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 program 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 organization 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 realize 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 realized 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 catalyze learning opportunities and help shape a platform for a future vision. These activities were:
- A vision team in the Central Lighting Development Lab. This involved four employees with an equal male and female representation, two of the people were new to the development lab, the other two were well established and anchored informal leaders. The team's role was to bring outside inspiration into the development organization via lectures, workshops, visits and books. These activities resulted in the start of two 'out of the box' innovation projects in 2002, one of which led to the invention of Ambilight TV.
- An exploratory automotive project for car headlights. This involved piloting a combination of the Dialog Decision Process (DDP)1 and a Philips Design innovation process based on socio-cultural insights.
- A Philips Lighting 'New Business Creation' (NBC) group. This involved a team of four senior managers and one lateral thinker, whose role was to challenge mainstream business assumptions by asking simple questions. Established as a new organizational unit in a six month period, the NBC group was set up to provide the environment for 'out of the box' business development. Once the unit was created, the main open question was how to fill the NBC idea pipeline?
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:
- Clarify alternative scope definitions for Philips Lighting that could deliver 10% top-line growth in the longer term.
- Define two to three New Business Creation projects.
- Define a process for knowledge sharing and updating the NBC long-list.
In addition there were several 'intangible' aspirations for the project - for example, it was envisaged that it would:
- Provide a 'growing in opportunity' for the senior management team, thus creating commitment for additional scope.
- Prepare for implementation (avoid 'not invented here syndrome') for critical mass of colleagues.
- Radiate, let involved colleagues experience that the whole exercise is about doing different things... and doing them differently...
- Create the confidence to deal with a stretching vision.
'Think the Lighting Future' was a 'presidential project' with core team participation from each Lighting business group, Philips Design and Philips Research: which 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:
- People - understanding and serving both end-users' explicit current as well as their implicit emerging needs.
- Technology - understanding and using current and emerging technology options to enable user relevant functionality.
- Business - understanding current and emerging market characteristics and dynamics; applying appropriate and future-proof business models.
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 honor. The workshops served several tangible and intangible purposes, including:
- Enriching the core-team work by existing corporate knowledge.
- Generation of business ideas seeds.
- reparing for later implementation.
- Building a 'performing' team around a shared vision.
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 Program
In July 2003 senior management launched the 'Atmosphere Provider' program. The program lasted two and half years and was given some explicit and several implicit deliverables:
- Bring 'Atmosphere Provider' as a theme to life.
- Create a 'need-scape' for the new innovation area.
- Envisage the boundaries/solution space of the innovation and growth opportunities.
- Initiate the creation of a related patent portfolio.
- Prove the business potential by piloting the three new business creation projects.
- Exploration towards new business proposition definition including initial product concepts.
- Prototyping and market testing.
- Business case development and transfer to mainstream business.
And implicitly -
- Prepare for transfer and scaling up.
- Initiate the building of an Atmosphere Provider network (with shared vision, creativity, cross-functional and discipline perspectives, embracing the required new way of working, etc.).
- Pioneer the end-user driven innovation approach.
The program architecture was designed to ensure cross-fertilization 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 program comprised a team of four people: the overall program 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 capacity 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.
- 10 July 2003 in the Philips Lighting Senior Management meeting.
- Bring the Atmosphere Provider theme to life.
- Show proof points via business potential in the three selected projects.
- Investment: EUR 2.85 million from August 2003 to December 2005.
Context of assignment:
- Cross-functional with impact on Philips Lighting level beyond a single Business Group, positioned under Global Marketing, unclear ownership on executive level, no standard processes or tools => learn as you go.
Characteristics of assignment:
- Innovation for additional profitable growth (out of the box), market-led, pioneering, emphasis on results in the form of content, high risk and high reward, phase 1 of change management.
- Dorothea Seebode, Gerard Harkin, Benedicte van Houtert, Paul Brulez, followed up by Stefan Verbrugh (from April 2004).
- Markus Reisinger, Liesbeth Ploeg (from Dec.04), Ronald Dalderup (from Jan.05).
- Focus on results, commitment, dialogue.
By the end of 2005:
- In total over 1800 people had been involved globally, across and beyond Philips Lighting.
- Three foundation documents were published with over 1000 copies distributed.
- Patents: > 50 IDs submitted, > 25 patents filed, > 10 patents in pipeline.
Case Question: Identify the key stages in the development process, starting at the initial brief to the final selection of the three business cases.
Please use the information in the references to enlarge on this assignment, and remember to put the references at the end.
Philips' new approach was piloted in this way:
a) A vision team: 2 male, two female, two new, two established. Their purpose is to go to workshops, lectures, site visits, and read books with the objective of bringing in new ideas for business innovation development.
b)An exploratory automotive project for car headlights using
i. Dialog Decision Process (DDP)
This decision making model is part of a training offered by SDP (Strategic Decisions Group)
an efficient collaborative approach to organizationally and analytically complex decisions. This process includes:
Framing a decision appropriately
Generating creative alternatives
Quantifying uncertainty using probabilities
Structuring and evaluating decision trees to determine the best alternatives
Communicating evaluation results
Judging the quality of a decision before it is made.
Dialogue Decision Process Course Brochure (2013)
ii. Philips Design innovation process based on socio-cultural insights
examines how we might open up and engage with the future differently, in terms of going beyond:
a market-led approach, based on consumer ...
The new concept development at Philips case is examined.