The Luxury of Open Innovation: a Case Study of Whirlpool
In the past, all companies almost depended on their own R&D centres for developing and launching new innovative solutions and products ideas - The Luxury of Open Innovation: a Case Study of Whirlpool introduction. 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.
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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.
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).
he 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).
4. DISCUSSION AND ANALYSIS
As 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. 5. 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. 5. 2. 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 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. . 2. 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 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. 5. 2. 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).
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.