The 8 Modules, 31 Focus Points and 5 Collaboration Phases of the SEIC Methodology provide a path to success

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The 11 modules of the SEI methodology focus on the key processes that enable the successful rollout of SEI

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In-depth explorations of the approaches and techniques used by leading organizations in the field of SEI today

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Thought leadership and insightful articles on the most important issues for companies pursuing an SEI agenda

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Useful downloads, from unique research to practical templates, frameworks and tools being used by SEI leaders

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Tapping into external R&D spend with Philips

The number of products created from external expertise is rising at Philips, underlining the Dutch company’s determination to access its suppliers’ innovations

Air purifier

 

What proportion of products would you expect a consumer-goods business to launch based on external expertise? 20%? Maybe 30?

 

These ballpark percentages were offered by several organizations during our recent Accelerator with Philips in Eindhoven. Several years ago, the estimates would have been even lower.

 

But with a determination to drive knowledge, innovation and intellectual capital from suppliers and other third parties, last year this figure stood at 67% for Philips.

 

It is a huge number, made more impressive when you consider that, for most of its 125-year existence, Philips has mostly focused on developing new products and innovations internally.

 

Not surprisingly, the shift from being an inwards-focused company to an outwards-looking one has been a long and sometimes difficult journey for Philips, but the fruits of that labor are now clear to see.

 

“Things have changed gradually over a number of years,” notes Maarten van den Boogaard, Philips’ Open Innovation Leader. “And today, we’re seeing external innovation becoming more and more important.”

 

A simple reason for this rise in importance is offered by Philips’ VP in Procurement, Maurits Smits. “We needed to tap into global R&D spend,” he says. “We might have an annual R&D budget of a billion euros, but externally, the amount being spent is far, far higher.”

 

One of the principle initiatives that Philips uses to tap into this spend is its Supplier Program for Innovation and Creative Entrepreneurship (SPICE). An open innovation platform, SPICE has now been running for over a year, resulting in numerous innovations for the business.

 

Van den Boogaard provides some examples of these results, which range from large innovations that have led to the launch of new products, to small, incremental innovations that have improved existing ones.

 

Philips’ latest toothbrush, for instance, is capable of telling its user how well they’ve cleaned their teeth. “That product wouldn’t exist if we hadn’t worked with our suppliers,” van den Boogaard notes.

 

And then there’s Philips’ air purifier – massively popular in China, and quickly gaining traction in Western markets. Philips understands how the machine works, but the actual filtration technology is developed by its suppliers according to specifications provided by the Dutch company.

 

But perhaps the most successful – and well reported – product within Philips’ 67% figure is its air fryer – one of the company’s longest-standing examples of supplier innovation. First introduced to its product range several years ago, 2016 saw Philips working with different companies and universities to further improve it, demonstrating that collaboration can and should be a continuous process, and not just a one-stop-shop.

 

Spending time and resources on harnessing external expertise can therefore have a transformative effect on a company’s product range. Philips’ 67% figure would have been unimaginable even five years ago, but today, third-party collaborations are an integral part of its consumer business. Companies in the beginning stages of working with suppliers and third parties can be assured that, with the same level of determination and a focus on change management, similar results can be achieved.

 

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