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

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

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

2 Confidential Philips - GSSI, Felice Valente - CHRM, June 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….

3 Confidential Philips - GSSI, Felice Valente - CHRM, June Let’s talk about our journey…

4 Confidential Philips - GSSI, Felice Valente - CHRM, June 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 ,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

5 Confidential Philips - GSSI, Felice Valente - CHRM, June Our focus on improving people’s lives Our portfolio leverages critical global trends 5 Rise of emerging markets Aging population Increased consumer empowerment and sustainable lifestyles Climate change and sustainable development

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

7 Confidential Philips - GSSI, Felice Valente - CHRM, June The world’s 42 nd most valuable brand in 2010 Brand value doubled since 2004 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 Value of the Philips brand* USD billions * Source: Interbrand Brand Valuation 2010

8 Confidential Philips - GSSI, Felice Valente - CHRM, June 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

9 Confidential Philips - GSSI, Felice Valente - CHRM, June 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

10 Confidential Philips - GSSI, Felice Valente - CHRM, June : Organizing Around Customer and Market

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

12 Confidential Philips - GSSI, Felice Valente - CHRM, June Engage (EES) Enable (IT) 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  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  Commercial Competences, assessment and training  Talent Management (acquisition, reviewing and retention)  Career Path  Local programs within the Sectors to increase Market centricity -DELIGHT! -RnB -OACM/District Model

13 Confidential Philips - GSSI, Felice Valente - CHRM, June 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 1.Basic Competences Toolkit for ‘Downstream Organization’: One Commercial Competency Framework 1.Empower country organizations in change management projects: Alignment Sectors and Countries 1.Drive competency building for different channels/way to market: Competency for future success 1.Continuously assessing and training Sales Force: 360 On Line Development Survey for Sales force ww - Review the Sales/IKAM Curriculum 1.Setting high standard of recruiting: Talent Staffing

14 Confidential Philips - GSSI, Felice Valente - CHRM, June Enable: Value Space and Sales enablers The Customer Excellence Value Space focuses on enabling the sales force with relevant tools and processes Focus areaStrong focus on key programs Management Agenda Philips OACMOne CRM, Pricing, VIPP Philips GrowthChina VS CE FocusInStore (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 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 Example enablers 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)

15 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 What will define our success? 15

16 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 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...

17 Confidential Philips - GSSI, Felice Valente - CHRM, June 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… 17

18 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 The business priorities in Markets will be underpinned and properly resourced to win for short and long term growth goals Define 17 market clusters lead by teams with the same geographical scope. Will enable gaining traction in the market place Fully dedicated Market leaders and Sector Market leaders in 10 out of those 17 markets. Will increase capacity, focus and dedication 5 shiftsChanges and benefits The BMC handshake and the collaborative P&L enable people to team up to excel, taking ownership and win in the market place Investments will be made in improving BMC performance as well as business development and new business creation A commercial shift in summary Resourcing to meet Our Growth Ambitions Enabling decision Making Closer To The Customer Support for Local Business Opportunities Aligning Market Clusters Strengthening Market Teams

19 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 Our new mindsets and behaviors Mindsets and behaviors What they concretely mean for Customer Centricity 2 Take ownership ▪ 4/29/2015, e.g. local teams have local room to act ▪ 4/29/2015, remove roadblocks that stop us from winning ▪ Take courageous decisions ▪ Empower and hold each other accountable to deliver ▪ Execute rigorously, see things through ▪ Focus on results over activity 3 Team up to excel ▪ 4/29/2015 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 1 Eager to win ▪ 4/29/2015 ▪ Identify growth opportunities on top of BMC plans ▪ 4/29/2015 ▪ 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 ver 4 June 2011

20 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 We believe we can build a great promising future…. 20

21 Confidential Philips - GSSI, Felice Valente - CHRM, June Philips investment proposition Vision 2015 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 16-18% Consumer Lifestyle 9-11% Lighting 12-14% 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 “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.”

22 Confidential Philips - GSSI, Felice Valente - CHRM, June 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 Philips program reaches children across new borders, teaching them about healthy lifestyles Health and well-being solutions that make a difference

23 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 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 Livable cities: Improving health and well-being in the urban environment 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. New social, economic and environmental challenges

24 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 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.

25 Confidential Philips - GSSI, Felice Valente - CHRM, June 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. Listening - Recent initiatives Making sense of what people need ‘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. 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.. 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’! 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.

26 Confidential Philips - GSSI, Felice Valente - CHRM, June 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. Our partnership with the World Green Building Council includes the ambition to improve the energy efficiency of cities by 40% over the next decade. Facilitating - Recent initiatives Encouraging and connecting stakeholders At the UN Climate Change Conference in Copenhagen we showed world leaders how innovation in lighting can significantly improve a city’s energy efficiency. We are a signatory of the World Business Council for Sustainable Development’s manifesto on energy efficiency in buildings. 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. 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.

27 Confidential Philips - GSSI, Felice Valente - CHRM, June Creating - Recent initiatives Lighting solutions that make a difference 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. 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. 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. 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’. Philips provides lamps for one in three outdoor light points across the globe. 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.

28 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 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.

29 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011 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.

30 Confidential Philips - GSSI, Felice Valente - CHRM, June 2011


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