Sustaining current and future

performance in times of great change

Conference on Quality Award Systems

December 15-18, 2009

Agenda

• Introducing the Philips company

• The business model at a glance
• How does the Q community support line management
• Innovations on the Business Excellence assessment approach
• Challenges of value adding assessments
• In summary

Are we really connected with the business?

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Building the leading company in
health and well-being
An introduction to Philips
A well-respected, blue-chip
company for over 100 years

Founded in 1891
Headquartered in Amsterdam, the Netherlands

Sales over EUR 26 billion (USD 33 billion)

Over 30% in emerging economies

116,000 employees
Sales and service outlets in 100 countries

Globally recognized brand (world top 50)

Our brand value has doubled to $8.3bn since 2004

€1.6 billion investment in R&D, over 6% of sales

55,000 patent rights – 33,000 registered trademarks
– 49,000 design rights

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Philips defined: we are…

“…a global company of leading businesses

creating value with meaningful innovations that
improve people’s health and well-being.”

Health and well-being Meaningful innovations

A commitment to healthy, fulfilled lives Improving people’s lives
in our communities and societies Going beyond technology
our world Introduced at the right time

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Philips portfolio leverages a
number of critical global trends

Aging population
The number of people aged over 60 will double from
500m today to 1 billion by 2015.

Emerging markets
99% of future population growth will be in emerging
markets. Emerging markets already produce 28% of
global GDP.

Empowered consumers
Demanding solutions to fulfill their personal needs.

Climate change and sustainable development

19% of global electricity consumption is used for
lighting. We can save 40%...or 600 power stations
worth of energy!

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Our health and well-being offer
is powered by 3 businesses

35% 35%

30%

2009 indicative sales split

Healthcare

Lighting

Consumer Lifestyle
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The power of Lighting
Further strengthening our global leadership

Lamps
Market leader: 1 out of every 4 lamps used worldwide is a
Philips lamp

Professional luminaires
No.1 lighting 65% of world’s top airports and 30% of offices,
hospitals and landmarks

Consumer luminaires
Market leader and front runner in driving the switch to energy
efficient lighting

LEDs
Strong presence in the complete solid state lighting chain

Automotive lighting
Leads the market, with 1 in 3 cars worldwide using Philips
automotive lighting

EBITA target of 12-14%

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Creating meaningful innovations
Improving lives in new ways

Gain deep insights into people’s

needs and aspirations
by following a process requiring
end-user input at every stage

Transform insights into innovations

by combining the diverse
perspectives of different disciplines

“Learn fast, fail cheap”

by applying a rigorous process to
assess value potential early

Lead in open innovation

by working closely together with
partners in a spirit of open innovation
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End-user input
at every stage of our innovation process

Insights on needs Multiple solutions Conclusions are validated Product creation process
and aspirations are are created by in-house with end-users and continues outside-in
gathered by listening, Marketing, R&D, and customers, both globally thinking throughout,
watching and engaging our Design teams who and locally. with experiential” and
end-users and customers collaborate, together with “simplicity” testing.
external specialists

This is how we are connected.

How about you?
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Close customer relationships
Creating promoters of our brand

Customer loyalty
is fundamental to growth
and profitability.

We win the trust of customers

and partners
• by understanding and anticipating
their needs
• by sharing our insights
• by providing the right products
and solutions

We monitor our effectiveness

with the Net Promoter Score based
on a simple question:
“would you recommend us to
a friend or colleague?”
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Philips people
Strong leadership, a highly engaged workforce

Employee Engagement Index A strong leadership team

High performance benchmark 60 culturally diverse top leaders focus on driving
our global businesses to reach their short and
long term goals.
70
69
A high performance workforce
64 The annual ‘employee engagement index’ polling
over 90,000 of the Philips workforce is touching
61 the high performance benchmark of the 3rd party
59 agency managing the survey.

Living the values

Philips has four simple values which ‘live’ within
the company and drive the actions of our people.
2005 2006 2007 2008 2009
(target)
An eye on the leaders of tomorrow
We structurally manage our talent, offering fast-
track, stretch opportunities for top performers to
ensure a quality succession pipeline for our
leadership team.
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Our agenda for 2009: not business as usual
Proactively managing in the current economic environment

Confidence in our strength

based on our balanced portfolio
of business and our strong
financial position

Managing the business

relative to markets and competition

Staying the course

with unchanged ambitions and
strategy to build the leading brand
in health and well-being

Management agenda 2009

will put us in a good position to benefit
from the upturn when it comes

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Evolution of Quality Management in Philips

’85 - ’90 90 -’99 2000 - …

Name CWQI Philips Quality BEST

Focus Internal Customers All stakeholders

Quality of … Products & Processes & Competence

Improvement
Functional & cross-functional & total value chain
teams
Relation to Separate Parallel Implementation
strategy

Managers .. Delegate Support Lead

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The Philips Business Excellence (PBE) Challenge

Going for GOLD as business and division

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What did we learn in Philips?

Assessment approaches and practices may be:

• Time consuming
• Paperwork intensive
• Heavy on resources
• Award or bonus driven
• Disconnected from the real business issues
• Lacking “assessment and review”
• Still product quality issues
• The same way for too many years

No holistic reviews if improvement methods are not in place !

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 Another Initiative ??

Oh no,
not again!

PQA-90

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Agenda

• Introducing the Philips company

• The business model at a glance
• How does the Q community support line management
• Innovations on the Business Excellence assessment approach
• Challenges of value adding assessments
• In summary

Are we really connected with the business?

18
HvB 20091212
The business process....

Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

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Do we address the need
for change...?
Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

20
HvB 20091212
 Supporting tools ISO, PST’s &
Desired Sates

Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

SWOT One Page Black Belts & BBSC

Strategy BIC

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 The holistic view ISO, PST’s &
2 levels of assessment Desired Sates

Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

SWOT One Page Black Belts & BBSC

Strategy BIC

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The One Page Strategy.... ISO,
ISOPST’s &
Desired
& PST’sSates

Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

SWOT One Page Black Belts BBSC

Strategy & BIC

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 One-Page Strategy
Company, division, plant or department xxx Date/rev #
Strategic Direction Business Drivers Results (BBS) Year 2010 Initiatives
Vision Leadership Financial

People Customers
Mission

Values Processes
Strategy/Ambitions

Partnership&Resources

Competences (People)

Processes

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 Strategic Direction

Vision - where are we going?

Mission - why are we here?

Ambition – what do we want to achieve?

Strategies – How are we going to get there?

Clarity particularly important in times of change

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The Black Belt programs ISO
& PST’s

Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

SWOT One Page Black Belts BBSC

Strategy &BIC

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 Three levels of performance
improvement

Problem Solving Continuous Breakthrough

Responding quickly to Improvement Improvement
contain and resolve Achieving step by step Managing all the
isolated discontinuities improvement across improvement efforts to
in performance all elements of the achieve the ‘vital few’
business priorities

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Balancing improvement resources
Strategic direction Business enablers Results (BBS) 2005 Top “Must Do” actions

Vision Leadership Financials 1. Achieve leading financial performance

A world where everyone can always - Develop a market driven and -Profitability amongst our peers
connect to information, entertainment and IFO, EPR, Cash
services continuous improvement mindset flow, Inventories 2. Realize breakthroug hs in operational
- Nurture an open two-way - Sales excellence for all parts of
Mission Nexperia, Key our business and
To be the leading provider of communication with our customers processes, delivering on

strategy driven continuous

semiconductor-bas ed solutions for our commitments timely
connected consumer applications employees and stakehol ders Customers and with zero defects
- Market share
Strategy People - Design wins 3. Create a flexible, world class
- Partner with leading customers, - Recruit, develop and retain a - Customer satisfaction manufacturing
content and service providers Vendor rating, organization and integral
- Develop customer solutions diverse and talented team of Pricing, supply chain which
based on Nexperia that combine people Complaint handling delivers responsively to

semiconductors, software and
services
- Manage a balanced portfolio
spanning emerging, mature
breakthroughs improvement
our customers
Values Processes
- Delight customers - Marketing and Sales 4. Grow our share of business by
- Deliver on commitments Process maturity increasing customer
- Develop people -New Product and System Creation satisfaction towards best-
- Depend on each other BCaM roll-out in-class

breakthrough
and multi-market products -Order Fulfillment and SCM
Partnerships & resources 5. Strengthen the product portfolio in line
- Set clear priorities in R&D Stacked Lead-ti me, with our strategy to
Supply reliability achieve leading market
investments and resourcing, and flexibility share positions in
in line with strategy Connected Consumer
- Use partnerships to extend Competence
our capabilities in technology, -People engagement 6. Improve employee engagement by

programs
upgrading our leadership,
manufacturing, and access to People management people management
skills skills, cross-divisional
customers -Technologies teamwork, and the quality
Use of advanced Si of our operations
Processes capacity,
- Marketing and Sales Patents
- New Product and System -Operational excellence
Creation Cost of non-quality,
- Order Fulfillment and Supply PBE, Sustainability
Chain
Management (SCM)

black belt
projects

other
projects
(bottom up)

© René Vervoordeldonk / Ronald Meijer

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 Teamwork: Business Improvement Competition

1) Engage people to start 2) Share knowledge & 3) Achieve great

improvement projects encourage people to team results and
work in a structured way make a difference

4) CL management in 5) Make improvement fun 6) Recognition of great

the jury results

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Success over > 10 years!
Lighting: 3415 teams
19400 participants (>40%)

Healthcare: over 350 teams,

close to 3000 people ( ~ 10%)

Consumer Lifestyle: ~750 teams

10-20% of employees involved
World Finals event with 60 teams!

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The Process Survey Tools.... ISO
& PST’s

Vision E Steady
state
x
processes
e
Strategy Deploy c Results
u
Change
t
manage-
e
Mission ment

SWOT One Page Black Belts BBSC

Strategy &BIC

31
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Process Survey Tools, what they are...

• A guidebook for self assessment of key processes

• Measure the maturity of the administrators processes
• Identify opportunities for improvement
• Enhance learning through common language and sharing Best practices

Towards World Class Element 1, 2…etc

10
10
9
9
8
7 8
6 7
5 6
4 5
3 4
2 3
1 2
0 1

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 Maturity scale
Approach, deployment and sometimes results
for each element at ten levels of maturity

10

1. Process elements 8
9

2. Maturity scale 6
7

3. World-class 5
4
4. Maturity profile 3
2
5. Profile comparability 1
0

Rule of thumb: level 5 = 500 EQA points

level 6 = 600 EQA points

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 Defines world-class levels

10

1. Process elements 8
9

2. Maturity scale 6
7

3. World-class 5
4
4. Maturity profile 3
2
5. Profile comparability 1
0

Step 10 describes how a world class company organizes and performs

Step 7 describes best-in-class

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 Assessing maturity profile

Element 1, 2…etc

10
1. Process elements 9

2. Maturity scale 8
7
3. World-class 6
5
4. Maturity profile 4
3
5. Profile comparability
2
1

Displays scores on a grid

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 Used to benchmark and learn!
(e.g. among NPO’s or Award Administrators)

Profiles of similar processes in different organisations

or the same process at different dates
Element 1, 2…etc

10
1. Process elements 9

2. Maturity scale 8
7
3. World-class 6
5
4. Maturity profile 4
3
5. Profile comparability
2
1

Organization A or date 1
Organization B or date 2

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 Process Survey Tools exist for:

• Manufacturing Process Management

• Human Resource Management
• Supply Chain Management
• Marketing and Sales
• Finance
• Purchasing
• Facility Management
• IT
• Innovation (several)
• Manufacturing Maintenance
• BEST

Why not have one for NPO’s and Award Administrators?

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Agenda

• Introducing the Philips company

• The business model at a glance
• How does the Q community support line management
• Innovations on the Business Excellence assessment approach
• Challenges of value adding assessments
• In summary

Are we really connected with the business?

38
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Self-Assessment

Our standards .....

Where are we relative to where we want to be as a business?

Business Targets On plan performance Basic requirement

Is used to learn & set

Benchmark Industry Leader, Best in Class
goals & targets

Desired State Our definition of Excellence Our on-going ambition

39

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Desired States: ambitions for excellence

• ‘Desired State’ concept triggers management to express their

ambition for the business in the language of the business
• Defines in the context of the particular business environment
where excellence is needed
• Facilitates identification of Business Drivers
• Helps to deploy the management ambition (2-3 years horizon)
• Challenges a critical view on existing KPI’s

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Business Process Area’s

PBE
Enablers Results

• Leadership 1 7
Management Processes
• Strategy planning & review 2 9

• Marketing 2 6
• Research & Development 4/5 6/9
Can we make this slide more
• Purchasing
exciting? 3 & Supply Management
“energy”statements….
Primary Processes • Manufacturing 4/5 6/9
Do we have a process convention
• Supply Chain Management
in Philips?
• International Retail Management 5 6

• Finance 3 7
• Human Resource Management 4 9
Supporting Processes • Information & Communication 4 9
• Business Excellence Management 4 8
• Sustainability 5 6

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Business strategy drives process excellence

Strategic Strategic objectives

review Deliver
Objective A
strategy
Objective B

Objective C

Improvement
initiatives
_
_
_

Process-DS àPBE-SA

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Peer review: Review day

Preparation • Review Team (RT) and MT: perform Peer

1 Process Areas Review focused on cross business learning.
• RT: have interviews in the organization
2 Desired States & KPI’s
• discuss interview findings in consolidation
meeting.
Self Assessment • RT & MT: discuss findings in combined
3 Process Area meeting.
Self Assessments
• MT: give presentation on Peer Review
4 Holistic View findings and suggests amendments on the
Improvement Agenda.
Peer Review • Scoring not mandatory / global agreement on
5 Organization & SA-scoring
Documentation

6 Review Day

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Details for one assessment day

parallel session 1 C
Review Team
Workshop with MT and MT
Intro parallel session 2 C shapes key
Review Team P
questions
parallel s. 3 C parallel s. 4 C

8:00 12:00 13:00 17:00

C Consolidation

MT Presentation
P by MT

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PBE integrated in the annual business calendar

Philips
Management
Agenda

Quarterly Business Review of Strategic Challenges

*Strategy Review (3yrs) Annual

*annual consistency Operating
check Plan

BBS
OPS
Top to do’s
PBE
self-assessment
consolidation Peer Reviews Deploy

Annual Business Calendar

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

PBE process self-assessments at appropriate times in the year

Continuous implementation of Management Agenda / Improvement plan

Note: PBE integration will be aligned with Corporate Strategy process

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In summary:

• Assessments only don’t add value

• Changing role for Quality managers
• To support business managers in managing the change program
• National award administrators to support companies/public sector
• National award/productivity organizations to manage the
transition and training for the new role of Q manager/assessor.

We can....if we are connected!

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 More information: “Exciting Quality Approaches”
hans.van.beek1@gmail.com
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