Download BUAD 437 Change Management: Electrolux AB Case Analysis

BUAD 437 Change Management: Electrolux AB Case Analysis - 4/15/2015
Team 5: Alex Bateman, Aaron Dean, Lucy King, Daniel Reichwein
Diagnosis of Electrolux
The history of Electrolux is comprised of many mergers with and acquisitions of
numerous companies. As such, the company has to not only compete in an evolving market, but
is also forced to address many internal organizational issues as well. The forces for and against
change stem from both internal and external influences; these forces for change being consumers’ desire for new technology, an evolving market, and the need for increased
collaboration within the company. The forces against change being - the siloed organizational
structure and Electrolux’s lack of a unified culture. Electrolux’s siloed structure inhibits the
ability for collaboration between different departments, and the lack of a unified culture of
innovation limits the company’s ability to improve.
Stakeholder Analysis
Stakeholder Influences on Organization
Consumers
Current
Employees
Innovation
Triangle
Influenced by Organization
The consumers’ demand for
technologically innovative products
drives Electrolux’s production.
The consumers are influenced by
the appliances, and their
capabilities, that the company
produces.
High level of influence.
Moderate-Low level of influence.
The employees influence the
organization through the work they
do. Without this work, the company
would not function.
The organization provides the
direction of the company and
thereby delegates their tasks to
them. The company also provides
their pay.
Moderate-High level of influence.
High level of influence.
They set the innovation agenda for
the year and provide the company
The organization as a whole affects
them through the production of the
Council
Competitors
Global
Major
Appliances
Leadership
Team
(MALT)
with a strategic direction.
appliances and adherence to the
direction given by the council.
High level of influence.
Moderate-High level of influence.
Competitors influence the company
by establishing the market norms
and offering competitive technology
and viable alternatives to
consumers.
Electrolux influences competitors
by similarly offering competitive
technology and alternative products
to consumers.
High level of influence.
High level of influence.
As the leaders of the company,
MALT provides clarity on issues
and opportunities affecting the
major appliances business.
MALT is affected by the
organization in that they must
respond to the organization’s
outputs in the establishment of the
major appliances business’ goals.
High level of influence.
Moderate level of influence.
The Appliance Industry
The appliance industry is moderately attractive in terms of growth and profitability,
dependent on which area of the industry one focuses on. In developing countries, the market is
much more attractive, as citizens are developing the need and the means to acquire household
appliances resulting in higher demand and growth options. In developed countries, the market is
less attractive as it has already been mostly saturated, and the main channel for new sales is
replacement appliances or upgraded appliances, e.g., new appliances that offer more for the
consumer. For Electrolux, the implications of the current market suggest that it would be most
beneficial for the company to penetrate developing markets with properly designed and priced
products, or to invest in R&D to develop innovative luxury products that revolutionize the
household appliance industry to remain successful in developed countries.
Analysis of Innovation at Electrolux
In terms of innovation, Electrolux can be considered a six on a ten-point scale, as a result
of their moderate focus on fostering innovation in their company. The company’s design
competitions, history of new ideas, and realization that innovation is the key to future success
has set the company up well to develop a more significant culture of innovation, but they have
not yet reached a level of innovation to rate them higher on the ten point scale. The company
could do more internally to encourage innovation at all levels. Their current innovation plans,
such as the annual design competition, seem more like externally based publicity stunts to paint
the company in an innovative light to the public, while only generating a handful of ideas. Were
the company to integrate an internal culture of innovation where each employee was empowered
and encouraged to develop ways to improve the company product offerings and development
practices, Electrolux would see an exponential increase in innovative ideas, positioning it better
in the market where innovation is key.
The company faces challenges in the siloed organizational structure, which limits crossdepartmental communication; the history of mergers, which has created a disorganized,
patchwork company structure; and the lack of a truly focused program for innovation, which
discourages employees to come forward with innovative ideas as there is no basis or precedent of
procedure for such ideas.
SWOT Analysis:
Strengths:
● Acknowledgement that innovation is
necessary for success.
● Some innovation programs in place
already.
Weaknesses:
● Siloed structure leads to lack of
communication and lower efficiency.
● No strategized innovation programs.
● Disorganized innovation structure.
● The Innovation Triangle.
Opportunities:
● Cross-functional team development.
● Intra-company focus.
● Incentives for innovation.
● Product diversification (for both
developing and developed countries).
Threats:
● Competitors.
● Resistance to change within the
company.
Evaluation of Lundberg’s and Rask’s Change Management Efforts
Lundberg and Rask have done a decent job thus far and have set themselves up for
continued success as the change agents within Electrolux. They are advocating for a change in
Electrolux’s structure and culture, specifically in the direction of new innovations and
globalization. The first couple of things they did immediately after they took their respective
positions in 2011 were to diagnose the situation they were now dealing with and to set up a plan
in order to move forward with the necessary objectives. They developed an innovation agenda
that focused on creating the space and the culture needed for new ideas and innovations to thrive.
As a way of bringing the global sectors together they established the Innovation Triangle
Council that was tasked with setting the annual innovation agenda and “providing both
governance and strategic direction”(p. 6) for the company. Additionally, they have created (or
are in the process of doing so) a platform in which employees from all around the world can
share new ideas or solutions with each other across the different divisions of the company.
Lundberg and Rask have come up with a list of several possible ideas in order to change the
employee attitude toward change and encourage new innovative ideas. These ideas being job
rotation, peer recognition, and the reconfiguration of the reward system. With these examples as
evidence, it is clear that Lundberg and Rask are on the right track with facilitating internal
communication and providing opportunity for innovation by identifying the problem,
establishing a plan of action, and executing the plan to bring about change. There’s no doubt
that they have made great progress, however there is still work that needs to be done.
Recommendations
The goal that Lundberg and Rask are trying to accomplish is increased innovation in a
diverse, global market with many competitors within a highly complex, expansive organization
whose structure and culture is very discrete due to the merger and acquisition nature under which
Electrolux was formed. The existing culture and structure is reflected well by their commentary:
“[Electrolux is like] multiple companies within a company. In order to achieve the changes they
desire, Lundberg and Rask really need to solve how they can foster the communication,
embracement of ideation failures, which is a requirement for innovation, and coordinated goals
in a 60,000 person organization spread all over the world. They have some options under
consideration for achieving these goals:
●
●
●
●
Collaboration Platform (in person, online, team-based, objective-centric, or functional)
Job Rotation
Peer Recognition
Innovation-Recognizing Award Systems
Both improved collaboration and innovation are goals that can be achieved by re-
inventing communication. This should be their number one priority moving forward. Given the
expansive nature of the organization and the logistical difficulties in assembling staff members in
the same physical space, we recommend an online collaboration platform. An online platform is
also beneficial for embracing ideation failures as it is less intimidating socially for employees to
bring up new ideas in this less personal environment than a room filled with all of an employee’s
bosses, for example.
In addition to being based online, the collaboration platform should not be top-down
oriented. Electrolux should empower those working closest to the point of manufacture and
customer contact. These lower level employees have a more direct perspective of the product
and the customers than the layers of management throughout the organization. Lastly, the
platform should be as organic as possible so that employees can adapt their ideation to the
current challenges and concerns of the company.
The proposed reward and recognition systems sound like a good idea, but the company
already has an individual and team reward structure in place. We don’t think an additional layer
of rewards is likely to substantively spur innovation. Instead, we recommend they focus on a
mechanism that will encourage employees to innovate. Job rotation could achieve that by
exposing employees to different facets of operations within the company and giving them the
perspective and incentive to collaborate with other employees. Another idea is empowering
designers to innovate by giving them some percentage of their time to cease their normal job
functions and ideate. This is a tactic that has worked well in IT companies, and would be worth
pursuing given the the new functionality and technology forces driving the developed market.
Because these markets generally have higher profit margins, the additional revenue from
innovation could be used to ideate on the manufacturing floor so that Electrolux could provide
more value at a given price point for customers in the emerging markets.
Regardless of the exact mechanism they choose, Lundberg and Rask will have success in
their change initiative if they focus on mechanisms that make communication and
experimentation easier.