Philips banks on innovation products

The overall strategy includes close collaboration with local partners to achieve product creativity.
President and chief executive officer Frans van Houten recently said the company could no longer focus on low-price markets, with innovation being one of the key strategies set to enable it to maintain profitable growth.
“Innovation does not only help us maintain profit in normal economic situations, but also during the current economic challenge,” he said.
He said Philips had a concrete policy to allocate 7 per cent of its sales to research and development, and the company recently announced an additional investment of 200 million euros (Bt8.34 billion) in this area. The R&D budget will go to its three core sectors of healthcare, lighting and lifestyle products.
“The investment will help us grow in our targeted sectors, and maintain Philips’s leadership in the light-emitting diode [LED] lighting market,” van Houten said.
Presently, the sales proportions for healthcare, lighting and lifestyle products are about 40 per cent, 35 per cent and 25 per cent, respectively. Philips last year generated sales of 25.42 billion euros.
The company, which used to market effectively in consumer electronics such as television sets and DVD players, is shifting from this segment to focus more on personal lifestyle products related to healthcare and better living.
Philips recently announced the strategic move on the occasion of its 120th anniversary.
Van Houten said innovative products fitted very well with global economic challenges such as environmental problems, energy saving, the ageing society, the rise of chronic diseases, and sustainability.
For example, LED lighting equipment will help consumers save on energy costs, while innovative healthcare products will lower patients’ medical expenses.
Other key Philips strategies are to understand consumer needs and bring products to market as rapidly as possible, and to cooperate with partners such as local companies, universities and governments to create products and solutions that meet customer requirements.
In order to successfully pursue these strategies, Philips needs to become less complex and create products that suit local demand, he said, adding that the teamwork between the R&D and marketing teams and its customers were crucial in this regard.
Philips is targeted on growth in emerging markets, the president said. The company early this year moved its head office for domestic-appliance business to Shanghai, and also acquired the Chinese kitchen-appliance producer, Povos. It also has a presence in the Indian, Brazilian and Russian markets.
Last year, sales from emerging markets accounted for 33 per cent of overall sales.
Asean, meanwhile, is a regional hub that is expected to contribute good growth to the company, he said.
Van Houten previously lived for 10 years in Singapore, where Philips’s design centre is located