Vision & Strategy

The Philips investment proposition

 

Our vision and mission

At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 2025. We will be the best place to work for people who share our passion. Together we will deliver superior value for our customers and shareholders.

Our strategy

In 2011 we embarked upon our multi-year Accelerate! journey of change and performance improvement. Designed to transform Philips into a truly agile and entrepreneurial company, Accelerate! is all about delivering meaningful innovation to our customers in local markets – and doing so in a fast and efficient way.

 

We take a systematic approach to value creation. To ensure that success is repeatable, i.e. that we create value for our stakeholders time and time again and deliver on our mission and vision, we have adopted the Philips Business System.

Key initiatives have been launched to step up resourcing for growth, granular strategy execution, value delivery to customers, and to adapt the culture and reward system. Initiatives also include a EUR 1.8 billion overhead cost reduction program to be completed by year-end 2016, End2End productivity gains and procurement savings of EUR 1.0 billion through Design for Excellence (DfX).

 

Accelerate! is working well and will continue to create lasting value for customers, shareholders and other stakeholders. Our Path to Value sets out the roadmap for this transformation journey:

As part of our transformation, we have moved from a holding company structured around multiple divisions to two stand-alone operating companies – in the areas of health technology and lighting – with the ambition of capturing growth and creating value, both leveraging the trusted Philips brand. In May 2016, Philips Lighting was listed and started trading on Euronext in Amsterdam as a stand-alone company, focusing on the great opportunities in energy-efficient connected LED lighting.

Addressing the need for better health and better care at lower cost

Royal Philips is focused on expanding its core business to address the opportunities in the fast-growing health technology market. In an increasingly connected world, where people are wanting to live healthier lives and societies are looking for more effective and lower-cost solutions across the health continuum, our businesses – with their combined clinical and consumer capabilities and cloud-based digital health platform – are excellently positioned to capture growth. Their total addressable market is estimated at over EUR 140 billion, with attractive profit pools and a strong growth outlook.

 

Philips’ HealthTech businesses have an attractive opportunity to increase profitability through top-line growth and margin expansion from further operational improvements and cost savings delivered by our Accelerate! program.

 

Our plan to grow Philips' leadership in health technology

Progress on our Path to Value

Operational improvements offsetting macro risks and headwinds

In October 2013, we launched a EUR 1.5 billion share buy-back program, which will be completed by 2016.

Sustainability

At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 2025. To guide our efforts and measure our progress, we take a two-dimensional approach – social and ecological – to improving people’s lives. Products and solutions from our portfolio that directly support the curative (care) or preventive (well-being) side of people’s health, determine the contribution to the social dimension. As healthy ecosystems are also needed for people to live a healthy life, the contribution to the ecological dimension is determined by means of our Green Product portfolio, such as our energy-efficient lighting. In 2015, we improved the lives of 2.0 billion people, an increase of approximately 140 million compared to 2014.

 

Success of our EcoVision program

Green Product sales increased further in 2015 to 54%, up from 50% in 2013, driven by investments in Green Innovation. In 2015, Philips invested some EUR 495 million in Green Innovation. Lighting continued to be the largest contributor, mainly as a result of investments in LED.

 

Healthy people, sustainable planet

On June 20, 2016, we launched the next 5-year sustainability program named Healthy people, sustainable planet. In this new program, we have set ambitious targets in order to retain our leadership in sustainability. The key targets for 2020 are:

 

  • Increase Lives Improved to 2.5 billion people per year
  • 70% of turnover from green revenues / 15% from circular revenues
  • Carbon neutral operations, 100% renewable electricity
  • 90% of operational waste recycled / zero waste to landfill
  • Striving for a zero injuries and zero illness work environment
  • Supplier sustainability program with all suppliers