the luxury of open innovation: a case study of whirlpool
DESCRIPTION
Unlike traditional innovation, open innovation could create wealth to it adopters. This is a discussion about how Whirlpool could manage to create new value.TRANSCRIPT
The Luxury of Open
Innovation: A Case
Study of Whirlpool
Karlstad Business SchoolHandelshögskolan vid Karlstads Universitet
TITLE OF THE WORK:
The Luxury of Open Innovation: A Case Study of Whirlpool
Prepared by:
Family name Given name
Shurrab Hafez
El Bouassami Mohammed
TABLE OF CONTENTS
1. INTRODUCTION..........................................................................................................- 1 -
2. BACKGROUND............................................................................................................- 2 -
3. THEORY........................................................................................................................- 2 -
4. DISCUSSION AND ANALYSIS...................................................................................- 3 -
4.1. Whirlpool.................................................................................................................- 3 -
4.1.1. Idea Generation....................................................................................................- 3 -
4.1.2. Idea Development................................................................................................- 4 -
4.1.3. Commercialization...............................................................................................- 5 -
5. CONCLUSIONS.............................................................................................................- 6 -
6. REFERENCES...............................................................................................................- 7 -
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1. INTRODUCTIONIn the past, all companies almost depended on their own R&D centres for
developing and launching new innovative solutions and products ideas. Therefore, most
of corporations relied mainly on their researchers and developers in order to keep their
ability up for getting new innovations to the market annually. However, nowadays, and
because of the tough competition, companies are forced to change their strategies so
that to speed up the integration of new ideas to the company, and then into the market
(Chesbrough, 2003).
For many years ago, a methodology called close innovation method arose. Firms
had been always defending the idea that states, to achieve a successful innovation; all
processes should be complied under total control. In other words, companies must be in
control of its own ideas from the development phase until the end user. But due the
increased speed of delivering new ideas to the market, more and more innovative ideas
or products are outsourced from different partners or independent research centres. In
order to survive under the fierce competition, it is almost impossible for companies to
rely only on their innovations developed within its own researches centres. Firstly,
because of time pressure to react quickly to the market needs, and secondly, the lack of
enough resources dedicated for research and development that require massive funds.
That is why companies tend to adopt new operation models based on open innovation,
which aim for a better and effective product development management (Fowles &
Clark, 2005).
The concept of open innovation is based mainly on the principles of exchanging
ideas and innovations between companies, by importing external innovations from
outside, while exporting unused ones to other companies who might be in need of it.
This report is dedicated to discuss how open innovation can create new value, and how
such innovation model can lead to create innovation network includes customers,
suppliers, distributers, and researchers. Therefore, in order to convey a realistic insight
about this era, a relevant case study of Whirlpool is used to study how they could
manage to create new value to the overall business.
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2. BACKGROUND Whirlpool is a worldwide company, headquartered in Boston, United States, for
home appliances. In 2010, they recorded $3.6B as return from innovation, which
accounts for 20% of the overall revenue. We find their experience very interesting to
discuss and analyze since they managed to take the advantage of innovation in terms of
different perspectives, especially the marketing one. Generally, Whirlpool adopted
open innovation perceptive. In 2010, Whirlpool was named one of the ten most
innovative companies in consumer products by Fast Company magazine (Whirlpool
2013).
3. THEORY The process innovation can be explained by the opportunities and ideas that the
market offers for companies, and also the process of the creation of its related business
model. Before any idea goes through development, there is always a need to set a
number of fundamental questions that must be answered before setting a suitable
business model to be followed. Such questions include asking for information about
target customers, goods or services to be offered to customers, how the offered products
and/or services create competitive advantage over the other players in the market, how
the product will be delivered, and finally how such innovative idea will add value and
handle the company’s growth (Muller et all, 2012 ).
Actually, and in many cases, innovation process is a combination of three
consecutive stages that the components and structure of business model are cleared and
accomplished. The first element is idea generation, which is done by collecting ideas
about customers’ needs and what products and/or services may be delivered as a value
proposition to the end-customer. The second element is idea development, which is
done by adopting the most relevant innovative ideas that could be marketed as an
answer for what the customers are waiting for. The third element is commercialization,
which is the process of testing assumptions about the market opportunities (Muller et
al, 2012).
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4. DISCUSSION AND ANALYSISAs the use of innovation within business is characterised by high uncertainty and
uniqueness, we prefer to expose some aspects of a real case, where open innovation
became central practice in.
4.1. Whirlpool
One of their new products that have been introduced to the market in 2000 is found
to be worth telling about and analysing, which is affresh (Muller & Hutchins, 2012).
The story of how affresh came into the scope of Whirlpool could reflect open
innovation and user innovation relevantly. We analyse the stages of affresh
development until it became a global brand from innovation perspective, with emphasis
on marketing stages. They have also considered different tools of innovation toolkit
including partnerships, crowdsourcing, technology brokering, technology scouting, and
consumer collaboration.
Whirlpool describes their experience for affresh as integration of triple diamond,
which are idea generation, idea development, and commercialization. For us, this does
not necessarily relate to open innovation exclusively, since the three elements are also
involved in the concept of traditional innovation. However, the essential difference rest
in details while translating these elements into practices.
4.1.1. Idea Generation
One of the dispensable questions when discussing integrating innovation is about
complementary products and services that could enhance the customer’s experience
with the existing products. This is what Whirlpool did when they started to integrate
open innovation instead of the traditional one. We think that, in order to find powerful
and convincing answers, Whirlpool removed many restrictions that traditional
innovation is characterized by such as considering any good ideas regardless of whether
all the assets and capabilities required to apply the ideas are available within the
company. For generating much relevant ideas, Whirlpool tried to be divergent by
employing one of open innovations toolkit that is called crowdsourcing. They could
manage to internalize and learn from outsiders including their existing end-customers,
suppliers, business-to-business partners, and other related actors to their industry. The
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internal and external participants could be called as innovation users, as discussed
earlier in the theoretical part. Whirlpool facilitated involving innovation users by
different means such as online websites and complementary industries ideation
sessions. For us, we think that this stage could not be taken for granted as success
guarantee, as it is highly costly and could be time wasting and misguiding. However,
Whirlpool tried to overcome the failure potential of this stage by assigning a
professional well-trained innovation team to listen to different new voices both inside
and outside the company. Besides, the awareness for innovation has been also
considered for those voices to increase the overall value of their contribution.
Whirlpool believes that open innovation is really about building and maintaining
relationships and alliances . These relationships are managed by relationship managers
as part of the new business development activities.
4.1.2. Idea Development
As the divergent philosophy of idea generation provided Whirlpool with interesting
ideas to discuss, the convergent way became necessary to approach some interesting
solutions. The main questions that have been drawn to nominate ideas and then develop
it required keeping the outsiders open to the specific extend, where the circle of
participant would become narrower. The evaluating questions for the ideas were as
followed:
Is the required technology for innovation in hands?
Does the idea development require core competences that are not in hand?
Who could deliver this competence?
Are there other ways to for how to get value from this idea, or similar or
relevant models or insights from other industries?
As we think, that made it easier to the innovation team to nominate both the future
outsiders to learn from, and the core idea to develop. The idea that showed interesting
answers came from conversations with customers about the need for an odor-removal
solution in their washing machines. Here the idea of affresh arose as detergent tablet
that cleans front and top-loading, high-efficiency washing machines and eliminates
odors. Answering questions came with suggesting several major players in the
consumer-packaged goods industry. This part of open innovation process is called
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technology scouting. Then, the target became narrower to have partnerships with
chemical technology suppliers. One of those suppliers has been chosen as close partner
to work with. The partner company worked on candidate chemical solution, while
Whirlpool engineers tested a clean-out washer cycle that optimized the performance of
the chemical residue remover. We think that could be seen as choosing the most
relevant innovation users as partners to increase the value of the future business. It
could be also regarded as sharing knowledge as expertise, since Whirlpool had
sufficient mechanical competence, while the partner company provided the
complementary part of the product, which is the chemical solution. They both worked
together concurrently to create a new innovative value that meets the consumer needs.
4.1.3. Commercialization
Since entering a new value to the market requires marketing and selling experience
that were not familiar to both Whirlpool and their partners, they had to study the
alternative they had. It was rationally to use the existing distribution channels as
starting point. They provided their customers with coupons and offerings attached with
affresh as complementary product to let consumers consider it in the future. Though
that was very successful and profitable, Whirlpool considered finding out the following
questions:
Do they have sufficient expertise in the intended market for this innovation?
If not, who does?
What are the best channels for distribution - beyond Whirlpool traditional
channels?
Should they manufacture this thing themselves?
Unsurprisingly, and as we expected, they required the outsiders again (innovation
users) to get help to answer these questions, which emphasises the role of supply chain
management and marketing research in the commercialization. They recruited a partner
(distributer) that could help them to extend the product into the mass, drug, and food
channels (Muller & Hutchins, 2012).
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5. CONCLUSIONS
Open innovation is a wide perspective needs to be applied carefully and in an
appropriate manner. It is surrounded by high uncertainty, and could be money and time
wasting. Innovation users are central in open innovation, where suppliers, retailers,
consumers, and other outsiders become innovation players. A real case of products that
have been introduced to the market as innovative products is informative for how
integrating innovation is effective. Whirlpool, as one of innovation leaders worldwide,
adopted open innovation with the main purpose of streamlining and accelerating the
path to market. In addition to achieving these objectives with several new product
startups, Whirlpool has also gained another benefit to open innovation. In the early days
of innovation at Whirlpool, one of the considerations in choosing opportunities to
pursue was the existence of the necessary competences within the company to produce
and deliver the innovation. The question concerning with if Whirlpool have the
competences to pursue this opportunity has been followed by who else could provide
the necessary competences to pursue this opportunity if they do not have them. By
changing the context to competences within Whirlpool, or any organizations, the
company is now pursuing and considering a number of opportunities that would have
previously been rejected, and they are successfully expanding their business to adjacent
spaces through the help of open innovation partners.
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6. REFERENCES
Literature Sources:
Chesbrough, H. W. (2003). ”Open innovation: the new imperative for creating and
profiting from technology”, Harvard business school press.
Fowles, S. and Clark, W. (2005). “Innovation networks: good ideas from everywhere in
the world”, pp. 46-50.
Muller, A. and Hutchins, N. (2012). "Open innovation helps Whirlpool Corporation
discover new market opportunities", Strategy & Leadership.
Muller, A. Hutchins, N. and Cardoso Pinto M. (2012). ”Applying open innovation
where your company needs it most”, pp. 35-42.
Electronic Sources:
Whirlpool (2013). Whirlpool history. Available: https://www.whirlpool.com. [2013-03-
17].
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