The Internationalization of Corporate R&D

THE INTERNATIONALIZATION OF CORPORATE R&DThe reason for searching for outside ideas is the need to develop products faster, withouthaving to do everything in-house, but instead leveraging the skills and knowledgeof others (Huston).To manage and access this large number of external researchers and to emphasize theincreased external focus, P&G has replaced the term R&D with C&D – Connect andDevelop (Huston & Sakkab 2006). External R&D partners can be used for all of the150 research areas within P&G. P&G’s external innovation network includes individuals,academia, government laboratories and intermediary companies, and makes use ofintranet, websites and search engines. Besides using InnoCentive, NineSigma, Your-Encore and yet2.com, P&G has an internal network called InnovationNet. It is a webportal – a “global lunch room” – on P&G’s intranet that connects 18,000 P&G innovatorsin R&D, engineering, market research, patents and purchasing (Anthes 2004).According to the company, the new innovation model has contributed to many of itssuccesses. For example, the electric toothbrush was developed by an entrepreneur inFlorida and today generates more than 200 million dollars in annual profits. According toHuston, P&G considers C&D to be in-sourcing, not out-sourcing, and has actually grownits R&D internally by bringing more ideas into the organization. P&G has been successfulin decreasing its costs for R&D in relation to revenue, and at the same time been ableto increase the total innovation capability. P&G has not replaced its own labs, which areclosely linked to its customers, because critical aspects regarding customers can never becompletely understood by outside partners, according to Huston (Huston).7.3 Marketplace for Problem SolvingInnoCentive and NineSigma are electronic marketplaces that bring companies withspecific R&D problems together with researchers and problem solvers around theworld. The business concept behind these companies is to save time and money forcustomers by providing them access to qualified researchers without having them ontheir payrolls. Problem owners can access a global network of problem solvers to findthe solution to their technology need. Researchers and problem solvers can live andwork anywhere in the world.There are a number of examples of how a marketplace for problem solving can benefitcompanies. A research group at Eli Lilly posted a problem on InnoCentive’s websitesince there was no time to work on the problem in-house. Three months later the problemwas solved by a retired researcher from a large research organization who earned25,000 dollars for his work. The solution, a part of a new pharmaceutical drug, savedtime and money for Eli Lilly. The company believes it could not have solved the probleminternally for the same amount of money (InnoCentive 2005).172