Philips Lighting - the industry leader, sensed disruption to its core business many years ago (pre-2000) and took the necessary actions to respond and adapt.
Here is a very useful case study on the disruptive innovation program at Philips Lighting. The case study was co-written by Professor John Bessant, Dorothea Ernst and me, for the 4th edition of the bestselling book: Innovation Management - Integrating Technological, Market and Organizational Change. It is also included in the book: Discontinuous Innovation.
It describes the innovation journey, covering many of the tools used and challenges faced along the way, written by people who were involved in the project. I was a core member of the Philips Lighting's project team.
If you are interested in radical innovation and want to learn from a real-life program, you will learn something new here. Here is the introductory text to the case study:
To state the obvious, radical innovation isn’t easy. It involves taking a leap into the unknown – and is particularly difficult for established organizations who have a track record of success which they don’t want to put at risk. So how does an organization jump the tracks? How can it switch off its immune system and open itself up to new – and potentially dangerous – inputs? How can it reframe, let go of its old ways of looking at the world and take on something which is very new – but by definition untried and risky?
These are not academic challenges but the very stuff of innovation management – the essence of what it means to lead strategically. Put very simply, innovation is a survival imperative. If organizations don’t change what they offer the world – products and services – and the ways in which they create and deliver those offerings (processes) then they risk being left behind and at the limit disappearing. History shows us an almost Darwinian pattern of the rise of new entrepreneurial and agile organizations which mature, become comfortable and then fat and gradually lose their edge. Middle age gives way to a kind of sclerosis where change is reduced to smaller and smaller increments until one day the organization is upstaged by external events and unable to move fast enough to cope. It is the new kids on the block who exploit the new technology, pick up on the new market trends, and work out new and more appropriate business models.
We detect this pattern because it mirrors our own behaviour, our own life cycle. But there is an important difference – organizations have the capacity to reinvent themselves. Not many survive beyond a fairly short life span but a handful of organizations do last beyond decades, joining the centenarians and even – in a very few cases – lasting over several centuries. But close analysis shows just how much these organizations have had to change in order to reinvigorate themselves. For example, the Swedish firm Stora was founded in the 13th century and is still a successful business today – but it has survived not by remaining in the original business of copper mining but by changing. The German tourism giant TUI is coming up for its 100th anniversary – but when it was founded in 1917 it was the Prussian state lead mining and smelting company. Mining and melting rocks is a long way from the tourism, travel and services business of today. And Nokia began life as a timber and paper company, not the global mobile telecoms player it has become, nor the mobile media and services business it is transforming itself into.
Importantly studies of longevity in organizations suggest that it isn’t simply a matter of ‘out with the old and on with the new’. What long term survivors do is manage crises in ways which incorporate the past strengths rather than replacing them. There is, of course, a need to take on new knowledge but there is also a process of letting go of what no longer matters. And most important there is a synthesis, a blending of old and new rather than a wholesale switch from one field to another. What Gerry Johnson and George Yip call ‘strategic transformation’ is much more than weathering storms, getting lucky in times of crisis or sweeping out the old and bringing in the new in a boardroom reshuffle. It’s about learning new tricks but it also reflects a capability to manage the learning process.
Innovation management involves mostly steady state maintenance of a stable position but occasionally managing the radical, discontinuous shift to a new state. The long-standing challenge here is that capabilities for dealing with one are not the same as the other – the former is about maintenance whilst the latter is about entrepreneurial risk-taking and creation of new possibilities. How does a large established organization deal with this? The difficulty is striking a balance – maintaining the current business through steady state improvements whilst also allowing some measure of entrepreneurial freedom to some people so that new possibilities can be generated. But how to manage the tensions between the two approaches?
Perhaps the simplest response is some form of corporate venturing – to spin off, spin out, separate – in human terms it is about giving birth to children who will carry on the line. But another, more tricky approach seeks to engineer a change which retains the new spirit inside the old organization – how to renew from within?
This was the challenge facing Philips Lighting in 2000 – how to move from a strong position in what was becoming a very mature market? The original business, founded over a hundred years ago, had been about lighting but the limits to growth in what had become a commodity business were clear for all to see. The big question was where and how to move forward – how to make a radical leap into the future? This wasn’t just a matter of finding new ideas but getting acceptance for them, building a new vision of what the company could be – and then implementing it. In other words the challenge was nothing less than one of how to change the corporate mind. [the above text is an excerpt from the case study]
Click here for the full case study
I hope you enjoy reading it!
Director of 3inno