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CASE STUDY 5
Exploring Innovation in Action: The Dimming of the Light Bulb
In the beginning….
God said let there be light. And for a long time this came from a rather primitive but surprisingly effective method – the oil lamp. From the early
days of putting simple wicks into congealed animal fats, through candles to more sophisticated oil lamps, people have been using this form of
illumination. Archaeologists tell us this goes back 240241at least 40,000 years so there has been plenty of scope for innovation to improve the
basic idea! Certainly by the time of the Romans, domestic illumination – albeit with candles – was a well-developed feature of civilised society.
Not a lot changed until the late eighteenth century when the expansion of the mining industry led to experiments with uses for coal gas – one of
which was as an alternative source of illumination. One of the pioneers of research in the coal industry – Humphrey Davy – invented the carbon
arc lamp and ushered in a new era of safety within the mines, but also opened the door to alternative forms of domestic illumination and the era
of gas lighting began.
But it was not until the middle of the following century that researchers began to explore the possibilities of using a new power source and some
new physical effects. Experiments by Joseph Swann in England and Moses Farmer in the USA (amongst others) led to the development of a
device in which a tiny metal filament enclosed within a glass envelope was heated to incandescence by an electric current. This was the first
electric light bulb – and it still bears more than a passing resemblance to the product found hanging from millions of ceilings all around the world.
By 1879 it became clear that there was significant commercial potential in such lighting – not just for domestic use. Two events occurred during
that year which were to have far-reaching effects on the emergence of a new industry. The first was that the city of Cleveland – although using a
different lamp technology (carbon arc) – introduced the first public street lighting. And the second was that patents were registered for the
incandescent filament light bulb by Joseph Swann in England and one Thomas Edison in the USA.
Needless to say the firms involved in gas supply and distribution and the gas lighting industry were not taking the threat from electric light lying
down and they responded with a series of improvement innovations which helped retain gas lighting’s popularity for much of the late
nineteenth century. Much of what happened over the next 30 years is a good example of what is sometimes called the ‘sailing ship effect’. That
is, just as in the shipping world the invention of steam power did not instantly lead to the disappearance of sailing ships but instead triggered a
whole series of improvement in that industry, so the gas lighting industry consolidated its position through incremental product and process
innovations.
But electric lighting was also improving and the period between 1886 and 1920 saw many important breakthroughs and a host of smaller
incremental performance improvements. In a famous and detailed study (carried out by an appropriately named researcher called Bright) there is
evidence to show that little improvements in the design of the bulb and in the process for manufacturing it led to a fall in price of over 80%
between 1880 and 1896 (A. Bright, The Electric Lamp Industry Technological change and economic development from 1800 to 1947,
Macmillan, New York). Examples of such innovations include the use of gas instead of vacuum in the bulb (1913 Langmuir) and the use of
tungsten filaments.
241 242
Innovation theory teaches us that after an invention there is a period in which all sorts of designs and ideas are thrown around before finally a
‘dominant design’ settles out and the industry begins to mature. So it was with the light bulb; by the 1920s the basic configuration of the
product – a tungsten filament inside a glass gas-filled bulb – was established and the industry began to consolidate. It is at this point that the
major players with whom we associate the industry – Philips, General Electric (GE), Westinghouse – become established.
Technological Alternatives
Although the industry then entered a period of stability in the marketplace there was still considerable activity in the technology arena. Back in
the nineteenth century Henri Becquerel invented the fluorescent lamp and in 1911 Georges Claude invented the neon lamp – both inventions
which would have far-reaching effects in terms of the industry and its segmentation into different markets.
The neon lamp started a train of work based on forming different glass tubes into shapes for signs and in filling them with a variety of gases with
similar properties to neon but which gave different colours.
The fluorescent tube was first made commercially by Sylvania in the USA in 1938 following extensive development work by both GE and
Westinghouse. The technology had a number of important features including low power consumption and long life – factors which led to their
widespread use in office and business environments although less so in the home. By the 1990s this product had matured alongside the
traditional filament bulb and a range of compact and shaped fittings were available from the major lighting firms.
Meanwhile, in Another Part of the World…
Whilst neon and fluorescent tubes were variations on the same basic theme of lights, a different development began in a totally new sector in the
1960s. In 1962 work on the emerging solid state electronics area led to the discovery of a light emitting diode – LED – a device which would,
when a current passed through it, glow in red or green colour. These lights were bright and used little power; they were also part of the emerging
trend towards miniaturisation. They quickly became standard features in electronic devices and today the average household will have hundreds
of LEDs in orange, green or red to indicate whether devices such as TV sets, mobile phones or electric toothbrushes are on and functioning.
Development and refinement of LEDs took place in a different industry for a different market and in particular one line of work was followed in
a small Japanese chemical company supplying LEDs to the major manufacturers like Sony. Nichia Chemical began a programme of work on a
type of LED which would emit blue 242243light – something much more difficult to achieve and requiring complex chemistry and careful
process control. Eventually they were successful and in 1993 produced a blue LED based on gallium arsenide technology. The firm then
committed a major investment to development of both product and process technology, amassing around 300 patents along the way. Their
research culminated in the development in 1995 of a white light LED – using the principle that white light is made up of red, green and blue light
mixed together.
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mixed together.
So what? The significance of Shuji Nakamura’s invention may not be instantly apparent – and for a long time the only products which could be
bought utilising it were small high power torches. But think about the significance of this discovery. White LEDs offer the following advantages:
• 85% less power consumption;
• 16 times brighter than normal electric lights;
• tiny size;
• long life – tests suggest the life of an LED could be 100,000 hours (about 11 years);
• can be packaged into different shapes, sizes and arrangements;
• will follow the same economies of scale in manufacturing that led to the continuing fall in the price of electronic components, so and become
very cheap very quickly.
If people are offered a low-cost, high-power, flexible source of white light they are likely to adopt it – and for this reason the lighting industry is
feeling some sense of threat. The likelihood is that the industry as we know it will be changed dramatically by the emergence of this new light
source – and whilst the names may remain the same they will have to pay a high price for licensing the technology. They may try to get around
the patents – but with 300 already in place and the experience of the complex chemistry and processing which go into making LEDs, Nichia
have a long head start. When Dr Nakamura left Nichia Chemical for a chair at University of California, Santa Barbara, sales of blue LEDs and
lasers were bringing the firm more than $200m a year and the technology is estimated to have earned Nichia nearly $2bn.
Things are already starting to happen. Many major cities are now using traffic lights which use the basic technology to make much brighter green
and red lights since they have a much longer life than conventional bulbs. One US company, Traffic Technology Inc., has even offered to give
away the lights in return for a share of the energy savings the local authority makes! Consumer products like torches are finding their way into
shops and online catalogues whilst the automobile industry is looking at the use of LED white light for interior lighting in cars. Major
manufacturers such as GE are entering the market and targeting mass markets such as street lighting and domestic applications, a market
estimated to be worth $12bn in the USA alone.
243 244
Go online to find the case study of Philips Atmosphere Provider, which gives a deep insight into the innovation thinking around this
revolution in lighting.
www.iande.info
Reflection Questions/Assignments Linked to the Case
(1)
Looking at the case study, try to identify the different sources of innovation and the changing pattern of threats (to existing players) and
opportunities (for new entrant entrepreneurs). What are the implications of the latest developments for different players in terms of the likely
threat to them and the ways in which they could respond?
Use the following framework to capture your answers.
Architectural innovationComponent innovation
Likely threat/opportunity for player 1 – and why
Likely threat/opportunity for player 2 – and why
Etc.
(2)
Competence-destroying and competence-enhancing innovation
Try to review the case in terms of the following questions.
• To what extent are the changes involved competence-enhancing (i.e. building on what a player in the industry already knows so they can
strengthen their position) or competence-destroying (i.e. something completely new which requires learning some new tricks) innovations?
• And for whom? (Think about the different players in the lighting industry – who are the likely winners and losers?)
• What strategies might a firm use to exploit the opportunities? (Again think about the different players in the industry and how they might
defend their positions or open up new opportunities.)
Use the following framework to capture your answers.
244 245
An established
record company
A newcomer wanting to offer
entertainment on the Web
A music publishing company (responsible
for copyrights on sheet music, etc.)
Other
examples….
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An established
record company
A newcomer wanting to offer
entertainment on the Web
A music publishing company (responsible
for copyrights on sheet music, etc.)
Other
examples….
Is the change competence enhancing?
Why?
Is it competence destroying? Why?
What might you do about this to
secure and improve your position?
(3)
Can you map the different kinds of innovation in the case study? Which were incremental and which radical/discontinuous? Why? Give
examples to support your answer.
(4)
Is the ‘revolution’ in the lighting industry a result of the development of new technologies? Or is it happening because of changes on the demand
side – shifts in what people want and are prepared to pay for? Or is it a mixture of both? What lessons might that offer to someone wanting to
enter the industry as a new player? And what might an established player do to preserve their position? Illustrate your answer with examples.
Summary of Web Resources
Cases
• SPIRIT
• Corning
• 3M
• Philips
• RED
• Open Door
• Tesco
• Public sector/high innovation
• Cerulean
• Aravind
• Model T Ford
• Threadless
• Lego
• Coloplast
• Karolinska Hospital
• Bicycles industry
• Philips Atmosphere


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CASE STUDY 7
Pre-Launch Decisions which Influence Innovation Success
It has been extensively documented in management literature that an incredibly large share of firms’ investments in technological innovation do
not generate substantial financial returns. Three main reasons underlying this phenomenon can be identified. First, technological innovation
creates knowledge and technological assets that often remain largely unexploited. Various studies show that between 70 and 90% of corporate
technology assets often never get used in core products or lines of business. Second, the likelihood that an innovation project reaches completion
and that the new product is introduced into the market is strikingly low. It has been estimated that the probability of new product
commercialisation is about 40% in many industries, with some cases (e.g., pharmaceutics) where the mortality of innovation projects is much
higher. Finally, a large share of the innovations that ultimately reach the market do not experience a satisfactory diffusion and their sales are
discontinued. Empirical studies have shown indeed that on average 40–50% of fully commercialised new products turn out to be commercial
failures.
An important managerial question is however left unanswered: which are the levers a manager can act upon to achieve adoption network
acceptance and early 329330adopters’ acceptance for a high-tech innovation, having a given functional content and a set of technical
specifications, which is introduced within the scope of a given competitive and product strategy (Table 7.5)?
TABLE 7.5 Commercialisation factors influencing the adoption of innovations
Variable Description
Timing – When will the innovation first be launched into the market?
– Will the firm announce the innovation to the press long before its market launch?
– Will the firm partner with external organisations long before the official market launch?
Targeting and
positioning
– Which market segments will the innovation will be addressed to?
– Which will be the position of the innovation in the eyes of potential adopters in each of the targeted market segments?
– Will the firm target different segments as long as the commercialisation process progresses?
Inter-firm
relationships
– Which external organisations will the firm partner with during the commercialisation of the innovation?
– Which forms of relationships will be most appropriate (e.g., licensing agreements, strategic, long-term partnerships) to
organise such relationships?
Product – Which bundle of additional adds-on, services and functionalities surrounding the ‘core’ innovation will be included in the
basic configuration of the new product?
Distribution – Which type of distribution strategy (e.g., push or pull) will be needed to streamline the market penetration of the
innovation?
– Which types of distribution channels will be chosen to deliver the innovation to market (e.g., retail or specialised
distributors)?
– Which critical functions (e.g., customer education) will they be required to perform?
Advertising and
promotion
– Which message will be communicated during the pre-announcement and post-launch advertising campaign?
– Which types of communication channels will be employed for these advertising and promotion initiatives (e.g., mass or
specialised channels)?
Pricing – Which pricing strategy (e.g., skimming or penetration) will be used for the market introduction of the new product?
– Which pricing strategy will be adopted for complementary goods and additional services?
330 331
The commercialisation processes of 11 technological innovations, launched in high-technology markets in the past 30 years, were investigated
using this approach (Table 7.6).
TABLE 7.6 Successful and unsuccessful innovation examined
Radical innovationsSystemic innovations
Unsuccessful innovationsApple Newton
IBM PC-Junior
Sony Betamax
3DO Interactive Multiplayer
Sony MiniDisc
Apple Newton
Sony Betamax
Successful innovations Tom Tom GO
Sony Walkman
RIM BlackBerry
Palm Pilot
Nintendo NES
Apple iPod
Comparing the commercialisation of the successful and unsuccessful systemic innovations in the sample, a number of decisions were taken along
the dimensions.
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the dimensions.
Inter-Firm Relationships
Our analysis indicates that obtaining the support from the critical members of innovation’s adoption network requires chiefly a careful
administration of the inter-firm relationships that are established before and along the commercialisation process.
The decision to prevent other companies (e.g., competitors and suppliers of complementary hardware and software) from manufacturing
products based on the innovation’s underlying technology is likely to be a first detrimental decision for the large-scale adoption of a hightechnology
innovation. This is due to the strong network externalities that high-tech markets, because of their tight interconnectedness, are
currently experiencing. Accordingly, letting the actors of the adoption network manufacture products based on the innovation’s technology (e.g.,
through advantageous out-licensing agreements) increases the availability of complementary products and the chances that a potential adopter
chooses to purchase the innovation. This in turn exponentially enhances the value of the innovation in the eyes of both subsequent adopters and
the other members of the adoption network, in a self-reinforcing double-loop cycle. The effects of this commercialisation decision are very clear
when comparing the cases of the Palm Pilot (whose OS operating system was released for free to all manufacturers of adds-on and software
applications) with that of Sony Betamax (with the Japanese firm that accepted to licence the underlying technology to Zenith only more than
one year after launch, when the incoming success of the VHS by JVC was already undisputable).
331 332
It also emerges as a critical approach to win the support of the critical members of the adoption network to enter into long-term, strategic
partnerships with them. This allows firms to share the risks and the costs they incur when supporting a systemic innovation (e.g., developing
and manufacturing ad hoc, specialised, complementary devices or pieces of software). This is what Palm did, in 1996, when commercialising its
Pilot: it decided to sign a 20 million agreement with Circuit City to ensure adequate shelf space and customer education services for its new
product. Similarly Apple, to streamline the acceptance of the iPod and the associated iTunes Music Store service, was able to convince a
number of record labels (e.g., Sony Music Entertainment, BMG, EMI, Universal and Warner) to endorse the new service provision model
ensuring a 65% compensation for each song sold through iTunes. In a similar vein, Nintendo invested heavily in order to obtain the full support
for its NES from the most important game developers (e.g., Taito, Bandai, Capcom). This required the Japanese firm to grant above the average
money compensation for each game sold. Sometimes the innovating firm instead refuses to establish any partnerships with the members of the
adoption network, or simply sets up arm’s-length, commercial relationships with them, with the aim of maximising its potential profits from the
innovation. This is evident in the case of 3DO, which failed to establish any forms of relationship with the developers of software titles and the
manufacturers of consoles for its new Interactive Multiplayer. A similar phenomenon is clear in the commercialisation of the Betamax, where
Sony refused to partner with video rental channels and film producers (with the exception of Paramount Home Video, with which a Joint
Venture was established).
A critical member of the adoption network for content-based innovations is the community of small and highly creative software and
application developers. In order to secure their support, it is especially critical to develop an easy to use software authoring kit that is made
available for free or at a very low price. This is what Palm did when it released for free the application development kit for its Pilot. 3DO, on
the other hand, decided to sell the authoring system for the Interactive Multiplayer for several thousand dollars.
Timing
Besides the form of the inter-firms relationships with the critical members of the adoption network, it seems that the timing with which they are
established is important in determining the degree of support they ensure to the innovation. The analysis indicates that sometimes firms
deliberately postpone the establishment of strategic partnerships with the adoption network on the assumption that, once the innovation has
taken off in the market, its critical players will support it of their own accord. However, it often happens that, after an initial, unexpected
growth of the new product’s sales, the innovation never diffuses in the largest part of the 332333target market. This is what happened in the
commercialisation of the MiniDisc: Sony refused to partner with consumer electronics outlets (which played a critical role in ensuring a wide
availability of recorded music albums) in the belief that the new format would diffuse into the mass market and, as a result, force outlets to
provide the required shelf space. This phenomenon is due to the fact that the bulk of a high-tech consumer innovation’s target market is made of
people who resist new products and experience a high level of uncertainty when evaluating the opportunity to buy them. Although early
adopters might be willing to purchase the new product whilst it is not backed up by the critical members of the adoption network (because they
are mainly attracted by the technical content and degree of sophistication of the innovation and are able to more objectively assess its
advantages), this represents an important signal to later adopters of the value of the innovation, which helps reduce their resistance and
customer uncertainty.
Therefore, although a high-tech innovation may experience an unexpected sales growth immediately after launch without support from the
critical players of the adoption network, it is of paramount importance to rapidly secure this support, through the establishment of long-term,
strategic partnership, if large-scale adoption is to be achieved. All firms whose innovations had experienced a relevant and rapid diffusion in the
bulk of their target market started very early indeed to work with the adoption network’s critical players. This is clear in the cases of the Pilot
by Palm, the NES by Nintendo and the iPod by Apple.
It often happens that firms rush to market their high-tech innovations in an attempt to establish them as technological standards and to quickly
recover their R&D investments. This sometimes leads to the launch of an incomplete product, with some functionalities not working perfectly,
as a result of the acceleration of development and testing activities. This seems to have a very negative effect on the attitude developed by early
adopters. Companies sometimes prefer shortening time to market at the expense of product completeness on the assumption that the potential
technical problems will not affect the purchasing decision and the satisfaction of the average member of the target market. In doing so they
overlook that the innovation is adopted immediately after launch by those customer segments that are most sensitive to the new product’s
technical content and sophistication, and whose opinion about the new product is key in affecting subsequent purchases. This erroneous
conduct is clear in the commercialisation of the IBM PC-Junior and the Apple Newton, while there is no sign of new product acceleration for
the successful radical innovations in the sample (e.g., Tom Tom GO, Sony Walkman and RIM BlackBerry).
It should be noted that the negative impact of the launch of an incomplete product is exacerbated by an overblown pre-announcement campaign,
which raises the expectations of early adopters and leaves them disappointed when a deficient version reaches the market: their attitudes to the
innovation as a whole are thereby negatively affected. This happened with the Apple’s Newton, which was announced 33333418 months
before the actual launch and was known as one of the most-hyped and postponed products for years. Similarly, the PC-Junior was preannounced
about 12 months before the launch, which fuelled the curiosity, rumours and enthusiasm that accompanied the new product.
Analysts started referring to the PC-Junior by the nickname ‘Peanut’. Interestingly, IBM itself contributed to nurturing these expectations by
drawing a thick curtain of secrecy over the new product after having pre-announced it.
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drawing a thick curtain of secrecy over the new product after having pre-announced it.
Targeting and Positioning
Especially for content-based innovations, it seems that a firm more easily succeeds in orchestrating the behaviour of the adoption network’s
players and in securing their support if the positioning of the new product is unambiguous. The experience of 3DO in the commercialisation of
the Interactive Multiplayer is paradigmatic in this respect. The new, revolutionary console always lacked a library of software titles that were
able to fully exploit its graphic capabilities. This was partly due to its unclear positioning: the Multiplayer was sold as a gaming platform with
advanced interactive, learning and educational capabilities, enabled by its CD-Rom support, that caused confusion in the developers community
about the exact applications that were required for its commercial success. On the other hand, the NES by Nintendo was unambiguously
positioned as a gaming system, and the Palm Pilot as a substitute for personal paper-based organisers.
The incapability to understand that an incomplete new product is likely to elicit a very negative reaction in the first market segments that adopt
it is also due to a lack of pro-active targeting of these early adopters. The firms in the sample that failed to raise a positive post-purchase
attitude of early adopters had not targeted the innovation at any specific market segments after launch. This is clear in the cases of Apple’s
Newton and IBM’s PC-Junior that were aimed at a broadly defined market made of mass consumers and families with children. It was only
after the first months of sales that managers realised the new products were being purchased by people with a very different profile than the
average target customer (namely, executives and companies looking for sales force automation applications, and managers used to working with a
traditional PC at the office who wanted to bring some work at home). On the other hand, when commercialising the Walkman, Sony realized that
it was going to be initially purchased by young men fond of sport and outdoor living, and that the ‘near CD quality’ of sound reproduction
associated with advanced portability of the device was key in affecting their post-purchase attitude. Similarly, RIM targeted its BlackBerry
immediately after launch to top executives (e.g., Chief Information Officers, Chief Financial Officers) or sales agents who had a compelling
reason to receive e-mail messages in real time while travelling for work, and ensured that this functionality was working perfectly from a
technical point of view.
334 335
Product
The aforementioned lack of targeting of the innovation’s early adopters is detrimental also because it often prevents firms from devising a
configuration of the whole product at launch that meets early adopters’ expectations, which are usually very different from the intended average
target customer’s. For instance, the IBM PC-Junior was not compatible with many of the applications available for the traditional PC, and the
Apple Newton lacked connectivity with PC and Macintosh at launch. It is noteworthy and seemingly nonsensical that both IBM and Apple
had sponsored these capabilities of the new products during the pre-announcement campaign, which exacerbates the negative effect of an
inappropriate product configuration at launch over early adopters’ satisfaction. This might be the result of the attempt to anticipate the launch
of the innovation without a clear targeting of the early customers.
On the other hand, the successful innovations in the sample do not seem to have missed any critical functionalities to satisfy early adopters’
expectations. How could this be achieved? The analysis suggests that an effective commercialisation strategy could need to include a limited
number of simple functionalities in the configuration of the new product at launch, designed to satisfy the compelling reason to purchase of
early adopters. The product configuration is enriched with additional functionalities as long as the innovation diffuses in the less innovative
segments of the target market. An essential prerequisite for successfully adopting this approach, which increases the likelihood that the new
product is complete at launch despite a firm’s attempt to rush it to market, is a careful targeting of the innovation’s early customers. This
approach was for instance adopted by RIM in the commercialisation of the BlackBerry. In order to improve the chances of satisfying the new
product’s early customers, RIM decided to design and launch a simplified version of the BlackBerry, called Desktop Redirector, that could
work using as a mail server any PCs or laptops and only featured the revolutionary ‘push’ approach to mail delivery. Agenda, address book,
and synchronisation with PC were added as long as the BlackBerry diffused in the market. On the other hand, Apple tried to include as many
complex functionalities as possible in the first version of the Newton (e.g., infrared communication, advanced handwriting recognition, contact
manager, organiser, synchronisation with both PC and Macintosh, traditional and wireless phone connectivity), some of which were absent or
did not function perfectly at launch, resulting in a very negative attitude from early adopters.
Advertising and Promotion
The role of the pre-announcement campaign in influencing the post-purchase attitude of early adopters has already been discussed in this
section of the chapter. In particular, it has emerged that an early pre-announcement of the new product generates


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References
1.
Crespi, G., Criscuolo, C., and Haskel, J. (2006) Information Technology, Organisational Change and Productivity Growth: Evidence from UK
Firms, The Future of Science, Technology and Innovation Policy: Linking Research and Practice, SPRU 40th Anniversary Conference, Brighton,
UK, September 2006.
2.
Tidd, J. and Hull, F.M. (2006) ‘Managing Service Innovation: The need for selectivity rather than ‘best-practice’, New Technology, Work and
Employment, 21(2), 139–161; Tidd, J. and Hull, F.M. (2003) Service Innovation: Organizational Responses to Technological Opportunities and
Market Imperatives. Imperial College Press, London.
3.
Cooper, R.G. (2000) ‘Doing it right: winning with new products’, Ivey Business Journal, 64(6) (July/August), pp. 1–7 [available online:
http://www.iveybusinessjournal.com/article.asp?intArticle_ID=235]
4.
Lynn, G.S. and Reilly, R.R. (2002). Blockbusters: The five keys to developing great new products. New York: HarperBusiness.
5.
Wheelwright, Steven C. and Clark, Kim B. (1997) ‘Creating Project Plans to Focus Product Development’, Harvard Business Review,
September–October.
6.
Tidd, J. and Bodley, K. (2002) ‘The effect of project novelty on the new product development process’, R&D Management, 32(2), 127–138.
406 407
CASE STUDY 9
New Concept Development at Philips
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, lowgrowth
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?
Exploratory Stages
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:
? 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 organisation via lectures, workshops, visits and books. These activities 407408resulted 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 organisational 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:
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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: 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:
? 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 honour. The workshops served several tangible and intangible
purposes, including:
? Enriching the core-team work by existing corporate knowledge.
? Generation of business ideas seeds.
? Preparing 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.
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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:
? 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 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.
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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.
Initiation:
? 10 July 2003 in the Philips Lighting Senior Management meeting.
Deliverables:
? 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.
Core team:
? Dorothea Seebode, Gerard Harkin, Benedicte van Houtert, Paul Brulez, followed up by Stefan Verbrugh (from April 2004).
Extended team:
? Markus Reisinger, Liesbeth Ploeg (from Dec.04), Ronald Dalderup (from Jan.05).
Mindset:
? 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.
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Case Questions
1.
Identify the key stages in the development process, starting at the initial brief to the final selection of the three business cases.
2.
What role did senior management and leadership play in the development of the new concepts?
3.
How did cross-functional teams contribute to the translation of concepts into business cases?
Source: Extract from Dorothea Seebode, Gerard Harkin and John Bessant (2009) Radical Innovation at Philips Lighting.
Go online to find the full version of the Philips Lighting case study.
www.iande.info
Summary of Web Resources
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Cases
• Bank of Scotland
• Coloplast
• Philips Lighting
Media
• Innocent Smoothies
• Von Hippel on lead users
Tools
• Stage-gate process
• Quality function deployment