management."

They are also looking at PLM for managing the collection of information systems and business processes used in upstream consumer studies, and in workflow management across the various functions in clinical testing.

With innovation on so many levels, Caserta says it is critically important for each function within P&G to manage its portfolio of projects to put effort against the most important -- usually the highest value -- projects. IT projects in R&D at P&G use a "fit/feasibility/attractiveness" process to rank projects. Regulatory and/or legal requirements are obviously "above the line" in this process to keep P&G in compliance. "Aside from that," he adds, "projects and proposals are compared on the basis of criteria like strategic importance, scalability, value creation and so forth."

Open Innovation

P&G is also astute enough to know that lots of great ideas come from outside their own walls. In fact, Chief Executive Officer A.G. Lafley, reinvented the company's innovation business model in 2000. He set the goal of acquiring 50 percent of innovations from outside the company and named this model "connect and develop." Caserta explains, "Connect and develop consists of the philosophy, processes and tools that allow us to connect to the right resources to source those 50 percent of new ideas from outside.  It's also intended to get the right experts in contact with our development challenges, whether those experts are internal or external." Essentially the mandate states that half of P&G's new ideas will come from its own laboratories and research centers, with the other half coming through open innovation.

To illustrate, Caserta cites pharmaceuticals. He says P&G could have an upstream research organization with hundreds or even thousands of staff working to develop new "drug candidates (novel molecules)." But, there are nearly 5,000 biotech companies out there doing the same thing.

"We don't have a monopoly on great minds or creative thinkers. Why shouldn't we take advantage of the excellent work being done elsewhere, seek out those organizations doing work aligned with our product areas, and partner with them to bring their ideas to market?" he asks.

Once again, IT has a significant and critical role to play here in developing and/or implementing software tools and processes to make "connect and develop" work for everyone in R&D, engineering and some of the commercial areas too, Caserta says.  The "connect and develop" approach creates interesting problems for IT such as how to utilize technology to find potential partners.

"Next," he explains, "how do we create an infrastructure (communications, shared modeling, access to systems) to allow our R&D organization to work with these partners, scattered all over the world, as though they were in the same building? Finally, how do we manage these relations over long development lifetimes, and within our overall research portfolio? These are some of the newest areas my staff is addressing."

Fundamentally, Caserta defines innovation as "the act of creating a novel product or service which addresses an unmet need, at the right time." This could mean developing, applying for the first time or reinventing a process or technology, with the key feature being the unique use of this process or technology. Moreover, true innovation, he avows, involves bringing the project to fruition at the right time. He explains that if it is too early few people will recognize the innovation as relevant, and if it is too late, another innovation would have already taken over that space. He suggests, "For those of us in consumer products companies, we should have a clear focus on developing innovative products and on innovating in all areas of the company deemed strategic."