A third aggregate dimension that emerged from the data centers around the use of strategic capabilities when undergoing business model innovation.
Strategic Collaborative Innovation
Many interviewees highlighted the importance of strategic partnerships and collaborations to drive innovation. By partnering with external companies, DMEC is gaining access to external expertise and resources that they do not possess in-house. Especially when exploring new
business models, DMEC needs quick access to tools and systems that can only be fond external to the company. As explained by interviewees 9 and 11:
„We started working with an agency, they had resources, and they had tooling. So we were able to implement that in a kind of online environment.“ – Interviewee 11
„ (…) You have a certain level of subject matter expertise. And that means sometimes that you need to have external input and maybe not resources or people with capabilities always access within the organization. Again, as I said, you need typically to create new processes and new processes mean new ways of doing things, or new information connections in a way. New tools to be used, so you need the assets, the capabilities and the systems. Typically, in developing new business models that are not there.” - Interviewee 9
Next to engaging in strategic partnerships for access to external knowledge and resources, it becomes increasingly essential to engage in partnerships for the success of the innovative business models. As explained by interviewee 5, it requires partnerships to make new solutions valuable to the customer as the products and solutions are becoming increasingly complex and require components from different businesses:
„The third capability I think, is partnerships. Because many of the new business models are done in partnership. For our hospital, in many cases, it doesn’t make sense to do business with Philips. They need a solution that involves many different components. How can you make that happen? It can be as simple as construction work to install an MRI scanner. But more and more, it’s the digital partner. There’s all kinds of partners that use and many of our solutions actually require partnerships to make it a really successful solution for the customer.“
Especially in the digital realm, strategic collaborations carry great potential for DMEC. By collaborating with digital partners, Philips can get access to a wider audience and tailor their online targeting of consumers. As stated by interviewee 11:
„So, let's say, for example, www.nu.nl maybe you know it, the news outlet in the Netherlands.
They have a lot of visitors, they have a lot of data. They cannot share the data with us, but they
could say hey if you plugin with your system with us, then we strike a deal with each other, we can make sure that you're targeting only people that are interested in health, or maybe another kind of a lifestyle, then we could target those folks.”
With the recent acquisition of a biotelemetry company, Philips has also been able to create an entirely new business model centered around prescriptions as a service. This acquisition presents an innovative value proposition to the consumer who is only paying for the service, which is actually needed, which in turn creates entirely new revenue streams for Philips. As explained by interviewee 10:
„I would say the relatively recent acquisition that we did of the biotelemetry company has some aspects that are kind of pretty innovative from a Philips perspective, in the sense that they're not always about selling a medical device to a fixed customer, but selling the potential, the service of monitoring, basically people's heart health or heart rhythms, as a prescription, basically, and selling that to the sort of insurance company pay us basically, rather than the hospitals themselves.“
Collaborating with external companies can also allow Philips to outsource the risk that is oftentimes accompanied when exploring new business models. If an innovative business model should fail externally, Philips is able to take the learnings, but has minimized bigger losses and the threat to destabilize the organization’s robustness. Once a business model has proven to be successful externally, it can be chosen to build and scale the innovation internally. As highlighted by interviewee 4:
„Sometimes we chose deliberately to do it (BMI) externally. Because if you didn't externally create a minimal viable product, you can also have the risks external. You can just buy it from another vendor and they take the risk and you can take the damage to learning and then when you fall are more stable. So you see that the proposition is working. The revenue is coming.
You can consider to build it internally.“
Lastly, interviewee 3 stresses the importance of partnering with competitors to create products and solutions which can serve consumer needs in the best possible way. Collaborating with competitors to create new business models should not be seen as a threat to Philip’s own brand positioning, but instead as an opportunity to create even more value for consumers which can result in benefits to everyone involved:
„I think we should take a broader perspective because, yes, we could still sell brush heads and we could still sell blades, but I think it should be more thought of as how can we serve consumers best and maybe that's a partnership with Unilever, Procter Gamble, whoever.”
Strategic Alignment
A second theme which was highlighted frequently by the interviewees, was the importance of strategic alignment between teams and between stakeholders.
„There also needs to be alignment with quite some stakeholders. For instance, supply chain, the supply chain is enabled,… finance when for instance, you also include online payments that need to be included. Content and product data management that you can get the right catalog in your platform.“ – Interviewee 15
One way to achieve this alignment is via DMEC’s portfolio management framework and the portfolio review meetings.
“So that is the idea of the portfolio review meeting: to align between squads in order to keep the alignment on working people level and in the same time stakeholders can join.” – Interviewee 13
Interviewee 2 elaborates further on the benefits of the portfolio review meetings. The meetings serve to connect the teams with the organizational strategy and clarify innovation processes by emphasizing decision making and prioritization:
„Agile portfolio management that I'm responsible for within DMEC is mainly around, how do
delivery, you have a focus on decision making and prioritization, but then leading up to the strategy that you have as an organization. So it's connecting the teams with the strategy.”
Next to agile portfolio management, lean daily management (LDM) and digital tools such as Azure DevOps, which has already been explained in a previous section, are employed at DMEC to achieve alignment between teams. Whereas LDM allows teams to understand whether they are on track to meet project goals or receive the support to meet these goals, Azure DevOps structures projects digitally and makes the current status of projects accessible for every employee:
“Consumer Engagement in care in D2C was using lean daily management, which is basically ensuring that your trains are on time is always the metaphor they use in the training. So, looking at your numbers, seeing where you are, hitting or missing your numbers.” – Interviewee 3
Alignment should also be done by sharing learnings between departments and businesses.
Sharing learnings enables an organization-wide improvement of products and services and ultimately create a better value proposition for consumers:
„But that also means that how D2C implements it might be different than how D2B implements it. And that's where it's good to have them on this digital platform angle, and someone who could look at this a bit more holistic. And also, therefore share learnings between the different departments, businesses, whatever you call them. And that I think is also necessary, because then you get the most value out of the solution.“ – Interviewee 14
The importance of cultivating an overarching and holistic view of the organization was also stressed by interviewee 4:
„For me in the end, they (consumers) should buy from Philips channel agnostic (…). Although I'm in DMEC, I should not be thinking only DMEC. So there's a part of our culture or our mindset… we need to be enterprise thinking. Otherwise, we will be fighting for our domain.”
As explained by interviewee 6, new business models can only be successful if all organizational departments are aligned:
„On the organizational side, what you really need to do always is that you cannot approach it one-sided from digital marketing e-commerce only, unless you have the total freedom to place on a website and you don't care about anything else. But you need to have the buy-in of a commercial organization that's actually going to sell it and also bring it forward in their activation. You need to have a business owner behind it that is willing to own the proposition.
You need to be super aligned with finance, supply chain and legal and those departments - that is absolutely critical.“