The Luxury of OpenInnovation: A Case Study of        Whirlpool
Karlstad Business School              Handelshögskolan vid Karlstads UniversitetTITLE OF THE WORK:The Luxury of Open Innov...
TABLE OF CONTENTS1.     INTRODUCTION ........................................................................................
1. INTRODUCTION    In the past, all companies almost depended on their own R&D centres fordeveloping and launching new inn...
2. BACKGROUND    Whirlpool is a worldwide company, headquartered in Boston, United States, forhome appliances. In 2010, th...
4. DISCUSSION AND ANALYSIS    As the use of innovation within business is characterised by high uncertainty anduniqueness,...
different means such as online websites and complementary industries ideation sessions.For us, we think that this stage co...
to work with. The partner company worked on candidate chemical solution, whileWhirlpool engineers tested a clean-out washe...
5. CONCLUSIONS    Open innovation is a wide perspective needs to be applied carefully and in anappropriate manner. It is s...
6. REFERENCESLiterature Sources:Chesbrough, H. W. (2003). ”Open innovation: the new imperative for creating andprofiting f...
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The Luxury of ‎Open ‎Innovation: A ‎Case Study of ‎Whirlpool

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Unlike traditional innovation, open innovation could create wealth to it adopters. This is a discussion about how Whirlpool could manage to create new value.

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The Luxury of ‎Open ‎Innovation: A ‎Case Study of ‎Whirlpool

  1. 1. The Luxury of OpenInnovation: A Case Study of Whirlpool
  2. 2. Karlstad Business School Handelshögskolan vid Karlstads UniversitetTITLE OF THE WORK:The Luxury of Open Innovation: A Case Study of Whirlpool Prepared by: Familyname Given name Shurrab Hafez El Bouassami Mohammed
  3. 3. TABLE OF CONTENTS1. 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 - I
  4. 4. 1. INTRODUCTION In the past, all companies almost depended on their own R&D centres fordeveloping and launching new innovative solutions and products ideas. Therefore, mostof corporations relied mainly on their researchers and developers in order to keep theirability up for getting new innovations to the market annually. However, nowadays, andbecause of the tough competition, companies are forced to change their strategiesso thatto speed upthe integration of new ideas to the company, and then into themarket(Chesbrough, 2003). For many years ago, a methodology called close innovation method arose.Firmshad been always defending the idea that states, to achieve a successful innovation; allprocesses should be complied under total control. In other words, companies must be incontrol of its own ideas from the development phase until the end user. But due theincreased speed of delivering new ideas to the market, more and more innovative ideasor products are outsourced from different partners or independent research centres. Inorder to survive under the fierce competition, it is almost impossible for companies torely 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 ofenough 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 exchangingideas and innovations between companies, by importing external innovations fromoutside, 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 howsuch innovation model can lead to create innovation network includes customers,suppliers, distributers, and researchers. Therefore, in order to conveya realisticinsightabout this era, a relevant case study of Whirlpool is used to study how they couldmanage to create new value to the overall business. -1-
  5. 5. 2. BACKGROUND Whirlpool is a worldwide company, headquartered in Boston, United States, forhome appliances. In 2010, they recorded $3.6B as return from innovation, whichaccounts for 20% of the overall revenue. We find their experience very interesting todiscuss and analyze since they managed to take the advantage of innovation in terms ofdifferent perspectives, especially the marketing one. Generally, Whirlpool adopted openinnovation perceptive. In 2010, Whirlpool was named one of the ten most innovativecompanies in consumer products by Fast Company magazine(Whirlpool 2013).3. THEORY The process innovation can be explained by the opportunities and ideas that themarket offers for companies, and also the process of the creation of its related businessmodel. Before any idea goes through development, there is always a need to set anumber of fundamental questions that must be answered before setting a suitablebusiness model to be followed. Such questions include asking for information abouttarget customers, goods or services to be offered to customers, how the offered productsand/or services create competitive advantage over the other players in the market, howthe product will be delivered, and finally how such innovative idea will add value andhandle the company’s growth(Muller et all, 2012 ). Actually, and in many cases, innovation processisa combination of threeconsecutive stages that the components and structure of business model are cleared andaccomplished.The first element is idea generation, which is done by collecting ideasabout customers’ needs and what products and/or services may be delivered as a valueproposition to the end-customer. The second element is idea development, which isdone by adopting the most relevant innovative ideas that could be marketed as ananswer 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). -2-
  6. 6. 4. DISCUSSION AND ANALYSIS As the use of innovation within business is characterised by high uncertainty anduniqueness, we prefer to expose some aspects of a real case, where open innovationbecame central practice in.4.1. Whirlpool One of their new products that have been introduced to the market in 2000 is foundto be worth telling about and analysing, which is affresh(Muller & Hutchins, 2012). Thestory of how affresh came into the scope of Whirlpool could reflect open innovation anduser innovation relevantly. We analyse the stages of affresh development until itbecame 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 consumercollaboration. Whirlpool describes their experience for affresh as integration of triple diamond,which are idea generation, idea development, and commercialization. For us, this doesnot necessarily relate to open innovation exclusively, since the three elements are alsoinvolved in the concept of traditional innovation. However, the essential difference restin details while translating these elements into practices.4.1.1. Idea Generation One of the dispensable questions when discussing integrating innovation is aboutcomplementary products and services that could enhance the customer’s experiencewith the existing products. This is what Whirlpool did when they started to integrateopen innovation instead of the traditional one. We think that, in order to find powerfuland convincing answers, Whirlpool removed many restrictions that traditionalinnovation is characterized by such as considering any good ideas regardless of whetherall the assets and capabilities required to applythe ideas are available within thecompany. For generating much relevant ideas, Whirlpool tried to be divergent byemploying one of open innovations toolkit that is called crowdsourcing. They couldmanage to internalize and learn from outsiders including their existing end-customers,suppliers, business-to-business partners, and other related actors to their industry. Theinternal and external participants could be called as innovation users, as discussedearlier in the theoretical part. Whirlpool facilitated involving innovation users by -3-
  7. 7. 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 itis highly costly and could be time wasting and misguiding. However, Whirlpool tried toovercome the failure potential of this stage by assigning a professional well-trainedinnovation 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 toincrease the overall value of their contribution.Whirlpool believes that open innovationis really aboutbuilding and maintaining relationships and alliances . These relationshipsare managed by relationship managersas part of the new business developmentactivities.4.1.2. Idea Development As the divergent philosophy of idea generation provided Whirlpool with interestingideas to discuss, the convergent way became necessary to approach some interestingsolutions. The main questions that have been drawn to nominate ideas and then developit required keeping the outsiders open to the specific extend, where the circle ofparticipant would become narrower. The evaluating questions for the ideas were asfollowed: Is the required technology for innovation in hands? Does theidea development require core competences that are not in hand? Who coulddeliver this competence? Are there other ways to for how to get value from this idea, or similar or relevantmodels or insights from other industries? As we think, that made it easier to the innovation team to nominate both the futureoutsiders to learn from, and the core idea to develop. The idea that showed interestinganswers came from conversations with customers about the need for an odor-removalsolution in their washing machines. Here the idea of affresh arose as detergent tabletthat cleans front and top-loading, high-efficiency washing machines and eliminatesodors. Answering questions came with suggesting several major players in theconsumer-packaged goods industry. This part of open innovation process is calledtechnology scouting. Then, the target became narrower to have partnerships withchemical technology suppliers. One of those suppliers has been chosen as close partner -4-
  8. 8. to work with. The partner company worked on candidate chemical solution, whileWhirlpool engineers tested a clean-out washer cycle that optimized the performance ofthe chemical residue remover. We think that could be seen as choosing the mostrelevant innovation users as partners to increase the value of the future business. Itcould be also regarded as sharing knowledge as expertise, since Whirlpool hadsufficient mechanical competence, while the partner company provided thecomplementary part of the product, which is the chemical solution. They both workedtogether 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 experiencethat were not familiar to both Whirlpool and their partners, they had to study thealternative they had. It was rationally to use the existing distribution channels as startingpoint. They provided their customers with coupons and offerings attached with affreshas complementary product to let consumers consider it in the future. Though that wasvery successful and profitable, Whirlpool considered finding out the followingquestions: 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 (innovationusers) to get help to answer these questions, which emphasises the role of supply chainmanagement and marketing research in the commercialization. They recruited a partner(distributer) that could help them to extend the product into the mass, drug, and foodchannels (Muller & Hutchins, 2012). -5-
  9. 9. 5. CONCLUSIONS Open innovation is a wide perspective needs to be applied carefully and in anappropriate manner. It is surrounded by high uncertainty, and could be money and timewasting. Innovation users are central in open innovation, where suppliers, retailers,consumers, and other outsiders become innovation players. A real case of products thathave been introduced to the market as innovative products is informative for howintegrating innovation is effective. Whirlpool, as one of innovation leadersworldwide,adopted open innovation with the main purpose of streamliningandaccelerating the path to market. In addition to achieving these objectives withseveral new productstartups, Whirlpool has also gained another benefit to openinnovation. In the early days ofinnovation at Whirlpool, one of the considerations inchoosing opportunities to pursue wasthe existence of the necessary competences withinthe company to produce and deliver theinnovation. The question concerning with ifWhirlpool have the competences to pursue this opportunity hasbeen followedby whoelse could provide the necessarycompetences to pursue this opportunity if they do nothave them. By changing the context to competences withinWhirlpool,or anyorganizations, the company is now pursuing and considering a numberof opportunitiesthat would have previously been rejected, and theyare successfullyexpanding theirbusiness to adjacent spaces through the help of open innovation partners. -6-
  10. 10. 6. REFERENCESLiterature Sources:Chesbrough, H. W. (2003). ”Open innovation: the new imperative for creating andprofiting from technology”, Harvard business school press.Fowles, S. andClark, W.(2005). “Innovation networks: good ideas from everywhere inthe world”, pp. 46-50.Muller, A. and Hutchins, N. (2012). "Open innovation helps Whirlpool Corporationdiscover new market opportunities", Strategy & Leadership.Muller,A. Hutchins, N. andCardoso Pinto M. (2012).”Applying open innovation whereyourcompany needs it most”, pp. 35-42.Electronic Sources:Whirlpool (2013). Whirlpool history. Available: https://www.whirlpool.com. [2013-03-17]. -7-

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