INNOVATION AT WHIRLPOOL:

CREATING A NEW COMPETENCY

Presented by, C. Sanjana R. Priyanga G. SugaPriya S. PrithiviRajan

CORE COMPETENCY

A unique ability that a company acquires from its founders or develops and that cannot be easily imitated. Core competencies are what give a company one or more competitive advantages, in creating and delivering value to its customers in its chosen field. Also called core capabilities or distinctive competencies. Competence that does not exist in that industry other than that particular firm. Eg: 3M- Innovation Apples unique competence seems to be its product design process. Honda - Engine

INNOVATION FUELS GROWTH

Demand for innovative products from customers & channel partners. On April 25, 2006, Whirlpool Corporation reported net sales of US$3.5 billion for the 1st quarter . In 2000, David R. Whitwam, Chairman and CEO of Whirlpool initiated major efforts to bring about a change in the companys corporate culture & embed innovation as a core competency.

BACKGROUND NOTE
In 1911, three brothers- Frederick, Louis & Emory Upton- setup Upton Machine Corporation in USA which produced electric motor-driven wringer washers. In 1916, partnership with Sears, Roebuck & Co. The brand name is Allen. In 1929, Upton merged with Nineteen Hundred Corp. of New York, USA. It entered global market by 1936. In 1948, Nineteen Hundred marketed an automatic washer under the Whirlpool brand.

In 1950, Whirlpool expanded its product range to include automatic dryers, refrigerators &air conditioners. Whirlpool financial Corporation was setup to provide credit to customers (these service was dropped in 1997). In 1970, Cool Line (customer interaction center) In 1987, Whirlpool & Sundaram Clayton of India formed TVS Whirlpool Ltd to make compact washers for Indian market. In 1989, went for a joint venture with N.V. Philips

Whirlpool aimed at integrating all its regional subsidiaries through its common systems. In 1993, Whirlpool won the US$ 30 million Super Efficient Refrigerator Program (SERP) Challenge for its better energy efficiency levels. In 2002, e-commerce service known as e-Partner. As of April 2006, Whirlpool home appliance maker was largest in US 2nd largest in global

NEED FOR A CHANGE IN CORPORATE

CULTURE In 1999, top management unable to drive growth. The companys revenues, profits & market share were stagnant. Major products declining at an avg. rate of 3.4% Need for launching innovative products came. The focus of the research & Engineering technicians were lowering cost (or) improving performance Whitwam realized a change in Whirlpools corporate culture

INNOVATION AS A CORE COMPETENCY

Innovative products could command premium prices & build customer loyality. Whitwam wanted to make innovation a core competency at Whirlpool. The top management criteria to be innovative: To create competitive advantage To be unique & differentiating To create shareholder value Measuring the results of innovation & linking it with rvenues was difficult.

Developed Consumer-driven innovation model that recognized three areas of innovation:

New products Marketable innovations Product replacement

Training the employees in creativity, giving them access to expertise & small amount of seed funding, the freedom to work on their ideas &way to share information. The first challenge was to create a knowledge management(KM)

LAYING THE FOUNDATION

In 1999, Whitwam started the innovation initiative by inviting ideas from all the employees. 25 employees were sent to Whirlpools European headquarters for 1 year to bring out creative ideas. Their sole assignment was brainstorming but the result proved disappointing because the ideas was not fit for Whirlpool. Whitwam realized that bringing out innovative ideas required much more than merely asking people to come out with ideas.

In 1999, Whitwam created a new position, director of strategy deployment and appointed Snyder to that post. Consultants trained the employees to think differently, explore for new learning & then use their new perspectives to generate new ideas, and existing ideas, concepts, or products. Whirlpool also looked at other great innovators of that time for inspiration

P&G The 3M company

In 2000, US$ 45 million allocated for innovation not considering about the result but just to lay a good foundation of corporate culture.

BUILDING THE FRAMEWORK

Instead of going for a few big projects, it encouraged many low-cost stratlets(small strategies) Snyder put a leadership tam in place. Each business unit has I-Board, 25 people from each region were trained to serve as in-house Iconsultants & I-mentors were people specfically trained to facilitate innovation projects. A knowledge management system called the Innovation E-Space was started which provided a course in innovation.

All the projects were listed on the I-Pipe on the website. The I-Pipe helped innovators to create strategy and top managers to edit it so as to fit the companys requirements. For the I-Pipe, the company built a platform on its SAP infrastructure. Whirlpool hosted innovation fairs to felicitate inventors and encourage the flow of ideas. The I-mentors helped employees to reflect on customer needs, industry trends, and their own experience. Different ideas came from various disciplines.

REINVENTING THE CORPORATE CULTURE

In 2002, Whitwam decided to bring in more structure into the innovation process so as to increase the participation. In monthly I-Board meetings, the top management evaluated and funded new propasals. Snyder also came out with an I-box to ensure that only brilliant ideas reached the I-board.

In mid-2004, Fettig succeeded Whitwam and he carried forward the initiative started by him. Whirlpool had become more flexible and adoptable. As of April 2006, Whirlpool had 717 ideas in an inactive status but rather shelved them for possible use in the future. The company had

24- I-consultants 600- I-mentors 5000 employees formally trained in innovation

Whirlpool had succeeded in reinventing its corporate culture.

THE RESULTS

Revenues from innovative products resulted US$ 800 million in 2005 as compare to just US$ 10 million in 2001. 2003 to 2005 revenue grown at a rate of 9 % per annum. As of April 200, innovation pipeline had 568 projects under development of which 195 were being scaled up for commercial launch. The avg. pricing increases by 5% per annum since 2003. As a result of the change in corporate culture, the employees had a freedom to contribute more. In April 2006, it also acquired long time rival Maytag Corp.

OUTLOOK
As of April 2006, about 1500 employees out of the 60000 Whirlpool employees worldwide worked on innovations on any given day. Around 5000 people worked on innovations in any given year. According to analysts, Whirlpool had laid a foundation on which it could continue to recreate its core business and stay ahead.