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Executive Education

Danfoss: Strategy, Innovation and Culture in Perfect Harmony

Each year INSEAD partners with over 3,500 organisations. Collaborating with Danish multinational, Danfoss, an ambitious project was set out to tailor-make a leadership programme to enhance culture and mindsets.

Q: Why do so many strategic innovations and initiatives fail?

A: Because they just don’t fit the existing corporate culture.

This is the question – and the answer – at the heart of the Danfoss – INSEAD Leadership Programme. It explains why INSEAD and Danfoss tailored the content around people and culture, not just competitive strategy and innovation. “The programme is designed for impact,” says INSEAD strategy professor, Karel Kool. “And at the end of the day, it’s people who make the difference,” adds Ilonka Nußbaumer, Head of Group Human Resources, Senior Vice President at Danfoss.

Behind these simple remarks is a great deal of research, including the work of Associate Professor of Organisational Behaviour, Spencer Harrison, who helped to design and deliver one module of the programme for Danfoss. “It’s become a business proverb that ‘culture eats strategy for breakfast’,” says Harrison. “But that doesn’t get you very far. Success is where strategy meets culture for breakfast.”

The power of culture

Harrison applied a research model called the Competing Values Framework to Danfoss. Based on data from over 1,000 organisations, it maps the shape of company culture based on two dimensions and four archetypes. Investing time in understanding the shape of your company can pay vast dividends when it comes to choosing and designing strategic innovations or culture change projects.

“When INSEAD mapped our culture into the model, I just thought: ‘Yes! That makes sense,’” says Ilonka Nußbaumer, Head of Group Human Resources at Danfoss. “The insight was just what we needed to support and develop leaders who think strategically, anticipate, and disrupt market, and innovate to create and develop green solutions focusing on energy efficiency, sector coupling and electrification.”

It just so happens that Danfoss forms a perfect square – balancing collaboration and control with creativity and market focus – which is pretty rare. But then Danfoss is not your typical multinational. It leads the market in products that everyone uses – components for heating, cooling, renewable energy, water supply, transport and more – but few people know its name. It has almost 40,000 employees globally and is headquartered in Denmark. It has sales of over €7 billion a year and is owned by the founder’s family and their foundation. What works elsewhere isn’t necessarily going to work at Danfoss.

Programme design: a process of collaboration

Rewind to 2019, when the company set out to make its top 250 leaders even better – and first approached INSEAD. Like many other organisations, Danfoss was looking for an external learning provider with particular expertise in innovation, digitalisation, customer focus and strategic agility, but it was INSEAD’s additional expertise in leadership and culture that sealed the deal.

“We knew we didn’t need just another strategic innovation programme or just another academic leadership programme,” says Ilonka Nußbaumer. “We knew we had great leaders, and clever people, but we wanted our senior leaders to run their businesses as if the businesses were their own. As we continue to increase our investments in innovation, we also need to invest in our talents to be able to develop and offer the best solutions driving higher energy efficiency or lower emissions and enable electrification.”

This became a mantra for INSEAD too, as Karel Cool went deep into Danfoss. He combed through 10 years’ worth of annual reports, immersed himself in competitive analysis, talked at length with the CEO, and travelled back and forth to company offices in Denmark and Germany. “He was very open minded. When we have told him that we miss the People & Culture part in that whole program - which is of very important to us as a foundation-owned company – he immediately got it and incorporated it into the training,” recalls Ilonka Nußbaumer.

“It’s important to get the programme design right,” says Karel Cool modestly. “Besides,” he adds, “all that preparation feeds into my research on competitive ecosystems. After 25+ years, I’m still learning too – and I learned a great deal from Danfoss.” It’s a philosophy that defines INSEAD’s own competitive advantage: academic rigour and practical relevance working in perfect harmony.

Delivery: a golden triangle of impact

The final proposal presented by Karel Cool was for a fully customised, three-module programme, blending online and face-to-face learning. In the words of Kris Donaldson, Director of Partner Development at INSEAD, “Karel’s design captured the golden triangle of impact formed by strategy, innovation and culture.”

  • Module 1: Strategic Agility and Diagnosing Culture (4 days on campus)
  • Module 2: Customer-Focused Innovation in the Age of Disruption (online – 7 weeks, based on real-life projects and supported by follow-up from Professor Cool himself and a team of specialist coaches)
  • Module 3: Organisational Culture and Change (4 days on campus).

The practical projects were to have a horizon of one to three years, a focus on market innovation and, ideally, a digital dimension: new products or product extensions, new geographies, new customer groups, new channels, or new business models. The participants were to learn in small classes of no more than 20 (divided into groups of 4–6 people from each of the business’s 4 divisions) and with 2 intakes per year.

The first class attended Module 1 in January 2020 and gave it rave reviews. One participant remarked: “Karel really is an inspiration to me. The best professor I ever met! Knowledgeable, honest, kind, humble and able to listen. Really a pleasure working with and learning from!” The feedback from INSEAD to Danfoss was equally positive. “The Danfoss executives gave some of the highest-calibre presentations I’ve ever seen at INSEAD,” said Karel Cool. At this point, everything and everyone seemed to be exceeding expectations.

In February 2020, the participants moved on to the online module, led by Professor Nathan Furr, author of bestseller, The Innovator’s Method. In truth, some of them were sceptical about online learning, but the combination of self-paced videos and quizzes, combined with deadlines and nudges for assignments soon won them over. “Online learning actually works,” commented one executive. “The fact we had a project to be developed in parallel with the lessons made the programme hands-on – it could not have had a better way to exercise the learning,” said another. So far, the feedback was almost too good to be true…

Agility: practice what you teach

The COVID-19 pandemic was already sweeping through the world. By the end of the online module, the executives were firefighting the inevitable impact on their lives and work – regardless where on the planet they were based. Module 3, scheduled to take place in May 2020, looked certain to be under threat, as did Module 1 for the second intake, which was supposed to start in June.

However, Danfoss and INSEAD weren’t going to give up that easily. It was time to put the strategic agility taught by the programme into practice. “We’d proven that asynchronous digital learning worked in Module 2,” says Karel Cool. “And INSEAD had already been running synchronous classes on Zoom and Teams with MBA students. Why not try the same technique with Danfoss?”

Danfoss jumped at the chance. Lesley Tull recalls: “We needed to work together to be agile and INSEAD were flexible.” The Danfoss and INSEAD teams started to meet every week to replan the delivery model of the programme, which eventually went ahead almost on schedule – and all-virtual.

Both teachers and learners felt that organisational culture was one of those “soft” topics that would be much better taught face to face. “People can’t see each other’s reactions when the culture maps go up on the white board,” sighs Professor Harrison.

However, the overall feedback for the first intake remained overwhelmingly positive with an excellent Net Promoter Score (+53%) for the programme as a whole. And, in the innovation-speak of Module 2, INSEAD was already rapidly “pivoting”. After improving the initial “rapid prototype” for the second intake– and “iterating” once again after that – future learners from Danfoss (and other companies) would undoubtedly benefit.

Early impact

In the meantime, the impact on Danfoss is already being felt. The golden triangle of strategy, innovation and culture is working its magic. Based partly on learning from the programme, two divisions of the company are now merging and many of the strategic projects devised at INSEAD are being implemented. One participant decided that a long-agreed method for entering a new market needed to be revised and redesigned the strategy within two weeks. Another concluded that a digital platform intended for Indonesia was time sensitive, so used it to better effect in South America.

Like the programme itself, the participants are rapid-prototyping and pivoting in real time. As Professor Cool puts it, “They’re not participants. They’re partners in innovation. We’re all experimenting and learning together.”

To find out more about Customised Programmes at INSEAD, please visit INSEAD Executive Education.