For Philips, Open Innovation is Vital to Stay Ahead of Competition

By: Francois Eudes Ruchon

“Open Innovation and technology scouting are vital for us to stay ahead of competition and identify cutting edge technologies that will allow us to propose the best products to our consumers”. In this interview, Steven Vaassen, Open Innovation Leader at Philips Consumer Lifestyle, shares his view on OI and how Philips is organized to decide when and how to use Open Innovation.

Q: Steven, who are you and what are your responsibilities?

Steven Vaassen: I’ve been in a variety of R&D roles, mostly in Philips. I have an engineering background, doing project and program management. I spent most of my career working closely on front-end innovation, and emerging technology. This gave me a wide view of combining the elements of business requirements for front-end innovation. It also helped me build a strong belief in the benefits of leveraging the outside world, especially in the mature business segments where we are working. We must engage with external solution providers to develop breakthrough technologies, to develop game changer products, as they have the knowledge, the background and the competencies that are required to do so. For instance when Philips made the move to enter the Skin Care market, it wouldn’t have been possible on a short term perspective without Open Innovation; we would have needed to build the knowledge and competencies entirely from zero. I think that these are very clear learnings, it’s fundamental to have an Open Innovation program in an organization like ours.

Over the years I have become a strong believer in working with both short-term and long-term partners, outside the company. That’s naturally led me toward the role that I am in today.

Philips Open Innovation journey starts with the impulsion of a new CTO 5 years ago

Q: Can you elaborate on the Open Innovation organization at Philips? Where is it implemented, when was it named Open Innovation as such and how it’s structured?

Our duties, as a central OI team is to make sure local teams are using the latest methods and intermediaries, etc.) and measuring performance.

SV: Today there are four sectors at Philips which are Group Innovation, Lighting, Healthcare and Consumer Lifestyle. I can only speak for the Consumer Lifestyle sector. We started using the wording Open Innovation about five years ago, under the impulsion of a new CTO who previously worked at P&G and Mars. He brought to Philips a clear vision about why Open Innovation is important and the values it adds. At Philips, he started with an improvement program and appointed Leaders in the Consumer Lifestyle sector to drive these programs centrally. Starting from zero, he built awareness of the name Open Innovation for the group, starting with a top-down strategy (evangelization) and also bottom-up, by providing enabling tools and methods. Today, the central OI team in Consumer Lifestyle is a team of two, including me. Our duties, as a central team, are to manage the toolbox (contracts, new methods) as well as attending conferences and fairs about innovation, connection with the community, maintaining connections to the global community of Open Innovation actors and leaders, making sure they are using the latest methods and intermediaries, etc.) and measuring performance.

We have developed and activated the mentality of Open Innovation. For each of our 12 innovation locations for Consumer Lifestyle, we have local Open Innovation champions who are part of our OI community. We coach the innovation teams locally, and challenge them on why we are developing products internally and if we shouldn’t look outside to find better components, technology, ideas, or intellectual property (IP). Open Innovation champions support teams to select the right intermediary. The team is kept as small as possible because we strongly believe that the local teams are responsible for making their project work.

Over the years we see more and more convincing evidence that our project managers and engineers have accepted Open Innovation as part of their default considerations when starting up a new project. The question to have in mind is “should we consider developing it ourselves or should we look for external parties to help identify the right technology, expertise or idea?”

We are also encouraging our technology scouts to communicate more to each other. We are sharing more and more with other teams internally. Now, there is more collaboration between the four sectors of Philips, and we’re sharing practices and tools between the sectors. It will keep on gaining maturity. Yet, Philips does not have a centralized, overall head of Open Innovation, like you can see for instance at Siemens, where they have a global VP responsible for Open Innovation. At Philips we don’t have that position at the moment.

Shift from technology enablers to working with consumers

Q: According to you, being more centralized is a global evolution of Open Innovation? What trends or tendencies have you observed around how corporations are structuring Open Innovation?

It depends on the management of each company. Especially since the global economy is at a downturn, we see central budgets are cut, so those central teams remain small. Companies like Philips have already experienced a cycle. We started implementing Open Innovation as a central approach from a top-down strategy, having a central resource to evangelize new things and establishing contacts with intermediaries and other OI actors. Now, four to five years down the road, this has become a much more common practice for our local organizations.

Working with lead users/consumers to identify new opportunities, new trends or needs from a consumer angle is a new trend I observe at Philips.

One other trend/shift that I have observed at Philips, and that I see generally is also on the focus, which is moving away from primarily technology enablers for the success of a new product, towards working with lead users/consumers to identify new opportunities, new trends or needs from a consumer angle. For example, engaging with them closer to the front-end, before technology creation, sizing up an opportunity by observing how lead users work, observing social media, extracting intelligence from leading consumers, rather than collaborating with established companies and technologies. This is becoming more and more important. There are many more providers, platforms and contests for designers or lead users.

Funding has been and will always be the main challenge

Q: Could you analyze the kind of roadblocks you faced while implementing Open Innovation within Philips?

SV: One key hurdle has been, and will always be, funding. As I said earlier, I’m a strong believer in local teams making the work. The decision should be made where the money is spent. From my central perspective, there is not much that I can activate, and that’s fine. If there is a lot of money at a central place to deploy all kind of tools and methods to be used, they may not be valued nor used at all, or sometimes merely because they come for free. Now at Philips I think that the funding is done where it is supposed to be done. And that leaves me as a central person with a small budget mainly in a coaching, challenging and connecting role.

One other challenge is on the definition of Open Innovation. We have seen too many activities earmarked as Open Innovation, diluting the message we want to bring. People believe and say that they are “already doing Open Innovation”; they don’t need to look further outside. For me we need to be very sharp with the definition of Open Innovation to continuously drive the right mindset.

Q: I can’t resist but asking you what is your definition of Open Innovation?

SV: I will define for my sector, or at least how we measure it: Open Innovation is either technology or IP or expertise coming from the outside that enable a key product differentiator.

Also, what do we consider as open? Is it necessarily with a new network? Or can it be with an existing one? We agree that using the innovation power of external parties to deliver something differentiating and of great value is part of our definition of Open Innovation. But of course, there is always some level of subjectivity and room for discussions in how we define it. At the end of the day we should really ask ourselves: “Should I be doing this myself or should I look outside for a more capable party?”

OI Intermediaries must have global reach and high technical expertise

Q: How do you select OI Intermediaries? When do you take decision to use an OI intermediary? How you select a specific one? Based on what criteria?

SV: Good question, even though we never did a clear listing of requirements on that. Philips is a global player. In that sense, it is Ok if local teams identify those to work with locally as I’m very much convinced that a source of innovation could be found anywhere in the world, so basically one of my primary requirements would be that an OI intermediary has global reach. Different angles/approaches to a challenge come from different areas, so global reach is key.

For Chemicals and Materials, SpecialChem is the best Open innovation Intermediary.

Another one is the angle of technical domain. There are domains where we could need specific competencies. That is why we have been using SpecialChem! Generic OI intermediaries have not delivered enough reach into specific technical domains. I assess the various needs coming from the different departments of my organization. If many of these needs are related to Chemicals and Materials and not fully covered by internal competencies, we should fill this gap by identifying the relevant OI intermediary. For Chemicals and Materials, it is SpecialChem.

Then I am very much open to pilot new intermediaries. To assess what an OI intermediary and new players can bring, I need to test first.

Q: You need a 1st success story that you can duplicate?

SV: Right. In order for my local teams to be enthusiastic about what an OI intermediary can bring to them, indeed I need to show first successes. Once value has been demonstrated, everything is much easier, for everybody.

Co-developing with partners providing supply capabilities

Q: Is it important for you to connect with business partners? Or are you satisfied with collaboration with academia?

SV: For sure I prefer business partners. Goal of Philips is to develop new products within specific application domains. Our innovation needs are close to consumers, relatively close to markets – as close as possible in fact. Universities have much longer timeline for innovation, much longer time-to-market. The link to academia and institutes is more apparent for Group Innovation. Co-developing a brand new technology with no IP or no demonstrated opportunities of industrialization for Philips, taking into consideration the risk and the investment, is mostly not what our sector is looking for. On the other hand, companies – business partners – especially with supply capabilities are the kinds of partners Consumer Lifestyle is interested in co-developing with.

Local teams are the key for the success of external integration

Q: Thank you for explaining. Could you please now share with us how Philips is structured in term of Open Innovation? You’ve explained the toolkits Philips Open Innovation team members are using. How you select OI intermediaries. But once an external technology or a partner is identified, how do you integrate these external technologies?

SV: Good question! This is one of the key challenges. Making the question, the need (or the brief) clear is crucial, but it is not the biggest hurdle. Those parts of the Open Innovation process are well mastered at Philips. But once we’ve selected this one partner, this one techno or IP we approach implementation on a case-by-case basis. In terms of process we follow basically a Want/Find/Get/Manage approach. We also have a strong alliance department and clear alliance management process – which is managed by a counterpart of mine, who is responsible for driving and coaching new alliance partnerships, including the involvement of other functions like legal, IP and procurement. Once the contractual part is arranged, the biggest challenge is that the operational teams need to actually collaborate with an external partner and are not very much experienced in this. Innovation teams do typically not get a lot of experience in doing such things. For instance, one of the key things we need to improve is to establish long-term win-win deals so both parties benefit from the partnership, ensuring that all parties remain satisfied during the period of collaboration. The relatively little experience that local teams have, makes them not so comfortable managing external innovation partners.

Luckily the limited knowledge of how to effectively collaborate with external parties is countered by the excitement it brings to the teams, which is great. However, still quite a number of these projects fail. At the end, the local teams need to be empowered to make Open Innovation work. They can be supported by Open Innovation leaders and alliance experts, but the local teams are the one effectively working with external partners. Local teams are the key for the success of external integration.

Another important part is the funding question. Doing the search is only a limited part of a project cost. The money involved in the collaboration can be huge. Generally speaking it is not always easy to switch money from one project to the other and from internal resources to funding a partner. Even if we identify a great opportunity outside, it requires tough discussions to re-prioritize money to one project versus another.

Q: Very interesting. So Open Innovation success relies on people! I understand that local teams and project manager skills are keys for success. Back to your OI processes, you’ve mentioned an Alliance Manager at Philips. What’s her role? Is her mission clearly defined versus yours?

Open Innovation is typically more technology driven, where Alliances are more business driven.

There is a clear distinction between her role and responsibilities and mine. My focus is much more on the Want/Find part of the Open Innovation process – organizing the searches and the scouting. Most projects are then handled by procurement in the local project team. Alliances are running projects mostly with bigger scope, e.g. large multinationals, umbrella partnerships for joint commercialization/distribution for instance. Sometimes there is an overlap or a handover between our programs, for instance when we start from a technology search yet end up in a business partnerships. Open Innovation is typically more technology driven, where Alliances are more business driven.

We are looking for state-of-the-art materials that improve consumer experiences

Q: Ok, understood. I’d like to end this discussion by understanding the importance of innovative materials and chemicals for Philips.

SV: Tough question as it is very diverse. If you look at the various categories Philips Consumer Lifestyle is handling, materials needs are different. Depending on the products, performances such as robustness or sustainability are of interest for us. Yet also hygiene and aesthetics related performances. Even endurance… We have a central technology team that works for many of our categories, product development experts and they look at new product-interface technology, finishing, functional coatings, protection such as heat resistance or printing properties, and they also look specific performances for sub-categories, which for instance get in contact with food, skin… There are great opportunities for innovative materials when they are used as differentiators. SpecialChem has been working on a search for skin friction reducing materials, which would bring a differentiating experience to consumers, so this is a good opportunity for our products.

Based on our capability to understand final consumer usage and needs related to our skin or kitchen appliances, we are looking for state-of-the-art materials that improve consumer experiences. Open Innovation and technology scouting are vital for us to stay ahead of competition and identify cutting edge technologies that will allow us to propose the best products to our consumers.

By François-Eudes Ruchon

Photo : Business hand pull rope by Shutterstock.com