Innovation of Hilti Group - Case Study Example

?Contents Introduction The Hilti Group also known as Hilti AG is an end manufacturer, developer and marketeer of construction and building maintenance tools with the primary focus of production being professional end users. The company has a diverse product portfolio that includes tools for mining, measurement, cordless tools, screw fastening systems, drilling and demolition systems, diamond systems, cutting and grinding systems, direct fastening systems, anchor systems, firestop systems and construction chemicals (Hilti, 2012). Although Hilti manufactures and sells a huge array of products but the company’s main focus areas are hammer drills, firestops and installation systems. Hilti is based in Schaan, Liechtenstein but has manufacturing facilities, retail outlets and marketing offices around the world. Overall the company employs more than 20,000 people worldwide. Historically the company was founded by Martin Hilti and Eugen Hilti in 1941 when they opened a workshop in Schaan, the capital of Liechtenstein (Hilti, 2009). The company expanded its operations to Italy between 1948 and 1960 representing the company’s first foreign venture. Since that point in time the Hilti brand name has come to assume manufacturing, marketing and after sales support in over 120 countries worldwide. In terms of the ownership, the Hilti Family Trust owns all of Hilti’s registered shares as of 2003. 2. The Organisation’s Need for Innovation 2.1. General Imperatives in Industrial Sector In recent decades there has been a strong move to make the workplace safer for the average worker especially for workers who are exposed to either the elements or to stress while on the job that could lead to irreversible physical damage. In addition to industries such as petroleum, mining, petrochemicals and the like, the construction industry is also considered as a dangerous workplace (Fung et al., 2010). The Australian construction industry is little different to worldwide construction industries in the respect of workplace safety and health concerns. 2.2. Change in General Imperatives in the Last Decade Safety and health concerns are exacerbated when the use of power tools is taken into account. On the one hand, power tools ease out the work that needs to be performed at construction sites but on the other hand they also pose increased risks to individuals using them. This danger in the workplace has been under focus in the same manner for large construction companies as for small construction companies (Hung et al., 2011) within the Australian context. One major danger from using power tools is the ability to lose control of the power tool causing physical damage to the operator as well as other workers or people in the surrounding. This kind of short term damage is augmented by long term damage that can occur from the extended use of power tools due to vibration and use. The workers who use power tools are in constant danger of developing physical disorders due to excessive vibration (Edwards & Holt, 2010) as well as losing their sense of hearing. 2.3. Innovation Imperatives facing the Organisation On the one hand manufacturers like Hilti have to come around with innovative solutions to deal with health and safety concerns posed in the workplace. On the other hand the range of global operations means that Hilti has to produce solutions that are technically acceptable and open to translation in various corners of the globe. Operating a large business in 120 countries around the world means that Hilti has to deal with a number of differing technical specifications on safety concerns, materials that are allowable for use, range of operating parameters such as voltage levels etc. Overall this indicates that Hilti has a two pronged innovation concern – one that bases itself solely on the issue of safety in the workplace and the other that concerns itself wholly with the issue of conformance to various international standards on safety and manufacturing. 2.4. Organisation’s Current Level of Innovation Hilti has carved a reputation for itself for being a repeat innovator when it comes to the world of power tools and allied accessories. The company has brought in various kinds of innovative features in power tools that span the domains of usability, safety, theft protection and others. Among other things Hilti has produced the ATC (Active Torque Control) technology that constantly monitors the amount of body movement being applied to a power tool in order to avoid excessive twisting that might cause the power tool to slip out of the operator’s grip and cause injury to the operator or to people nearby (Hilti, 2012 a). These kinds of safety features by Hilti have been bolstered by the development of improved designs for mechanical as well as chemical anchors that prove to be more reliable in case of seismic events. This in turn ensures that more lives can be saved in case that natural calamities set in. Another major innovative development by Hilti in recent years has been the development and implementation of the TPS (Theft Protection System) on power tools. This technology relies on RF (radio frequency) waves to prevent any unauthorised use of power tools (Hilti, 2012 b). The implementation of TPS has meant that theft levels in power tools are decreasing as stolen power tools cannot be used without the proper RD identification. 2.5. Comparison with Other Innovative Organisations Hilti tends to operate in a market where customers change rapidly so there is dire need for consistent innovation. This need stems from both product development and marketing which involves the creation of a product that is acceptable across the board to a number of different accreditation systems. A number of other innovative organisations exist both within Hilti’s own domain of operation and in the overall international market. Studies have found that Hilti is one of the organisations that has integrated customers into product development at various levels in innovative styles to produce results the world over (Sandmeier et al., 2010). This kind of innovation at Hilti has encompassed both in house contractors as well as outside contractors while keeping the customer centre focus. Another study found Hilti “as a radical innovation for the industry as a whole” given its practice of incorporating innovation at all possible levels. It must be noted that this study compared Hilti to other innovation giants such as Gore, Geberit and Nike but found that only Hilti was delivering solutions that were redefining the methods in which the industry was operating (Enkel & Gassmann, 2010). In a similar manner other studies have identified Hilti as an innovation leader using a lead user approach to create greater levels of innovation (Sandmeier, 2009) by placing the customer at the centre of focus for new product development (NPD). In addition to the above Hilti has also been considered as a major success for the implementation of the BPM (Business Process Management) culture model. It has been argued that the use of IT (Information Technology) is not uncommon to businesses to create innovation yet its complete potential is not realised given the problems in cultural adoption of IT. However the case at Hilti has been different in the respect that IT has been applied to create innovation through a complete cultural change (Brocke & Sinnl, 2010) whose effects have been felt pervasively throughout the organisation. With all of the arguments presented above put together, it can be seen that Hilti is a major innovator within its own industrial domain as well as within the range of other innovative companies in other industrial sectors. 3. The Organisation’s Vision and Strategy for Innovation 3.1. Current Vision and Strategy’s Interfacing with Innovation Hilti is based on a number of different components for its vision including innovation. The organisation’s motto reflects its overall strategy and reads “Hilti. Outperform. Outlast.” The company’s core vision dictates that customer contact shall be given top preference for product development, sales as well as competence. Similarly the second component of Hilti’s vision is providing groundbreaking products, systems and services which reiterates the company’s overall vision of innovation. The third component of the organisation’s vision is producing extraordinary designs that are visually appealing as well as totally functional (Hilti, 2012 c) which lends all the more support to innovation as a core organisational objective. 3.2. Components of the Vision As mentioned before, the major component of Hilti’s vision is to be a successful company. Among other things, Hilti has a major focus on developing its people by first integrating them with the overall team and then advancing them as professionals and as people. Another major component of Hilti’s overall vision is to allow its team members to live the corporate culture at Hilti by focusing on team development and providing employees with pride in working at Hilti. This component of the vision is augmented by Hilti’s commitment to its stakeholders as being a family owned company with strict long term stakeholder oriented approach. In addition the company’s long term vision is to have ambitious targets for future growth along with high customer satisfaction while being a “great place to work” for its team members. The need for sustainable profits and growth is also emphasized. The last component of Hilti’s vision as a company is to be the employer of choice and this has produced results in the form of multiple awards provided to Hilti. Moreover a survey conducted for job satisfaction at Hilti revealed that 90% of the employees took the survey voluntarily with an overall satisfaction rate of 86% (Hilti, 2012 d). When Hilti’s vision as a company is deconstructed it becomes apparently visible that the company focuses on being successful, producing a capable human resource pool and retaining it, to use a long term oriented stakeholder approach and to have ambitious growth targets to drive business processes. The vision of Hilti to be a successful organisation or to have ambitious growth targets or using a long term oriented stakeholder approach are vague when it comes to underpinning innovation as such. It can be realised that these components of vision affect the innovation offered by an organisation in its business processes but the extent of innovation or its amount cannot be quantified. On the other hand when human resource development is taken into account it can be realised that human resources are essential to innovation in any organisation at any level. Human beings are essential to the creation of value and to innovate things accordingly because ultimately the business processes, systems and services are meant to service human beings. In order to innovate businesses processes it is essential to allocate the proper time and resources to support research and development. It has been argued that research and development activities pose particular problems for SMEs because of the high risk of exposure, higher fixed costs, high levels of minimum investments required as well as severe fiscal constraints. However Hilti’s case is differentiated in the respect that Hilti invests around CHF 140 million per annum in order to support research and development. The stringent commitment to fiscal resource provision as well as the drive to train and retain a large human resource pool ensures that Hilti has a robust research and development cell. This becomes all the more important when it is considered that research and development activities are considered as the “main driver” for innovation success (Rammer et al., 2010) for both SMEs and large businesses. The application of human resources to drive such innovation cannot be under stressed as they serve as the more critical component behind innovation. 3.3. Innovation Strategy and Corporate Strategy In the case of Hilti, it must be noticed that the innovation strategy is embedded both within the organisation’s vision as well as in the corporate strategy in use. Various kinds of innovation management models consider human resources to be an essential key dimension of the innovation process in implementation (Perdomo-Ortiz et al., 2009). Hilti’s focus on its employees in developing them as professionals and as people can be seen reflecting this idea. It has also been argued that better human resource management leads to better knowledge indexes, improvements in the attitude and behaviour of staff and employees. Teamwork has also been found as a major driver for technological innovation (Perdomo-Ortiz et al., 2009) which is highly relevant in the case of Hilti. The organisation bases its business on the development of innovative technological products so technological innovation is highly valued at Hilti. In order to support technological innovation through teamwork, Hilti has chosen to pursue human resource development as a viable option. 4. Context, Competencies and Culture for Innovation 4.1. Innovation as a Core Business Component As previously mentioned Hilti values innovation from the position of a core business component. The company’s core business component is based on the production of new and innovative power tools as well as other allied services. The production of new kinds of power tools and other such services requires a large amount of innovation to be displayed due to the tight competition as well as accreditation requirements as listed before. Moreover a globally changing market demands that the prime focus be placed on the customer in order to develop products and services that are appropriate for the customer’s changing needs. There is little doubt that customers have often been chosen as drivers of innovation in both academia and the industry (Foss et al., 2011). The need to keep the customer as a core focus stems from the basic relationship between supply and demand. Modern customers are dynamic, flexible and well aware and there are large chances that they might shift their focus to other suppliers if their needs are not dynamically met. Given these considerations, innovation has to be brought in as a core business component to ensure above all survival in a rapidly changing market scenario. In the case of Hilti as well the prime focus has been on creating innovation through focus on the customer. 4.2. Support for Innovation from the Organisation and its Environment In order to encourage innovation in a business organisation environment there are two major components – leadership from the top as well as requisite financial resources. A host of other factors may be identified as well but these critical factors need to be addressed before any other factors such as human resources can be dealt with. Leadership from the top ensures that the organisation has a stable set of consistent policies to work with in the longer run. This is all the more important as innovation may not be as fruitful initially as speculated and may require considerable time and effort to produce results. In order to back up the right policies, it is essential that the top management of the organisation deal with the same vision and commitment to innovation. A study comparing innovation practices in the profit and non profit sectors found out that there was a direct relationship between leadership commitment and the creation of innovation in business operations (Sarros et al., 2011). In addition to this, it was found out that leadership provided bases for changes in organisational culture that augmented and bolstered the amount of innovation present in various business processes. Other than the major issue of leadership commitment, the other major issue pertains to finance available to the organisation to drive innovation. As related before, the drive towards innovative business practices may require sustained effort with or without major breakthroughs initially. For example in Hilti’s case, if Hilti desires to innovate new products in the road construction industry (where it has little previous experience) it would take a lot of time to innovate products as well as services by building appropriate labs and hiring and training requisite personnel. Therefore financial commitment is another major facet that must be looked into before an organisation can innovate its business operations. Innovation studies have found out that finance is a requisite for large companies and SMEs alike in order to innovate (Romero-Martinez et al., 2010). 5. Learning for Innovation 5.1. Avenues of Learning for Innovation in the Organisation Organisations can adopt either of two learning models (exploratory or exploitative) or their combination in order to innovate their overall products and services. The avenues for exploratory learning ensure that the business in question has enough information available on the current market to innovate successfully. The main purpose behind exploratory learning is to assess the market’s common pitfalls and capabilities in order to innovate accordingly. There is however no “golden rule” to drive exploratory innovation in an organisation’s business model because different industries will place different demands on the complying industries. In contrast the other major avenue to learn for an organisation is the exploitative model that relies on direct learning from the organisation’s market experience (Kim & Atuahene-Gima, 2010). It must also be mentioned that exploratory learning is more suitable when the market in question is turbulent while exploitative learning is more suitable when you are dealing with a high competition intensity market. When this is taken to Hilti’s case, it becomes apparent that most of Hilti’s operations are based in markets that are highly competitive in nature so Hilti needs to learn from exploitative learning techniques. Hilti uses similarly structured exploitative learning practices and this is reflected by Hilti’s drive to stop manufacturing certain products while other products have been developed even more to take the market. 5.2. Other Possible Avenues of Learning Businesses may also employ other means to enhance learning although there is rife debate to the employment of tangible and intangible resources to achieve this. It has been suggested that the employment of IT aids in enhancing learning within an organisational context is highly productive. The lowered cost of learning in using IT solutions has also been appreciated in appropriate literature (Bueno et al., 2009). Such learning can be augmented through the use of more tangible resources such as workshops and laboratories. Though there may be disagreement to the use of tangible and intangible resources but there is little doubt that the use of both types of resources allows the creation of innovation in business practices. Hilti is also seen exploiting the power of both tangible and intangible resources to enhance learning. On the one hand Hilti has laboratories and workshops geared to learning while on the other hand Hilti employs computing solutions extensively to upgrade the skill levels of their employees. 5.3. Organisation’s Ability to Continuously Innovate and Change The organisation’s capability to innovate continuously is highly important for businesses operating in highly competitive markets. The changing flex of products, services and customer satisfaction methods leads to the need for continuous innovation in an organisation’s business processes and if required the overall management structure of the organisation too. Hilti has been shown to operate in a highly competitive business market environment so there is dire need for Hilti to innovate and evolve as the markets evolve. This challenge has been dealt with by Hilti by taking the customers on board to drive innovation. 6. Potential Change Management Issues 6.1. Overall Change Process As mentioned before, the change process in an organisation is best driven when dealt with from the top. It must be taken into account that driving change is not a simple process as it may cause the emergence of grievances as well as lowering current business productivity levels. However there is little doubt that proper business innovation has more advantages than disadvantages in the longer run (Heyrup, 2010). In the shorter run however driving change may cause employees to come into role conflict as well as ending up in more ambiguous statuses and roles. It is highly important for an organisation to minimise employee grievances in order to subsidise the turnover rates effectively. This is all the more important for organisations who train their own employees for specialised functions such as R&D as well as specialised manufacturing, marketing or other specialised business operation techniques. Moreover change management in an organisation is required to deal flexibly with various changes to the overall business processes portfolio so that even if some business processes are being affected, their fallout does not directly affect manufacturing or services. For example, if a firm chooses to employ a newer more flexible manufacturing machine in place of its older line of machines then there would be need to manage production in the period that the new machine is being installed or the production levels could fall drastically. Another effective change management technique is to compartmentalise the overall change processes that are being enforced to minimise the fallout of each change being imposed. This technique has been employed at Hilti through the differentiation between products as well as manufacturing facilities. New manufacturing techniques are employed at a few manufacturing facilities before it is employed across the board. Similarly marketing techniques are employed in certain markets before they are used all across the globe. 6.2. Barriers and Enablers to Change The inertial resistance from inside the organisation is perhaps the greatest barrier to change given especially the roles of older employees who do not want to change. In contrast, change is facilitated by the results it produces. The results provide impetus for more change on a more sustainable note. 6.3. Internal and External Communications Communication is an essential feature of change management without which the overall change process is confined to failure alone. There is an obvious need for both internal communication and external communication to enhance and facilitate the overall change process. When change is being brought into an organisation, the various internally communicating interfaces need to ensure seamless communication at all appropriate levels to ensure that as one process changes, appropriate measures are taken at the right time to initiate other changes elsewhere. For example if a company chose to install a new machine somewhere it would represent a change in the production department. However the operator(s) operating the machine would need to be trained as well in order to deal with the machine once it is installed but this change management must be dealt with by training not production. In a similar manner there is a great need for external communication with all kinds of entities such as suppliers, consumers, regulators and the like. The domain of business operations may be directly affected by the actions of any external stakeholders so there is constant need to monitor these changes and to react to them accordingly. It would be all the more better if these external stakeholders are taken on board in a business and are communicated with frequently to ensure that change management is smoother and better coordinated. Hilti has put a major focus on customers as an external agent of change and effective external communication ensures that Hilti stays ahead of the curb. 6.4. Leadership and Agent Change Roles Commitment to change management from the top is essential as related before but this ownership of change has to trickle down to the last line employee just the same. The top management, the mid level and lower levels of management will all see changes in their roles as change is brought into focus in an organisation. In order to avoid high turnovers due to grievances it is best if employees are taken on board through internal communication and possibly incentive provision. 6.5. Project Management and Measurement Requirements When initiating change it is best to estimate the overall change as well as its possible effects on other portfolios of business such as production, marketing etc. If an organisation has enough experience at garnering such changes then the assessment should be internal or else it should be external. 7. Bibliography Brocke, J.v. & Sinnl, T., 2010. Applying the BPM-Culture-Model – The Hilti Case. In ACIS 2010 Proceedings Paper 16. Liechtenstein, 2010. University of Liechtenstein. Bueno, E., Aragon, J.A., Salmador, M.P. & Garcia, V.J., 2009. Tangible slack versus intangible resources: the influence of technology slack and tacit knowledge on the capability of organisational learning to generate innovation and performance. International Journal of Technology Management, 49(4), pp.314-37. Edwards, D.J. & Holt, G.D., 2010. Cost-effective risk assessment of hand-arm vibration exposure. 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