Innovation at Whirlpool - Creating a New Competency
| Case Code: HROB081 Case Length: 21 Pages Period: 1999-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.500 Organization: Whirlpool Corporation Industry: Electricals and Electronics Countries: USA, Europe Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Need for a Change in Corporate Culture
By the late 1999, the top management at Whirlpool found itself unable to drive growth in its businesses. The company's revenues, profits, and market share were stagnant. And this, despite the fact that Whirlpool had adopted various operational initiatives to cut costs and achieve economies of scale in its operations. In December 2000, Whirlpool announced that it would cut 10% of its international workforce and initiate restructuring of its global operations...
Innovation as a Core Competency
Whitwam believed that only innovative products could command premium prices and build customer loyalty. He emphasized the need to develop a culture that would spur Whirlpool's growth through consumer-focused innovation. This would be a part of the company's competitive strategy. In fact, Whitwam wanted to make innovation a core competency at Whirlpool.
Moreover, he did not want creativity to be limited to a few people in the organization; he wanted all the employees to be creative. Nancy T Snyder (Snyder), vice president of leadership and strategic competency development at Whirlpool, explained, "We had this internal market of people we weren't tapping into...
Laying the Foundation
In late 1999, Whitwam started the innovation initiative by inviting ideas from all the employees. He felt that a direct call to employees was needed to ensure that no brilliant ideas got lost in the corporate hierarchy. In order to bring out creative ideas, 25 employees from the company's European arm were released from their routine job and sent to Whirlpool's European headquarters at Comerio, Italy, for one year. Their sole assignment was to brainstorm and come out with ideas regarding new products or services that would truly differentiate Whirlpool's offerings from those of its rivals...
Building the Framework
While the core groups were being trained, Snyder focused on getting the rest of the company's global workforce involved in the initiative through the Internet and innovation fairs. Strategos helped Whirlpool to put the necessary infrastructure in place and to use Information Technology (IT) to facilitate the objective.
Whirlpool re-engineered management processes that slowed down innovation and used IT to improve and accelerate the innovation chain from idea to final product. Instead of going in for a few big projects, it encouraged many low-cost "stratlets" (also known as small strategies)...
Reinventing the Corporate Culture
That the employees were enthusiastic about the various innovation initiatives started by Whirlpool between 2001 and 2002 was evident from the fact that the KM site recorded up to 300,000 hits per month.
In 2002, Whitwam decided to bring in more structure into the innovation process so as to increase the participation to include all employees and also to get more practical ideas. In monthly I-Board meetings, the top management evaluated and funded new proposals. Only new ideas that helped enhance Whirlpool's existing brands or products would be considered (Refer to Figure I for flow of ideas from the employees to the decision makers). Snyder also came out with an "I-box" to ensure that only brilliant ideas reached the I-board. The I-box was a two-step graphing tool. In the first step, the employees had to demonstrate that their proposals were something that people would buy. These arguments had to be backed by market research...
The Results
According to the company, revenues from innovative products were almost US$800 million in 2005 as compared to just US$10 million in 2001. The share price had also doubled.
Between 2003 and 2005, Whirlpool's revenues had grown at an average of 9% per annum. Fettig had attributed one third of this growth rate to innovative new products. As of April 2006, Whirlpool's innovation pipeline had 568 projects under development of which 195 were being scaled up for commercial launch. The company expected these new appliances to rake in another US$ 3.3 billion in annual sales once they were launched (Refer to Exhibit IV (A) and Exhibit IV (B) for Whirlpool's innovation pipeline). Commenting on these improved results, Fettig explained, "We're seeing evidence of what we call a "want in." In other words, consumers see something that is so different or innovative that they want to buy it as opposed to: they have to buy it...
Future Outlook
According to Fettig, Whirlpool's approach had been quite healthy. He felt that Whirlpool was in a position to leverage on innovations devised in one part of the world and apply them to another part of the world. According to his estimates, as of April 2006, about 1,500 employees out of the 60,000 Whirlpool employees worldwide worked on innovations on any given day. Around 5,000 people worked on innovations in any given year. Fettig said that Whirlpool could increase this figure to 10,000 or 15,000 employees. However, he also felt that it was unlikely that they could have all the 60,000 employees working on innovations...
Exhibits
Exhibit I: The Whirlpool Logo
Exhibit II: Whirlpool's Consumer-Driven Innovation Model
Exhibit III: Comparision of Share Prices* (in Us$) of Whirlpool in Q1 of 2001 And 2006
Exhibit IV (A): Whirlpool's Innovation Pipeline: 2005
Exhibit IV (B): Whirlpool's Innovation Pipeline: 2006
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