Now P&G is applying its innovation prowess -- and marketing muscle -- to IT. By marketing some of its internally developed IT, P&G is gaining additional revenue while improving its own in-house IT products and services.
The roots of P&G's IT commercialization efforts go back to the late 1990s, when former Chairman, CEO and President Durk A. Jager began preaching about innovation. His plans, which have since been continued by current CEO A.G. Lafley, included adopting great ideas from P&G's business partners and remarketing some of its own intellectual property (IP).
Case in point: P&G has remarketed Power Factor, a set of technologies and work processes designed to improve an organization's manufacturing throughput. P&G has been using these systems internally since the early 1990s and began licensing them to other companies in 2000, says Jack J. Ridge, director of external business development (EBD).
In 1999, P&G created the EBD group to identify internally developed IP, such as technologies and business proc-esses, that could be repackaged and licensed to other companies.
P&G isn't the first company that has successfully marketed some of its internally developed IT. For example, The Men's Wearhouse Inc. in Houston developed software several years ago that stores a customer's sizes to make it easier for spouses to shop for their husbands, says Cathy Hotka, senior vice president of technology and business development at the Retail Industry Leaders Association in Arlington, Va. The software was eventually sold to Retek Inc., which has since been acquired by Oracle Corp.
While other companies have sold homegrown technologies and IT capabilities, most have been one-off deals, notes Howard Rubin, an analyst at Gartner Inc. "That's a tough business model for most IT organizations to sustain," he adds.
In contrast, in February 2005, P&G dedicated a division to focusing exclusively on reselling internally developed IT-related IP. It's a one-person shop run by Bill Metz, a 15-year IT veteran of the company. Metz is constantly beating the bushes looking for technologies P&G can remarket and customers who might be interested in them. But he's not entirely alone. As manager of IT EBD, he works closely with P&G's legal and public relations staffs.
The technologies in question are not necessarily what one would associate with a consumer packaged goods manufacturer. For instance, a colleague at P&G's IT organization in Spain recently contacted Metz about a PC-based diagnostic system that the company developed. Physicians can use the software to quickly diagnose osteoporosis by viewing X-rays on a computer screen. As part of P&G's efforts to establish business relationships with health care providers, the system is currently being used for free by a group of doctors at 230 hospitals in Europe, says Edwin Erckens, an IT manager for P&G's pharmaceutical business in Barcelona. Metz is exploring opportunities to distribute the technology to doctors worldwide.
Robert Scott, vice president of innovation and architecture in P&G's global business services division, declined to share the dollar amount of the IT EBD group's first-year revenue, saying only that its targets are modest, since it's just beginning to mature.
The Feedback Bonus
By licensing technologies to other companies, P&G also gets a nonmonetary return, says Mike Hock, associate director of the EBD group. It's able to apply customer recommendations to improve systems it runs in-house.
For example, in mid-2004, one of P&G's Power Factor customers, a soft-drink maker, complained that the system was too complicated to use, says Hock. So P&G spent the next six months simplifying how the individual modules work and interface with one another. Those changes benefited not only the soft-drink maker and other customers that license the technology, but also P&G's internal manufacturing groups, which use it as well.
Allowing customers to "commercially harden" a P&G system or business process "is a great way of feeding your innovation process," says Hock. To make sure this happens, Metz meets regularly with P&G's IT customer advisory boards to solicit their input on potential product improvements.
Companies that have successfully marketed some of their IT, such as Honeywell International Inc., typically have leaders with a strong mix of IT and business skills that have helped them to make the transition from IT to a revenue-generating entity, says Navi Radjou, an analyst at Forrester Research Inc. in Cambridge, Mass.
Metz has some business experience of his own. In the late 1990s, for example, he worked with developers in India to set up Web development work for P&G. That helped kick-start his role with EBD. Still, he acknowledges that he faces some formidable challenges. These include conveying the commercial viability of some of P&G's technologies and work processes to internal IT staffers, some of whom see marketing IT as "a foreign notion," he says.
One of the toughest lessons that Metz has had to learn is that not every project he's involved in will turn into a money-maker. "Some lines get bites, and some don't. It's the nature of the work," Metz says.
P&G is admittedly learning along the way as its IT EBD group matures. Challenges include striking a balance between the time needed to commercialize and resell its homegrown IT and the burden that places on developers and IT managers. "The biggest challenge is how [to market] our IP without dragging down people from their operational duties," says Scott. "I'm not sure we've worked out the balance."
Reselling IP isn't for everyone, says Radjou, partly because of a cultural reluctance to let go of something that gives you a perceived advantage. "IT is not something that most companies are easily willing to share," he adds.
But Metz and his colleagues are bullish about their future and proud of how they have positioned themselves against traditional IT vendors. "The kinds of solutions we use here are leading-edge," says Metz. "You're not going to get a 1.0 solution that hasn't been field-tested."