Sherwin-Williams: A Case Study of Open Innovation
One might not expect a 152-year-old paint company to have an intense focus on open innovation. But Sherwin-Williams, the largest global producer of coatings (i.e. paint products), is doing just that.
One might not expect a 152-year-old paint company to have an intense focus on open innovation. But Sherwin-Williams, (the “Company”), the largest global producer of coatings (i.e. paint products), is doing just that. With $17 billion in revenue, Sherwin-Williams manufactures paints and coatings used by professional contractors, home improvement DIY-ers and industrial manufacturers1. The Company’s External Innovation program was launched in 2008 as an initiative to identify externally-developed technologies for products that could improve shareholder value and financial performance2.
Why is open innovation important to Sherwin-Williams?
While the paint industry is relatively mature (global sales are expected to grow 2-3% annually), Sherwin-Williams has embraced open innovation as a means for increasing its growth rate3. Within the U.S., the Company has seen a shift in customer behavior linked to demographics, as more millennials are spending money on home improvement projects, and rely more on technology during the paint purchasing process. Globally, the Company faces increasing competition from smaller, low-cost players focused on commodity products, increasing the need for product innovation to maintain Sherwin-Williams’ advantage4. In addition, the Company has used open innovation to combat its own bureaucracy as an organization with over 60,000 employees spread across five continents, by looking outwards towards smaller firms, universities, and inventors as sources of new product ideas5.
What has Sherwin-Williams’ External Innovation team done to leverage open innovation in the short and medium term?
- Technology Scouting: identifying the needs of all Sherwin-Williams divisions and scouting for potential solutions from startups, inventors, independent labs, customers, research institutes and more.
- Proof-of-Concept Testing: after sourcing new product concepts from external parties, the team uses Company research labs to develop these materials into demonstrations for customers.
- Government Funding: the team will also work with institutions such as the USDA, NIH, DoD, EU and more to secure funding for some external innovators.
- Information Services: the team conducts patent searches and provides technology landscapes to help Sherwin-Williams stay informed of competitive threats4.
[Source: Company Presentation, 2016]
In the near-term, this has led to product developments that would not have occurred without heavy reliance on external innovation, such as the Forever™ Paint & Primer, marketed under Sherwin-Williams’ Dutch Boy brand and sold in hardware stores nationally2. For this product, Sherwin-Williams was able to address a particular pain point for its customer base (predominantly female DIY customers), by partnering with an outside firm, Nottingham Spirk, to develop a lightweight, easy-to-open plastic container which eliminates the need for paint keys and screwdrivers6. In addition, the Company partnered with Arm & Hammer™ to integrate odor-eliminating technology into the product, allowing painted rooms to smell better for longer periods of time7. Forever™ Paint & Primer’s integration of multiple external innovations have allowed it to serve an emerging demographic with a customer-centric design-thinking approach one might not expect from Sherwin-Williams.
[Source: YouTube]
Over the medium-term, the Company is engaged in partnerships with universities to develop new materials and products that are potentially useful for commercial purposes. These investments tend to be longer-term in nature and require Sherwin-Williams to fund research initiatives over an extended period of time4. One example is the Company’s commitment in 2015 to fund $1 million towards materials research through the Institute for Advanced Materials at Case Western University8.
Recommended steps for Sherwin-Williams to further harness open innovation
To-date, Sherwin-Williams’ focus on external innovation has been highly-targeted, by “scouting” partners who can fill specific product needs outlined by the Company’s divisions. But “open innovation” can involve the use of competitions or contests to solve problems traditionally faced by closed enterprises such as Sherwin-Williams9.
In the near-term, Sherwin-Williams can build on its current practice of sourcing external partners for “idea generation” by gathering product ideas via an open competition where monetary incentives are offered to teams of researchers who can best develop chemicals to solve a particular issue that the Company faces in its coatings business10. Rather than have to “scout” for the solution, Sherwin-Williams could use an even broader form of open innovation to have the solution come to them.
In the medium-term, Sherwin Williams can expand its open innovation practice to using its consumers for “idea selection”10. For instance, the Company’s consumer paint products are offered in a variety of seasonal colors – perhaps the Company can leverage social media to create a voting contest where customers can choose their favorite colors. In turn, this could inform Sherwin-William’s decisions to produce certain hues earlier in the manufacturing process.
Open questions for discussion
- Given that many of its products are commoditized and contain few discernible features, how else can Sherwin-Williams use open innovation to create new products?
- Imagine you work in Sherwin-Williams’ External Innovation team, tasked with scouting technologies from startups and developing them for commercial use. What challenges might you face as you try to get buy-in from stakeholders within the company to bring new products to market?
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Citations
- Sherwin-Williams, 2017 Annual Report, p. 1-8, https://investors.sherwin-williams.com/doc/annualreports_2017, accessed November 2018.
- Canadian Innovation Centre, “MC: Open Innovation: Victoria Scarborough – Sherwin-Williams External/Internal Innovations,” YouTube, published Oct. 5, 2015, https://www.youtube.com/watch?v=IygSK_DezQY, accessed November 2018.
- Robert J. Wells, Senior Vice President of Corporate Communications & Public Affairs at Sherwin-Williams, remarks made at The Sherwin-Williams Company Q3 2018 Earnings Call, Oct. 25, 2018. From transcript provided by CapitalIQ, accessed November 2018.
- Victoria Scarborough, “Sherwin-Williams Overview,” PowerPoint presentation, July 2016. Available at: https://www.innovationleader.com/wp-content/uploads/2016/07/2016-SherwinWilliams-Overview.pdf [Accessed November 2018]
- Sherwin-Williams, 2017 Annual Report, “Our Global Footprint”, https://investors.sherwin-williams.com/doc/annualreports_2017, accessed November 2018.
- “Twist & Pour Paint Container.” Nottingham Spirk. Accessed November 12, 2018. https://nottinghamspirk.com/project/twist-pour-paint-container/.
- Dutch Boy Forever Color Card, Sherwin-Williams brochure (Cleveland, OH, 2018).
- “Sherwin-Williams to Commit $1 million toward Materials Research at Case Western Reserve University,” Sherwin-Williams press release, Nov. 2, 2015, https://www.prnewswire.com/news-releases/sherwin-williams-to-commit-1-million-toward-materials-research-at-case-western-reserve-university-300170297.html, accessed November 2018
- Lakhani and J. Panetta. The principles of distributed innovation. Innovations: Technology, Governance, Globalization 2, no. 3 (Summer 2007): 97–112.
- A. King and K. Lakhani. Using open innovation to identify the best ideas. MIT Sloan Management Review 55, no. 1 (Fall 2013): 41–48.
Rupert, I liked your choice of Sherwin-Williams–it is an unusual company to adopt open innovation. To address your first question, I don’t view Sherwin-Williams’ products as a commodity. Developing new paints requires significant materials research. I believe the company should focus on partnerships with other large companies or government entities when creating new products instead of crowd sourcing. You raised an excellent point about using consumers preferences to manufacture trendy colors earlier. There is huge market potential in being the first to market.
Thank you for this informative article on a surprising innovator! I was pleased to hear the ways that Sherwin Williams is focused on responding to their customer needs and designing clever innovations for them. I really liked your idea about directly including customer voting in the decision processing. I think this would be a very valuable path for Sherwin Williams to continue their innovation path!
Thanks for the article! This one hits close to home for me, especially since it sometimes hard to think of open innovation as a valuable tool for “old school” industries when in many cases it can be.
At my previous employer we owned a old cleaning chemicals company and one of the issues that the company suffered from was product innovation. In an interesting turn of events, one of the most significant changes in innovation came from a an executives’s wife who claimed she loved the product, but that the packaging was a major pain point – it always toppled over. One day at dinner, she drew out on a napkin what she thought a new, more stable design could like. Her husband (the executive) brought it into work and a few months later that new packaging hit the retail shelf in mass!
I think as industries and companies evolve it is easy to forget the purpose for which they were created – to serve the needs of the customer. Sometimes the customers know best and open innovation is a fantastic way to tap into the wealth of ideas that long term users of a company’s products or services have.
The issue then becomes how to qualify ideas and select the ones with the greatest impact. It’s interesting to think what kinds of organizational changes are needed to embrace open innovation kn an organization that is very set in its ways.
My opinion might be biased because I am a HUGE HGTV fan; but, I can totally see crowdsourcing opinions on paint colors working out well for Sherwin-Williams. However, I don’t think simply posting different colors on instagram and asking customers to opine on them would work. I think the company would have to partner with HGTV or other home improvement media companies to push for open innovation. One thing I could see really working would be partnering with HGTV on their annual “Dream Home Sweepstakes.” They could paint the rooms of the house in different colors and those people who enter the sweepstakes could also get extra prizes by submitting their opinions on the different paint color options.
If Sherwin Williams didn’t have this open innovation model, I think they would have really painted themselves into a corner. As a scout evaluating any new technology, demonstrated proof of concept is going to be the most important addition to any innovation platform. In cases like these, the main questions for stakeholders in development will be production and technical feasibility. In biotech, we were often faced with the arduous task of repeating existing data to demonstrate proof of concept. Thankfully this too can be outsourced, and can speed up the evaluation process. I imagine that Sherwin Williams has to go through a similar process themselves, to validate new tech that comes in the door, and then decide for themselves whether a market for it really exists.
I love this example of new technology and approach applied in a 1.5 century-old company. The variety in the examples you give is interesting- from technology/features of coatings to colors and even containers, like the “Twist and pour” example. I wonder whether the adoption of “open innovation” is a singular strategic move by the company, or whether they have to integrated it many times and ways across the many divisions and applications.