| Recently, yet2.com sat down with Jeff Weedman, Vice President of Licensing and Corporate New Ventures for Procter & Gamble. Jeff has been responsible for overseeing a remarkable shift in the intellectual asset management policy of this $39 Billion company. In his interview, Jeff shares his experience at P&G and passes along valuable lessons for any corporation seeking to realize value from latent technology assets.
Jeff Weedman |
Reorganizing to Innovate: Procter & Gamble´s Jeff Weedman
Q: In recent years, Procter and Gamble seems to have undergone a rather fundamental transformation in regard to its policies on technology and other knowledge-based assets. Describe P&G´s shift in their approach towards intellectual asset management.
Weedman: I think that the headline is that we´ve gone from protective to proactive in how we as a company think about intellectual property. Historically, P&G has been an innovate-from-within organization with very deep bench strength in research and development, being in the top 30 of all companies in terms of patents issued. We have been very focused on internally inventing solutions to real consumer needs. In the mid-90s, as we stepped back and looked at our effectiveness and efficiencies, we realized that we were using less than 10% of the technology that we developed in our own products.
"...we realized that we were using less than 10% of the technology that we developed..."
The result of this discovery was a two-pronged desire to change our model. First, we recognized the need to extract value from all of the intellectual property and innovation that we´ve been responsible for. Second, and perhaps more importantly, we wanted to help foster more rapid innovation internally. In order to reach this goal, we were able to make two internal changes that have really powered our shift over time. The first was we published a new patent policy requiring that all of our technology be available for license within 3 years after first market exposure or five years after the initial invention. This helped to rid us of a fundamental internal debate; instead of my group having to convince people to license certain technologies, now our company mandate is to go out and license everything when it´s past the hurdle rates that we´ve put forth. The second internal change was an agreement to return all of the value we received from licensing back to the business unit that invented it, giving these business units an opportunity to actually build their own profit bottom line by being cooperative and collaborative with our efforts. This change resulted in my organization going from a situation where we had to knock on people´s doors to being oversubscribed.
Q: Discuss the external factors prompting Procter & Gamble to try and realize value from its technology and other intellectual assets.
Weedman: In my business, I try to resist theoretical academic debate on what drives the value of companies, and really focus on the practical. The practicality as far as I´m concerned, is that my organization needs to show money on the bottom line; credibility flows, whether internally, externally, or on Wall Street when we start generating significant returns for the corporation through our activity. Additionally, we believe that the external recognition that P&G is not just a marketing company but also a technology-rich company is going to pay huge dividends. In my area, it will allow us to attract even more technology, as we actively in-license, and will allow us to attract customers for our technology, and will help the analysts and people who track our company understand that Procter & Gamble has a huge, fundamental technology and innovation base that really is the secret to our success.
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Q: You mention that Procter & Gamble makes everything available, even core technologies. Do you place any restrictions on who you will license to? Will you license to your competitors?
Weedman: The only restriction we have is that the deal needs to be a good value. We will license to our competitors; although we may be ahead of the trend in our industry, other companies in other industries have been doing this forever. As an example, take a look at the high tech and software industries. Companies in these industries cross-license and license to competitors extensively; in these sectors, licensing to your competition pretty much the way of life.
"If we can bring shareholder value by licensing technology to direct competitors, why wouldn´t we do that?"
The major criteria driving our organization should be: are we bringing shareholder value to the bottom line? If we can bring shareholder value by licensing technology to direct competitors, why wouldn´t we do that? The deal itself needs to be attractive to us, but licensing to a competitor can also help to increase the size of the pie. To the degree that we as an industry can become better at meeting consumer needs through more rapid innovation, our company wins. Additionally, I think that licensing to competitors also drives our internal R&D efforts. The fact that we´re going to license technology means that we´re no longer simply competing with the innovations of our competition, but we´re also competing with ourselves. This forces us to run faster and innovate faster to stay ahead.
Q: When trying to bring P&G´s technologies to market, what are some of the problems faced externally?
Weedman: The intellectual property marketplace, as it exists today, is extraordinarily inefficient and fragmented. Licensing hinges on who you know, who can you call, who can you get to talk to you. It is geographically inefficient--how would I know that there is someone in South Africa or in Bejing that needs a specific new technology?
As a result of this inefficiency, we have been very supportive of the burgeoning efforts to create an internet-based marketplace so that there can be a free-flow of information about available technologies and technologies that we are trying to sell. We do not single-source the Internet as the means for the marketplace, and still have incredibly good contacts in many industries, through our suppliers, and through other marketing efforts. However, we are very hopeful that companies like yet2.com will succeed in creating a much more efficient marketplace.
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Q: Describe your process for deciding what technologies should be posted on an online marketplace. What criteria do you use to decide what gets posted?
Weedman: We have a philosophy that we should essentially post all of our technologies-core and non-core-online. The reasoning is very simple: I do not believe that a good business decision can be made on whether or not we should license something until you know whether someone else values it. Too much time is spent internally having philosophical, theoretical debates on whether something should be made available. I have a very simple rule: when people tell me something is not available for license, I ask them whether they would be willing to license it for $50 million a year. Invariably, the answer is "of course." Then, the only question is finding a price for these technologies, and you´ll never know that until you know whether or not someone is interested. Posting a technology online does not mean that you have to do the deal. The deal still must make good business sense.
And so, internally, we strongly encourage (and have received strong endorsement from the CEO, CTO, and various R&D VPs) that we need to take stock of our technology inventory and for the most part be willing to post everything. I think that people who try and post and license technology that´s non-core are going to find that, because they know less about it, they will be less successful in finding good deals. We simply say "post it all, and let the external market validate its value."
Q: Describe the position of your organization within Procter & Gamble. Does your organization concentrate solely on technology licensing, or do you have a broader mandate?
Weedman: I report directly to the CEO of Procter & Gamble. I think it´s fair to say that this structure is a signal of the strategic importance of licensing to the rest of the corporation. Who I report to directly has migrated as my organization has grown and changed and delivered more to the bottom line; whether the current structure might be sustained forever, I really don´t know, and really don´t lose sleep over it. The key is that we´ve had very senior buy-in as we´ve expanded our efforts.
Our group is not solely focused on technology licensing. We also own responsibility for trademark and know-how licensing. In a lot of ways, our group´s charter is much broader than a lot of the IP licensing groups that are in other companies. We have a group within my group that focuses on trademarks; we have a stable of over 300 brands that are known around the world, and we have historically not done anything with them in a licensing manner. We now have a tremendous opportunity to build brand equity. Additionally, we also have another group that focuses on know-how licensing. We have some of the world´s best reliability engineering capability, safety management data capability, and our plants are some of the most efficient in the world. There´s an incredible amount of know-how that would cost other companies years and hundreds of millions of dollars to duplicate that we´ve kept quiet and secret. Why shouldn´t I take that outside and extract value from that also? When you think about it, the scope of our group goes far beyond technology.
Furthermore, our organization commercializes technology in ways well beyond licensing. We do donations, joint ventures, and startups--the key is to find the best deal for P&G.
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Q: Tell us a little bit about your background. Describe how you have quickly ramped up your organization within P&G.
Weedman: My most recent previous job was that I was Vice President and General Manager for our Laundry and Cleaning Products business in Canada. I´ve been a general manager in the company since the early 90s. I started in the marketing side of the company, and have played different roles in sales and strategic planning. Although I´ve held a variety of positions within this organization, I´m not a lawyer and I´m not a scientist.
In terms of hiring for my organization, we´ve not gone outside Procter & Gamble. We´ve brought people into our licensing organization from all over the company and have deliberately sought people from multi-functional backgrounds. We have a good contingent of people from various R&D backgrounds, we have people who came from sales functions, as well as a couple of marketing people. We have people with purchasing backgrounds, as well as quite a few finance people in the group, both as licensing management and as people doing the finance work. We have a small legal staff. We´ve sought people from different functions for a variety of reasons. First of all, making licensing an effective business is not just a legal function, nor is it simply an R&D outlet--it´s a business. We want people who have a good understanding of the range of the functional needs necessary to run a successful business. Secondly, hiring people from across functions helped us to do the missionary work internally. We have people who are highly regarded from the functions that we came from--they have credibility within our company.
"Making licensing an effective business is...a business."
In terms of staffing, we also get additional help. We´ve had business units in corporate functions conclude that their fair share of my organization´s time is not enough. So, they´ve actually contributed head count and budget to my organization to work on their specific projects. When is the last time that you ever heard that happen?
Q: It has been several years since Procter & Gamble began this effort. What lessons have you as an organization learned in that time?
Weedman: Well, I will tell you this: In 1997, we wrote a visionary forecast on what we wanted our organization to be in the year 2002, in which we set some numerical targets. I´m happy to tell you that this plan is out of date. We´ve achieved our major goals at least two years faster than I had ever dreamed that we would. And so, we are in the process of setting another very high target showing how we aspire to deliver value to our company´s bottom line over the next 5 years. We´re going to reach even higher.
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