How Philips recovered from US1.3 Billion losses

In 2011, Philips has plunged into having US1.3 billion losses. Clearly, this large value is an accumulated number way before 2011.

If you are unaware, Philips started as an electronics company selling great commercial products like television, the radio, and even invented rotary shaver and cassette players.

However, due to rising prominent competitors in the electronics field like Samsung, LG, Sony, and other smaller brands that provide cheaper alternatives that deliver similar quality, Philips has lost its market share.

To resolve this, Frans van Houten rolled out various execution to make Philips back on traction again.

Using WE Development's Demand-Supply Improvised (DSI) model, let us look at how Philips implemented positive change!

1) Cutting and identify resource issues

2) Identifying the most viable market demand

3) Establish and execute customer retention model

1) Reflected in DSI model - Resource

First, Philips plans on cost-cutting by removing unnecessary resources such as coordinators, contractors, and less productive spending. Philips also restructured processes and people to achieve effective utilisation of employee’s working hours. With this, any underperforming portfolios are taken out. This allows cost to be focused on strategic resources. You can read more from here

Second, all recommendations on cost-cutting are validated by numbers directly from their balance sheet.

Third, the actual removal of resources by cutting 6700 jobs and splitting the company into half helps eliminate redundant processes and allowed a more directed focus on cost-effective markets.

2) Reflected in DSI model – Demand

First, they used their already “close to market” position to understand their customer’s demands.

Second, having too many products on hand, Philips prioritized its market segment into 2, Philips Lighting and Healthcare, since these two areas have potential market growth.

Third, in 2014, they officially make changes by splitting the company into half into Philips Lighting and Philips Healthcare.

3) Reflected in DSI model – Retention

First, Philips identified the complex needs in its healthcare segment where aftersales support is critically required. Some application areas include patient health status, patient health tracking, equipment, and machine technical support and training.

Second, to communicate and execute this retention model, a service portal was created to allow their customers and users to flag necessary problems and to generate necessary logs and reports remotely.

Third, they continued to revise and improvise by partnering with SalesForce to automate patient and customer relationship management systems to achieve market satisfaction. Furthermore, the service portal has more features to support aftersales as well. You may visit their service portal here.

Gentle Note

If you wish to know more about how DSI model can help you, book a consultation with us here today!

Our references:

https://hbr.org/2010/05/when-youve-got-to-cut-costs-now

https://www.philips.com.sg/healthcare/services/maintenance-services/customer-service-portal