Speech Frans van Houten at the Philips Innovation Experience 2011, September 27, 2011

September 27, 2011

Ladies and Gentlemen,

 

Welcome to our Innovation Experience! And welcome to the smartest city in the world! In June, Eindhoven was named ‘Intelligent Community of the Year’ by the international think tank ‘Intelligent Community Forum’ in New York. And one of the most important criteria of the judges was innovation and that is what we are going to experience today.

 

I am very proud of this distinction – I was born here. But more importantly, this is also a great homage to Anton and Gerard Philips, the founders of our company. When they set up a small lighting company here 120 years ago, Eindhoven was a poor town with only 4,500 inhabitants. Today it is a world-class high-tech hub. And I believe that the drive, the entrepreneurship and the creativity of these two Philips brothers contributed to this. They understood the importance of good ideas and good technology.

 

At Philips, innovation is our lifeblood. And we have an impressive innovation track record. Light bulbs became X-ray tubes for healthcare, radio lamps, and cathode ray tubes for television. We stood at the cradle of the CD and the DVD, digital technologies that had a major impact on how we listen to music or watch movies. And we are still going strong. We are a global company, present in over a hundred countries, with a very strong brand. While our product portfolio has changed profoundly, innovation remains a cornerstone of our business strategy.

 

The importance of innovation

 

In my view, innovation starts with a good idea, which comes from true understanding of your customers and markets.  It means that we need to offer the right products and technologies people need. And bring it to market fast and effectively. If we get that whole chain right, a good idea will become a successful innovation, grow the business and will become relevant for our customers and the society in general. 

 

Innovations are essential for us. They inspire us and improve our lives and they help us overcome major societal and environmental challenges such as an aging society, the rise of chronic diseases, the need for energy efficiency and a sustainable world, and consumers’ growing desire to lead a healthy and exciting life.

 

Today, you will see many exciting and innovative jewels that improve people’s lives.  We make cardiovascular surgery quicker, safer and less costly. Our smart lighting in schools helps students to achieve better results and lowers the schools’ electricity bill. And our innovative kitchen appliances help people prepare healthier and tastier food.

 

At Philips, we want to excel through customer intimacy, innovation and speed. That is how our innovations can add value for our customers. To underline that innovation is a strategic cornerstone for us, I announced this summer that we are stepping up targeted investments in market penetration and innovation by an additional investment of  200 million Euros. We believe that nurturing our innovative core competencies will help us increase the number of market leadership positions we have and rejuvenate our company.

 

For me, customer intimacy is an essential part of innovation. That means you need to know what your customers need. Hospitals in India have different needs from hospitals in France. Drinking coffee is not the same in Brazil and Germany. And you can’t think up all the detailed solutions for energy efficient street lighting in a Chinese city from an office in here in the Netherlands.

 

Innovation in Emerging Markets

 

I believe that future global growth will be concentrated in emerging markets. We fully realize that we need to be very present in these markets in order to provide locally relevant, innovative products. Just to give you an example, we treat China as a home market. That means, earlier this year, we moved the head office of our Domestic Appliance business to Shanghai and in July, we acquired the Chinese kitchen appliance maker Povos. As a result, we now innovate in and for China. Let me give you another example: residual pesticides on fruit and vegetables are a serious problem in China. We have developed the “Active Water” solution to tackle this. We have also developed a solution for indoor air pollution in China, caused by chemical substances emanating from inner walls. Of course, our focus in emerging markets is not just on China. We are strong in Brazil and Russia and strong in India, where we are stepping up our investments to build up a stronger presence in the kitchens of the Indian households.

 

But, to be successful innovators, we need to be fast. Philips can only unlock its full potential if we get faster in responding to customers. That means taking more risks, but also providing customers what they want, and more important when they want it. An innovation that comes too late is not an innovation at all. At Philips we need to speed up - with the mindset of being close to the markets and eager to win.

 

To understand the local needs of clients, we work closely together with them. Already at an early stage, we look for possibilities to align our innovation strategy with our clients’ aspirations, engaging in long-term, win-win collaboration where possible. Recently, we won a contract with a European hospital for medical imaging equipment because the hospital decided to go with Philips based on our exciting research roadmap in that area for the next five years. “You want to go where we want to go”, is what they told us.

 

We do not only partner with our customers. We also team up with other companies, with universities, with government and with start-ups.  Intense cooperation is so important because it breeds creativity. Innovation is near when researchers from different backgrounds, different companies and universities, work together, each one at the edge of their scientific comfort zone. And together they can do amazing things.

 

One of the reasons the Intelligent Community Forum chose Eindhoven as the smartest city of the year is exactly this cooperation between industry, companies and academia in Brainport, the greater Eindhoven region. The High Tech Campus Eindhoven is at the very center of Brainport. Once a ‘Philips only’ research campus, the High Tech Campus is now one of the world’s foremost high tech hubs, where more than 90 companies and research institutes innovate together. At the campus, some 8,000 people of over 50 nationalities work side by side.

 

Our innovative power is not limited to the High Tech Campus here in Eindhoven – Philips innovates all over the world. Let me give you a couple of examples: in China, we engage in medical imaging R&D for the Chinese market at our Suzhou campus. Earlier this year, we reached an R&D agreement with Rosatom to jointly develop a nuclear medicine ecosystem in Russia. We have strong healthcare R&D facilities in the United States and India. And here in Western Europe, we have important research activities in Germany, France and in the UK. In Spain, we collaborate with key luminary partners.

 

What I also want to emphasize is that innovation is more about passion and believing in ideas than just about pouring money into it. As Steve Jobs said: “Innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea. It’s ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea.” He is right. For innovation, we need drive, we need entrepreneurship, we need dynamism. That’s the mentality we need to foster. 

 

A great example of cooperation and entrepreneurship in innovation is our Image Guided Intervention solutions in Healthcare. Image Guided Intervention allows us to reduce the need for risky open heart operations by dramatically improving the precision of minimally invasive alternatives to replace heart valves using catheters. At Philips, it was the drive of a small group of passionate people that, even against initial opposition, propelled the project forward. Philips could not have done this on its own. We worked together with catheter companies, including some small ones, and university hospitals. Together, we came up with great solutions that now help save the lives of people for whom open heart surgery is too risky and at much lower costs.

 

And I want to see many more of these examples in the near future as passion, entrepreneurship and cooperation breed success.  And I intend to drive innovation within Philips with more intensity to win new territories and customers. Because creating value in the market also means creating value for the society.

 

Innovation needed more than ever

 

In innovation, we need to make clear and courageous choices. It is better to go for a few things and do them right than to do a lot of things halfheartedly. At the moment, our world needs innovation more than ever. I see innovation as an important driver for profitable growth, not only in good economic times but even more in challenging economic times we currently face.  Investing in innovation will help you to become more productive and more future proof. By investing in breakthrough innovation you could even invest yourself out of the crisis.

 

I would put it even stronger and call for action to invest in innovation as it can contribute to reducing the huge public deficits many countries are currently facing. In healthcare for example, investments in Home Healthcare and sophisticated Patient Monitoring can improve the quality of the full care cycle while at the same time reducing its overall costs significantly.  It is a myth that innovations and new technologies will increase the costs of healthcare. To the contrary, investments in technology have proven to bring down the costs of the overall healthcare system.

 

And the same holds true for lighting. We recently upgraded highways in both Malaysia and the Netherlands with new energy efficient street lighting and built a system that actually is paid out of its savings. And upgrading and refurbishing existing buildings with new, energy efficient technologies will result in even more attractive office spaces in the future. Together we can save tens of billions of Euros a year by switching to innovative, energy efficient lighting of our streets and buildings.  I firmly believe that today’s investments in innovations will lead to tomorrow’s savings.

 

Summary

 

There are not that many companies - such as Philips - that have been innovating for 120 years. And we plan to do so for another 120 years! The building where we are right now, the Evoluon, marked our 75th anniversary in 1966. It was the showcase of our innovations in the late 1960’s and 1970’s. Today, our researchers, developers and designers are eager to help build a more sustainable world with innovative solutions that make sense. We have maintained a strong research capacity where other companies haven’t. And we are constantly looking to attract the brightest talent to do amazing things together. Take for example our cross-sector competencies, which allow us to integrate light innovations in healthcare solutions. Today you will see LED patches integrated in textile to alleviate muscle pain and our Heal Well proposition for hospital rooms, which allows patients and staff to control the lighting in the room in order to support the healing process, improve sleeping patterns and increase the patient’s feeling of wellness. And have a close look at our RéAura, a revolutionary laser skin rejuvenation system which we developed only very recently.

 

Ladies and gentlemen, to sum up:

 

Since I took over as CEO of the company earlier this year, I have stressed the importance of shaping Philips into an organization where entrepreneurial spirit can thrive and an organization that is equipped to bring meaningful innovations to the market faster. These are the key ingredients to foster innovative ideas and deliver value to our customers.

 

It is no coincidence that I have a painting of Anton Philips in my office. His presence inspires me; it reminds me every day of the long and proud history of our company in innovation and entrepreneurship. And I want to continue this tradition.

 

Today, you will experience exciting future products and solutions that embody the kind of Philips I envision: A company with great people and great capabilities, an eagerness to innovate and come up with meaningful solutions that shape our society, now and in the future. That is what inspires us at Philips; that is what we are passionate about.

 

I hope that today, you will recognize that passion.

 

Thank you very much for your attention and I hope you have an inspiring day with us.