Second panel discussion

Second panel discussion

moderated by Twan Huys

‘As much risk in China as there is in Silicon Valley’

The first question from the audience was directed to Philips, as the first Dutch company to make inroads into doing business in China. The Chinese government expected Philips to transfer knowledge to Chinese companies, said the questioner, and some Chinese people even think Philips could be a domestic Chinese company. How do you evaluate innovation in China, and reverse the technical knowledge transfer from China to the Netherlands? How does it contribute to the Dutch economy?

Frans Van Houten told the audience that the CEO of Philips’ China operations came to sit on the company’s executive team, and had once accused other team members of being complacent, to which the Dutch team members took exception, “instead of asking ‘where can we improve?’. It was a good learning moment!” said Van Houten, who went on to explain that business needed to overcome the belief that innovations made in China would be stolen. “There is as much risk there in China as there is in Silicon Valley. Managing intellectual property is the same risk anywhere. ‘Beefing up’ the innovation in local products in China cannot be done from the USA or from the Netherlands. “It was a real learning curve,” he said. “Turnover of personnel was very high in China, so there’s a lot of work to make sure knowledge doesn’t walk out of the door.” The new innovation laboratory in China delivers unexpected outcomes and fresh thinking, he said, in combination with other more experienced innovation centres. “Great products innovated in China become great in Europe too,” he said.

Shifting centre of innovation gravity to India or China

Prof. Henk Volberda Henk asked if Philips’ ‘centre of gravity of innovation’ would shift from the Netherlands to India or China. Van Houten agreed the centre of gravity will shift. Asia and Africa will start taking their share, he said. “We don’t export jobs, but we do add more jobs in other countries rather than here.” That was particularly true for Research and Development, he said.

Prof. Volberda commented that some of Philips’ knowledge-intensive activities are offshore, while the company is ‘back-shoring’ some activities to the Netherlands, for example its production of electric shavers. “We didn’t imagine that ten years ago,” he said. Van Houten added that in terms of local relevance, products are slightly different, so local supply chains were still needed.

Asked about the relationship between the Port of Rotterdam and the Port of Amsterdam since the latter’s denationalisation half a year ago, Port of Rotterdam’s Paul Smits said the relationship had been improved. The Port of Rotterdam had seen its levels of investment increase since it became a non-listed public limited company. “I hope the Port of Amsterdam has that too,” said Smits.

Bringing new light and safety to Africa

Asked about the challenge presented by the African energy market, Philips’ Frans Van Houten said the company had ignored it for too long. “Africa often seemed too risky,” he said. But Philips has re-committed to Africa by opening offices and creating new products such as community lighting and generators with a low entry cost. “It’s a re-occurring community model in which we can bring new light and safety. It boosts economic life in the communities,” he said.

Tackling wicked problems

An RSM student in the audience asked how the panel would tackle ‘wicked problems such as climate change or the fact that a child dies every six seconds’ without reinventing the past.

Prof Rob van Tulder said it was inspiring to learn from Summit speakers about partnerships and clusters. “Many leaders are searching for vision and a new value preposition. We study inclusive business and how to create a market,” he said. We need transformational leaders, and we’re realising the issue is enabling and connecting leadership.

Philips’ Frans Van Houten said ‘babies come with all sorts of problems’. “We’re bringing in ultrasound [diagnostics] and other technology, but it’s too expensive to operate these systems. We’re also developing new tools to address infant mortality in the African market. It isn’t easy to communicate broadly about it. Many issues are in a local and micro setting, he said, and added that the Philips brand needed to be associated with these solutions.

Student exchange to bridge China and Europe

Questioning the role of universities in leadership issues, a student member of the audience said they had an opportunity to do an internship in China, and wondered how such an internship could be connected to reinventing the future. Philips Frans van Houten said the company’s student traineeships and student exchanges were an attempt to bridge China and Europe. “This creates development and diversity,” he said.

How does Accelerate! work?

Asked how Philips’ Accelerate! performance programme was able to do a good job in the company’s existing culture, Frans van Houten said: ”It isn’t finished yet.” The company has put more than 2,000 leaders through a behavioural change programme, but he referred to the change programme as ‘the iceberg model’, fuelled by invisible hopes and fears. “When you put people in a room together to create success, we all say we can do better. The finger pointing starts and it becomes personal. Let’s address our hopes and fears to solve our problems. Why would we fight each other in our own company if we all want to reach the same objective? People need to find new ways to collaborate and measure the success of shared objectives,” he said.

Twan Huys asked how it was possible to win when there was negativity. Frans van Houten said there was no need for indiscipline, and what was needed was a base of operational excellence “so we can deliver what we invent. You need to add the creativity where it adds value,” he said.

Making high-tech entrepreneurship a Dutch dream

Another question addressed to Frans van Houten covered making people willing to take risks. “In Israel, people are willing to take risks if they want to build an inspiring life. In Brazil they would play soccer, but in Israel they start a high-tech company. How do you create willingness to take risks in people? How can you make high-tech entrepreneurship a Dutch dream? How do you get this Israeli spirit into the Netherlands?” said the audience member.

The Philips CEO replied that the theory around change management is ‘a burning platform’. “We have convinced ourselves that we’re poor, but in fact we have a lot and need to create momentum. The Netherlands needs to create a vision: where do we want to go? We can help the food problems in the world if Dutch companies put energy behind it. We need to start discussing behaviour in the Netherlands and talking about this is important. Dialogue gives people insights and changes their mind.

Paul Smits of Port of Rotterdam said power should be given to the people with the positive voice, making sure the negatives ones can’t be heard.