BreakThrough Study Idea

Approach to Retrofit - Learning from the Example of Daikin Industries ~ Recommending Retrofit ~fenj shi・ikeda hirofumi

<Series 2 / complete>

2018.07.26

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From the left, Mr. Feng and Mr. Ikeda

Daikin Industries focused on the concept of “Retrofit” before other manufacturers and succeeded in commercialization. Regarding the initiative of retrofit, we continued our previous discussion with Feng Shi, Manager of Business Strategy Division, Services Headquarters, and Hirofumi Ikeda of Sales Planning Group, Planning Department at Daikin Industries.
*Department and designation as at the time of writing this article.


Maintenance team working in the field thinks of customers first

In the last part, we discussed that “Retrofit system” of Daikin Industries developed for multi-split type air conditioning systems already installed in buildings, avoids high costs associated with the upgradation of old air conditioning equipment and impact on business of customers due to stoppage of air conditioning, and realizes comfort, energy saving, and long life by replacing the main components consisting of compressor and control board. In this part, our discussion will focus on why and how we commercialized the “Retrofit system”.

The reason why our company started retrofit business of multi-split type air conditioners was that by replacing the compressor and control board with components manufactured using the latest technology, the air conditioners could be used safely for a longer period, which was sure to benefit the customers, and this was the idea from the service department which was in charge of maintenance (Mr. Ikeda was then working in that department). While renewal of air conditioners is one of the options for customers, we thought that for manufacturers like our company, who specialize in air conditioners, it is possible to not only develop new products, but also increase the performance of existing products enabling their use for an extended period, which can become the pillar of a new business that is unique to us.

In 2014, the top management of our company came up with a major policy to expand the service solution business for flexibly dealing with diversifying markets and customer needs by moving from tangible to intangible solutions, and this also formed a basis for the idea.

However, it was not easy to commercialize retrofit. We faced many negative reactions from the departments of design, manufacturing, sales, and marketing within the company. Sales team had opinions such as, “Renewal of air conditioning will be delayed”, “This will have a negative impact on sales of new products”, and “It will be difficult to secure sales that can be profitable as a business”. Initially, the thinking was that multi-split type air conditioners cannot be upgraded once they are released to the market. Therefore, nobody had considered retrofit to be a possibility. As might be expected, even after deciding the concept and policy, there were many severe opinions from the development team regarding establishment of the new business, such as “Development resources are insufficient”, and “Quality and reliability of equipment already installed cannot be ensured”. Even the service department from where the idea originated, there were varying opinions such as “This is good!”, and “What customers are seeking is not just energy saving”.

However, our focus was on the large number of products already in the market. Adding value to products will make our company superior to competitors. In other words, “Retrofit” is a big business opportunity. With that thought, I continued to take up the challenge as a project leader.

Though there were various issues, we solved them one by one, convinced others within our company and were able to start. When we started the retrofit business, customers who have used the service were very satisfied, and this convinced us that our choice was not wrong.

I think the reason why we could come up with the new business model called “Retrofit” is that we were a specialized manufacturer, had a service system in place as a manufacturer, and were able to pick up various concerns from the views of employees working in the field.

Challenges and Possibilities of “Retrofit”

I believe that the success of the “Retrofit system” was because we dared to take up the challenge in a field, into which other manufacturers do not venture. The good and humane people are the pride of our company. Even executives do not put on airs and the free atmosphere allows one to express one’s opinion freely.

Nevertheless, in a company such as ours, there are inter-departmental barriers. Personnel working in manufacturing, sales, installation, and repair are surprisingly unaware of the kind of work others are doing. We thought that if there is an opportunity to connect the entire organization across departments then the environment will become much better. While technology is obviously important, customers are also important. Unless new ideas originate by focusing on customers, there will be no evolution. Nonetheless, it is difficult to take up new initiatives with surplus along with the main business. It is also important whether you can afford to take up challenges. If not, you will end up focusing only on short-term goals.

I think Retrofit, as an initiative that has made the best use of ideas that have come from employees int the field has a significant possibility even for small and medium enterprises. Though energy efficiency is important for products, durability, ease of use, and ease of maintenance, etc. are also important. With the market becoming saturated for new air conditioners, I think the significant point is what further value can be added to the existing products, such as our company’s “Retrofit system” that was born by adding new value to equipment already installed.

We are at a stage where we are changing the way we sell products. We need to establish relationships with customers by providing solutions. By offering various values including “Retrofit”, we want customers to become fans of Daikin and our repeat customers.

Daikin Industries was able to create new value and culture called “Retrofit” in the air conditioning industry. I hope that the concept of “Retrofit” spreads to more companies, and more companies undertake new businesses with “Retrofit” as the keyword.


Series

“Retrofit System” of Daikin Industries ~ Recommending Retrofit ~

Approach to Retrofit - Learning from the Example of Daikin Industries ~ Recommending Retrofit ~


Daikin Industries, Ltd.

A global manufacturer of air conditioners and chemical products headquartered in Osaka, Japan with a presence in 38 countries across five continents around the world. Our company provides a one-stop service to users using an integrated system of manufacturer services covering the whole country with the motto “Speed”, “Accuracy” and “Politeness”. We also offer services such as maintenance and energy efficiency solutions.

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