Philips 2006 Annual Report Download - page 12

Philips Annual Report 200612
Exceed our EUR 500 million overall cost-reduction
target within two to three years
We are fully on track to exceed the targeted EUR 500
million cost reduction by the end of 2007. In 2006 we
made substantial progress in our drive to simplify our
organization and reduce costs by working together
more effi ciently. In supply management and IT we have
been able to work together as One Philips in a more
structured and harmonized way while ensuring that
quality improved and costs went down.
In addition to our existing programs, we will realize
a further EUR 75 million reduction on a run-rate basis in
2007, driven by a simpler country management structure,
the removal of a regional management layer and a lean
corporate center, refl ecting the divestment of our
Semiconductors business.
Taking value creation to the next level
Philips is now a much simpler company focused around
the brand and driven by innovation. We are well positioned
to benefi t from major trends that will determine global
GDP development in the coming decade, i.e. the need
of a growing and longer-living population for more and
affordable healthcare, the demand for energy-effi cient
solutions (e.g. in lighting) and developments in the
consumer space. Today, we are seeing the rise of the
experience economy. For Philips, this is a very promising
growth area, which is in an early stage of development.
Through our Ambient Experience solutions we want
to be a strong force in the ecosystem of this
emerging economy.
Capturing the market opportunities presented by these
trends should enable us to create even greater value
for our stakeholders. Our Growth, Talent and Simplicity
programs, which will be continued in 2007, remain key
to the fulfi llment of this ambition.
Growth
In 2007 and beyond we will continue on the growth path
we have been following in recent years – redirecting
resources to high-growth opportunities, leveraging
our brand and competencies, expanding key account
management, stimulating new business development,
making value-creating acquisitions, growing in emerging
markets, and innovating and marketing for further
organic growth.
The key to profi table growth is to create and retain
more happy customers. While we had a wealth of
data in the organization on customer satisfaction,
product quality, etc., we did not, until this past year,
have a single key metric across the organization. In
2006 we adopted the ‘Net Promoter Score’ (NPS),
a simple but powerful concept that measures the
answer to just one question: “How likely is it that you
would recommend this company/product to a friend
or colleague?” This metric will provide a tangible
measure of progress, which will help to focus minds
and actions in this vital area.
Talent
Having talented, engaged people in the right place
throughout the company is vital for lasting success.
Like
satisfi ed customers, engaged employees are a
pre-requisite
for growth. It is the task of leadership
to provide our employees – at every level of the
organization – with an inspiring environment to
work in, one where they can contribute fully and
feel valued for their talents.
The extent to which we succeed in doing so is measured
through our annual employee engagement survey. And
while we see progress year to year, we are still some
way off the high-performance benchmark. This represents
probably the biggest untapped improvement potential for
the company and therefore ranks high in our priorities
for 2007.
Simplicity
Simplicity – everyone knows what it is, but it can be hard
to defi ne. For us, simplicity is the ease with which people
can access or control the benefi ts that technology has to
offer. It is our touchstone, a constant reminder to stop
and ask ourselves ‘Will this make life simpler?’… or …
‘Is there an easier way to do this?’ It is a way of thinking
that is permeating the entire fabric of our company as we
seek to deliver on technology’s promise to improve life.
At the 2006 Philips Simplicity Event held in London
in October, we unveiled new and innovative concepts
based on our “sense and simplicity” brand positioning.
We also revealed a number of potential products
nearing market readiness that have evolved from
earlier Simplicity concepts.
6 Financial highlights 8 Message from the President 14 Our leadership 20 The Philips Group