A large company creating value based on a small firm’s technology
In 2010, Philips introduced the Airfryer, a new kitchen appliance at the Internationale Funkausstellung (IFA), an important consumer electronics fair in Berlin. The AirFryer is an egg-shaped device that allows consumers to fry a variety of foods conveniently and easily, including French fries, snacks, chicken, and meat, among many other foods. The AirFryer was developed using the patented Rapid Air technology, which results in frying crispy fries that contain up to 80% less fat than a conventional fryer. Because the device uses only air to fry the foods, it produces fewer smells and vapors than traditional frying, it is easy to clean and safe for daily use. The Airfryer was listed in the top five inventions of the 2010 IFA. Alongside Philips’ marketing managers, Fred van der Weij, who invented the technology, was present when the award was presented to the company. Fred owns APDS, a small product development firm founded in 1990, and under which the Airfryer was developed.
Several years prior to this success, Fred was not happy with the results he achieved with the fat-free fryer he bought via a television sales ad. As an engineer and food aficionado, his discontent triggered his desire to solve the problems he was encountering with his fryer. He started working on a better version of this popular appliance. By 2007, he had found a way to optimize the fryer so that it worked properly. At that time, however, he did not have the financial means or business insight to market the product properly. Coincidentally, Fred met Hans Brocker. After working for Braun as a commercial director for 24 years, Hans started a company that guides inventors in marketing their ideas. He immediately recognized the potential of Fred’s invention and became a shareholder of KCS, the daughter company of APDS, which was tapped to manage the new product. The partners first tried to secure a bank loan and external investors, but were not successful. Eventually, Fred developed the prototype himself by teaming with Chinese partners who were part of the network to which Hans had access. They subsequently filed for a patent. Two years later, the prototype was ready and Hans and Fred developed the product strategy. They were considering whether to produce the product themselves or sell the idea. Because Fred had connections with Braun, they first presented their invention there, but Braun was not interested. As their next step they contacted Philips.
Since 2005, Philips had been trying to develop a fryer that makes the frying process healthier. They had the technology, but were struggling to transform it into a consumer product that was consistent with the Philips credo of sense and simplicity. The product they initially developed was too complex and too expensive. Early in 2009, KCS, the small company owned by Fred van der Weij and Hans Brocker contacted them. They had developed a product that not only used appropriate technology, but could also be translated into a consumer product that is simple and user-friendly. Godwin Zwanenburg, the Innovation Lead at Philips Consumer Lifestyle, presented the idea to his commercial team, and they decided to sign a letter of intent so they could start the investigation phase. In this phase, various aspects of a potential product undergo rigorous testing for safety, technical specifications, applicability, and quality. The product passed every test, and Philips decided to sign a licensing agreement with the inventors. They subsequently created the Airfryer, an appliance that uses 80% less fat than a traditional fryer by implementing Rapid Air Technology. The appliance was fashioned according to the typical look and feel of Philips’ products.
The Airfryer was launched in September 2010 at the IFA and immediately attracted significant attention. It was featured in magazines and on television and was listed among the top five inventions of the fair. After this introduction, the Airfryer was demonstrated and promoted in various shops in the Netherlands, Belgium, France, and Germany. Philips expended great effort to persuade customers to fry their food in a healthier way. To do this, they included a recipe booklet with the product and created a Web site where recipes were available to give owners and potential buyers inspiration. Sales took off and Philips began thinking of its next steps. They were planning to introduce the Airfryer in other European countries, Australia, the Middle East, Russia, and the Americas and tailor the product for different electricity nets and cooking habits.
From their perspective, the inventors also had ambitious plans. They aimed to introduce a new version of the Airfryer for the professional market. This product would process a larger amount of food in a shorter time. Because Philips does not target the professional market, the licensing contract allowed the inventors to explore this market niche. They were, however, required to notify Philips and share all royalties and profits.
For Philips, finding an externally developed invention such as the Airfryer was like finding a needle in a haystack. It was important, therefore, that independent inventors find their way to the company, so that inventions with a strong market potential would not remain unexplored. For Philips, licensing agreements on external inventions mean quick entry into the market, without spending a lot of time and money on their own R&D. For the inventors, on the other hand, it is a good way to commercialize and market their ideas; indeed, most do not have the much-needed capital, resources, networks, and market leverage. For these reasons, Philips is currently working on a strategy to make it easier for external engineers and inventors to find their way to Philips business developers. Once inventors reach them, for example, through a portal on the Internet, they receive a reply within two weeks that includes a clear evaluation of the technology and the way to proceed. In this way, Open Innovation can create a win-win situation for both inventors and multinationals. Collaborating with smaller firms is a way for established companies to innovate that becomes increasingly important to stay ahead of competitors.
The Airfryer became a major commercial success: It was the number one brand in low-fat fryers in 2015. Managers originally thought that the Airfryer would sell well in Europe, but the real successes were booked in other continents due to the variety of food that could be fried with the Airfyer. Its versatility is one of its best selling points. The market for low-fat fryers is growing rapidly but still has a large growth potential, as the awareness among consumers is still low. Philips is promoting the use of the Airfryer by working with chefs, developing recipe booklets and promoting social media around the Airfryer. It is an innovative product: Consumers have to be educated about its potential.
Figure 1: Philip’s Airfryer
Learn More: Philips’ Airfryer