The archive · Work & Ways of Doing · Strategic decision · 2000–2008
P&G's Connect + Develop opens R&D to the world — half its innovation now starts outside
Lafley's 2002 reversal of 'invent it ourselves': global scouts and networks hunt proven external ideas, lifting outside-sourced innovation from 15% to over 50%.
Procter & Gamble
What it had to solve
By 2000, P&G's internal-only R&D model was failing: the success rate of new products was under 35%, innovation costs were climbing faster than revenue, and the stock had fallen from $118 to $52 as the market cap more than halved. New CEO A.G. Lafley concluded P&G could not invent its own way to the 4–6% organic growth it needed, and asked R&D leaders Larry Huston and Nabil Sakkab for a new model.
How it works
For nearly 165 of its first 170 years, Procter & Gamble grew by inventing inside its own labs. By 2000 that model was failing: the success rate of new products was below 35%, innovation costs were climbing faster than revenue, and the share price had fallen from $118 to $52 as the market cap more than halved. New CEO A.G. Lafley concluded P&G could not invent its own way to the 4–6% organic growth it needed, and gave R&D leaders Larry Huston and Nabil Sakkab a radical assignment: find a new model.
The result, launched in 2002, was Connect + Develop. Each business unit published its top-ten consumer needs; technology entrepreneurs in six hubs worldwide plus supplier and open networks hunted for proven solutions, writing technology briefs like the one that found Pringles Prints' ink-jet printing at a small Bologna bakery run by a university professor. P&G licensed the process and launched the product in under a year, versus about two years internally, and rewards were reworked to favor finding innovations over inventing them.
The numbers followed the structure: by 2006 more than 35% of P&G's products on the market had a Connect + Develop component, versus 15% in 2000, and 45% of development projects drew on external partners. R&D productivity rose 60%, innovation success more than doubled, and innovation spending fell from 4.8% to 3.4% of sales. Products including Olay Regenerist, Swiffer Dusters, Crest SpinBrush and Mr. Clean Magic Eraser came through the model.
Managing IP, an independent publication, reported in 2015 that innovation from external sources had jumped from about 10% to more than 50% between 2001 and 2008 — the target Lafley had set had become the operating norm. P&G still runs Connect + Develop today as an open submission point and hands out annual Partner Excellence awards, making it one of the most durable management inventions of the 2000s.
Why it lands
- A numeric goal (50% from outside) made open innovation a measurable target, not a slogan.
- Scouts and hubs turned 'open' into daily work: 70 technology entrepreneurs plus six regional centers and supplier networks.
- Technology briefs turned vague needs into searchable problems — the Pringles print brief found an existing bakery process.
- Rewards for external sourcing flipped the 'not invented here' incentive inside out.
- Proven, already-working ideas cut time to market (under a year for Pringles Prints) and spread the risk.
What it did
By 2006, 35% of P&G products on the market had a Connect + Develop component, up from 15% in 2000, and 45% of development projects drew on external partners; R&D productivity rose 60% and innovation success more than doubled, while innovation spending fell from 4.8% to 3.4% of sales. Managing IP reported external sourcing passed 50% between 2001 and 2008, and Pringles North America posted double-digit growth on the strength of Pringles Prints.
What you can take
Set the ambition as an explicit number, build the search infrastructure, and reward 'found' as much as 'invented' — proven outside ideas cut time and risk, if insiders will adopt them.
Since then
Connect + Develop became P&G's standard innovation engine rather than an experiment: the more-than-50% external goal was reached and held, and later products like Tide Pods and Crest White Strips were built through the same channel. P&G still runs pgconnectdevelop.com as an open submission point for innovators and patent-holders and hands out annual Partner Excellence awards to universities and suppliers — the model outlived the 2000s and was widely copied by consumer-goods rivals.
Sources
- Connect and Develop: Inside Procter & Gamble's New Model for Innovation
- Open Innovation Model Helps P&G 'Connect and Develop'
- How to make open innovation work
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