P&G can't hire its way to its growth target, so it stops treating outside inventors as competitors and starts treating them as its own R&D department

the problem

Internal R&D headcount and budget grow linearly, but the growth target requires innovation output to grow faster than either can scale

background

what everyone would do

Hire more scientists and fund more internal labs -- the standard response to a growth target that outpaces innovation output, treating the constraint as a headcount and budget problem to be solved by scaling up the same closed, invent-it-ourselves model that created the ceiling in the first place.

what they saw

Lafley and Cloyd saw that the real constraint wasn't the size of P&G's own labs, it was the assumption that every product had to originate inside the company at all -- meanwhile, universities, small companies, individual inventors and even competitors were already producing finished or nearly finished innovation the world over, sitting unused because P&G had no formal channel to find and bring it in. The fix wasn't more internal capacity, it was building a door into a much larger pool of innovation that already existed outside the company's walls.

the move

P&G formalized Connect + Develop as a standing program: internal 'technology entrepreneurs' worked with each business unit to identify its top unmet needs, then actively searched external networks, suppliers, and a public web portal for existing innovations that matched — rather than commissioning new internal research to solve each need from scratch. C+D hubs were established across Japan, India, China, Latin America, North America, and Europe to source leads globally, with an explicit target of eventually sourcing half the company's innovation from outside its own labs.

why it works

By assigning technology entrepreneurs to identify each business unit's specific unmet needs and then actively search external networks and a public portal for existing matches, P&G converted a fixed internal-capacity constraint into an open market it only had to select from and integrate, rather than invent from scratch. Because much of the sourced innovation was already developed or nearly so, products built this way moved from concept to launch in under a year at a fraction of the cost of the traditional two-year internal cycle, letting P&G's innovation output scale with the size of the entire external ecosystem instead of the size of its own R&D headcount.

the payoff

By 2006, more than 35% of P&G's marketed products carried some Connect + Develop contribution, and that share continued climbing past 50% in the years after — while products developed this way, such as Pringles Prints, moved from concept to launch in under a year at a fraction of the cost of P&G's traditional two-year internal development cycle.

where it breaks

This approach depends on having the internal capability to evaluate, adapt and integrate external innovations quickly and well -- a company that can source outside ideas but lacks the process discipline to actually incorporate them captures none of the speed or cost advantage and just adds a new sourcing bureaucracy on top of the old one. It also requires a category where useful, transferable innovation genuinely exists outside the company's own walls in usable form; for genuinely novel, category-defining breakthroughs with no external precedent to find and adapt, there's nothing to connect to and internal R&D investment remains the only path.

what came after

P&G's Connect + Develop became one of the most cited real-world case studies of 'open innovation,' the term coined by Henry Chesbrough around the same period, and its structure — a standing external-scouting function paired with a public-facing portal for outside inventors — was adopted in some form by large consumer-goods and technology companies seeking the same escape from internal-R&D capacity limits.

references

1. [1]Connect and Develop: Inside Procter & Gamble's New Model for InnovationHarvard Business Review, 2006hbr.org
2. [2]Open Innovation Model Helps P&G "Connect and Develop"Tech Briefs, 2012techbriefs.com

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