In the book "Let's make things better," Marcel Metze describes two important parts of the Philips organization. "The production division focused on the design, development and production of equipment. Philips is player in solutions for light, household and medical equipment ... The second large division that is recognizable is the sales-organization that is decentralized geographically: Close to the clients. " (1 - in a free translation) This structure is visible in the cultures that are originated from the organization of the business. The production business is dominated by an engineers' culture, the sales organization consists of a marketing and sales culture.
As Gerard Kleisterlee has studied Electrical engineering he originally represented the engineering-side, but on his way to the top he must have combined his engineering background with a client focused vision.
The two "cultures" which are somehow contrasting is what makes Philips unique. Only through a constant dialogue between the two, Philips has been able to transform its products from simple electronic equipment to designers goods. "The engineers know that without the client there won't develop good products, the sales organization knows that without a good product there is no sale."(1)
In this shift, the sourcing of the production has been changed. From autonomy over production to outsourcing to cost-effective companies (and countries). This change of internal organization makes the company more flexible to changing consumer preferences and market trends. Design and time-to-market is what is key in surviving in this complex and fast changing consumer-driven market.
What is unique about Kleisterlee is that he gained his position of the CEO of Philips completely by an internet promotions path.
Kleisterlee describes himself as quite, sometimes even a bit boring. He doesn't grant a lot of interviews and stricktly separates his private life from the public function as a CEO. (2). As we will learn, he doesn't seem to be emotionally attached to the parts of the company where he worked himself.
But what did he do? He ".... had a bright idea: sell off the volatile semiconductor business, re-brand the sleepy Dutch giant, and change the corporate culture..."
-- In this merger-mad age it's no big deal for a CEO to sell off a division or two. It's another story entirely if that division is his corporation' second-most-valuable unit, one where his father worked for decades and which the CEO himself describes as "the heart of the company."
Shareholders first? But that's exactly what Gerard Kleisterlee of Philips did ... using the proceeds to focus on faster-growing lines like lighting and medical devices and to answer the prayers of Wall Street with a multibillion-dollar share buyback.
On Europe... "More than 40 percent of our revenue comes out of this continent... We know the future has to be higher value added and service."
On Growth ... "Thirty billion is sort of a magical threshold ... the ambition is to break through that barrier."
On Management.... "I'm not on their back. If there's a problem, then they know I'm there."
On getting employees to change... "There will always be people who ... will frustrate the effort in a silent subdued way every way they can. Those you have to take out."
"The job is far from finished"... But shareholders are already applauding, sending Philips (Charts) stock up more than 30 percent over the past six months to its highest levels since the tech bubble burst (3).
But that was before the credit crunch ... (to be continued).
