Seminar 4: Electrolux AB: Managing Innovation. Problem Essay
Group 10: Victoria Gruener, Christophe Vigier
,
Jiamei Chen, Xavier Cordova, Maria Isabel Durá, Marta
Pérez

1. Problem definition:
Electrolux AB is the second largest kitchen and home appliances company worldwide.
Anton Lundberg and Joakim Rask, the Vice presidents of this company, clearly layout two main areas of concern for the company concerning innovation. They must find a manner to foster collaboration across continents and functions to improve the innovation method and create a culture of innovation wherein change is perceived by everyone in the company as an opportunity rather than a threat. The history of Electrolux is comprised of many mergers with and acquisitions of numerous companies. As such, the company has not only to compete in an evolving market, but it is also forced to address many internal organizational issues as well.

2. Diagnosis:
In order to achieve innovation as a strategic source of differentiation, it was necessary to foster collaboration across geographies and functions, which was a challenging task for Electrolux AB because of its organizational structure based on a product­centric approach and the presence of silos in the whole organization. It was also necessary to create an innovation culture within the company, what resulted in a problematic issue because of the lack of openness and free sharing of ideas and the negative mindset of the employees towards change. 3. Proof of causes:
Organizational structure
Electrolux was organized by a product­centric organization based on developing products and then finding consumers. This structure organization also resulted in progressive commoditization, which implies the increasing homogeneity of products within the appliances industry s a result of less technological innovation, products
.
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became undifferentiated from others.
Furthermore, the existence of multiple silos in­house lead to lack of cross­sector and cross­functional support among subsidiaries and within functional departments .

As consequence, subsidiaries could not collaborate effectively with each other, and thus, this also complicated the spread of knowledge from centers of excellence towards the rest of subsidiaries. For instance, one of the critical issues that Lundberg and Rask faced while developing an innovation agenda framework that would place the consumer at the center, was the strategy development, and in view of this, they established
“innovation territories”, that is, areas where Electrolux would look for innovative ideas for providing compelling benefits to the consumers and delivering significant business value. These centers could be considered as centers of excellence as they provide a significant business value. However, as consequence of the multiple silos, the innovative ideas that these centers deliver would not flow properly and thus, the organization might not benefit from these centers of excellence optimally. Lack of openness and negative mindset
Electrolux has been mainly expanded through mergers and acquisitions, these changes could be perceived as threats by the employees because these new subsidiaries were also working as silos, thus, a lot of strategic information and decision were kept limited to its specific groups or regions. As Electrolux was growing the generation of a positive mindset forward change became increasingly difficult.
This absence of openness and free sharing of ideas damage the interaction from subsidiary to Electrolux headquarter, thereby reverse knowledge transfer is not correctly exploit. Electrolux can’t benefit properly from seeking innovative opportunities and acquiring local market knowledge and unique information outside. 4. Action plan
Goals:
Short­term: Establish a fluent collaboration between individuals and business units. By doing that, communication among Electrolux can be improved and mismanagement, such as the example of the failure of the innovative tumble dryer that was developed in the mid­2000, could be avoided.

Medium­term: The company has to broaden the employees’ perspective beyond their scope, as well as to increase internal transparency to avoid working in silos and become more efficient.
Long­term: Create a culture of innovation in order to gain competitive advantage and evolve from a product­centric company to a true customer­focused company. Actions required to achieve the above stated goals:
Short­term: company’s short­term goal can be achieved through creating a
The
cross­platform collaboration team within the organization. This idea might be implemented through establishing both online and offline platforms, where employees can come together, share ideas, and deliberate upon them in a meeting.
Medium­term: These steps include to ensure that employees across all functions and businesses benefit from each other’s learning which is essential towards broadening the employees’ perspective beyond their scope and getting closer towards becoming a consumer­focused organization. Transparency, on the other hand, might be improved by implementing peer recognition. This tool can be very powerful, when trying to foster both employee participation and competition, in which the individual’s success could be seen transparently. Instead of using silos between the different functions (including
R&D,sales,
etc), Electrolux may consider the implementation of teams that are responsible for the consumer experience in each business and region. These teams would enable the company to integrate consumer experiences and launch plans much more easily.
Long­term: All of the mentioned actions will help Electrolux to achieve its long­term goals of creating a innovative culture within the organization and becoming a consumer­focused company. Additionally, the top­management at Electrolux may also develop new training incentives or new reporting tools for monitoring the organizational progress in order to successfully support the company’s transformation.

5. Risks
As Electrolux’ organizational transformation includes tremendous changes, affecting employees at all levels, the company will probably face a number of risks that may slow down or (worst case) lead to the failure of this process. As for instance, Electrolux might be facing employee resistance. Also, the developed tools may solve current issues, but they won’t probably be powerful enough to guarantee a long­term organizational success, as Electrolux is operating within a fast changing technological environment.
Finally, as a result of the technological innovation era that we are facing an increasingly difficulty to develop technological high­end products. Therefore, products are becoming more undifferentiated from competitors’ products and that could mean that potential customers go for the cheapest product instead of the Electrolux’s one since they all have more or less the same innovation level incorporated.

Preparation ­ Seminar 4 (Group 10)
1.Problem definition:
Need of foster collaboration across continents and functions to improve the innovation method and create a culture of innovation among employees. 2. Diagnosis
Electrolux’ product­centric approach has not been proved suitable to be able to compete in today’s environment. The company also adopted a structure of silos which resulted in a lack of openness and free sharing of ideas. Additionally, the negative mindset of the employees towards change was also leading to problems. 3. Cause­effect analysis
Product­centric organization based on developing products and then finding consumers.
This structure resulted in progressive commoditization.
The existence of multiple silos in­house lead to lack of cross­sector and cross­functional support among subsidiaries, these could not collaborate effectively with each other, and thus, this also complicated the spread of knowledge from centers of excellence towards the rest of source units.
The absence of openness and free sharing of ideas damage the interaction from subsidiary to Electrolux headquarter, thereby reverse knowledge transfer is not correctly exploit. 4. Concepts and frameworks
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Centers of excellence: organizational unit that embodies a set of capabilities an that has been explicitly recognized by the firm as an important source of value creation, with the intention that these capabilities be leveraged by and/or disseminated to other parts of the firm.Product­centric organization: Electrolux was organized by a product­centric organization based on developing products

and then finding consumers. This structure organization also resulted in progressive commoditization.
­

Progressive commoditization: it was produced by the product­centric organization and this process implies the increasing homogeneity of products within the appliances industry a result of less technological innovation, products
. As became undifferentiated from others.

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Customer­focused organization: In case of Electrolux, product development follows customer demands. There was a need for integration and marketers looked for cohesive experience. By this way Electrolux was able to reach integrate consumer experiences and launch plan thanks to specialists and consumer experience teams.

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Reverse knowledge transfers: transmission of knowledge and ideas about the market from the subsidiary to the headquarters.

5. Actions
The aim of the action plan is to achieve the following goals: enable a collaboration between individuals and business units, increase transparency, broaden the employees’ perspective beyond their scope, eliminate silo­structure, create a culture of innovation and to become a customer­focused company.
Short­term actions include:
Create cross­platform collaboration teams within the organization through establishing both online and offline platforms, where employees can come together, share ideas, and deliberate upon them in a meeting.
Medium­term actions include: Ensure that employees across all functions and businesses benefit from each other’s learning in order to broaden employees’ perspective beyond their scope and getting closer towards becoming a consumer­focused organization. Additionally, transparency might be improved through implementing peer recognition. Instead of using a silo­structure, Electrolux may consider the implementation of teams that are responsible for the consumer experience in each business and region. These teams would enable the company to integrate consumer experiences and launch plans much more easily.

Long­term actions include: Create an innovative culture within the organization and becoming a consumer­focused company through implementing the previous mentioned actions.