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Phillips Design

Case Study
Phillips Design

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Phillips Design

Table of Contents

Page

1 World Outlook: Home Entertainment 3

2 Introducing Phillips Design 4

3 Design as a Business Driver 5

4 The Phillips Design Philosophy 6

5 The “High Design” Process 8

6 A Design Oriented Organization 9

7 The Business Model: Balancing Quality and Cost 10

8 Role of Industry Development 12

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1. World Outlook: Home Entertainment

Home entertainment has gone beyond being merely about appliances. This industry, driven by
the baby-boomers, has evolved and has now become a lifestyle proposition. Consumers of today
look beyond product functionality, demanding an enhanced experience which encompasses
design, quality and function.

Globally, the home entertainment industry is booming. The Canon Digital Lifestyle Index
predicts Australian spending on digital technology to be AUD$5b by the end of 2007. 50% of
this spending is driven by the sales of flat –panel TVs. Chinese spending on DVDs is expected
to exceed USD$500m by 2010 (Screen Digest, Cinema and Home Entertainment in China).

Key Challenges

While the statistics above are encouraging, players in this industry grapple with maintaining a
competitive edge.

“There is no real technological advantage……You can take the lead technologically for 6 months at the most and
before you know it, everybody has access to the same technology!” (Low Cheaw Hwei, Global Account Director)

To be competitive in this industry, players have to perceptive to the needs of the consumer and
conceptualize and design their products to meet these requirements.

Phillips: Lifestyle Market Leader

“Lifestyle” is one of the three core areas of focus of Royal Phillips Electronics, Netherlands
under its “Vision 2010” strategic plan. Phillips aims to provide consumers with products that
embody “sense & simplicity”.

“We believe that every moment you spend at home (or away from work) should be enjoyable and uncomplicated:
time spent recharging your batteries or simply enjoying yourself. That’s why we continue to develop products
designed to help make your life simpler and more relaxing whether you’re watching TV, adjusting the lighting in your
bedroom, cleaning your teeth, listening to music or simply making your coffee in the morning.” (Koninklijke Phillips
Electronics N.V, 2004-2007)

Growth

The burgeoning Asian economies provide an excellent opportunity for Phillips to grow its sales
of lifestyle products. Currently, the Asian market contributes 20% of Phillip’s global revenue
and this is expected to grow to 25% in 5 years. (Business Times, 01 October 2007).

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2. Introducing Phillips Design

“Design has always been one of the key drivers behind Phillips” (Low Cheaw Hwei, Global Account
Director)

Phillips Design, part of Royal Phillips Electronics, is headquartered in Netherlands and has the
reputation as one of the largest and longest-established design organizations globally. It has 12
branch studios which span Europe, USA and Asia-Pacific. It has an especially strong Asian
presence with 5 Asian studios based in Hong Kong, Singapore, Taipei, Pune and Bangalore. On
average, Phillips Design handles about 3000 projects per year, 30% of which is handled by the
Asian studios. An added testament to the strength of its Asian studios is the fact that 60% of all
Consumer Electronics products are developed there.

Phillips Design consists of 450 professionals from

more than 35 different nationalities, who are trained in
diverse disciplines such as psychology, cultural
sociology, anthropology and trend research. The
mission of the global team is to build a harmonious
relationship between people, objects and the natural
environment.

“New Value”
Phillips offers various services for all stages in the product-creation process. Phillips defines
Value as creating something that is “…socially relevant, culturally appropriate and individually
meaningful at a specific moment.”

“New Value is founded on research about people, societies and

culture. It allows us to resolve complex problems and create
propositions that really differentiate themselves in the market”

Services

• Experience Design • Innovation Design • Design for New Media and the Internet

• Identity Design • Design for Product • Design for Print and Packaging

• Understanding People, Cultures • Design for Interaction • Design for Environments

and Societies

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3. Design as a Business Driver

Usual Business Drivers

Low Cheaw Hwei, Senior Global Account Director, Phillips Design, describes the “usual
business drivers” as being technology-related. Features and specifications of products are used
to drive sales. While this is a rational and functional method of bringing a product to the market,
this is often insufficient to promote demand. This is where design comes into play.

Design as a Business Driver

“…the difference where design becomes a driver is that is also

starts to address the emotions of the consumer, the softer aspects of
the consumer….the softer need….the latent desires or wants of the
consumer.”

- Low Cheaw Hwei, Senior Global Account Director

Design digs deeper and complements the functional aspects of the product. This results in the
creation of a product that appeals to the consumer on a practical and more significantly, on an
emotional level.

In addition to this, technology-related competitive advantage is likely to be equalised quickly.

To gain absolute advantage over other players in the market, Phillips focuses on designing for
the consumer.

Investment of Design

“The investment of design as a business driver has to be taken on a mid-to-long-term investment. It is not an
ingredient which we immediately just throw into the business equation” ” (Low Cheaw Hwei, Global Account
Director)

Design goes beyond just styling. It requires the fusion of multiple disciplines such as sociology,
marketing, economics, and psychology to acquire an in-depth understanding of the consumer
and to accurately define the proposition for businesses.

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4. The Phillips Design Philosophy

Phillips, as an organisation with a global reach, sees itself as contributing significantly

to the shaping of the future. In order to stay relevant in a world of rapid globalisation,
increasing environmental awareness and increasing consumer sophistication, Phillips
has developed a design strategy which encompasses the following:

Assembly and disassembly

This strategy entails the manufacture of products which upon reaching the end of their
useful lives, can be dismantled and broken down into parts to be used in new production
processes. This strategy requires a two-dimensional approach. First, materials should be
carefully selected to ensure they are chemically compatible to be used in the future
product. Second, the way in which components are assembled in complex products
should be carefully planned to ensure that they can be easily broken down into
homogenous parts.

Durability

“Durability” here refers to the creation of “relevant objects with lower environmental
impact”. This can be down in two ways. The first method involves making products,
which while being only moderately durable, are highly recyclable. The second method
involves the creation of a generation of products whose life-cycles are extended
considerably. The feasibility of the first method depends on availability of solutions
which make the repeated use of materials and components economically viable. The
feasibility of the second method depends on the extent of research and development of
materials which stand the test of time.

Miniaturization

“Miniaturization” refers to the reduction in the weight and size of products in order to
cut down on the amount of materials and energy used in manufacturing and using them.
Miniaturization is only possible if high-performance materials and technologies are
available at economically feasible rates.

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Usability

The concept of “usability” as used today, refers to the creation of products which are
able to enhance comfort, satisfaction, productivity and are culturally adaptable. It is
unlikely that all these requirements will be established at the planning stage. Therefore
it is imperative that the design-process is flexible and responsive in an “iterative way” to
the demands of the consumer.

Service Carriers

The strategy of making products “service carriers” is an emerging trend which entails
replacing physical products with software. Examples of this are the possibilities which
have been realised with the invention of the Compact Disc. This strategy is important
because it enables the provision of information and services with minimal consumption
of energy and resources.

Interdependency

“Interdependency” refers to the creation of products which are compatible with both
earlier and future versions.

(Flying over Las Vegas, 1992)

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5. The “High Design” Process

“High Design” is another aspect of Phillip’s design strategy. It refers to a multi-

disciplinary approach to design. This process was developed in response to the
phenomena of saturation (people having almost everything) and hyper-choice (people
having almost unlimited choices available). These phenomena create problems for both
consumers and producers. Consumers are left wondering what they should purchase
while producers do not have a clear idea of what proposition will appeal to consumers
(The human side of things, Ingrid van der Zon).

Stefano Marzano’s (MD of Phillips Design) response to this was to develop relevant
products which heighten people’s comfort, satisfaction, pleasure and productivity. The
rationale behind this is that if a product makes a people’s lives better, it will
immediately become the first choice.

Accolades

iF Awards 2006:
17 Phillips products won awards in 6 categories at the prestigious annual iF
product design awards. Of the wins, 8 were for its lifestyle products. The iF
product design award is recognized throughout the design world and is seen
as a visible symbol of product and service quality.

Red Dot Award 2006:

With over 4000 entries from 40 countries, it is one of the largest design
competitions in the world. The Philishave SmartTouch XL and the Phillips
Digital Photo Display have been awarded Red Dot distinctions for high
design.

Hong Kong Award for Industries 2006:

Phillips has received 2 prestigious awards from one of the most influential
commercial organizations in the world. The Phillips WACS700 Wireless
Music Centre & Station and the SHS850 Outdoor Corded Headphone have
both been recognized in the Consumer Product Design category.

Hong Kong Design Awards 2005:

The HKDA Awards covers various design disciplines from graphic, product,
interior, spatial, photography, illustration, fashion accessories as well as
media. In 2005, Phillips received 3 Silver awards.
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6. A Design Oriented Organization

The Singapore design studio consists of 40-plus individuals who are representative of the multi-
national, multi-disciplinary characteristics of the larger global organisation. Its focus is on three
key areas which create a total brand design experience for Phillips and external customers.
These areas are:

1) Design management

2) Design direction-setting

3) Design realization

The Singapore studio identifies its key strength as being able to integrate developments in
technology, socio-cultural change and strategies for business sustainability. It aims to provide
clients with cutting-edge design and design-related information to empower them to develop
more human-focused and intelligible products and services. The studio is also able to
significantly leverage Singapore’s strategic location to tap into the rapidly growing Asian
market.

While not being as price-competitive as its competitors in other parts of Asia, the team’s
competence in design gives them a significant edge.

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7. The Business Model: Balancing Cost and Quality

Phillips aims to be:

• A Leader in Lifestyle

• An Enabler in Healthcare

• A Partner in Technology

Key Markets

Consumer Electronics Sales (2005)

Key Business Areas

Sales by Region (2005)

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Earnings

Increased focus through outsourcing

A comprehensive range of outsourcing arrangements allows Consumer Electronics (CE) to
focus on specific parts of the value chain: marketing, product innovation, brand and channel
management.

CE increasingly out sources activities to Original Equipment Manufacturers (OEMs) and

Original Design Manufacturers (ODMs) in order to further de-risk the business.

Alliances
CE has entered into alliances with broadcasters, operators, distributors and content providers in
the world of cable, satellite and broadband to offer integrated hardware/ content solutions to
consumers.

An example of this is an alliance with Premiere, Germany’s leading pay-TV operator, for
HDTV content including the FIFA 2006 World Cup.

(Consumer Electronics Business Presentation, 2005)

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8. Role of Industry Development

In the opinion of Cheaw Hwei, the efforts of the Singapore government in cultivating design
have been incredible. Instead of treating design as simply a skill that can be cultivated in a short
span of time, the government has taken a patient approach which is bound to lead to the growth
of competent design community.

“..its about planting seeds which would then in the future grow into real pockets of
creative thinking…and it has to be done from bottom-up and top-down.” (Low
Cheaw Hwei, Senior Global Account Director)

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