What happens when the growth is dependent on coming up with several stellar products (means giving back in several millions or billons of US Dollars!).. what does a company do to make the innovations get to see the light of day faster? It creates a network of innovation.. called by Larry Huston and Nabil Sakkab as “Connect and Develop“! This is a full article in the March 2006 HBR… but here it is a summary – awesome stuff.
We discovered that important innovation was increasingly being done at small and midsize entrepreneurial companies. Even individuals were eager to license and sell their intellectual property. University and government labs had become more interested in forming industry partnerships, and they were hungry for ways to monetize their research. The Internet had opened up access to talent markets throughout the world. And a few forward-looking companies like IBM and Eli Lilly were beginning to experiment with the new concept of open innovation, leveraging one another’s (even competitors’) innovation assets—products, intellectual property, and people.
As was the case for P&G in 2000, R&D productivity at most mature, innovation-based companies today is flat while innovation costs are climbing faster than top-line growth. (Not many CEOs are going to their CTOs and saying, “Here, have some more money for innovation.”) Meanwhile, these companies are facing a growth mandate that their existing innovation models can’t possibly support. In 2000, realizing that P&G couldn’t meet its growth objectives by spending more and more on R&D for less and less payoff, our newly appointed CEO, A.G. Lafley, challenged us to reinvent the company’s innovation business model.