When people think about innovative businesses what excites them? I’ve heard plenty of people getting frothy about their new phone and all the fancy apps it comes with but I have yet to hear anybody getting agitated about washing machines and microwave ovens. Domestic appliances or “white goods” do not set the imagination alight.
A sea of white
In 1999 Whirlpool, one of the larger appliance manufacturers, confronted this reality. They realised that customers saw their market as an undifferentiated “sea of white”. A washing machine looks like a washing machine, no matter who made it.
In a rather unimaginative attempt to address the issue, the then CEO appointed an Innovation Tzar. Her job was to make Whirlpool more innovative.
Murder the Tzar
The Romanovs were not great role models. Tzars don’t have a history of being successful. They tend to make a very large amount of money, for a very short period of time, then they are executed.
At Whirlpool that didn’t happen. The Chief Executive stuck with his Tzar. Over the next ten years she developed a host of management initiatives to improve innovation:
- Innovation became a central topic in leadership development programmes.
- Every product development plan had to contain “New to market innovation”.
- A capital budget was set aside for innovation projects.
- Innovation boards allocated this capital and reviewed progress.
- Managers defined “Innovation” (to prevent business units sucking up innovation capital).
- Employees were allowed to approach multiple innovation boards for investment.
- 600 innovation mentors were trained and appointed.
- Every employee went through innovation training.
- The senior management bonus was reconfigured to promote innovation.
- Quarterly business reviews had time specifically allocated to discuss innovation plans.
- An innovation portal was built that allowed employees access to innovation tools and data.
- Metrics were developed to measure innovation inputs, outputs and work in progress.
This plethora of initiatives didn’t fall out of some master plan. They developed over time as the organisation hit obstacles and overcame problems. Whirlpool persisted with its approach and after ten years of testing and learning it started to work.
Innovation and new products became a substantial part of Whirlpool’s revenues.
The increasing revenue from innovation helped Whirlpool to maintain its top-line. This was despite a major recession and a significant drop in the value of the housing market.
It is one thing for a competitor to reverse engineer a new washer dryer. It is another thing altogether for them to knock off a complex, interlinked, management process and culture.
The stream of new products was impressive but the business capability that Whirlpool built was the real innovation.
Where do you need to innovate?
This is great if you are happy to stick with the pack, but if you want to be good at something — Credit Risk, Decisioning, Logistics, Recruitment, Sales — then you had better try something new.
What capability is your organisation building?
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Image by Jurgen Appelo
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