Philips 2005 Annual Report Download - page 10

Philips Annual Report 200510
Delivering on our commitments
Last year, we committed to the following management
agenda for 2005:
To grow healthcare as part of our portfolio
To continue the transformation of Philips into
a market-driven organization
To continue the focus on innovation across the Group
To reduce earnings volatility of our cyclical businesses
To focus on further simplifying Philips.
So how did we do?
Growing healthcare
I am pleased to report to you that our Medical Systems
division showed strong growth throughout 2005, both in
revenue and order intake. Its sales increased by almost 8%
and order intake by 14%, making healthcare the fastest-
growing part of our portfolio. This is attributable to a
high introduction rate of innovative new products and the
division’s successful growth strategy for Asia. In 2005 we
alsosawthersteconomyproductsfromourChina-based
Philips-Neusoft venture, which should further strengthen
our position in Asia and in emerging markets.
Our acquisition of the US-based company Stentor, a leading
player in PACS (Picture Archiving and Communication
Systems), will greatly enhance our capabilities in healthcare
IT, a cornerstone of tomorrow’s digital hospital.
In 2005 we entered into a venture with the German
pharmaceutical company Schering to develop contrast
agents and medical equipment for the emerging optical
imaging market. Optical imaging has the potential to
offer new approaches in the prevention and treatment
of breast cancer and other diseases.
Over the last year we have made good progress in developing
the roadmap to build our Consumer Health & Wellness
portfolio. We have created business teams to address the
markets for mother and childcare and for skincare. In view
of the ageing population in many countries and the shifting
trend in healthcare from the hospital to the home, we see
tremendous potential for growth in this area. Remote health
monitoring is an important part of this, and we have been
conducting pilot projects with our Motiva system together
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with several partners in both Europe and the US, with very
positive results. Our intended acquisition of Lifeline Systems,
announced in January 2006, will allow us to further develop
ourpresenceinthiseldofactivity.
In 2005 our Ambient Experience suite won a Gold IDEA
design prize. Drawing upon expertise from across the
entire company – design, medical systems, lighting, consumer
electronics and semiconductor technology – to create
a friendly and reassuring environment for patients, it provides
an outstanding illustration of the potential of cross-
divisional cooperation.
Creating a market-driven organization
Understanding the unmet needs and wishes of customers
is the starting point for our innovation and product creation
processes. In 2005 this focus resulted in the introduction
ofmanyinnovativenewproductsandsolutionsreecting
our “sense and simplicity” brand promise.
Over the past 12 months we have stepped up our
efforts to reconstruct our business models to get closer
to our customers. For example, we now have in place
an International Retail Board, which oversees relations
with our global retail customers. Dedicated sales teams,
representing all relevant Philips lines, manage the respective
accounts, ensuring that we interact with the customer as
one company. The top six retail accounts managed by the
International Retail Board – representing sales of some
EUR 2.5 billion – achieved year-on-year growth of over
25%, outgrowing the market. This approach enables us
to come up with new products based on real consumer
insight, which, in turn, will help us to grow faster and
realize better margins.
As part of its Business Renewal Program, our Semiconductors
division has changed its organizational structure from one
based on technology to one centered around markets and
customers. This shift is already having a positive impact,
thoughitwilltaketimebeforethebenetsarefullyvisible.
A strong, well-positioned brand can create market pull.
The fact that we jumped 12 places in Business Week’s
authoritative Global Brands Scoreboard is further evidence
of the success of our marketing focus and our innovative
Message from the President