Are You NIH? Or Perhaps IHBLRIA? Well,You Should be PFE or Maybe PFEAAWP!

Going in Circles, or Taking the "Road Ahead?"

I stumbled upon a blog post by Richard Stuebi the other day (“On Innovation”)  in which he discussed a meeting that he’d recently attended on the topic of innovation.  During that meeting Dr. Chris Thoen from P&G spoke of an interesting twist that P&G has applied to the NIH problem.

The “what” problem, you ask?

That would be the “Not Invented Here” (NIH) syndrome.

NIH refers to an unwillingness within an organization to adopt an idea or such simply because it originates from outside of the organization.  Not to be outdone, NIH is quite similar to another often seen syndrome referred to as the “Invented Here, But Let’s Reinvent It Anyway” (IHBLRIA) syndrome that goes even further down the rabbit hole by working from the assumption that not only is external schtuff bad but also any previous ideas or such from within their own organization are unacceptable or otherwise not applicable — and so then instead they should re-create whatever rather than reuse anything.

And as they say, “That’s just not right.”

It’s critical to understand though that both NIH and IHBLRIA are most often based on a lack of understanding of the value of the knowledge of others, or misconceptions related to the (over) valuing of the organization’s own knowledge, or failing to realize that the potential of all outside collective knowledge clearly surpasses the sum total of internal collective knowledge.  In short, this is misperception rather than reality that then shapes the culture of the organization in this negative manner.

The opposite culture would be one that is sometimes described at “Proudly Found Elsewhere” (PFE).  Or you have perhaps heard of the practice referred to as “shamelessly borrowed.”

Interesting concepts but in the end they tend to offer limited strategic gains. Think of it as a bit of a “zero sum game” where an individual organization’s gains or losses are balanced by the gains and losses of all other competing organizations.

In the case of PFE or shamelessly borrowing, lots of good ideas are circulated and while everyone improves this typically doesn’t result in clear strategic gains by any participant. Similar to what was seen, for example, in TQM as applied to the automotive industry where all manufacturers saw vast improvements in quality because the quality improved throughout and across the industry.

And that’s where P&G comes into the story. Finding a way to exploit PFE, resulting in strategic gains that produce competitive advantage.

In 2000, P&G came to the realization that their “invent-it-ourselves” model would not sustain sufficient growth. Internal expenditures in R&D had increased to a point of diminishing returns. P&G culture was deeply rooted in the NIH mindset. But their “ah-ha” moment was an internal revelation that their strategic strength was not necessarily in coming up with the new-big-idea. Or even in developing the new product based upon the new-big-idea. Rather, it was their ability to get the product that is based on the new-big-idea out into the world.

In short, P&G realized that it didn’t matter where the innovation came from, just that the innovation resulted in getting innovative products to market. And it didn’t matter then where the innovative idea came from, just that they “ran with it.” P&G realized that as smart and creative as their talented people were, there were many more creative and talented people outside of P&G.

At that point in time, according to P&G’s vice president for innovation and knowledge, Larry Huston, and senior vice president for corporate R&D, Nabil Sakkab, P&G realized that although their own R&D organization numbered some 7,500 folks, that there were probably some 1.5 million folks outside of P&G with knowledge and talent that were needed to produce desired innovations.

P&G realized that they couldn’t meet their growth goals, typically 4-6% per year for large and mature companies – amounting to a need to build an additional $4 billion a year for P&G, without making a change.

P&G also recognized that changing the culture was the single biggest challenge that they faced in moving past NIH. This cultural shift was necessary to move P&G from “closed innovation” (generating all of your own ideas and innovations) to that of “open innovation” (utilizing both internal and external ideas and innovations).

And I think that’s where I think that P&G has had tremendous success. Based on what is described by Dr. Chris Thoen, P&G’s managing director of External Innovation and Knowledge Management, as their desire to embrace “Proudly Found Elsewhere and Applied With Pride” (PFEAAWP). And that change in mindset spawned P&G’s “Connect + Develop” concept, based generally on “open innovation” concepts. Connect + Develop(SM) is P&G’s “version of open innovation: the practice of accessing externally developed intellectual property.”

P&G’s results?

P&G CEO, A.G. Lafley made it a goal to acquire 50% of P&G’s innovations from outside of the company. By 2006, P&G was able to develop more than 35% of new products based on ideas and innovations that came from outside of P&G.  And today, according to Bruce Brown, Chief Technology Officer, P&G, “more than 50% of our product initiatives involve significant collaboration with innovators outside of P&G.”

Sounds like “goal accomplished, but still striving for more” to me.

Today P&G actively solicits for those collaboration opportunities on P&G’s Connect + Develop(SM) web portal “where anyone, anywhere, can submit their innovation to P&G for consideration.” P&G indicates that they have more than “1,000 active agreements” for collaboration on innovation.

How did they achieve those results? According to Dr. Thoen, it was all of the things typically critical to achieving success in any Knowledge Management or Innovation program:

  • Building rewards and recognitions into career development (P&G tied those specifically to goals of Connect + Development(SM))
  • Ensure adoption of the concepts needed to succeed (P&G tied Connect + Development(SM) to work plans to ensure adoption of the concept)
  • Socializing success stories to spread the word of the successes of collaboration, and to emphasize the value of the external ideas and innovations
  • Identify and utilize champions to spread the word and to influence others to support the concept

One huge take-away from all of this, I believe, is that to achieve the desired results you actually have to drive the organization in that direction.  If, for example, in an organization there is greater reward for making something new (internally, from scratch), than for reutilizing accomplishments achieved outside of the organization, then that’s the kind of results you will see (ignoring outside possibilities).  In short if “reutilize” or “convert” or “re-purpose” are rewarded less than “create” or “invent” or “discover” then you’ll be rewarding the wrong thing.

 

Dr. Dan's Daily Dose:
In today’s competitive environment, an organization that maintains a NIH or IHBLRIA is probably not long to last.  Innovate or “die” as an organization, and recognize that innovation spawns from new knowledge.  Understand what your organization’s true strengths are, and then develop knowledge management and innovation strategies to develop and support those capabilities.  Engage the organization to make the necessary cultural shifts to promote collaboration.  Reward the right things, for the right reasons, and to accomplish the strategic goals by ensuring that the operational things are actually supporting those “big picture goals.”

 

About Dr. Dan Kirsch