European competitiveness in times of change Gerard Kleisterlee European Competitiveness Conference INSEAD Alumni Association, 8 June 2007, Amsterdam
Agenda Philips European competitiveness Europe where next? Conclusions 2
Agenda Philips European competitiveness Europe where next? Conclusions 3
Royal Philips Electronics Founded in 1891 Headquarters: Amsterdam, The Netherlands One of the largest global electronics companies with sales in 2006 of EUR 26,976 million Multinational workforce of 124,300 employees (April 2007) Manufacturing sites in 28 countries, sales outlets in 150 countries R&D expenditures EUR 1,619 mln (2006) 4
Strategy Evolution High Volume Electronics 90ties Healthcare & Lifestyle now Portfolio One Philips Restructuring Growth Volatility Value Creation Let s make things better Sense and Simplicity 5
Where and how we compete Our businesses are centered around people and the quality of their lives Brand Sense and simplicity We address the needs of people in the four domains of lifestyle; space, appearance, body and mind Consumer Lifestyle Professional Lighting..and the needs of professionals that improve the quality of life in the domains of body (healthcare) and space (lighting) Mind Body Space Appearance Our competitive differentiation is in our brand and in our innovation capabilities Professional Healthcare Innovation Open innovation 6
A well-balanced portfolio in consumer retail and professional markets built around the brand Divisions Sales* Market spaces - Sales Other 1% Medical systems Other 1% Prof. Healthcare 27% 27% CE 40% 54% 10% DAP incl. CHS 22% Lighting Consumer Retail 18% Prof. Lighting * 2006 excluding disposed of activities 7
Creating growth opportunities Innovation Emerging Markets Growth Acquisitions Market driven Brand perception 8
Meeting global challenges 9
With a strong European presence Sales Asia Pacific 18% Asia Pacific 18% Employment Asia Pacific 23% Asia Pacific 23% Latin America Latin America 7% Europe 46% 7% Europe 46% Latin America 11% Latin America 11% Europe 42% Europe 42% North America 29% North America 29% North America 24% North America 24% Industrial presence Asia Pacific Asia 21% 21% R&D spend Asia Asia Pacific Pacific 11% 11% Latin America 14% Latam 14% Europe 41% Europe 41% North America 23% North America 23% Europe 66% Europe 66% North North America 24% 24% 10
Agenda Philips European competitiveness Europe where next? Conclusions 11
Competitiveness is a sum of factors Global context Society Demographics, labor participation Entrepreneurship Industrial policy Competitiveness Business Innovation Cooperation Market Environment Institutions Market efficiency Infrastructure Education Regulation Transparency Etc. 12
Overall not a bad picture 13
But what s behind it? 14
Where are the innovators? 15
Where are the big players? U.S. Europe Asia 16
Who s most admired? 17
Where are the best universities? Europe versus US, some differences Funding DARPA, NIH vs. European framework programs Private funding Entrepreurial culture Public-private partnerships Specialization Competition Culture of excellence Autonomy Selection Alumni network Appreciation of excellence Source: Institute of Higher Education, Shanghai Jiao Tong University 18
Real GDP growth EU vs US, China and India 2008 2007 2006 2005 12 10 8 6 4 2 0 EU-27 EU-25 Eurozone US China India Source: ERT, Benchmarking Europe s Competitiveness, May 2007 Source for ERT: Eurostat, March 2007 and World Economic Outlook Database, Sept 2006 19
Europe stays behind US in purchasing power and productivity 2005 2006 2007 2008 2005 2006 2007 2008 Source: ERT, Benchmarking Europe s Competitiveness, May 2007 Source for ERT: Eurostat, March 2007 20
The ageing workforce is not addressed Source: ERT, Benchmarking Europe s Competitiveness, May 2007 Source for ERT: Eurostat, March 2007 21
R&D expenditure still far from Lisbon target 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 22 Romania Cyprus Bulgaria Slovakia Poland Latvia Malta Greece Lithuania Portugal Hungary Estonia Italy Spain Slovenia Ireland Czech Rep Luxemburg UK Netherlands Belgium France Austria Denmark Germany Finland Sweden EU-27 EU-25 Eurozone United States Source: ERT, Benchmarking Europe s Competitiveness, May 2007 Source for ERT: Eurostat, March 2007
The Single Market is not yet there Economic nationalism not yet fully banned Fragmentation in legislation, regulation still continues E.g. energy and services Internal market rules not fully adopted Unnecessary regulation still exists The European patent discussion Is the wish to create a European Institute of Technology an indication of the lack of Single Market in European R&D? We could be much more efficient in an integrated approach on global challenges such as energy & climate change and the modernization of healthcare 23
Agenda Philips European competitiveness Europe where next? Conclusions 24
Play on all fields Global context Society Competitiveness Business Environment 25
Businesses must play the globalization game E.g.: What is the future of manufacturing in Europe? Visibility low high Smart Supply Systems in a Package Made to Fit High Tech Systems small Size big 26
Pioneer pan-european Open Innovation in a global context Present Spin-in of Technology External companies Past Institutes Corporate Research Corporate Business Company Research Start-ups Own Businesses Technology spin-out Joint Ventures with others 27
Adapting the environment Strengthen the innovation triangle (education R&D innovation) Focus Mass Commitment Execution in R&D programs Better EU regulation aimed at increased competitiveness Break down Single Market barriers 28
Foster and focus excellence Göteborg Helsinki Stockholm Cambridge Paris Stuttgart Eindhoven München Grenoble Source: European Trend Chart on Innovation 2003 29
An integrated approach to drive paradigm shifts in global challenges 30
Adressing issues in society Create a mindset for change Keeping to old securities is not an option Stimulating entrepreneurship Winning minds for Europe Address our demography challenges Increasing labor participation and mobility Making the old-age dependency affordable 31
Agenda Philips European competitiveness Europe where next? Conclusions 32
Conclusions Competitiveness is determined by the interplay between business, environment and society, in a global context Europe scores well in current rankings on overall competitiveness, but is lagging in many of the underlying factors that drive it towards the future Europe needs decisive, concerted action Clear choice for innovation and acting accordingly An urgent and integrated approach on global issues Realize the Single Market with improved (and less) regulation for competitiveness European citizens need to know and accept the urgency of change and addressing the demography challenge ahead 33