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Why every company should be innovating with purpose

In 2011, the global population stood at under seven billion (just!). The world was slowly recovering from the financial crisis of a couple of years before and, while the Arab Spring was in full flow, there was yet no sign of the refugee crisis – nor various political upheavals – to come.

Back then, I was freshly appointed at the helm of Royal Philips. Over an era of more than a hundred years, Philips had built a succession of large, diverse businesses with varying missions and dynamics. My biggest concern at the time was that Philips would stay relevant.

As is usual for chief executives in these situations, I got together with my leadership team and we took a long, hard look at our core strengths and at the outside world. What was clear was that every industry was being transformed – quickly and relentlessly – by fierce disruptive innovation, driven by digitization, connectivity, and new business models.


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Spencer Platt | Getty Images

Meantime, global leaders gathered to tackle grand challenges and, from their collective discussions, were borne the United Nations' 17 Sustainable Development Goals. Among these, three – ensuring healthy lives; responsible consumption and production and revitalizing the global partnership for sustainable development – were areas where we knew Philips could make a great and lasting contribution.

We knew we could put the company on the right side of history by decisive transformative action and by redefining our purpose to improving people's lives through innovation. We determined to become a focused health technology company that would serve customers right across the health continuum – from healthy living and prevention, through effective diagnosis and treatment, to home care – where the cycle to healthy living could be restored again.

We undertook a huge internal transformation to sharpen our customer focus, step up innovation, improve productivity to ensure competitiveness, change our culture and simplify our ways of working so that our size and scale became a competitive advantage rather than a bureaucratic hangover after years of diversification.


We divested our landmark consumer electronics businesses and, in 2016, listed the lighting business, upon which the company had been founded, on the Amsterdam Euronext. These companies had deep roots: now we were to give them wings, so they could exist as independent organizations, focused on better responding to the markets they served.

Today, our 17 billion euro ($18.3 billion) business is almost exclusively in the area of health technology. We've acquired companies in areas as diverse as healthcare consulting, image-guided therapy and digital pathology as we build upon strong positions in hospital and home. We've stepped up R&D investments significantly to almost 10 percent of sales. More importantly, we've set ourselves a "moonshot" – to improve 3 billion lives a year by 2025 through meaningful innovation.

Certainly, opportunity abounds: More and more, patients (and consumers) are able to take care of themselves through a wealth of smart devices and wearable technologies, connected to the cloud. Indeed, the Fourth Industrial Revolution will greatly lead to increased consumer health awareness and self-management and will enable individualized treatment pathways supported by tele-health care and coaching.

Already we co-create with customers to help optimize care delivery workflows across care settings, capitalizing on the value of data by clinical informatics decision support systems. Data will increasingly be measured and leveraged at every opportunity. Moreover, the world will move towards a model of outcome-based care, with business models evolving which underwrite the productivity gains being promised!

And we see great possibilities for more inclusive care, helping to improve access for everybody, wherever and whenever they need it – in humanitarian settings, emerging markets or in deprived areas of mature markets. For example, in Kenya, we've developed the concept of integrated Community Life Centers for developing markets, the new throbbing heart of rural communities that combine first-line clinical care with hygienic essentials like solar power and clean water.


Indian passengers stand and hang onto a train as it departs from a station on the outskirts of New Delhi.
Money Sharma | AFP | Getty Images
Indian passengers stand and hang onto a train as it departs from a station on the outskirts of New Delhi.

So what have we learned? Even though we live in a fast-changing world with short-termism all around, it requires years of determination to transform a company and structurally reap the rewards. Innovation companies need to set their sights on solving unmet needs – but this approach requires focus and long-term tenacity.

Daily we remind ourselves that, to be attractive to customers and consumers alike, a company needs to be competitive and differentiating. To attract talent, we provide purpose, meaningful jobs at the cutting edge of innovation and the promise of a career of agile learning.

And our circular economy thinking provides a real competitive advantage since a growing number of hospital customers (and others) demand more sustainable specifications for the communities they serve.

Little wonder that we endorse the WEF's Compact to Responsive and Responsible Leadership as the natural way of doing business sustainably. We see it as a blueprint for all-round stakeholder management in the societies we serve.

Frans van Houten is chief executive of Royal Philips.


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