Frans van Houten, President and CEO, Royal Philips
Abhijit Bhattacharya, Exec. VP and Chief Financial Officer, Royal Philips
Jean Botti, Exec. VP and Chief Innovation and Strategy Officer, Royal Philips
Ronald de Jong, Exec. VP and Chief Market Leader, Royal Philips
Pieter Nota, Exec. VP and Chief Exec. Officer of Personal Health, Royal Philips
Brent Shafer, CEO, Philips North America
NUMBER OF EMPLOYEES: 37,008
GLOBAL HEADQUARTERS: Amsterdam, The Netherlands
Philips, on the whole, is a company going through a significant transformation that ultimately will see the emergence of two unique entities. The first, which will remain as Philips, will support the healthcare world with its novel technology solutions. This unit will include not only the current Healthcare division, but also the Consumer Lifestyle portion; combined, the offerings are referred to as the HealthTech portfolio. While founded on lighting, the company finds itself seemingly moving away from that technology. With that in mind, the yet-to-be-named second firm will become a new company that is primarily made up of the Lighting unit.
By maintaining the ability to deliver care through advanced technology from the doctor’s office to the hospital through to patients’ homes, Philips views healthcare as a high-value growth opportunity. Meanwhile, by separating out the lighting business, it sees more ability to strengthen its position in the market while delivering advanced solutions.
“It is my deepest conviction that both Philips and Lighting stand to benefit from the separation, as it will enable greater focus on their respective attractive markets and allow them to capture higher growth and deliver higher profitability,” said Frans van Houten, CEO of Royal Philips, regarding the forthcoming company split.
The path that has led Philips to this step in its strategy began with the company embarking on its Accelerate! journey, which started in 2011 as an effort to improve performance. A split of the company would represent the most dramatic change that’s occurred since the start of the initiative. Prior to this phase, the effort has led to the implementation of the Philips Business System—a strategic push to help the company enhance its focus on quality and excellence while simultaneously improving productivity. van Houten credits the many large-scale, multi-year hospital deals Philips won in 2015 to the improvements made through these efforts.
Those wins and the fruits of the company’s labor are quite apparent in the financial statement for 2015. The Philips healthcare division saw an increase of 19 percent in sales over the prior year, which translated to 10.9 billion euros. When digging deeper into the sales numbers, Philips demonstrates the importance green product solutions have become in healthcare. The company defines its green technologies as offering “a significant environmental improvement in one or more green focal areas,” such as energy efficiency, packaging, weight, recycling and disposal, or lifetime reliability. Sales of those products saw an increase of 31 percent over 2014—a figure of 4.58 billion euros.
Geography was irrelevant to Philips’ success last year, as both mature markets and growth sectors saw double-digit percentage sales increases. Encompassing Western Europe, North America, Japan, South Korea, Israel, Australia, and New Zealand, mature areas accounted for 8.2 billion euros, representing an increase of 19 percent over the prior year. Growth geographies—Asia Pacific (excluding those listed in the mature regions), Latin America, Central and Eastern Europe, the Middle East (minus Israel), and Africa—contributed 2.70 billion euros, an increase of 18 percent over 2014.
“We reinvigorated our Healthcare business in North America and gained momentum in winning large-scale multi-year healthcare enterprise deals,” said van Houten. “And at our Imaging Systems facility in Cleveland, we saw a gradual ramp-up of production in the course of the year.”
Philips put its increased sales directly back into further development of innovation (at least in part). Devoting a five-year-high of 7.9 percent of total sales (1.92 billion euros) to research and development expenses, Philips continued to plan for future success. While the specific amount of investment made in the healthcare space was not disclosed, Philips put 495 million euros toward green innovation. Tied directly to prior years’ investment in R&D, the company filed for 1,750 new patents in 2015 across all divisions—also representing a high mark over a five-year-period.
Just before the close of 2014, Philips announced the acquisition of Volcano Corporation, a provider of image-guided therapy technologies. Philips had maintained long-standing partnerships with the company prior to the acquisition, and the firm’s assets blended nicely with Philips established image-guided therapy business group. On Feb. 17, 2015, Philips completed the acquisition.
“The completion of the Volcano acquisition is an important milestone in our strategy to become a systems integrator in the fast growing image-guided minimally invasive surgery market and accelerate our growth in that market,” van Houten said in a company statement regarding the completion of the acquisition. ”The combination of Volcano’s broad portfolio of imaging and measurement catheters and Philips’ interventional imaging solutions allow us to provide our customers with an integrated solution to improve procedural outcomes at a decisive stage in the health continuum. ”
In May, parent company Royal Philips signed a five-year research alliance with the Massachusetts Institute of Technology (MIT) as the first step toward the development of technology solutions that would ultimately broaden the company’s HealthTech offerings. The agreement would also lead to innovations for the company’s lighting business unit.
At a budget of $25 million, the agreement reflects the company’s largest research alliance investment in the region. The deal also marks the relocation of Philips’ research center to Cambridge, Mass., in order to take advantage of potential research opportunities with other universities in the area, as well as MIT faculty and Ph.D students.
“The Boston area is rich with innovative talent that is regularly applying new thinking to solving big societal issues and developing disruptive technologies that can address those issues in new ways; it’s a culture and vision that is very much in line with that of Philips,” said Henk van Houten, global head of Philips Research. “By moving to Cambridge and collaborating with MIT, its staff, and its partners, Philips can work with some of the best minds in the world on healthcare delivery, looking at ways to better prevent, manage, or treat common diseases across the health continuum.”
Just a few months later, the Philips/MIT team announced that one of the first areas it would tackle was the management of brain injuries. Researchers would look at using Philips’ ultrasound technology in conjunction with MIT physiological modeling as a less invasive way to measure intracranial pressure (ICP).
“The current invasive method of measuring ICP is used only in the sickest patients, but knowledge of ICP is potentially important in a much broader population,” said Thomas Heldt, the Hermann L.F. von Helmholtz Career Development Professor at MIT’s Institute for Medical Engineering & Science, and assistant professor in MIT’s Department of Electrical Engineering and Computer Science, who is principal investigator of the study. “Our goal is to develop a noninvasive method of measuring ICP that could be used in treating a much wider range of conditions. This project gives us an opportunity to test innovative hardware and modeling techniques at the bedside in real time.”
Reflecting industry-wide trends that see digital healthcare gaining significant momentum, Philips debuted its app-based ultrasound solution, Lumify. This technology provides high-quality imaging to a smart device via a subscription model. It is intended for use by emergency departments, urgent care centers, and other clinical settings. Cloud-enabled, the technology offers users easy and convenient access to diagnostic images essentially anywhere they are able to be connected to the internet.
Information is also available via Philips’ HealthSuite Digital Platform, another cloud-enabled platform that offers users data and analytics in the hope of improving patient care. Collaborating with Amazon Web Services, this digital offering connects with a variety of devices to enable healthcare professionals to enhance their access to critical patient information.
“Ultrasound’s versatility, portability, and safety enabled it to become one of the most widely used first-line diagnostic tools. With the advent of app-based ultrasound, we strive to bring the value and benefits of ultrasound to more places across the health continuum,” said Vitor Rocha, CEO of Ultrasound, for Philips. “App-based ultrasound provides valuable information to the right people at the right time. It’s designed to drive transformation in care delivery and digital health—a dynamic combination that can extend the reach of ultrasound in a remarkable way.”