Leveraging the Brain Grid

When Alan Lafley took over the helm at P&G he initiated a complete transformation of the company. P&G opened up and tore down the walls between their marketing, customer service, R&D and product development departments. According to The Economist P&G has radically altered the way it comes up with new ideas and products. Harvard Business Review wrote about their “connect and develop” method: P&G connects with external sources of new ideas, university and government labs, Web-based talent markets, suppliers, even competitors. Then it develops those ideas into profitable new or refined products—swiftly and cheaply— using the firm’s R&D, manufacturing, and marketing prowess. P&G used to source around 15% of its new products and innovations outside the company. This is now approaching 50%. Their profitability and company value have appreciated accordingly.

Most organizations are set up to operate in a stable environment. Once their product is out there, they have Marketing run campaigns, Sales signing up customers, Customer Service supporting them, Purchasing getting the best supplier deals and Manufacturing delivering the goods. Each department follows its internal play book and time-tested business processes. Unfortunately earlier success is no guarantee for the future. Not only financial services, retail and commodity markets are subject to gyrations, most markets are getting more dynamic and unpredictable. Rapid adjustment and constant innovation are critical for survival, let alone market leadership. If organizations are ossified along their functional units they will not be able to preempt or react to a dynamic marketplace.

A look at the average company shows us that Customer Service, with probably the best insight into customer requirements, is not talking to Product Management. Marketing still lives in the world of packaging and pushing the product, rather than engaging with customers. The Purchasing Department is specialized in getting the best transactional deals by issuing 1,000+ page requests for proposals. They are not an integral part of the company's value chain. Many contracts assume that the business will continue for the next years very much the same way at the day of signing. These contracts don't take into account that there will most likely be dramatic changes in the market place, regulation and that mergers and acquisitions may happen. Nor do they allow for strategic alignment, co-design and innovation. The IT department usually is a drag on progress, rather than an enabler. Introducing a new product-line for the company typically means that a multitude of systems need to be overhauled; from the rigid SAP or Oracle ERP system, to a cobweb of proprietary applications and CRM systems. As no project ever gets delivered within 12 months, the time to take a product to market will be measured in years rather than months, let alone weeks.

P&G broke with the traditional model and tied the various functions together into a cohesive set of connected business processes. They turned their organization inside out. It used to take P&G around two years to develop and launch a new product. Now it is down to less than a year. The apparel company Zara can modify their products within two weeks and get a completely new line in their stores in six weeks. They launch around 10,000 designs each year. These highly successful companies have done away with their silos and organized their company around rapid response to the market.

Even large companies can transcend not only the boundaries of their departments but also those of their company. P&G opened up to the outside world and created networks to co-design, collaborate and “crowdsource” for innovation. When P&G embarked on their Connect and Develop approach they decided to issue technology briefs that define the problem instead of publishing a detailed specification the size of War and Peace. Such brief is circulated not just within the company but throughout their global networks of individuals and institutions. Somewhere someone will probably have a ready-made solution available that will substantially cut down development time. If this is not the case then the “brain grid” can be utilized. In grid computing several networked computers, sometimes thousands of servers, are used to a single problem at the same time. Similarly the brain grid connects the best teams and brains across the globe to collectively solve problems or create opportunities. P&G uses both proprietary networks of trusted partners as well as open networks, such as NineSigma. This company “enables clients to source innovative ideas, technologies, products and services from outside their organizations quickly and inexpensively by connecting them to the best innovators and solution providers from around the world.” TopCoder nurtures a community of around 180,000 competitive software developers. A majority of the top performers come from China and Eastern Europe.

We will see the growth of large scale networks that support collaboration and development. Engaging a global community of supporters, being able to frame problems, managing on outcomes (rather than inputs) and understanding packaging are the managerial skills required to leverage the global brain power. Open, networked companies will innovate faster, get closer to customers and get to market quicker. They will emerge as the winners in the post-recession world.