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INNOVATE

4 Steps to Innovate the P&G Way

Don't have the $2 billion R&D budget of P&G? Not to worry. CTO Bruce Brown says any company can master this process.

Procter & Gamble Co. headquarters building in Cincinnati

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Want to learn how to innovate? Procter & Gamble CTO Bruce Brown knows a few things about how it works with a $2 billion annual R&D budget and 8,000 department employees. But he also has some insight into how smaller companies can make it work because of the relatively small businesses with which P&G partners. Here are four points that Brown made when I interviewed him recently:

Look for a proprietary advantage

P&G is always looking for an edge, as should any small business. Having something you can do that others can't is a big plus. "That could be in the form of patents or trade secrets that give them a distinct advantage," Brown says. As I recently noted, for many companies, patent protection may be prohibitively expensive to obtain, maintain, and defend. Luckily, you're not stuck there. Trade secrets, when handled correctly, can give you a boost that others miss. Sometimes you can gain a boost from smart know-how — business processes that give you a leg up. A solid cost advantage can also provide the leverage you need. No matter what specific form it takes, having something over your competitors that you can defend successfully can be a big help.

Wield your operational smarts

It's great to know in theory how to do something. But if you can't produce and deliver efficiently, your innovations may not matter. "[Potential partners] have to be able to make or ship fairly reliably because we support a very big business," Brown says. Guess what? All of your customers want what they want when they want it, so they're not that different from P&G. If you aren't good on the operational end, do what Steve Jobs did in the late 1990s and hire a Tim Cook. Get the operational experience and expertise you need. Or check with your investors, as they might have insight that you could badly use.

Establish a robust innovation process

It's a mistake to think that innovation is just coming up with a new idea and taking it to market. "While we never want to deny ourselves the opportunity for serendipity, we never want to depend on it for the way we grow," Brown says. In other words, you can't only depend on the killer idea. "You have a mixture of big breakthroughs and smaller incremental things," he says.

Have a mix of big idea people who understand the consumer, scientists, and engineers. That can give you a portfolio of ideas that you create and then refine to improve the product or service and come up with variations that will appeal to specific customer segments. Your goal? "Every couple of years a big breakthrough that lets you reestablish the competitive advantage bar," says Brown. A good innovation process may also including modeling and simulation software so you can develop ideas virtually, saving money and time.

It's about location, location, location

Being in the right physical place can be critical. "Shipping costs can easily overwhelm the cost of making the products," says Brown. The more you diversify your market, the more you may have to develop manufacturing and marketing capabilities in other locations.

The top companies that P&G partners with either have or develop strengths in all these areas. The good news is that you can learn what you don't have. Today is as good as any to start.

IMAGE: Al Behrman/Associated Press
Last updated: Apr 30, 2012

ERIK SHERMAN's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.
@ErikSherman




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