Inside Philips’ digital transformation strategy

Philips is a case study of the type of company facing the innovator’s dilemma: 125 years old, the Amsterdam-based conglomerate generates $25 billion in sales with 108,000 employees spread across 60 countries. Change  — and consistency — don’t come easily at that size.

But Philips is all too familiar with change. It has morphed several times in its history, with a current focus on using the Internet of things. The company has created a central 60-person digital center of expertise, which numerous digital-focused sub-centers focused on specific disciplines like search and social marketing, real-time content marketing, and media optimization.

Philips’ global head of digital, Blake Cahill, joined the business 26 months ago with a single goal in mind: create digital harmony between Philips’ 10 businesses and get all staff and markets to the same level in digital. That has meant that while Philips uses agencies, it is bringing more capabilities in-house.

“It’s not that we weren’t doing digital before,” he said. “We were; we were just writing a lot of checks to agencies, but digital marketing is now in our brand DNA.”

“I’m trying to create one highway with all the cars going in the same direction, at approximately the same speed. If you looked at it two years ago across the 10 businesses we have, some weren’t even inside the car on the highway, let alone driving on it. Some parts of the business, or certain markets, had adopted digital faster, and others were still on horseback. Now we have everyone on the same page.”

Cahill also doesn’t believe in having expertise scattered across the business, with no easy way to track or measure its effectiveness. That’s why he pooled 60 people into one digital center of expertise and created what he refers to as “centers of gravity” around key digital topics. Each of these is manned by four or five people.

“In a large company, you’ll at times get pockets of excellence and then closets of darkness: some people doing great stuff and others doing nothing,” he said.

Philips is also trying to create common measurement standards for its marketing. It now has global performance dashboards that each country the business operates in can access and compare their own performance against their peers in other markets.

“Before we had vignettes of case studies but no harmonized [key performance indicators]. Now this means we all speak a common language, and it’s by far one of the biggest step ups we’ve made. If you can’t compare data, you can’t see what’s scaling and what isn’t. People can really have a sense for which market is excelling, which is lagging.”

Building that performance and data-driven culture map is helping Philips define its next battleground: real-time media optimization. Philips ran pilots last year to test its own ability at improving digital marketing performance. Although he wouldn’t give exact details, Cahill said it improved overall efficiency of its spending by 20 percent.

“It provided a platform of saying we need to pull more media in-house, and do media optimization in parallel with our agencies,” he added.