People Need to Change Focus Towards Growth Areas

Image: Amit Verma

François Adrianus ‘Frans’ van Houten
Age: 52
Designation: CEO; and chairman of the board of management and executive committee, Royal Philips Electronics NV
Education: MA in economics and business management from Erasmus University Rotterdam, The Netherlands


Q. Philips has repositioned itself from an electronics giant to a company that is focussed on health care, lighting and customer lifestyle. What role do emerging markets play in this transformation?
In the transformation of Philips, we see what is relevant to the world, what we can do to contribute (in terms of innovation) and as we focus on the future, we see how we can differentiate ourselves from the laggards. A lot of this is happening in the emerging markets. Europe today generates 26 percent of our revenues and Asia’s share is almost 35 percent. Five years ago, Europe was at 35 and Asia below 30. The European market is in trouble but there are opportunities in the Middle East, Russia and India; people need to shift gears and change focus towards the growth areas. And local relevance means that the whole might and power of the company shifts.

Q. As the regional head for the consumer electronics division in the late 1990s, you tracked the Indian market closely. How has it changed in the last decade?
First, what deeply impresses me about India is the huge talent base. Second, and it is a paradox, you are at the forefront of technology while at the same time have a huge rural population. So we need to cater to both sections of society.

Q. How have you done that?
Let me give an example from our health care business in the country. I was told that more than 1,000 hospitals need to be added in the near term and health care needs to be affordable. The local R&D team in Pune has created a product that is a cath lab [where coronary catheterisation is conducted], that is affordable and targeted at community hospitals. While we continue to provide high-end solutions, we also have good solutions in affordable health care.

Q. What is the role played by the innovation centre in Bangalore?
Much of the health care product development in Bangalore gets exported to all over the world. I dare say that there is no health care product sold by Philips that doesn’t have some intellectual property (IP) out of India.

Q. Over the past few months, there’s been a lot of debate over the Foreign Corrupt Practices Act. Philips has been a multinational company for more than a century. How do you handle this issue?
It is not just an issue in India but all over the world. More than 10 years ago, we prepared a strong internal business principle statement that every employee signs up to. Adherence to business principles is a must. And that means everywhere and in India, we would rather decline business than participate in practices that are unjust. If it happens, we take immediate action. We audit our suppliers and distributors. The whole ecosystem needs to comply too. It is not like we do this and we don’t care what others do.