Dutch brand Royal Philips will be splitting its lighting business from its healthcare and consumer divisions.
At a meeting with investors and analysts in London yesterday, the company said that the next strategic step would be to capitalise on fundamental market changes and create two market-leading companies.
Frans van Houten, chief executive officer of Royal Philips said the time is right to take the next strategic step for Royal Philips, as it “continues on [its] transformation”.
“To become the global leader in HealthTech and shape the future of the industry, we will combine our vibrant Healthcare and Consumer Lifestyle businesses into one company. At the same time, giving independence to our Lighting solutions business will better enable it to expand its global leadership position and venture into adjacent market opportunities,” van Houten added.
This is in hopes that both companies will be able to make the appropriate investments to boost growth and drive profitability. Each company will also have a dedicated management structure.
In relation to the company’s strategic repositioning, Philips will start the process to transition its Lighting solutions business into a separate legal structure. It will also consider various options for alternative ownership structures for the arm. The Lighting solutions business for the brand is estimated to exceed EUR 60 billion.
As a stand-alone company, the Lighting solutions business will “benefit from improved speed and agility in its operations to deliver innovation and capital market access to boost growth in connected LED lighting systems and services, more than offsetting the decline of conventional lighting”, said the company.
Meanwhile, Royal Philips plans on capturing new HealthTech opportunities by combining Philips’ existing Healthcare and Consumer Lifestyle businesses. Philips will also aim to capitalise on the convergence of professional health care and consumer end-markets. This comes as the company sees an increasing number of consumers to proactively monitor and manage their health and the rising pressures on the healthcare system to create new models of affordable care.
Currently, Philips’ HealthTech businesses already has leading positions in oral healthcare, healthcare informatics, ultrasound diagnostics, cardiac care and home healthcare, and serve a total addressable market estimated to exceed EUR100 billion.
“Philips is uniquely positioned to help reshape and optimize population health management by leveraging big data and delivering care across the health continuum. […] The combination of our Healthcare and Consumer Lifestyle portfolios and the integration of the data from the connected products on Philips’ cloud-based digital health platform illustrate our opportunity to capture growth in an increasingly connected world, where societies are looking for more effective and lower cost health solutions,” explained van Houten.
According to a press release, the new operating structure enables additional cost savings across the enabling functions resulting in EUR 100 million additional savings in 2015 and further EUR 200 million in 2016.
Marketing has also reached out to Philips on comments on how this would impact the APAC operations but Philips was unable to comment at the time of writing.
Earlier this month Philips also launched its digital regional command centre, which promises to make a major overhaul of how it does marketing. The command centre will combine social monitoring and content creation around live conversations.