Philips: “It always starts with a problem”

Security is extremely important at Koningsbergerstraße 11 in Klagenfurt, and not just anyone can access the Philips grounds there. You must sign in, are given an ID badge, and must be accompanied by an employee to enter the facility. The work here is top secret.

New ideas and concepts for products like the Jamie Oliver

that was launched in September, epilators and lasers for skin rejuvenation are constantly being developed at the innovation site for the Consumer Lifestyle segment, as Philips calls it. "We are responsible for small kitchen appliances and beauty products for women here. The products that we develop are only made here – for the entire worldwide market," said Roland Waldner, head of innovation at Philips in Klagenfurt. The company celebrated its 50-year anniversary in 2012, and it all started with "a specific kind of men`s shavers," Waldner told.

The site is broken down into two areas: product development and production, though no complete devices are manufactured, just certain parts. Seventy percent of the components, such as cutting elements for beard trimmers and epilator heads, are sent to China. There, Philips wants to succeed by offering higher quality than its competitors. The production center in Klagenfurt delivers to 13 customers; some parts, roughly 40 million components per year, are also sent to other Philips factories.

Over 350 employees are currently working at the site in Klagenfurt. "About half of them are in innovation, and the other half in production," said Ferdinand Sereinig, site manager at Philips Klagenfurt. "Our development budget is 20 million euros a year," Sereinig continued. There are usually around 30 projects running at the same time.

From problem to productWaldner said that product development always starts with a "problem." "There are generally two different triggers for the start of a project: There is a customer need that is not met ideally, or there is a technical problem." This means that not every product that is being worked on at the development department in Klagenfurt is an entirely new idea. Sometimes, they are asked to refine something for which there is not yet an ideal technical solution, said Waldner.

In any case, though, the vast majority – 95 to 98 percent – of all projects start with analyses of customer needs and the question of how a product can be improved. One example named by the head of innovation was the aspect of health, which has also become an important factor for kitchen appliances over the years. "People today want to cook quickly and easily, but also healthily. We must react to the trends that develop around the world."

Creative processes"When you have an idea, write it down immediately," is the credo at Philips. "The employees in the innovation department have their own idea notebooks where they capture their thoughts," explained Waldner. Then, the next thing is to forget these ideas again, because they are in the idea book. "Later, when you maybe need this idea again, you can take your book and pull up the idea. But first, you have to try to understand the problem," said Waldner.

Once a project is launched, a lot of work is completed in intensive workshops that can include internal employees but also customers, external consultants and external experts. Waldner also said that the key is not how many ideas people have, but how good the ideas are. "When someone tells me that they came up with 5,000 ideas, I say: I`m sorry to hear that, who is going to look at 5,000 ideas?" There are no fixed requirements for how long a project will run, but there are of course deadlines that the teams try to meet. "Projects usually run for about a year before they are finished," said Waldner.

Around 80 projects are run every year at Philips in Klagenfurt – ranging from truly major innovations to small improvements, like color or design changes. However, extremely few projects that are started result in a finished product that is sold on the market. "Of 9,127 ideas that were written down over 13 years, only 15 products made it to the market," said Waldner, relaying statistics from his dissertation. That works out to be only 0.14 percent of all ideas. And just because something is developed in Klagenfurt doesn`t mean that it will be sold on the market in Austria. "We are often sorry when we create products that you then can`t get here," said Sereinig. These decisions are made at different management levels at the company`s headquarters in Amsterdam.

External expertsThe employees at the Klagenfurt site come from all over the world – both from other countries and from universities in the local region. Philips also works constantly with external experts and research institutes in its development activities. "When you want to build a juicer, you first have to know very basic things like the characteristics of a carrot," said Waldner. Experts are especially needed in the area of health, and doctors and dermatologists are often consulted. Projects are sometimes also assigned to technical academies and universities of applied sciences, where students work on them individually and in groups then work on them. "We could not work without open innovation today," said Waldner; there is no way to be up to date in every area, so the company calls on external experts whenever the need arises.

A lack of specialists and advertising in other countriesIt is generally very difficult to find really good specialists and creative people, said Sereinig. "In recent years, we have made sure to get people from other countries for positions at our site," said Sereinig. "We develop products for the global market, so we like to work with international teams." However, it is not easy to get people excited about the site, so they actively advertise it. "One advantage that we definitely have is that we are part of a large group, and can therefore offer the prospect of an international career," added Sereinig. International employees generally stay in Klagenfurt for between three and five years.

"Many have a hard time dealing with the uncertainty that is inherent to our work over the long term," explained Waldner. You sometimes invest months into something, but no concrete result comes out in the end. "You really have to be tenacious, and have to learn to stand up when you fall down. Not everyone can do that," said Waldner. As the boss, his job is to give the people in the team the feeling that it is okay when no product comes out of a project.

Consumer researchPhilips Klagenfurt also operates its own customer test center. It uses a pool of 4,000 to 4,500 testers who are regularly invited for product tests. Basically anyone can apply to participate. The people are given questionnaires, and these are used to determine what tests the people are suitable for. The selection is made on a case to case basis according to Philips. The testing rooms look just like on television and in the movies: The testers are observed through one-way mirrors while they try out the products. This provides additional information, for example how people handle a device. Every tester is also given an attendant to assist him or her during the tests.

Not all tests are conducted with individual people, many different methods are used. Group discussions are also held, and there are cases when products are sent tester homes so they can try them out in everyday use. The tests also have different degrees of complexity and may address the actual use of the product, or just the color and design. Country-specific tests are also completed. "A product might have to fulfill different criteria in Brazil than here in Austria," Philips said.

Because the beauty devices that are developed in Klagenfurt are designed primarily for women, most tests are completed with women. "But we also have men, it depends on the product. Tests with the ReAura skin rejuvenator were also completed with men, for example," we were told at the Philips test center.

Future plans in difficult times"We are always faced with challenges as a site," said Sereinig. There is of course no guarantee that development will remain in Klagenfurt for the long term. But the managers are confident, and said that they are used to "having to go the extra mile" because they are so far away from headquarters in the Netherlands. And this has always paid off. There have been ups and downs in the past, and sometimes people had to be laid off. "But we have grown significantly especially in the past few years," said Sereinig. The situation at present is stable, though Philips is feeling the crunch of the hard economic times, and is cutting back on its development budget in some cases. Because of this, Sereinig does not want to look too far into the future, "but the outlook for next year is good, we have our budgets."

In the future, Philips in Klagenfurt will continue to focus on internationalization. "More and more of our work is cross-border in nature," said Sereinig. The proximity of Slovenia and Italy and collaboration within the region are very important, for example. Philips will also soon be involved in a project of an international school that is being implemented together with the company Infineon.