Creation of meaning for warranty

“Co-branding is only specific to the Danish window manufacturer; we are not going to take it to other customers. They have helped us with co-development and we have a different agreement with them. It costs money and I don’t think it generates profits.” (Director of BU, 2014)

“But this window producer, our co-developer now, can’t be the example to follow. We supported him a lot, almost gave him the product for free.” (Director of BU, 2014)

Therefore, this element was a part of the value proposition for Woodstock in the Danish market only. It was also intended to be temporary. The BU was willing to compromise and accept this new model during the development phase, as a form of payment to the co-developer. This confirms Weick’s (1979) argument that what survives confrontation with ecological change are elements explained in pre-existing cause maps (Weick, 1979:187). Only the existence of a value capture mechanism would have convinced the BU to accept it, showing that revenue model legitimizes the existence of the value proposition.

“We need to see what is the practice in this industry and what are our competitors doing? I think the main goal is to be as good or better than aluminium.” (Senior Project Manager, 2013)

“What is the reference? We need a reference point. I just said it is important to stick to the agreement that aluminium is the standard, so if it does not pass certain standards, I think we could also accept not passing that standard.” (Vice President of Innovation, Steering meeting, 2013)

The integration and creation of a warranty for a product produced by the company involved different steps of growing complexity when transferring from G1 to G3. In the G1 phase, Pinta Inc. needed to assure its customers that the “Woodstock product should not crack, delaminate nor disintegrate if it is maintained to our rules” (Steering meeting, 2012), while for G3 the company had to assure the durability of their product in terms of colour and gloss as well.

During the process of formulating the warranty, there were two major interruptions: the first involved an internal misalignment regarding what a warranty should cover, which determined a need to accept redefined targets, and the second, a lack of alignment with suppliers’

expectations.

a. Change of targets: compromising

The aim of Woodstock, as declared in Steering meetings was to create a window profile that would perform better than its competitors, namely aluminium windows providers. The development team, together with the BU had defined targets that turned out to be unrealistic, leading to a rise in conflicts. For example, in one of the gate meetings in 2013, the creation of a mandatory warranty was considered an outstanding issue, showing that the two sides had not reached agreement, or a common understanding of the implications of being liable.

“There is an outstanding issue regarding the warranty obligation towards our co-developer. He has been promised a warranty scheme ever since the project started, but the BU will not accept this as they think it is going too far. We therefore have a conflict about this that we need to resolve. We will discuss this issue with director of the BU to find out how to get around it. This outstanding issue is carried over into the next step.” (Portfolio Manager, Gate meeting minutes, 2013)

The creation of a warranty involved conducting multiple tests to prove the durability of the window frame under different weather conditions for a certain number of years. Pinta Inc.

needed to accept to be liable for different aspects of the product, such as colour and gloss loss over time, the product’s reaction to time ageing, and delamination. The conflict escalated when the initial target number of testing hours, based on those set by the aluminium industry, were not reached. Furthermore, after studying their competitors more closely, they also realized that they had set targets that were too high for Woodstock, in their endeavour to create “the best window on the market, at least the same or best than aluminium profiles” (Business Developer, BU, Interview, 2013). In this situation, the retention decision to continue development was based on benchmarking the situation against, not only external practices, but other internal projects as well.

“So I looked through all the homepages and looked at what are they actually promising their customers? I was looking, of course, especially at the aluminium windows, to see what I was up against.” (Senior Project Manager, Steering meeting, 2013)

They discovered that aluminium runs tests on colour loss for 1000 hours to give a five-year warranty, while they had decided to run a test of 2000 hours to offer a ten-year warranty. As the tests failed, they needed to redefine their targets, after acknowledging that they lacked appropriate knowledge of the matter they broadened the focus of their research across the entire window industry, not only aluminium:

“We tested for about 2000 hours, when actually aluminium is tested for 1000 hours. And we failed. (…) that was a target we set out in the absence of better understanding.” (Senior Project Manager, Interview, 2013)

Furthermore, the vice president of innovation, pleaded for this not to be a showstopper, he made the Steering Group aware that they were operating with two different targets: an internal one, that of 2000 hours, and an external one, namely the industry standard, which they needed to gain more knowledgeable about.

“But this is not a showstopper, because it’s an internal standard, and it is the industry standard that is key to the market. So, we have to differentiate between these two different targets. We have two targets here, and we should be aware of this.” (Steering meeting, 2013)

Despite this situation, the decision makers agreed to take the risk of offering the product to their customers without a warranty on the quality of the profiles until the situation was resolved. The decision was considered possible since they were operating with small volumes. In this manner, they could keep the project ongoing.

“We realized that the first profiles to our customer had no ‘official’ warranty but the quantity is rather limited, so it will be on our account.” (Steering meeting, 2013)

Interestingly, the interruption was a misalignment between two internal paradigms, the first of the BU, where accuracy was very important:

“What I hear is that we had a target at the beginning, and now you ask me to change it, and still continue with the project. And I don’t understand, we had some targets to fulfil and we failed, this is what I see. We said from the beginning that we would make a window that performs better than aluminium.” (Business Director, BU)

The second was that of R&D, which was defined by a trial and error culture, where plausibility and equivocality was accepted. R&D tabled arguments to prove that the comparison was not just, due to the technical specifications of the paint system used in aluminium. Furthermore, the vice president of innovation, whom had played the role of the mediator between the two parties, had drawn on his experience in the windows industry to challenge the targets and show that the initial targets could be changed, with no major consequences for Woodstock:

“One of the biggest window manufacturer has a standard of a 1000 hours’ rate globally, with no difference between regions. I had a feeling when you're talking about the standard; it's a kind of artificial standard. Nobody relates to it. That's how I feel. So you really should depend on using aluminium as a real standard I would say.” (VP, R&D, Steering meeting, 2013)

Clearly, the targets needed to be redefined, which required the R&D team examine the industry they were planning to compete with more closely. By collating information from the industry, the team observed that the goals they had formulated at the beginning of the process were above the conditions imposed on other types of windows, not only aluminium. This “news” gave them an explication for the long-term duration of Woodstock’s development period, and types of misunderstandings that had informed the formulated targets.

“As I said, one explanation as to why in the beginning we set this goal at 2000 hours was that we were not aware of all the rules for this business -- and after we discovered that in fact it is too much -- so why try to be more royal than the king?” (Business Director, Interview, 2014)

“Yes, I did a little study on warrantees also. We had the discussion that we were going to offer this ten-year warranty, and in Denmark we can witness a lot of companies offering a warranty for ten years. So I looked through all the homepages and looked at what they were actually promising their customers. I was looking, of course, especially at the aluminium windows to see what I was up against. There was absolutely nobody discussing or mentioning anything about gloss and colour. Aluminium standards did not mention it at all.” (Senior Project Manager, Interview, 2014)

This interruption caused the team to pause to assess whether this attempt to apply the wrong specifications should be a “showstopper” – the word used in the Steering meeting by the Business Director. Ultimately, the decision to continue with the project was influenced by a process of internal benchmarking against other Pinta Inc. projects. The company had listed the internal practices and acknowledged that Woodstock was “different” (Business Developer, BU), observing that the same conditions that would have stopped another internal project were not applicable here. Labelling the situation as “different”, plus accepting a shift from “best window on the market” to “why try to be more royal than the king” guided the decision to continue with the project.

“One thing was that our other BUs create external facades -- of course we are comparing with them a lot. I think we should keep on doing that. But we also must be clear on the following -- in their business, as such, they have no competition, because they have boards made of stone, and of course there is also, like we have, no industry standard. Therefore, they made their own industry standard. So, this is not for me a showstopper, we should go on.” (Business Director, Steering meeting, 2014)

The final decision was to redefine the targets for the Nordic market, leaving the south open to discussion, as they were starting to realize the complexity of the industry they were aiming to supply.

b. Lack of alignment with suppliers

Woodstock’s profile was comprised of three parts: the profile, the paint system and tape. Each of the parties involved and responsible for a component had to provide their own warranty. Only after each party had formulated their warranties, could Woodstock combine them all into a final warranty to the windows’ producers. This fact meant the creation of the value proposition was dependent on the value network supporting the product:

“Before we can provide a warranty, we need a warranty from our (sub) suppliers.” (Senior Project Manager, 2013)

A challenge arose from the supplier of the paint system (paint system hereafter). The paint system was only a supplier and co-developer of the system, and the decision of to use one supplier was intended to assist the warranty process (VP, R&D, 2014). However, paint system refused to give a warranty to meet the specifications that Pinta Inc. requested, resulting in a lengthy negotiation process, characterized by frustration over the low negotiating power of the Woodstock business team. This supplier needed to run multiple tests for different colours, so the company would be able to access the available profiles, but the process took longer than expected, which delayed the launch date of the product several times:

“I was in contact with paint system for quite a while to come up with a type of warranty and this is what they came up with last week, saying paint system ensures that “the products presented above perform according to paint system test results”. This is the only result that we have had until now – I think they warrant nothing. So yeah, it still must be finalized, but it is a very difficult and long way to get a decent warranty about the paint system. We want to warrant ten

years to the market, and paint system has to cover some aspects of that and this is the only thing that they can come up with, just a product warranty based on their own results.” (Business Director, BU, Steering meeting, 2014)

The collaboration with paint system was considered “slow” and “inefficient”, but their position was strong because they were the only co-developer of the necessary paint system. Interestingly, the reason mentioned for not signing a new supplier was, aside from costs, the lack of time, as developing a relationship with a new supplier would delay the launch of the product by another year.

“Group management has decided not to put resources into finding a new supplier, and continue the collaboration with paint system; the reasoning is time.” (Project Manager, Woodstock)

However, the fact that paint system had been so evasive in their warranty offering, which was wholly unpredicted by managers, had created a conflict. The vice president remembered the argument, at the beginning of project, which had been that having one supplier for the full painting system would “facilitate” getting a warranty for the entire system. This was no longer the case, as paint system did not meet expectations. The team realized that their negotiating position was very weak:

“VP R&D: I just want to challenge that we some time ago agreed that it is important that we choose one system supplier to get the warranty. Well, we can’t get the warranty, was that then the right decision?

BU: no. This was also how they described it.

VP R&D: But I guess as soon as we are in to a situation where there is, I mean more solutions we have a possibility to put pressure on them as well. I guess that is it. So, I think we will get

there in time, but as things are right now we are not in a strong position. Just as with painting the profiles, we have just one supplier!

They can afford a “take it or leave it attitude, which we can’t.” (Steering meeting, 2014)

They also realized that they would probably never achieve what they had planned from the beginning, so they would have to formulate the “most optimal way given the situation now”

(Steering meeting), which was interesting as initially high expectations became pursuit of a best-case scenario.

“Project Manager: what I think we need is to have a warranty on the performance of the systems. That’s what we need from paint system and they should be able to give us that, they have designed a test for it, so we just need them to put this on paper.

VP R&D: But apparently, they are not there. Do we believe that they will ever get there?

BU: I really don’t know. We will never get where we want. That’s for sure. Now we just need to find the most optimal way in this situation. That’s the only option.” (Steering meeting)

To resolve the situation, Woodstock’s inventor proposed relabelling the part of the warranty stating maintenance free, meaning ten years without painting, to “low-maintenance” (Senior Project Manager, Steering meeting, 2014). After further research, the team noticed that the notion “maintenance free” was not present elsewhere, and so agreed relabelling would reduce their liability on the market. The consensus at that time was to ratify the decision, as pipeline was showing a market launch with the Co-creator, and missing that deadline was unthinkable.

Furthermore, at the beginning of 2015, when the project was taken over completely by the BU, they decided to begin searching for another supplier who would be able to offer a warranty for the full system:

“In order to strengthen supply security and improve our position when negotiating prices for coating material (putty and powder) for our profiles, it was agreed to seek an alternative supplier to paint system. We are looking for a supplier for the full system to strengthen the warranty cover.” (Project Manager, project meeting, December 2014)

The process of creation of the warranty component showed the dependency of the value proposition on the value network.