Less than a week after announcing a spin-off of the company's historic lighting business, Royal Philips chief executive Frans van Houten unveiled a batch of innovations and his ambitious goal to reform the healthcare industry, as well as a plan to "sell
Speaking at the “Philips Innovation Experience 2014” event, which nearly 200 journalists from around the globe attended in Eindhoven – the city where Gerard and Anton Philips turned on their first incandescent bulbs and created the Dutch company 123 years ago – van Houten said Philips considered organisational change as “a way to boost investment and grow faster”.
Philips declared on September 21 that it would spin off its lighting operations into a standalone company, possibly for an initial public offering in the future, and combine its healthcare and consumer-lifestyle divisions into a HealthTech company.
The separation will end Philips’s more than 100-year-old conglomerate structure.
The CEO said the separation of the legal entities, which would take some 12-18 months to complete, may not be noticed by its customers or consumers at large.
“Our customers and consumers might not see much difference. Many people don’t know [our former] TV [division] is already a separate company,” he added.
The Dutch giant sold it television business in 2012, after spinning off its semiconductor division – now known as NXP Semiconductors – in 2006.
Van Houten said Philips must keep reinventing itself to stay relevant in its markets, including moving away from categories that are no longer growing, or in which it has no chance to differentiate.
“But the spilt we announced today is different to the TV-business separation that we did earlier. Both offer exciting opportunities, but the two areas have nothing much in common,” he said.
Affirming the “A” rating given to Philips, Fitch Ratings said in a report issued shortly after the company’s announcement that it considered Philips’s loss of synergy from the dual separation of its HealthTech and lighting businesses to be limited, given the unrelated technologies utilised by the two businesses.
“HealthTech will not benefit from the same multi-sector diversification as the existing Philips group, which is exposed to the healthcare, consumer and lighting markets. However, the loss of diversification is, to a large extent, mitigated by HealthTech’s scale of operations, leading positions and improved earnings profile,” said the international rating agency.
Thanks to advances in imaging and monitoring technologies, combined with rapid development in digital health data and cloud computing, Philips sees a “coming era” of a healthcare industry that is highly integrated and personalised, said the chief executive.
The company will also continue with its bold mission to improve the lives of 3 billion people by 2025, up from 1.8 billion that it serves yearly today, he said.
“Innovation is not only about products, but it is also about a business model that will enable us to deliver healthcare to [people at] the bottom of pyramid,” he added.
On the other hand, Philips also sees that people, particularly in the growing middle class, are beginning to value their health and well-being more than material wealth, he explained.
Van Houten said the lighting industry was also undergoing a transformation, with LED (light-emitting diode) and digital lighting technologies catalysing a shift to lighting solutions.
“Even so, light will still be light as we know it. We’re now selling light as a service. You can rent light, and only pay when you use it. Already many cities have contacted us [about this],” he said.
Innovations on show
Among the innovations showcased at the “Philips Innovation Experience 2014” were Minicare Cardiac Tropnin-I, a blood test that will give doctors lab-equivalent results for on-the-spot patient diagnosis; and UroNav, a solution that combines MRI images, ultrasound data, and electromagnetic tracking to help clinicians make better-informed patient-specific decisions in their treatment of prostate cancer.
Also showcased were Philips PulseRelief, an app-enabled TENs (trancutaneous electronic nerve stimulation) device that helps users choose and control personal treatment to relieve pain; and eCare cloud-based solutions for collaborative care.
On the lighting front, Philips showcased a Power-over-Ethernet connected office lighting system; and an indoor positioning system that uses “connected LED in-store lighting” to communicate location-based information to shoppers via a smart-phone app, such as special offers and information relevant to their location in the store.