When was the last time you re-thought your operations processes? Are they still relevant?
Process innovation and creativity are key elements to successful operations strategies. Companies reluctant to rethink their operations processes can learn a lot from those companies that successfully applied process innovation and creativity to their value chain, including:
- IDEO, a small design firm that has incorporated creativity into its design and development process, resulted in the company holding more than one thousand patents and produced the first commercial mouse, the first commercial laptop, and the first stand-up toothpaste tube.
- McDonald’s Corporation, whose operations strategies include balancing certainty and discipline with creativity which resulted in franchises creating some of the icon’s most famous items, such as the Big Mac, Filet-O-Fish, and Egg McMuffin.
- CVS, where process design engineering principles were used to improve the pharmacy order fulfillment process.
- And, of course, Procter & Gamble (P&G).
Procter & Gamble’s New Approach to Product Development
Like many consumer packaged goods companies, Procter & Gamble conducted most of its new product development in its R&D Labs. The company invests $2 billion annually in R&D, with 8,000 employees in 26 labs around the world. Despite that large focus on innovation, P&G simply wasn’t reaching its goals for new products, so it decided to expand its view of how the company developed new products by sourcing innovations from its supply base and value network.
“It used to be that all Procter & Gamble products were developed in their R&D labs,” commented MIT Sloan Professor Charles Fine in the article “Your Next Supply Chain,” MIT Sloan Management Review. “Then they asked themselves ‘Why not use the world as our lab? Let’s try to create mechanisms to find innovations, ideas, and new products anywhere.’”
This change in how P&G-sourced innovations led to a tripling of its innovation success rate.
P&G recently expanded that further to source innovations from outside its supply chain and partner networks. In February 2013, P&G launched a website, pgconnectdevelop.com, which connects innovators with P&G’s needs, allowing anyone—customers, partners, and the general public—to submit ideas to the company. In the news release announcing the program, Laura Becker, General Manager of P&G’s Connect+Develop program, states, “Procter & Gamble is focusing on strengthening areas of our open innovation work to deliver more discontinuous, breakthrough innovations. Part of that work means making connections both easier and more effective.” According to the release, the company is receiving 20 submissions each weekday.
P&G is a company that had a structured, evolutionary approach to developing new products. It added a revolutionary approach to product development through examining its operations processes and making the total approach more relevant to today’s open innovation world. Says Fine, P&G’s story of process innovation and creativity “is another model of how people are using supply chains and different models of supply chain design to create value collectively in the value chain.”
Charles Fine teaches in the MIT Sloan Executive Education programs, Developing a Leading Edge Operations Strategy, Advanced Certificate for Senior Executives, Driving Strategic Innovation: Achieving High Performance Throughout the Value Chain, Future of Manufacturing, and Supply Chain Strategy and Management. He is the author of Clockspeed: Winning Industry Control in the Age of Temporary Advantage.