Carol Kinsey Goman

Article Summary:

How collaborative innovation can supply a new competitive edge.

Collaborative Innovation

For generations, Procter & Gamble generated most of its phenomenal growth by innovating from within. They hired the best global talent and built huge research facilities. And for a long time, that strategy worked just fine. But in 2000, newly appointed CEO A.G. Lafley dispensed with the company's age-old "invent it ourselves" philosophy and created a "connect and develop" approach - which uses the world as a giant idea factory.

Today the company searches everywhere for proven technologies, packages, and products it can improve, scale up, and market. Now the company collaborates on a massive, geography-defying scale with suppliers, competitors, scientists, and entrepreneurs. In fact, R&D productivity at Procter & Gamble has increased by nearly 60%. In the past two years, P&G launched more than 100 new products for which some aspect of development came from outside the company.

Procter & Gamble isn't the only organization looking outward. According to IBM's Global CEO Study 2006, leaders today are increasingly seeking innovative ideas beyond company walls. While CEOs in the study ranked employees (especially those in sales and marketing) as the major source of new ideas, they also stressed the overwhelming importance of collaborative innovation from customers and trading partners.

The study also highlights the link between external collaboration and financial performance. Top performing organizations used external sources 30% more than under-performers. Of this kind of collaboration, one CEO stated that, "We need third parties as benchmarks and sparring partners. This also helps our staff broaden their views." While another simply said, "If you think you have all of the answers internally, you are wrong."

In direct contrast to past corporate doctrine, where innovation was considered too critical and prprietary to involve outsiders, major strategic alliances are quickly becoming the new competitive edge. As a client of mine put it, "The competition can hire away individual talent and they can duplicate our processes - but our intricate networks of relationships with employees, customers, global partners, regulatory bodies, and suppliers is ours alone. It can't be copied. Every organization has to start theirs from scratch."

But even the CEOs in the IBM study called collaborative partnering theoretically easy and practically difficult to do. Which means that, despite the value they place on collaboration, most leaders have not yet made it operational. Some of the obstacles to collaboration are external - including government and other legal restrictions. But the greatest barriers are workforce issues, limiting funding, and (most of all) unsupportive corporate cultures.

If your organization is looking for ways to collaborate for innovation, here are a few ways get started:

Bring in the customer.
Despite the demonstrated benefits of working closely with customers to drive sales, improve product innovation, and better match supply with demand, a recent study by Deloitte found that only 3% to 8% of respondents are actually engaging their customers in this manner. If your company is not already collaborating with customers for innovative product/services development, this is the place to begin.

LEGO Factory has been around for a while, but it remains an inspiring example of how to tap the creativity in a customer base. Children and other building enthusiasts visiting the site are invited to design models (using easy to use, free downloadable software) and take part in competitions for LEGO prizes. A popular contest last year entitled winners to have their model produced and featured in Shop@Home, receiving a 5% royalty on each set sold.

Make suppliers part of the solution.
As part of Chrysler's SCORE (Supplier Cost-Reduction Effort), there is shared responsibility for innovative ideas to get cheaper parts. The goal for each supplier is cost-cutting opportunities that equate to 5% of its annual billings to Chrysler. The collaborative program has generated a flood of more than 100 ideas per week and an estimated savings of $2.5 billion.

Partner with the competition.
Collaboration among competitors is the most difficult and delicate form of partnership. But archrivals Procter & Gamble and Clorox have managed to make it work. The two packaged goods companies compete fiercely in the cleaning products and water purification categories, yet both profited when Press'nSeal, a new plastic wrap based on breakthrough P&G technology, went to market under Clorox's well-established Glad brand. And the collaboration continues with the recent introduction of Glad ForceFlex trash bags, which are made of strong but stretchable plastic developed by P&G.

Choose the right people.
The best collaborative projects are often those in which the team members can let go of their own (sometimes entrenched) views and ideas, and apply a more open style of working with others. Because collaboration is built on a foundation of good working relationships and trust between individuals, personal qualities (good communicators, good relationship builders, flexible, culturally and politically savvy, confident without being arrogant) are often more important than subject matter expertise. Experts can be brought in as a resource to the process, whereas key interpersonal skills are what keep the collaborative venture on track.

With the constant pressures on resources and the ever-rising expectations of stakeholders, going it alone is no longer the most viable option for an organization. And, in reality, every organization exists within it own unique ecosystem of cross-organizational networks. Collaborative innovation is just one way of expanding and capitalizing on those networks so that they create a competitive advantage.

Carol Kinsey Goman, Ph.D., coaches executives, facilitates management retreats, helps change teams develop strategies, and delivers keynote speeches and seminars to association and business audiences around the world. She is the author of nine business books, including: "The Nonverbal Advantage: Secrets and Science of Body Language at Work,"   "This Isn't the Company I Joined: How to Lead in a Business Turned Upside Down,"   and "Managing in the Global Organization."   Carol can be reached by phone: 510-526-1727, or through her website: www.CKG.com.

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