Recently, Roy Jakobs, CEO of Philips, gave an interview to foreign media and responded to questions such as how to reverse the company's situation after a large-scale recall and the company's restructuring plan.

According to data, Philips was founded in the Netherlands in 1891 and mainly produces products in lighting, household appliances, and medical systems. The company has transformed from a Philips family business to a global multinational corporation managed by modern professional managers.

In its 130 year history, it has evolved from a lighting business to a diversified enterprise that covers almost everything, and then continuously "slimmed down". Eventually, it sold off its lighting business, leaving only medical care. It has successfully transformed from an electronics group into a global top medical technology giant, leading in the fields of imaging diagnosis, image-guided therapy, patient monitoring, health informatization, consumer health, and home care.

In October 2022, Roy Jakobs became the CEO of Philips and initiated a business restructuring plan, including layoffs, which is still ongoing. Roy Jakobs stated that Philips has currently reduced 9000 positions.

01. Roy Jakobs appointed as CEO to enhance patient safety and product quality
According to data, Roy Jakobs was born in the Netherlands in 1974 and has extensive experience in digitalization and global administrative leadership. In 2010, Roy Jakobs joined Philips and has been promoted to the company's Chief Business Leader for Connected Healthcare for many years; He has always been the preferred candidate for crisis management in the company; In early 2020, Roy Jakobs led Philips' COVID-19 pandemic response efforts.

In June 2021, Roy Jakobs, then the Chief Business Officer of the Connected Care department, took over the handling of Philips respiratory system recalls and introduced the progress of its recall process, communication work, and repair and replacement plans. At that time, Jakobs stated that supply chain constraints were slowing down the replacement and repair speed of faulty equipment, making it difficult for the company to predict the specific time for equipment replacement or repair.

In the latest interview, when mentioning the Philips recall incident, Roy Jakobs said, "The first thing I did after taking office was to put a new patient safety and quality leader on the execution table of my execution team. This leader has experience in dealing with such challenges, helping us better handle such difficulties, deal with some of the difficulties, effectively handle such cases and recalls, and of course, the execution team takes a holistic view of what we need to do when we handle problems.

As a result, Philips has established a clear responsibility mechanism, elevating "patient safety and product quality" to the management scope of the company's top leadership, the Global Executive Committee, establishing a new organizational structure, strengthening business management processes, and enhancing the effectiveness of early warning systems.

As early as 2022, Philips launched a quality change project called "Strengthening Patient Safety and Quality Management" globally and in Greater China. Focusing on the management of the entire lifecycle and process of medical devices, Philips has further integrated and improved its quality management system in key areas such as product development, post market supervision, and risk management.

02. Layoffs are part of the restructuring plan
Previously, Roy Jakobs announced a three-year restructuring plan, which is now halfway through. As part of the restructuring plan, Philips may plan to lay off 10000 employees. So, what is the ultimate goal of this restructuring plan? What kind of structure will Philips form after the restructuring is completed?

In response, Roy Jakobs said, "We need to adapt to a very unstable environment, which actually requires more agility and also puts pressure on them, because if you look at our customers, they are under pressure from resources and affordability. So we need to streamline.

Therefore, from a structural perspective, Roy Jakobs wanted to adopt a simplified operational model and made several important interventions.

Firstly, although Philips comes from a matrix of companies that produce products, sell products in regions, and provide specific functional expertise such as quality, innovation, or finance, they have differences and conquer who is doing what, and we have a common P&L. Therefore, Roy Jakobs encourages businesses to take the lead and be responsible for serving specific departments.

If we were the monitoring department, then the business would have comprehensive P&L accountability. We are introducing various functions into the business. We are streamlining the entire organization, which reduces handover points or makes you more flexible. At the same time, you ensure that processes are simplified so that people can work faster and better, "explained Roy Jakobs.

Therefore, Philips adopted a streamlined architecture and completed this task with fewer roles. In fact, Philips has reduced its workforce by 9000 people so far. However, at the same time, the employee engagement of the company has increased by 8 percentage points in the past 12 months. Currently, Philips' dedication score is 78%, while the global standard is 80%.

03. Philips continues to "slim down" and focuses on digital healthcare
In fact, in recent years, this century old medical equipment company has been continuously "slimming down", transforming from a diversified enterprise that almost covers everything to a medical group that focuses on digitalization.

However, during a critical period of transformation, Philips was embroiled in a serious ventilator recall scandal in April 2021. Until the end of April this year, this three-year drama finally ended with Philips paying a settlement of $1.1 billion.

Over the course of three years, large-scale recalls and high maintenance costs have severely damaged Philips' reputation. According to Futu Niu Niu, Philips' free cash flow at the end of 2022 was -979 million US dollars, a year-on-year decrease of 213.05%. Subsequently, the company took a series of measures to restore profitability:

At the end of October 2022, the company announced a 5% layoff globally. Data shows that the total number of employees worldwide is approximately 78000, so this layoff will affect 4000 people. Philips expects that the restructuring will incur costs of approximately 300 million euros (approximately 295.1 million US dollars) in the future.

In January 2023, Philips announced another layoff of 6000 employees to restore profitability. It is expected that 50% of the layoffs, or 3000 people, will be completed this year.

In April 2023, the company also plans to cut its corporate research budget by 500 million euros, and the Philips Research Institute, derived from Philips' famous centralized R&D department NatLab, has also suffered significant impacts. It is reported that Philips Research institutes worldwide, including China, will be disbanded. In January of this year, Philips announced its withdrawal from the US ventilator market. Philips Respironics will focus on the sales of consumables and accessories, including face masks, and will no longer sell hospital ventilators, certain home ventilators, portable and fixed oxygen concentrators, and sleep diagnostic products.
In June, Philips announced that it would close its Wellcome business headquarters in Pittsburgh and cut hundreds of manufacturing jobs in the region. At the same time, the company will terminate production at its Murrysville and new Kensington factories and hand over work to an undisclosed contract manufacturer.

After a series of adjustments, Philips welcomed positive news in the second quarter of 2023, with financial reports showing a year-on-year increase of 470% in net profit, marking the first time since the fourth quarter of 2021 that the company has turned losses into profits.

25.6 billion, Philips welcomes its largest shareholder
At the same time, the company received investment from the richest family in modern Italian history, the Agnelli family.

In August 2023, the Agnelli family acquired a 15% stake in Philips for the first time through its holding company "Exor NV" for 2.6 billion euros, becoming its largest shareholder; At the end of June this year, Exor increased its holdings by 19.5 million shares, with a total price of 481 million euros (approximately 3.738 billion yuan).

Exor's total investment in Philips before and after the two investments reached 3.3 billion euros (approximately 25.64 billion yuan), with a shareholding ratio of 17.51%.

Based on the above, it is not difficult to see that Philips' sale of AGITO Medical is also one of the steps to "restructure" and optimize resource allocation, aiming to quickly realize profits and focus on long-term goals with more abundant cash flow.

Source: http://qixieke.com/Font/index/detailPage.html?id=3202-23