P&G Asks: What's the Big Idea?

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"When A.G. [Lafley] says he wants half of innovation coming from outside, he doesn't just mean product technologies," says Jack Ridge, one of P&G's directors of external business development. "He also means processes, ideas on how we structure the organization—whatever innovation looks like."

To help find those more process-oriented ideas, the company set up a program similar to Connect & Develop for P&G's corporate functions, such as marketing, manufacturing, and information technology. The program, called "Know How," started as a way for P&G to commercialize, or export, the processes it had mastered, such as "reliability engineering," a set of technologies that improve manufacturing efficiency.

Disruptive Innovation

More recently, however, the "Know How" program has been focused on importing ideas for its corporate functions instead. Case in point: P&G has licensed technology from two companies that developed "layered voice analysis," which examines the emotional tone of people's reactions. P&G believes the technology could be a treasure trove for its market researchers when gauging customer feedback on new products or pricing. In other cases, the company might provide upfront development cash to another firm in order to influence how its technology develops or limit the competitors that have access to it.

While such technologies could give P&G a boost in understanding its customers, the company has also been ramping up its focus on much more disruptive innovations. Through recent work with Clayton Christensen and his consulting firm, Innosight, P&G is looking to improve its ratio of true breakthroughs to more incremental ideas, such as product line extensions to about one in every four or five.

"The Swiffer had nine innovations off of it," says David J.K. Goulait, an R&D associate director who's leading the initiative. CEO Lafley "is very conscious of the fact that it's awfully easy to fall prey to what you're really good at, and keep doing the same thing over and over again," he adds.

As part of this new mandate, P&G has established a network of guides who help shepherd the teams attempting breakthrough projects. They've also set up different yardsticks to measure their success. One of these, says Goulait, is "Does the idea make a difference in somebody's life? Could a consumer now do something they couldn't do before that was really meaningful? If you can't put that together, than it's probably not a big idea."

McGregor is BusinessWeek's management editor.