CASE STUDY 9
New Concept Development at Philips
Philips has a proud history of innovation and has been responsible for launching several ‘new to the world’ product categories, like X-ray tubes in its early days, the Compact Cassette in the 1960s followed by the Compact Disc in the 1980s, and more recently Ambilight TV. These successes are linked to Philips’ deep understanding of innovation, enabled notably by significant R&D investments and strong traditions in design.
Since 2003, Philips has been engaged in a market-driven change programme to rejuvenate its brand and approach to new product innovation with expertise on end-user insights. Six years later, the end-user insights approach has significantly influenced the way Philips innovates, in line with the new brand promise of ‘sense and simplicity’. Yet in 2000, new product innovation was still predominantly shaped by R&D, particularly in its lighting business. In that same year, Philips incurred a net loss of EUR 3206 million. Management was focused on dissolving the Components business, returning the Semiconductor business to profitability, simplifying the organisation and making cost savings.
Philips’ role in the global lighting industry had always been dominant. Philips Lighting was Philips’ ‘cash cow’; it operated in a mature, low-growth oligopoly market in which finding new approaches to realise bottom-line growth was the main challenge. End-user driven innovation was a new approach to innovation, perhaps truly a ‘radical’ one given the division’s history. How was this new approach piloted?
Following Albert Einstein’s notion that ‘insanity is doing the same things over and over again and expecting different results’, senior management realised that something had to change. Consequently, in early 2001 the Chief Technology Officer of the Lamps business initiated a set of complementary activities of an exploratory nature in order to catalyse learning opportunities and help shape a platform for a future vision. These activities were:
Think the Lighting Future Project
Building on the experiences of these three exploratory projects and using other Philips knowledge on radical innovation, the ‘Think the Lighting Future’ project (TTLF) was defined at the end of 2001. It was established in response to the CEO’s ambition to identify a 10% top-line growth opportunity (approximately EUR 500 million) which could be achieved in a five to seven year time-frame. Senior management was instrumental in initiating the TTLF project. The project had three tangible deliverables for the end of 2002:
In addition there were several ‘intangible’ aspirations for the project – for example, it was envisaged that it would:
‘Think the Lighting Future’ was a ‘presidential project’ with core team participation from each Lighting business group, Philips Design and Philips Research: 408409which was – next to its scope of 10 years ahead – an innovation in itself. In addition, special attention was put on forming a diverse team to enable different views to be captured. Importantly this project provided opportunities for learning and improvement of the corporate innovation process – for example, the original three-step design process (information sharing, ideation, idea development and concept definition) was expanded by a fourth step (translation to action).
Emphasis was also placed on creating broad ownership from the beginning both in management via the DDP approach and in the executing functions via multifunctional workshops. Subsequently the dialogue decision process was further expanded to a ‘trialog’ process involving the decision team, the core team (i.e. the decision preparation team) and the implementation team.
Vital to orchestrating communication was the set-up of Think the Lighting Future as an extended Dialogue (trialog) Decision Process around three key innovation dimensions:
Thirty-two colleagues were invited to two workshops. They came from different innovation backgrounds (marketing, business development, R&D) and from different Lighting businesses, Design and Research teams. Maximal possible global presence was established. Since TTLF was a highly visible presidential project, workshop participation was seen as an honour. The workshops served several tangible and intangible purposes, including:
All workshop flows and all tools used during the workshops were especially designed such that the holistic outcomes became highly probable by equally and simultaneously focusing on the different dimensions: people and their needs, technology enabling new solution spaces and business including generic competition and existing next to emerging business models facilitating value creation.
By the end of 2002, TTLF was concluded and was regarded as a successful exploration and visioning project. It led to the selection of a ‘theme’ for new business: Atmosphere Provider, which was about ‘empowering people to become their own light designers’. It also led to three new business creation projects and delivered a list of ideas for New Business Creation. However, no additional turnover had yet been generated. The real work was about to start…
Atmosphere Provider Programme
In July 2003 senior management launched the ‘Atmosphere Provider’ programme. The programme lasted two and half years and was given some explicit and several implicit deliverables:
And implicitly –
The programme’s architecture was designed to ensure cross-fertilisation between the development of the broader business theme and the three new business creation projects; emerging insights from creating the new business were captured via foundation documents; general observations derived from the theme development were fed back into NBC projects.
The core of the programme comprised a team of four people: the overall programme manager who had led the TTLF project and three project managers, of whom one had been a TTLF core team member whilst the other two were new to Philips Lighting. Over time, a small support team became involved: a lighting designer, an experienced market researcher, a marketing specialist and several colleagues from Philips Design. The team was small and flexible; additional skills and 410411capacity were brought in on an as-needed basis, which in turn required good communication skills from the project managers and the commitment from senior management to ensure the needed resources were made available to the team when required.
Identify the key stages in the development process, starting at the initial brief to the final selection of the three business cases.