4A well-respected, blue-chip company for 120 years Founded in 1891Headquartered in Amsterdam, the NetherlandsSales over EUR 25.4 billion in 2010 (USD 33.8 billion)33% of sales generated in emerging marketsGlobally recognized brand (world top 50) Our brand value doubled to $8.7bln since 2004119,000 employeesSales and service outlets in over 100 countries€1.6 billion investment in R&D, 6% of sales50,000 patent rights – 36,000 registered trademarks – 63,000 design rights4
5Our focus on improving people’s lives Our portfolio leverages critical global trends Aging populationIncreased consumer empowerment and sustainable lifestylesClimate change and sustainable developmentRise of emerging markets55
6Unique leadership positions in many markets Current NPS leadership positions1 HealthcareRegionalCardio vascularGlobalPatient MonitoringRegionalCardiac resuscitationRegionalRadiation Oncology SystemsGlobalUltrasoundRegionalHome HealthcareConsumerLifestyleRegionalMale electric shaving & groomingGlobalMother and Child CareRegionalPower ToothbrushesGlobalFemale depilationGlobalSteam ironsRegionalBlendersGlobalJuicersLightingRegionalConsumer LuminairesGlobalProfessional LuminairesGlobalLampsRegionalAutomotive LightingGlobalHigh Power LEDsGlobalLighting Electronics1 (Co)Leadership is defined as outperforming (>5%) or on par with best competitor, globally or regionally1 (Co)Leadership is defined as outperforming (>5%) or on par with best competitor, globally or regionally6
7The world’s 42nd most valuable brand in 2010 Brand value doubled since 2004 Value of the Philips brand*USD billionsA 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 growthWith 7% in 2010, Philips outpacing the average value increase of 4% shown by other brandsStrong internal brand 82% of employees are “proud to work for Philips”Brand campaign 2010Developing thought leadership in health and well-being and making our trusted brand promise of ‘sense and simplicity’ meaningful in this area7* Source: Interbrand Brand Valuation 2010
8Philips 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-beingA commitment to healthy, fulfilled lives in our communities and societies our worldMeaningful innovationsImproving people’s livesGoing beyond technologyIntroduced at the right time8
9Creating 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 stageTransform insights into innovations by combining the diverse perspectives of different disciplines“Learn fast, fail cheap” by applying a rigorous process to assess value potential earlyLead in open innovation by working closely together with partners in a spirit of open innovation9
11“Cost Agility & Execution” OACM business context After ~ two years of “crisis” growth and leadership is back on the agendaDubai Summit 2007Summit October 2009“Levers for Growth”*“Cost Agility & Execution”Vision 2010 bottom lineVision top-lineSummit September 2008Summit February 2010“Cash is King”“Driving growth”*Levers addressed include granularity of growth; superior customer experience (NPS); innovation to win; and leading to win11
12Empower (Organization) Enhance (Capabilities /NPS) Introducing the 4 Es model We identified 4 key enablers that should capture link existing Sector programs and global program managementEnable (IT)Engage (EES)High performing companies always show an high level of engagement (commitment) of their sales forceSales people are the real ambassador of the company in front of the outside worldIntegral profitability reportingB2B OnlineOne CRMPricingBMCsLocal programs within the Sectors to increase Market centricityDELIGHT!RnBOACM/District ModelCommercial Competences, assessment and trainingTalent Management (acquisition, reviewing and retention)Career PathEmpower (Organization)Enhance (Capabilities /NPS)12
13Enhance: Commercial Capabilities Competences stock taken and reinforcing partnership M&S in Commercial OrganizationIncrease customer centricity by empowering local markets and customer facing staffReinforcing Partnership Marketing and Sales in “Downstream Organization”, from Commonalities of Competences to Commonalities on Business Impact.Building Talent Management around Commercial OrganizationsBasic Competences Toolkit for ‘Downstream Organization’: One Commercial Competency FrameworkEmpower country organizations in change management projects: Alignment Sectors and CountriesDrive competency building for different channels/way to market: Competency for future successContinuously assessing and training Sales Force: 360 On Line Development Survey for Sales force ww - Review the Sales/IKAM CurriculumSetting high standard of recruiting: Talent Staffing13
14Strong 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 processesFocus areaStrong focus on key programsManagement AgendaPhilips OACM One CRM, Pricing, VIPPPhilips Growth ChinaVS CE Focus InStore (POS) Excellence, B2C Online, OneMobileCustomer Excellence flagship projects:OneCRM – Pricing - Instore (POS) Excellence (CL) - OneMobile (HC)Focus programs in other Value Spaces:VIPP in Information excellenceB2B Online in Marketing ExcellenceExample enablersCategory Management analytics5 high- and 23 low level processes signed of by LI and CLGreat feedback on the application from the CatMan global forum in Prague, OctoberChat for Consumer CareEnable 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
16We 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
17We 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?171717
18A commercial shift in summary 5 shiftsChanges and benefitsAligning Market ClustersDefine 17 market clusters lead by teams with the same geographical scope. Will enable gaining traction in the market place1Strengthening Market TeamsFully dedicated Market leaders and Sector Market leaders in 10 out of those 17 markets. Will increase capacity, focus and dedication2Enabling decision Making Closer To The CustomerThe BMC handshake and the collaborative P&L enable people to team up to excel, taking ownership and win in the market place3To 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 organizationsDefine 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 marketsUniform 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 organizationsGood 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 KPIsLocal teams will be empowered and will have local ‘room to act’ through P&L that are managed collaboratively.Align resourcing with growth goalsBusiness 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 AmbitionsThe business priorities in Markets will be underpinned and properly resourced to win for short and long term growth goals4Support for Local Business OpportunitiesInvestments will be made in improving BMC performance as well as business development and new business creation51818
19Our new mindsets and behaviors BRU-AAAOur new mindsets and behaviorsMindsets and behaviorsWhat they concretely mean for Customer Centricity1Eager to win4/13/2017Identify growth opportunities on top of BMC plansBuilding required local capabilitiesTake an outside in perspective, serve our customersAdapt to the diversity of Businesses and MarketsEnsure speed of action, outpace competitionResource to win for long term leadership2Take ownershipTake courageous decisionsEmpower and hold each other accountable to deliverExecute rigorously, see things throughFocus on results over activity4/13/2017, e.g. local teams have local room to act4/13/2017, remove roadblocks that stop us from winningThis slide can be used as a response to the group exercise to outline the defined behaviors, tailored to Customer Centricity3Team up to excel4/13/2017 between businesses and markets, e.g. co-create the strategic plan and co-ownership for the P&LIdentify opportunities for cooperation or synergiesHave open and tough dialogues, productive conclusionsCollaborate, leverage each otherCelebrate successLearn, improve, developver 4 June 201119
20We believe we can build a great promising future…. 2020
21Philips 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 growthGenerate a return on invested capital of at least 4% above Weighted Average Cost of Capital21
22Sustainability as a driver for growth Health and well-being solutions that make a differencePhilipsprogram reaches children across new borders, teaching them about healthy lifestylesSustainability as a driver for growthOur commitmentOne of the strategic drivers behind our targets is a commitment to sustainabilitySuccess of EcoVision4 program: Our Green Product sales represented around 30% of sales in 2009, 3 years ahead of our 2012 targetEcoVision5 programTargets for the period 2010 – 2015Bringing care to more than 500 million peopleImproving 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 products2222
23New social, economic and environmental challenges Livable cities: Improving health and well-being in the urban environmentRapid urbanization More than half the world’s population already lives in cities and urban areas– this is predicted to rise to almost 70% by 2050New social, economic and environmental challengesSafety 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 readingGrowing 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’.
24Livable citiesHow 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 readingThe 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?
25Listening - 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 readingQuality 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
26Facilitating - 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 readingThe 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 toparticipate 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 residentsof cities today, the program consists of three distinct award categories:• Well-being Outdoors: initiatives that will help citizens feel safe in public spaces or helpcreate city identity and foster a sense of belonging; • Independent Living: initiatives that will help the growing number of elderly people livingalone 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
27Creating - 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 readingPhilips 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
28Living in a city should be an opportunity to thrive, not a burden Livable Cities is an achievable visionAs 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 ownershipLivable Cities is not an ‘ownable’ space but rather a shared, public forum which encompasses and engages every layer of society.Pragmatic innovationSolutions firmly grounded in practical applications – already available today – will help secure the long-term future of our cities and their citizens.Our roleIn addition to developing relevant solutions, we are also facilitating dialogue, encouraging partnerships and sharing key insights among stakeholders.Background readingFaced 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.
29Philips wants to be a global leader in health and well-being, Vision 2015 Our ambitionPhilips wants to be a global leader inhealth and well-being,becoming the preferred brandin the majority of our chosen markets.We believe Philips is uniquely positioned forgrowth through its ability to simply make adifference to people’s lives with meaningful,sustainable innovations.