Philips concentrates activities in the Netherlands; cuts another 6,000 jobs

Philips cuts in addition to the reduction of its workforce by 4,000 roles announced in October 2022, another 6,000 jobs world wide. The simplified operating model will make Philips more agile and competitive. The leaner and more focused organization will have a significantly reduced cost structure, states the company in a press release.

Philips will change its operating model to end-to-end businesses with single accountability. They will be supported by lean central functions and strong customer facing organizations in the countries and regions. To this end, the company will right size the central functions, which will include organizational delayering and reallocating part of its corporate innovation activities to the businesses.

To win in these segments, Philips will pivot its innovation model to yield higher impact and better returns. To ensure that innovation is done closer to its customers, Philips will concentrate a higher proportion of its R&D resources in the businesses (90 percent compared to 70 percent in 2022).

As a result, part of Philips’ corporate innovation activities will move into the businesses. Additionally, the company will focus on fewer, better resourced, and more impactful projects, with patient safety, quality, and customer need at the heart of innovation design. Going forward, Philips will continue to invest an industry-leading 9 percent of sales in R&D (more than EUR 1.7 billion), compared with 10.5 percent of sales in 2022.

Philips: In the future, there will be more care provided outside the hospital

In the future, we will no longer go to the hospital or to the doctor for care as often as we do now, predicts Philips.

‘People-centric innovation’

“Philips operates in attractive health technology market segments with good growth and margins”, says CEO Roy Jakobs. “The company has built leading market positions based on meaningful innovations and high customer intimacy, further supported by a compelling purpose, a strong brand, and clear ESG commitments. However, given our significant operational challenges, we are not fully extracting the full value of our businesses, as also reflected in our 2022 results.”

“Our strategy will focus on organic growth through patient and people-centric innovation at scale, with a strong improvement in execution as key value driver. This will be enabled by strengthening our patient safety and quality management and completing the Respironics recall. We will also urgently enhance the supply chain reliability to improve performance and simplify our way of working to improve our agility and productivity.”

“This includes the difficult, but necessary further reduction of our workforce by around 6,000 roles globally by 2025. I am confident that these comprehensive actions will put Philips on a progressive path to value creation with sustainable impact to achieve mid-single-digit comparable sales growth and a low-teens Adjusted EBITA margin by 2025, further expanding to a mid-to-high-teens margin beyond 2025.”

Patient safety and quality

Strengthening patient safety and quality is Philips’ highest priority. This includes completing the Respironics recall and test program in 2023 and managing the impact of the proposed consent decree, as well as the ongoing investigation by the US Department of Justice and the litigation related to the Respironics recall. Across the company, Philips will ensure patient safety and quality is at the core of its innovation approach to avoid future issues.

Moreover, the company will step up accountability for patient safety and quality, including giving all employees dedicated patient safety and quality objectives, deploying an expanded compliance and awareness program, and simplifying processes.

Reflecting Philips’ priorities, Philips has elevated the patient safety and quality function to the Executive Committee. Effective February 6, 2023, Steve C. de Baca (American, 1968) has been appointed as Chief Patient Safety & Quality Officer and member of Philips’ Executive Committee reporting to CEO Roy Jakobs. He will bring more than 30 years of quality and regulatory affairs experience in the medical technology industry.
Additionally, Jeff DiLullo (American, 1969) has been promoted as the new Chief Market Leader of Philips North America. Jeff brings more than 20 years of experience in sales, services and solutions delivery to drive growth in this very important region.

Effective February 6, 2023, Jeff DiLullo will succeed Vitor Rocha, who has decided to leave Philips. Philips expects to announce the new leaders for its Precision Diagnosis business segment, previously led by Kees Wesdorp, who decided to leave Philips and its Connected Care business segment in early 2023.

Philips generated 2022 sales of EUR 17.8 billion and employs approximately 77,000 employees with sales and services in more than 100 countries. Philips today presented its annual and final quarter 2022 results.