|
|
|
|
|
Here he is, the Dutch engineer who describes his company as "too old, too male and too Dutch". At 59, he is currently Member Group Management Committee & CEO Asia Pacific, Royal Philips Electronics, a $31.8-billion company. On a recent visit to India, he spoke to BT Online's Shailesh Dobhal about the challenge of rejuvenating Philips. Q. Philips is considered a brilliant inventor, but time and again it has fumbled in marketing. Is that changing -- and how? A. That is what people say. I am not disagreeing, but if I look at our company and the categories that we play globally, we are No. 2 in medical systems, No. 1 in lighting, No. 1 in domestic appliances, No. 1 in shavers, No. 1 in steam irons and No. 1 in electrical toothbrushes. In semiconductors, where we participate, we are among the top three. In televisions, No. 2, and in audio, No. 2. So we must not be completely stupid! Q. Sure, but... A. And I want to add something to this: the hit rate in this industry is little better than the movie industry, but low in general. The hit rate in the movie industry is 10 per cent. In horse races, it is 5 per cent, and in the electronics industry, it is 20 per cent. So only one in five project wins. And if you'd care to go through the list of failures of our competitors, I will be only too happy to produce it for you. The real challenge for (Philips') management is to increase that hit rate, because (right now) we are not happy with it. I agree with you that we invent more than we produce in the market place. And that is not to say we are not good inventors, because we are the No. 1 licensing company in the world. So what we don't make in the market, we make an IP (intellectual property) out of it. But you are right, we're not good enough in bringing technology to the market. We are improving that by putting more emphasis on marketing, by putting more people in marketing, by doing advanced testing, by doing, for instance, the 'home-of-the-future', which just opened in Singapore with live environment, with 30 families signing-in. It concerns us because we like to see more successes and higher return on investment. Q. Your Chief Executive Gerard Kleisterlee recently said the company's problem is that top management is "...too old, too male and too Dutch", and perhaps the corporate culture too techie. And that inhibits market-savviness and global outlook. Do you share his views? A. He is my boss, what should I say! It is an issue and we want to be a real global multinational. We are (already) a global multinational. There is a ranking of most global companies, and we are the No. 12 here, if you look at sales, people and assets. But we have to admit that the Dutch influence by history is still very high and we would like to change that. On the other hand, tell me a Japanese company which has a foreigner in their management? We want to have more women on our staff and have also made a commitment to the outside world to have 10 per cent women in the top ranks, a stiff target. We want to do that because we believe that a mixture of people can create more creativity and only relying on just Dutch engineers---and I am one, and Kleisterlee is another--- is not good enough for the future. That is not to say it is a disaster. If that were, we would have been fired in the meantime. Q. Consumer Electronics is a revenue giant, but an earnings disappointment for Philips. What's been done to turn that around? A. Consumer electronics is our No. 1 revenue generator. Medical systems is No. 2. And we think that medical systems, within five years I would guess, would become No. 1. We have done a lot of acquisitions in medical systems, and we first want to get all that digested and then we might have to make the next step. Consumer electronics is, in general, an industry that doesn't make a lot of money worldwide. You don't find many companies here that make more than 4 per cent (Philips is around 2.4 per cent). So one thing that we have to solve is the United States problem, growing sales there. and we are committed to solving that by the last quarter of this year, with break-even next year, and we will do whatever it takes to reach there. Secondly, we have changed the whole structure of the division by what we call de-verticalising it. What we have done is to take almost all the capital out of the business and virtually work on zero working capital, by moving a lot of manufacturing to sub-contracting. Moving a lot of R&D into semiconductors, because nowadays lots of specifications and characteristics of (consumer electronics) products are in the semiconductor. India here is a little different, because working capital is as high as anywhere in the world, but Philips India makes lots of products itself... it has a lot of factories. So India has a little bit more capital, but profitability in the country is above the world average. So India in that sense is doing better in consumer electronics. We have a very good market share in audio, and we do relatively well in televisions. Q. But there is this feeling that Philips had the time in India to take the (colour television) market, but it couldn't and the Koreans (LG and Samsung) who came in much later, did. A. Well, that is a correct statement, because facts are facts. But don't forget that we employ more people in India than the Koreans put together. We have a thousand people in the software centre, with 20 per cent of our software engineers located in India. In the television business, I agree with you. We are not even No. 3 here. Looking forward, it will be a mixture of a little bit of everything--prices, more marketing push et al. Q. But you are not seen as an aggressive marketer in India. A. Well you can say that. But the numbers are numbers. What am I going to do about it? Let me first put it in perspective. What I want to do, is develop a plan for Asia-Pacific. Not to look at it as one region, but as five plans, one per domain geographically. India, China, Japan, Korea and well, call it ASEAN. We have 22 per cent of our worldwide sales in Asia-Pacific, and we think this area is so important that we have to increase the push. So in any country we have to look at the market, the market potential and our position. In audio, we are very big (in India), but we may want to grow that market. In televisions, we have to do something, and that is a matter of distribution, talking to the trade, talking to the consumers and the right products. In that sense, business is simple. We could have done that before, so we have to correct that. Q. How big and important is India within Asia-Pacific for Philips? A. It is just under 10 per cent of sales, after China, Japan and Korea. And I am very ambitious in that planning, in the sense that I would see us increasing that sales percentage overall in every country, and India in that sense has more potential than the US in certain product categories. We might have to introduce some products typically for India, wireless for example. We are strong in phones, we have a good position in phones in China, so why wouldn't we get a good position in India? So there are a lot of challenges. One is to make use of market potential and grow our sales here by increasing market share, or by moving into other categories. Second is to make use of India as an export centre, and we have done that only incidentally. We have to make use of talent here in India. And then you look at the Indian economy growing... India is a very big country. We have been here for the past 73 years, and we had our bad periods--- very bad periods---but we stuck and were amongst the very few that never left. We had to clean up the company five or six years ago, and it was in a certain way a very painful process, and we came up very healthy. And we invested, over the last five years, a considerable amount of money ($150-million), by funds that we generated here, but also funds that we brought in. And we acquired a factory (in Vadodra). India is important enough not to ignore, and we have also to be careful not to put everything in China, though it may be the current wisdom. Can everything go faster? Well, yes, always, everywhere. We operate in 150 countries, and they are all different.
|
|
Issue Contents Write to us Subscription Syndication INDIA TODAY |
INDIA TODAY PLUS | SMART
INC © Living Media India Ltd |
 |
 |
