P&G Case Study

Innovation in Outsourcing: The Case of The Procter & Gamble Company

Case Study by the Academic Team from The University of Tennessee, College of Business Administration

GEO

IAOP’s Global Excellence in Outsourcing Award

www.IAOP.org

P&G: Taking Innovation to New Levels of Value through Partnership

INTRODUCTION

Many people believe innovation springs serendipitously from some kind of “aha” moment – literally a bolt out of the blue. P&G knows differently. Innovation has been the corporate lifeblood since P&G’s humble beginning in 1837 when William Procter and James Gamble signed a partnership agreement formalizing The Procter & Gamble Company. Today, P&G’s products touch and improve the lives of over 4.8 billion consumers in 180 countries. Fifty “Leadership Brands” include some of the world’s most well-known household names with 25 of these 50 brands each generating more than $1 billion in annual sales. Simply put, this degree of corporate growth could not be achieved without significant innovation across all aspects of the business even extending to our relationships with suppliers and partners. In 2001, P&G radically changed its approach to Research & Development (R&D). Instead of relying solely on its own, highly capable R&D resources, P&G welcomed ideas from individual entrepreneurs and scientists from other companies, and universities, the concept came to be known as Connect & Develop; the goal was to gain half the ideas from inside and half from outside the company. Connect and Develop brought many great ideas, but the question remained. How does a company like P&G drive innovation in its outsourcing efforts? After all, P&G’s outsourced service providers are companies that have their own priorities, business objectives and investment requirements. Larry Bridge, P&G’s Global Facilities and Real Estate (F&RE) Governance Manager, explains. “In the world of outsourcing, innovation has to come from all places - including suppliers. Outsourcing is a...