Companies used to spend billions on R&D, but that traditional source of new ideas is broken, says Larry Huston, head of Procter & Gamble’s so-called Connect & Develop program. Huston’s mission is to tap outside expertise—from scientists, entrepreneurs, inventors, retired executives—to come up with a new crop of marketable ideas. “Open-market” innovation is the latest trend among cutting-edge companies that realize that there are a lot more smart people in the world outside the company than inside. “Companies getting the most bang for their buck on innovation are not trying to do it all themselves,” says management consultant Darrell Rigby. “They’re opening their borders to free trade.” P&G employs about 7,000 people in its R&D unit, but globally there are 1.5 million scientists, mostly chemists, with expertise in P&G’s areas of interest. “It doesn’t take a genius to figure out that if you can engage the brains of your 7,000 plus the key ones from that 1.5 million, you can build better products,” says Huston. Huston tracks down new brain pools by trying to tap into established networks’ government labs, P&G alums, innovation fairs or Web-based markets for intellectual capital like Innocentive or NineSigma, which function like an eBay for scientists. The rewards can be substantial—Huston’s been known to pay $5,000 for a single idea, and would be willing to go as high as $100,000 for the right solution.

Business 2.0 30 May 2003