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Philips: Organizing Around Customer and Market Transforming an Hi-tech company into a Health and Wellbeing organization Philips - GSSI June 2011.

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Presentation on theme: "Philips: Organizing Around Customer and Market Transforming an Hi-tech company into a Health and Wellbeing organization Philips - GSSI June 2011."— Presentation transcript:

1 Philips: Organizing Around Customer and Market Transforming an Hi-tech company into a Health and Wellbeing organization Philips - GSSI June 2011

2 Company story: Unlocking Philips’ full potential
Our journey 2010: Organizing Around Customer and Market How will we create our success? We believe we can build a great promising future…. 2 2

3 Let’s talk about our journey…
3 3

4 A well-respected, blue-chip company for 120 years
Founded in 1891 Headquartered in Amsterdam, the Netherlands Sales over EUR 25.4 billion in 2010 (USD 33.8 billion) 33% of sales generated in emerging markets Globally recognized brand (world top 50) Our brand value doubled to $8.7bln since 2004 119,000 employees Sales and service outlets in over 100 countries €1.6 billion investment in R&D, 6% of sales 50,000 patent rights – 36,000 registered trademarks – 63,000 design rights 4

5 Our focus on improving people’s lives Our portfolio leverages critical global trends
Aging population Increased consumer empowerment and sustainable lifestyles Climate change and sustainable development Rise of emerging markets 5 5

6 Unique leadership positions in many markets Current NPS leadership positions1
Healthcare Regional Cardio vascular Global Patient Monitoring Regional Cardiac resuscitation Regional Radiation Oncology Systems Global Ultrasound Regional Home Healthcare Consumer Lifestyle Regional Male electric shaving & grooming Global Mother and Child Care Regional Power Toothbrushes Global Female depilation Global Steam irons Regional Blenders Global Juicers Lighting Regional Consumer Luminaires Global Professional Luminaires Global Lamps Regional Automotive Lighting Global High Power LEDs Global Lighting Electronics 1 (Co)Leadership is defined as outperforming (>5%) or on par with best competitor, globally or regionally 1 (Co)Leadership is defined as outperforming (>5%) or on par with best competitor, globally or regionally 6

7 The world’s 42nd most valuable brand in 2010 Brand value doubled since 2004
Value of the Philips brand* USD billions A strong brand drives sales A significant amount of sales is attributable to the brand alone: Healthcare 29% Consumer Lifestyle 24% Lighting 21% High brand value growth With 7% in 2010, Philips outpacing the average value increase of 4% shown by other brands Strong internal brand 82% of employees are “proud to work for Philips” Brand campaign 2010 Developing thought leadership in health and well-being and making our trusted brand promise of ‘sense and simplicity’ meaningful in this area 7 * Source: Interbrand Brand Valuation 2010

8 Philips defined: we are…
“…a global company of leading businesses creating value with meaningful innovations that improve people’s health and well-being.” Health and well-being A commitment to healthy, fulfilled lives in our communities and societies our world Meaningful innovations Improving people’s lives Going beyond technology Introduced at the right time 8

9 Creating meaningful innovations Improving lives in new ways
Gain deep insights into people’s needs and aspirations by following a process requiring end-user input at every stage Transform insights into innovations by combining the diverse perspectives of different disciplines “Learn fast, fail cheap” by applying a rigorous process to assess value potential early Lead in open innovation by working closely together with partners in a spirit of open innovation 9

10 2010: Organizing Around Customer and Market 10 10

11 “Cost Agility & Execution”
OACM business context After ~ two years of “crisis” growth and leadership is back on the agenda Dubai Summit 2007 Summit October 2009 “Levers for Growth”* “Cost Agility & Execution” Vision 2010 bottom line Vision top-line Summit September 2008 Summit February 2010 “Cash is King” “Driving growth” *Levers addressed include granularity of growth; superior customer experience (NPS); innovation to win; and leading to win 11

12 Empower (Organization) Enhance (Capabilities /NPS)
Introducing the 4 Es model We identified 4 key enablers that should capture link existing Sector programs and global program management Enable (IT) Engage (EES) High performing companies always show an high level of engagement (commitment) of their sales force Sales people are the real ambassador of the company in front of the outside world Integral profitability reporting B2B Online One CRM Pricing BMCs Local programs within the Sectors to increase Market centricity DELIGHT! RnB OACM/District Model Commercial Competences, assessment and training Talent Management (acquisition, reviewing and retention) Career Path Empower (Organization) Enhance (Capabilities /NPS) 12

13 Enhance: Commercial Capabilities Competences stock taken and reinforcing partnership M&S in Commercial Organization Increase customer centricity by empowering local markets and customer facing staff Reinforcing Partnership Marketing and Sales in “Downstream Organization”, from Commonalities of Competences to Commonalities on Business Impact. Building Talent Management around Commercial Organizations Basic Competences Toolkit for ‘Downstream Organization’: One Commercial Competency Framework Empower country organizations in change management projects: Alignment Sectors and Countries Drive competency building for different channels/way to market: Competency for future success Continuously assessing and training Sales Force: 360 On Line Development Survey for Sales force ww - Review the Sales/IKAM Curriculum Setting high standard of recruiting: Talent Staffing 13

14 Strong focus on key programs
Enable: Value Space and Sales enablers The Customer Excellence Value Space focuses on enabling the sales force with relevant tools and processes Focus area Strong focus on key programs Management Agenda Philips OACM One CRM, Pricing, VIPP Philips Growth China VS CE Focus InStore (POS) Excellence, B2C Online, OneMobile Customer Excellence flagship projects: OneCRM – Pricing - Instore (POS) Excellence (CL) - OneMobile (HC) Focus programs in other Value Spaces: VIPP in Information excellence B2B Online in Marketing Excellence Example enablers Category Management analytics 5 high- and 23 low level processes signed of by LI and CL Great feedback on the application from the CatMan global forum in Prague, October Chat for Consumer Care Enable chat as a channel to communicate with consumer on their pre and post purchase needs. +50% consumer NPS increase versus Calls with the call centers. -50% cost of chat versus calls of the call centers. (18 million touch points a year) 14

15 What will define our success?
15 15

16 We risk to lose our relevance
As we grew scale and efficiency increasingly became competitive drivers… We centralized decision making, drove uniformity in products and systems and so were able to tightly manage our costs... Now we’ve lost some of our agility, speed of decision making and adaptability to local needs. Competition is growing faster, and our market share loss across many businesses confirms the immediate urgency to act... In the last decades of 1900 our landscape changed. The fierce global competition in the high volume electronics field forced us to change our strategy. To stay ahead of the game we needed to ensure scale and efficiency. They were our key competitive drivers. As a result, we centralized decision making to ensure scale in operations, uniformity in products and services. It enabled us to align systems and processes across our large company and hence control our costs. Our market organizations increasingly had less decision making authority, felt less empowered and engaged, and struggled to align policies and practices between businesses and customer expectations. As a consequence, we weakened one of our biggest assets: our ability to be locally relevant in more than 200 countries around the globe. Whilst competitors have grown, our growth has been almost stagnant over the past years. Competition is growing faster than Philips, confirmed by the loss of market share in many of our businesses. We risk losing our relevance if we do not take action urgently >> Can you give examples of global/locally relevant competitors that are closing in on us? Battles we have lost? Market share we are losing in specific businesses? 16

17 We must accelerate to seize our opportunity
Our future success depends on our ability to understand and anticipate customer requirements and act on these quickly… Recognizing local and global trends - aging population, urbanization and sustainability… We must team up to excel by using our global power combined with strong entrepreneurship in our Markets.... to act quicker, drive local innovation and accelerate growth… Our future success much depends on how well we are able to read and anticipate customer needs and act on them quickly. Trends vary from country to country, region to region. We need to be well equipped to recognize global ánd local trends and identify new opportunities to drive growth. We need to do this by teaming up using our global power provided by our brand, global businesses and strong functions, combined with strong entrepreneurship in our Markets to act faster, driving local innovation thereby accelerating growth. >> what are some of the local or business trends your audience can relate to? Can you give examples? What would be an example of local innovation? What business opportunities do you see? 17 17 17

18 A commercial shift in summary
5 shifts Changes and benefits Aligning Market Clusters Define 17 market clusters lead by teams with the same geographical scope. Will enable gaining traction in the market place 1 Strengthening Market Teams Fully dedicated Market leaders and Sector Market leaders in 10 out of those 17 markets. Will increase capacity, focus and dedication 2 Enabling decision Making Closer To The Customer The BMC handshake and the collaborative P&L enable people to team up to excel, taking ownership and win in the market place 3 To unlock our true potential in the market place we have decided to accelerate a number of changes. We are raising the importance of the market organizations. Over the years the role of the market org has been changed to executional bodies that had to implement policies and strategies defined elsewhere. Instead, we will empower the market organizations to co-create the strategic plan and co-own the P & L. We will: Align our market organizations Define 17 market clusters. The sectors have already re-aligned their market groups to conform to the new 17 market clusters. Fully dedicated Market leaders and Sector Market leaders in 10 out of those 17 markets Uniform market definitions as a pre-condition to enable strong teams to take ownership for growing the Philips business This means they have the same geographical scope and can therefore have the whole view of the customer. Strengthen capabilities of the Market organizations Good work requires dedication and focus. 10 markets will have dedicated leadership at Philips and Sector level. Market leaders will have controllable P&L, and Sector leaders will have controllable P&L - enabled by the business market handshake. Business – Market handshake during AOP carrousels with agreement on annual targets and KPIs Local teams will be empowered and will have local ‘room to act’ through P&L that are managed collaboratively. Align resourcing with growth goals Business priorities in your markets will be resourced to win. Our granular BMC approach will enable us to decide together where resourcing is required. We are a bit light in our capacity. To foster and encourage local innovation, we will also install a growth fund 100 mln fund. That’s exciting, as we have never done this before! Make sure we have teams that know what it will take to get there. Protect those investments to meet short and long terms goals. These are the contours of our changes. But we enable them together. Resourcing to meet Our Growth Ambitions The business priorities in Markets will be underpinned and properly resourced to win for short and long term growth goals 4 Support for Local Business Opportunities Investments will be made in improving BMC performance as well as business development and new business creation 5 18 18

19 Our new mindsets and behaviors
BRU-AAA Our new mindsets and behaviors Mindsets and behaviors What they concretely mean for Customer Centricity 1 Eager to win 4/13/2017 Identify growth opportunities on top of BMC plans Building required local capabilities Take an outside in perspective, serve our customers Adapt to the diversity of Businesses and Markets Ensure speed of action, outpace competition Resource to win for long term leadership 2 Take ownership Take courageous decisions Empower and hold each other accountable to deliver Execute rigorously, see things through Focus on results over activity 4/13/2017, e.g. local teams have local room to act 4/13/2017, remove roadblocks that stop us from winning This slide can be used as a response to the group exercise to outline the defined behaviors, tailored to Customer Centricity 3 Team up to excel 4/13/2017 between businesses and markets, e.g. co-create the strategic plan and co-ownership for the P&L Identify opportunities for cooperation or synergies Have open and tough dialogues, productive conclusions Collaborate, leverage each other Celebrate success Learn, improve, develop ver 4 June 2011 19

20 We believe we can build a great promising future….
20 20

21 Philips investment proposition Vision 2015
“Philips’ strategy is to become the leading company in health and well-being. We believe that a steadily growing demand for healthcare, a healthy lifestyle and energy-efficient lighting solutions will – driven by an aging population, increased environmental awareness and expanding emerging markets – allow Philips to generate double-digit EBITA margins.” Main financial objectives: Comparable sales growth on annual average basis equal to real GDP + a minimum of 2% Reported EBITA margin between 10% and 13% of sales of which: Healthcare % Consumer Lifestyle % Lighting % Grow EPS at double the rate of comparable annual sales growth Generate a return on invested capital of at least 4% above Weighted Average Cost of Capital 21

22 Sustainability as a driver for growth
Health and well-being solutions that make a difference Philips program reaches children across new borders, teaching them about healthy lifestyles Sustainability as a driver for growth Our commitment One of the strategic drivers behind our targets is a commitment to sustainability Success of EcoVision4 program: Our Green Product sales represented around 30% of sales in 2009, 3 years ahead of our 2012 target EcoVision5 program Targets for the period 2010 – 2015 Bringing care to more than 500 million people Improving the energy efficiency of Philips overall portfolio by 50% Doubling the global collection and recycling amounts of our products, as well as double the amount of recycled materials in our products 22 22

23 New social, economic and environmental challenges
Livable cities: Improving health and well-being in the urban environment Rapid urbanization More than half the world’s population already lives in cities and urban areas – this is predicted to rise to almost 70% by 2050 New social, economic and environmental challenges Safety and security, overcrowding. Pressure on resources, clean air and water, energy and waste management. Public health, longer life expectancy, anxiety levels. A sense of physical, economic and social well-being. Background reading Growing urban populations raise other critical issues. For example, cities account for 70% of global energy consumption. Approximately 40% of the world’s energy is used in buildings - more than in transport or industry. People are also living longer, living longer alone, and living longer alone in cities. Globally we have reached a critical point in relation to the sustainability of many of our cities. Modern urban living is frequently characterized by overcrowding and pressure on resources, high levels of personal anxiety, and a certain sense of loss in traditional ‘community spirit’.

24 Livable cities How can we make a difference for the people who inhabit, work in and visit them? As a leading global company in health and well-being, Philips is helping define and shape the dialogue on livable cities. Background reading The new social, economic and environmental challenges cities face (see previous slide) have enormous implications. While efforts are being made, they have mainly been isolated and insular “solutions” that have failed to acknowledge the enormity and nature of the challenge. Under the theme Livable Cities, parties are beginning to look at the challenge from a more coherent, integrated perspective. With increasing numbers of people living in cities, the burning question is: what actually constitutes a livable city?

25 Listening - Recent initiatives Making sense of what people need
The Philips Center for Health and Well-being has successfully identified obstacles to improving people’s health and well-being (e.g. insufficient access to healthcare and a need to feel safer and more secure) and is instrumental in suggesting solutions to overcome them. . Philips and the Financial Times organized the Urban Regeneration Conference which brought together senior figures from across the UK to discuss strategies for enhancing economic vitality of the country’s urban centers. Philips’ Index for Health and Well-being is a worldwide survey for determining how people feel about their living environment. For example, a recent poll we conducted in America identified safety/crime rate, local hospitals and access to healthcare facilities as the main areas of concern among citizens. Background reading Quality of sleep has a profound influence on citizen’s health and well-being. We have undertaken a number of studies on sleep to generate useful insights. For instance, a survey we commissioned in March 2009 in the US, Europe and Asia revealed that 19% of respondents are sleeping less than experts think they should, while 34% said that inadequate sleep negatively affected their family relationships. 87% have had their work impacted by lack of sleep with between six and seven days being the average number impacted each year. These findings have profound implications for how healthy, productive and happy we are as citizens and, by extension, as a society. The Philips 'Keeping Cities Livable' consultation event brought together key stakeholders to discuss relevant issues including the city as a brand, social cohesion, feeling at home and comfortable in one's city, safety & security and leading a healthy life. The importance of a healthy environment is a recurring theme in the studies and urban analyses of Richard Florida, Director of the Martin Prosperity Institute, who was one of the participants. Addressing the event, Florida talked of the correlation between the creativity and innovation of a city's inhabitants and levels of obesity and smoking, which are less prevalent in areas with a greater concentration of ‘artistic’ inhabitants. The Urban Regeneration Conference brought together senior figures from across the UK – architects and urban planners, government decision makers, property developers and sustainability experts – to discuss strategies for enhancing the economic vitality of the UK’s urban centers through innovative approaches in designing and financing urban regeneration. ‘Keeping Cities Livable’ a consultation event we organized in 2009, brought various independent experts, global agenda-setters and opinion leaders together. Key outcomes included the need to focus on social cohesion, leading a healthy urban lifestyle, security and the city as a brand. With a good night’s rest being a major issue for countless city dwellers, we commissioned several surveys on sleeping in various countries world-wide in In India, 93% of people surveyed across 25 different cities fell into the category ‘sleep deprived’! 25

26 Facilitating - Recent initiatives Encouraging and connecting stakeholders
The Livable Cities Award is a new Philips initiative designed to generate practical, achievable ideas for improving the health and well-being of people living in cities. The 3 categories cover well-being outdoors, independent living and healthy lifestyle at work and home. At the UN Climate Change Conference in Copenhagen we showed world leaders how innovation in lighting can significantly improve a city’s energy efficiency. Our partnership with the World Green Building Council includes the ambition to improve the energy efficiency of cities by 40% over the next decade. The Philips Center for Health and Well-being functions as a think tank in which key stake-holders can come together, exchange views and inspire each other on how to make our cities more appealing and fulfilling places to be. Background reading The Philips Livable Cities Award, is an initiative designed to generate practical, achievable ideas for improving the health and well-being of people living in cities. Individuals, community or non-governmental groups and businesses are eligible to participate in the Award program that comprises a total prize fund amounting to 125,000 Euros. With the aim of developing simple solutions to the complex challenges faced by the residents of cities today, the program consists of three distinct award categories: • Well-being Outdoors: initiatives that will help citizens feel safe in public spaces or help create city identity and foster a sense of belonging; • Independent Living: initiatives that will help the growing number of elderly people living alone to feel secure and comfortable in a city, with appropriate access to healthcare; • Healthy Lifestyle at Work and Home: initiatives that will support a healthy body and mind, whether through a person’s surroundings or via other essentials such as exercise, sleep and diet. We are also involved in the annual international city.people.light award, we promote the use of light as an essential component in urban development. Launched in 2002, City.people.light honors towns or cities that strive to “rehumanize” urban environments through the medium of light. To date, 141 urban lighting projects from all over the world have been viewed. With a jury comprising lighting architects, designers and municipal lighting managers, criteria such as contribution to a city’s cultural and architectural heritage, night-time identity and environment are assessed. Recent winners of the prestigious city.people.light accolade have included Seoul, South Korea (2008) and Jyväskylä, Finland (2009). We also aim to ensure that global political leaders are fully informed of the latest technological capabilities and innovations in energy efficiency. At the COP15 United Nations Climate Change Conference in Copenhagen, Denmark (December 2009), we showed world leaders how innovation in lighting can help mayors and municipal leaders to significantly improve a city’s energy efficiency. One example was a concept demonstration of new solar-powered LED lighting. The city.people.light awards, organized jointly by Philips and the Lighting Urban Community International Association, highlight the contribution lighting can make to the well-being of those living in, working in or visiting a city. We are a signatory of the World Business Council for Sustainable Development’s manifesto on energy efficiency in buildings. 26

27 Creating - Recent initiatives Lighting solutions that make a difference
We contribute to the sense of calm and connection with one’s surroundings in an urban environment through our solutions for city streets, homes, offices, shops, hospitals, hotels as well as the automotive and entertainment industries. In doing so we ‘simply enhance life with light’. Cities often want to reinforce and strengthen their identities by using our colorful LED lighting solutions, invigorating skylines and landmarks in a sustainable and easy-to-realize way. Philips provides lamps for one in three outdoor light points across the globe. Our Light on Demand concept enables municipalities to save energy through outdoor lighting which provides bright, white LED light as pedestrians approach and then dims when they walk away. This leads to lower energy consumption and less light spill without sacrificing safety. Background reading Philips rolled out the world’s first dedicated solar-powered LED floodlighting solution to help citizens - in the developing world and elsewhere - with little or no access to electricity to extend their activities beyond sunset. A portable solution using the latest energy-efficient LED lighting technology, the system illuminates large areas with bright white light. Advanced battery cells provide up to eight hours of floodlighting on a single charge. It can be used for sporting events, evening classes in remote villages, safety and security, shops or outdoor markets, and even emergency lighting in disaster situations. The first dedicated solar-powered LED floodlighting is ideal for environments with little or no access to mains electricity. It helps strengthen the local community by illuminating sports events, schools and night-time commerce. We are currently working on series of multi-purpose intelligent solutions, for instance, street furniture. A luminaire, as well as providing light, could then also function as a sign, interface, landmark and bench. 27

28 Living in a city should be an opportunity to thrive, not a burden
Livable Cities is an achievable vision As long as the citizen is empowered to participate in the dialog and there is sufficient cooperation between city dwellers and the public and private sectors. Joint ownership Livable Cities is not an ‘ownable’ space but rather a shared, public forum which encompasses and engages every layer of society. Pragmatic innovation Solutions firmly grounded in practical applications – already available today – will help secure the long-term future of our cities and their citizens. Our role In addition to developing relevant solutions, we are also facilitating dialogue, encouraging partnerships and sharing key insights among stakeholders. Background reading Faced with the reality that many urban practices are unsustainable, society at a wider level looks to be gradually waking from its collective slumber. Livable cities is not linked to a specific ideology or cultural style. It is a modus operandi, incorporating the movements and actions of all citizens of all ages and backgrounds. Not the preserve of planners or politicians, it is a public forum, encompassing every layer of society, where citizens should be empowered through the ‘design’, ‘build’ and ‘operate’ phases. The vision of more livable cities is achievable if one develops the right technology, the right business model, the right alliances, the right cooperation models between public and private sectors, the appropriate regulation environment and, most importantly, the optimum relationship with the end user – the citizen. By deepening engagement with citizens, Livable Cities aims to provide prescient and timely input into the public debate. Living in cities should not be seen as a burden but rather as an opportunity to thrive. It is time that the public be given the full range of opportunities for this to occur.

29 Philips wants to be a global leader in health and well-being,
Vision 2015 Our ambition Philips wants to be a global leader in health and well-being, becoming the preferred brand in the majority of our chosen markets. We believe Philips is uniquely positioned for growth through its ability to simply make a difference to people’s lives with meaningful, sustainable innovations.

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