Focus on the real problem being solved
Internal structures that work well in a “business-as-usual” scenario may not be sufficiently equipped to incubate socially innovative ideas. As a result, ideas can get stuck within a large company. Hence, practitioners have often found it useful to either refine existing structures or create new ones.
In 2013, Philips noticed that its Africa sales teams were generating numerous inclusive innovation ideas aimed at marginalized communities– including LED lights with solar panels and medical devices for low-resource settings – yet none of them were making it through to implementation. The ideas were getting stuck in the company’s internal structures and information flows of its conventional product development process. In the standard process, the sales divisions identify ideas and then request the manufacturing divisions or business units to develop new products. The business units then evaluate the ideas and decide if they are fit for production. In the socially innovative cases, the business units were checking with their existing retailers to see if they would stock such products, who, of course, responded that they would be of no interest to their existing high-end customers.
“Inclusive innovation means you create locally relevant solutions for unmet needs of people who are excluded today. You may need to change the approaches or business models that are customary. Create local ventures with autonomy to break away from existing conventions, while leveraging assets.”
Frans van Houten, Chief Executive Officer, Royal Philips
Philips realized that its socially innovative ideas were facing internal barriers to scale. Given it targeted a new and unfamiliar segment of customers, it reasoned, it would take new internal structures and business models to serve them. Thus the Philips Africa Innovation Hub was created in 2014 as an internal collaboration between Philips Africa and the global R&D and strategy teams. Unlike many incubators housed within R&D departments or business units, the Africa Innovation Hub is located in Nairobi and hierarchically sits inside the sales organization to be as close to customers and market insights as possible.
Using ring-fenced funding provided by the Philips Executive Committee, ideas are incubated through a highly structured, stage-gated process. The stages include a pre-seed phase focused on scouting, exploration and market research; a seed (validation) phase that generates clarity on product specifications and costs; an alpha phase where the business model is tested through pilots and limited sales; and a beta phase that generates significant sales. After each phase, the “social intrapreneurs” working on each idea pitch to an Innovation Board, comprised of senior executives from the regional market, research and business units. If successful, the idea moves to the next stage with replenished funding. Once the concepts reach the beta phase, they are expected to be transferred to the business units as profitable businesses.
Such a structured process intentionally allows for significant trial and error: if a concept doesn’t work in the alpha phase, it can go back to the seed phase and create a new plan. This new structure, which relies on close collaboration between the sales teams and the Innovation Lab, now helps Philips to successfully reach new customer segments. In 2014, the company went to market with a “pay-as-you-go” model that rents out LED lights to low-income households for a daily fee (helping customers who struggle with a large upfront payment), and in 2015 Philips announced the first in a series of medical devices and solutions for low-resource settings, specifically for community care.
Home page image: REUTERS/Amit Dave