Wednesday, March 30, 2011

Blog 2 - Open Innovation at Philips

In the McKinsey Quarterly article ‘Global Trends to Corporate Strategy’, 24% of respondents said that innovation in products, services and business models contributed most to the accelerating pace of change in the global business environment today. Marla Capozzi and Bhaskar Chakravorti talk about ‘Innovating at scale’. They cite the example of P&G which employed “open innovation” networks to “broaden their sources of innovation” as growth could not be attained with only internal product development. Similarly Philips Electronics has been instrumental in coming up with many innovative products for healthcare, lighting and lifestyle. Their products have been easy to use and provide a great user experience complementing their motto of ‘sense and simplicity’.

The article ‘Global Trends to Corporate Strategy’ mentions that “large corporations must innovate to build new businesses for themselves so that their portfolios stay in line with changing consumer preferences, budding demand in emerging markets, and other global trends.” Philips has changed over time to accommodate new businesses and now has a well balanced business portfolio comprising 35% consumer lifestyle, 35% healthcare and 30% lighting.

What is noteworthy and interesting is the open innovation strategy adopted by Philips to diversify its portfolio and keep pace with the fast changing business environments. The drivers of open innovation include end-user innovation, moving from vertical integration to system integration, and widely distributed good ideas. Its open innovation strategy and relationships with institutes, academia and industrial partners has made it possible to harness creativity and expertise from a diverse range of people and organizations, enabling more innovations to be brought to the market faster and more effectively.

Philips Research founded in 1914, engages in two kinds of open innovation. Through “inside-out” innovation, it makes its skills and resources available to the outside world. It does this by undertaking contract research for external parties, providing technical facilities and support and assisting with IP licensing. Through “outside-in” innovation it leverages the capacities of individuals, organizations and start ups from across the world. To facilitate this it has built high-tech campuses in the Netherlands and China comprising different companies and institutions that work together to come up with breakthrough technology and innovative products. At their’ ExperienceLabs’ the new technologies and concepts are tested in the early stages of development.

Philips Research thus delivers:

1) Roadmap innovations to support the existing businesses in the field of Healthcare, Lighting and Consumer Lifestyle

2) Innovations adjacent to existing businesses

3) Break away innovations to address new markets in line with the strategic direction of Philips.

Thus Philips has “used scale to transform promising ideas into innovations whose value can be amplified by their diffusion among a number of customer and product segments.”

So the question I have for you now is – what steps are you taking - as an individual, as an employee of your company or as a leader of an organization – to drive innovation and benefit from the value addition that it brings about?


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