CASE STUDY 9 New Concept Development at Philips

the key stages in the development process, starting at the initial brief to the
final selection of the three business cases.

New Concept Development at 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
Philips’ role in the global lighting industry had always been
dominant. Philips Lighting was Philips’ ‘cash cow’; it operated in a mature,
low-growth 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
□ 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 activities407408resulted 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:
□ 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
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
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
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.
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.
o ○ Create a ‘need-scape’ for the
new innovation area.
o ○ 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.
o ○ Prototyping and market testing.
o ○ 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 and410411capacity 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.
□ 10 July 2003 in the Philips Lighting Senior Management meeting.
□ Bring the Atmosphere Provider theme to life.
□ Show proof points via business potential in the three selected
□ 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).
□ 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
□ Patents: > 50 IDs submitted, > 25 patents filed, > 10
patents in pipeline.



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