The Luxury of Open

Innovation: A Case

Study of Whirlpool

Karlstad Business SchoolHandelshögskolan vid Karlstads Universitet

TITLE OF THE WORK:

The Luxury of Open Innovation: A Case Study of Whirlpool

Prepared by:

Family name Given name

Shurrab Hafez

El Bouassami Mohammed

TABLE OF CONTENTS

1. 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 -

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1. INTRODUCTIONIn the past, all companies almost depended on their own R&D centres for

developing and launching new innovative solutions and products ideas. 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. 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.

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2. BACKGROUND 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).

3. THEORY The 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).

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4. DISCUSSION AND ANALYSISAs 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.

4.1. 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.

4.1.1. 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

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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.

4.1.2. 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

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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.

4.1.3. 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).

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5. CONCLUSIONS

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.

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6. REFERENCES

Literature Sources:

Chesbrough, H. W. (2003). ”Open innovation: the new imperative for creating and

profiting from technology”, Harvard business school press.

Fowles, S. and Clark, W. (2005). “Innovation networks: good ideas from everywhere in

the world”, pp. 46-50.

Muller, A. and Hutchins, N. (2012). "Open innovation helps Whirlpool Corporation

discover new market opportunities", Strategy & Leadership.

Muller, A. Hutchins, N. and Cardoso Pinto M. (2012). ”Applying open innovation

where your company needs it most”, pp. 35-42.

Electronic Sources:

Whirlpool (2013). Whirlpool history. Available: https://www.whirlpool.com. [2013-03-

17].

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