How to Innovate
How Whirlpool Puts New Ideas Through the Wringer
Today, the maker of such brands as Whirlpool, Maytag, and KitchenAid has formalized a process to sort through the thousands of ideas that, at any one time, are percolating up from product groups, new business development teams, and i-mentors—employees trained in innovation who have been deployed throughout the organization to identify promising ideas. From that first grab-bag of concepts, managers green-light several hundred for study, giving each a slice of an innovation budget that Norena ballparks at "several million dollars for North America" this year.
Ultimately, almost half of those flow into its innovation pipeline, which currently numbers close to 1,000 products. On average, 100 are introduced to the marketplace. "Every month we report pipeline size measured by estimated sales, and our goal this year is $4 billion," says Norena. With Whirlpool's 2008 revenue totalling $18.9 billion, that would mean roughly 20% of sales would be from new products.
Beginning AffreshThe process has helped Whirlpool find such innovations as Affresh, a hockey puck-shaped tablet that consumers can toss into front-loading washers for a cleaning cycle. In less than two years, Affresh, which works with any brand of appliance, has grown into a line of four products that Whirlpool expects to be an $80 million to 100 million business by 2015. Taking Affresh as a guide, here's a look at how the Benton Harbor (Mich.) appliance maker evaluates new ideas.
Affresh came out of regular consumer research a few years ago: Water and chemical residues caught in the seal of the door of front-load washing machines, customers told Whirlpool researchers, were causing odor problems. (Not all of Whirlpool's concepts emerge from customer research; Gladiator GarageWorks—a line of storage containers and appliances for garages and workshops—was conceived in a sales and marketing brainstorm about how Whirlpool might develop products for rooms beyond the kitchen and laundry room.)
For an idea to be considered for development, it has to meet Whirlpool's three-pronged definition of innovation: It must meet a consumer need in a fresh way; it must have the breadth to become a platform for related products; and it must lift earnings. (Add-on innovations are expected to deliver results within months, while new-to-the-world ones are given three to five years.)
Charles Martin, director of strategy and marketing for new business development, who led the Affresh development, already knew there was a consumer need. Four to six weeks of research and concept development convinced him he could clear the second hurdle too, by expanding into kitchen appliances too. And Whirlpool had good reason to expect profits. Sales of front-loaders are on the rise—1.91 million will be sold this year, according to IBIS World—and the machines are expected to eclipse top-loaders in three to five years.
Clearing the HurdlesResearch findings are written up in a document Whirlpool calls an "opportunity brief." The brief is reviewed by a 15-member panel of innovation experts and regional managers from across the organization, including marketing, sales, customer service, and engineering. This i-board meets monthly to review potential projects, and allocate funding. Martin's team was granted several thousand dollars to continue development of the Affresh idea.
Roughly 40% of ideas that make it to this stage end up in the innovation pipeline. Those that don't get tripped up by the next hurdle: the i-box, a three-page scorecard that forces innovation teams to be very concrete about expected factors such as revenues, technical feasibility, relevance to the brand, and market trends. "The i-box needs to make the case that there is a consumer need, that the concept meets it, that it does it better than existing products, and so on," says Norena.
The i-panel then reviews the i-box, with each member scoring how well the concept meets each criterion on a scale of 1 to 5, with 5 being the strongest. The averaged scores determine whether a concept will be funded (at which point it officially enters the pipeline) or shelved. "Everything checked off," says Martin of the Affresh i-box.
Whirlpool currently has some 1,500 projects shelved for a variety of reasons. An idea to create an "on the move" appliance for campers, for instance, was held because it strayed too far outside of Whirlpool's home-focused comfort zone.
Thumbs-Down on a Steam DryerIdeas can also be held simply because of overall resources and priorities. Every year, Whirlpool sets a goal for innovation-related revenue for each product team. "We might say we want 80% of new revenues to come from innovations to core products, 15% from innovations that leverage or expand the core, and 5% from totally new innovations," says Norena.
A concept for a dryer with a steam function, proposed in 2004, ended on up the shelf because it didn't match up with that year's priorities. Three years later, when the fabric care team began working on a relaunch of Whirlpool's Duet line, the innovation manager for the laundry team reviewed the shelved concepts for features to include in the new machines. Duet dryers came to market in 2008 with the steam function. (Concepts can also be resurrected by the i-board, which reviews all active innovation projects and shelved ideas during an annual pipeline cleanup.)
Once Affresh and other new concepts officially enter the innovation pipeline, they go through Whirlpool's standard stage-gate process. Affresh's development differed only in that it was developed in partnership with an outside partner, a chemical company that Whirlpool won't identify, one of Whirlpool's first open innovation projects.
The first Affresh product—a three-pack of tablets for cleaning front-load washers—showed up in appliance stores in September 2007 at a suggested retail price of $6.99. Whirlpool won't reveal specific numbers, but says that first-year sales exceeded Martin's estimates by 200% and were robust enough for the company to expand distribution to national grocery chains such as Kroger (KR) and Publix Super Markets. Building on that, Whirlpool developed a more efficient product for service technicians and, coming next month, an Affresh-branded dishwasher and disposal cleaner.
What can executives learn from Whirlpool's approach to screening ideas?
Define Innovation A brief, concrete definition of innovation will help employees evaluate new concepts at the front end, screening out those that just don't fit. As a concept progresses, keep returning to the definition to make sure that the idea still clears the bar.
Never Kill Good Ideas A concept that might not be worth pursuing today—because of limited resources, for instance, or the lack of a partner—might be next year's innovation. Don't kill projects. Shelve them, and annually review all concepts for possible resurrection.
Adjust Your Criteria Early in the process Whirlpool concepts are required to meet the basic definition of innovation. As projects progress, the evaluation criteria become more rigorous. Begin with easier requirements to avoid killing off concepts before they can be developed.
Link Idea Screening with Strategy A concept might be innovative but still not smart for a company to develop because it would take the company too far afield. Make sure that the people evaluating ideas do so in the context of the company's strategic goals.