UltraRope: Crafting a Go-to-market Strategy
for Kone’s Innovative ‘UltraRope’ Hoisting Cable
The elevator or “vertical transportation” industry is organized into three main categories: installation, maintenance, and modernization. In recent decades, this industry has been dominated by four main manufacturers that also provide modernization and maintenance services: Otis (United States), Kone (Finland), ThyssenKrupp (Germany), and Schindler (Switzerland). Thousands of other small, independent companies also specialize in maintenance.
Several significant trends have affected the elevator industry in the last couple of decades. Chief among them is urbanization. The rising number of people moving into cities around the globe has increased the number of multistory and high-rise buildings, thus dramatically increasing the demand for new elevators, the modernization of existing elevators, and the maintenance of them all. An aging population has also increased the global reliance on elevators. Finally, stricter legislation on elevator safety as well as concerns about energy consumption have also had an impact on the industry.
Kone Corporation, one of the world’s leaders in the elevator and escalator industry, is headquartered in Espoo, Finland, and employs more than 47,000 people. The firm has grown dramatically since its founding in 1918, in part due to strategic acquisitions that have opened doors to new products, new markets, and new knowledge. Kone has long been viewed as a technological leader thanks to innovative products like the MonoSpace.
More recently, Kone engineers have developed the UltraRope, a carbon fiber cable that is stronger than traditional steel elevator cables but weighs about one-tenth of its counterparts. Elevators equipped with UltraRope cables require far less energy to operate. Like many of Kone’s innovations, this idea bubbled up internally from Raimo Pelto-Huikko, one of Kone’s in-house design specialists. Pelto-Huikko was granted a small budget for his initial research, but the positive results in the early stages caught the attention of top management. Pelto-Huikko was allowed to amass a product development team and given a far more substantial budget to perform rigorous testing at Kone’s test lab in Tytyri, Finland. Kone’s leadership is convinced that the UltraRope is a truly disruptive innovation for this industry.
A new way to differentiate itself will be a tremendous asset as Kone moves into the future. China has been an important market for the firm in the past, but with that economy cooling down, Kone needs to look elsewhere for new customers in rapidly developing economies like Brazil, India, and the Middle East.
Strategic Issues and Suggested Discussion
- Using the development of UltraRope as an example, explain how Kone’s culture fosters invention and innovation.