PHILIPS CASE STUDY
BY: Soubhagya, Sampad, Sumit, Sneha, Dolly

BACKGROUND
• Philips is one of the world’s leading electronics companies.
• 1980s was a significant period for the electronics industry
over which enormous changes took place worldwide
• A period of high growth for the consumer electronics
market.
• Innovative new products
• Underestimation of newer competitors

BACKGROUND
• Many of the competitors, particularly from Japan, had advantages over Philips
• Japanese companies gained economies of scale
• Difficult time for Philips, barely grew
• New products such as the Video 2000, failed.
• Market share was falling
• Sense of complacency inside the company
• Approaching 1990, the company was faced with a serious financial crisis

KOTTER CHANGE MODEL
• John Kotter (1996), a Harvard
Business School Professor and a
renowned change expert, in his
book “Leading Change”,
introduced 8 Step Model of Change
which he developed on the basis of
research of 100 organizations
which were going through a
process of change.

Step 1: Establish the need for urgency
Identifying and highlighting the potential
threats and the repercussions which might
crop up in the future.
Examining the opportunities which can be
tapped through effective interventions.
Initiate honest dialogues and discussions to
make people think over the prevalent issues
and give convincing reasons to them.
Request the involvement and support of the
industry people, key stakeholders and
customers on the issue of change.

Step 1: Establish the need for urgency
• Some of the factors that created the need for urgency in the organization:
1. The 1980s was a significant period for electronics:
• High Growth
• High Innovation
• Newer Competitors entering the market
2. Entry of various Japanese companies:
• These companies achieved economies of scale and thus were able to produce products in large
volumes than other traditional companies for example Thorn, RCA, Thompson (in France), and
Philips.

Step 2: Create a guiding coalition
Identifying the effective change leaders in your organizations and also the key
stakeholders, requesting their involvement and commitment towards the
entire process.
Form a powerful change coalition who would be working as a team.
Identify the weak areas in the coalition teams

Step 2: Create a guiding coalition
To support this change, Philips has
established a strong guiding coalition of
leaders and experts within the company.
This coalition has been responsible for
developing and implementing the
company's strategic plan, which includes
a focus on innovation, customer-
centricity, and sustainability.
The top 100 managers of the company
continued the process by holding
discussions and decision-making
meetings with managers at the next
levels (Centurion II and III) until
thousands of managers were involved in
a worldwide cascade of meetings.

Step 3: Develop a vision and strategy
• Determining the core values, defining the ultimate vision and the strategies for
realizing a change in an organization.
• Ensure that the change leaders can describe the vision effectively and in a
manner that people can easily understand and follow.

Step 3: Develop a vision and strategy
Initiatives:
• ‘Operation Centurion’ : To the creation of a smaller business with more focused activities, its central theme
though was to influence the way Philips was managed.
• Customer-first: To ensure that all Philips people focused their work on satisfying both internal and external
customers of the organization.
• Emphasizing ease of use as a key feature of all Philips products.
• Carrying out initiatives to develop the capabilities of managers.
• Upgrading the Philips image and unifying the “look and feel of its products.”
• Focusing on dealing with only the best suppliers.
• Taking positive measures to ensure a smooth cash flow for the business.

Step 4: Communicate the change vision
Communicate the change in the
vision very often powerfully and
convincingly. Connect the vision
with all the crucial aspects like
performance reviews, training,
etc.
Handle the concerns and issues
of people honestly and with
involvement.

Step 4: Communicate the change vision
Philips has been successful in communicating its change vision to its
employees and stakeholders. The company has used various channels to
communicate its strategy, including town hall meetings, internal
communications, and public announcements.
The top 100 managers of the company continued the process by holding
discussions and decision-making meetings with managers at the next
levels (Centurion II and III) until thousands of managers were involved in
a worldwide cascade of meetings.

Step 4: Communicate the change vision
“Town meetings” (meetings
between everyone in a particular
unit.) : At ground level, they
implemented these meetings to
ensure two-way communication
between the employees and
upper management.
All employees were asked to
raise challenging questions, to
express their opinions and make
suggestions. Managers gave
information, answered questions
and made decisions - on the
spot.

Step 5: Empower broad-based action
Ensure that the organizational processes and structure are in place and aligned
with the overall organizational vision.
Continuously check for barriers or people who are resisting change. Implement
proactive actions to remove the obstacles involved in the process of change.
Reward people for endorsing change and supporting in the process.

Step 5: Empower broad-based action
• Centurion project Encouraged cultural change in Phillips. This project encouraged employees
to take more responsibility for decision-making at every level - this process is described as
‘empowerment.
• In their business operations, we can get to see the impact of the Centurion process,
particularly in the following case:
• Reducing an order backlog :
Philips assembled a project team with members from every department involved in the
delivery process. The team appointed an owner for each overdue order, sorted out the
immediate problems, looked for causes, and found solutions. Delivery reliability has improved
by 75% after one year.

STEP 6: ENSURE SHORT TERM WINS
By creating short term wins early in the change process, you can give a
feel of victory in the early stages of change.
Create many short term targets instead of one long-term goal, which are
achievable and less expensive and have lesser possibilities of failure.
Reward the contributions of people who are involved in meeting the
targets

STEP 6: ENSURE SHORT TERM WINS
Philips was faced with cash
flow problems as they could
not bill their clients
Took positive measures to
ensure a smooth cash flow for
the business.
development of a critical new
product was seriously
behind schedule.
At a Centurion meeting,
urgency of the situation was
recognised and a task force
The new product was launched
six months ahead of schedule
and became
a tremendous success

STEP 6:
ENSURE
SHORT TERM
WINS
• A number of company-wide issues were identified at
Centurion I meetings
• focus of areas of company policy
• “Customer First” was set in motion to ensure that all Philips
people focused their work on satisfying both internal and
external customers
• Emphasising ease of use as a key feature of all Philips
products
• Carrying out initiatives to develop the capabilities of
managers
• Focusing on dealing with only the best suppliers.

STEP
7: BUILD ON
THE CHANGE
A survey was carried out of the Centurion project, involving
1,500 Philips people in 15 countries
Way to go in managing cultural change but benefits were
starting to materialise
Move Centurion forward into a new phase of development
Change process should be simplified
Fewer new initiatives and to place more emphasis on
making existing initiatives work
Clear set of values that would focus on the most important
factors for the company

STEP
7: BUILD ON
THE CHANGE
Everyone contributes to the satisfaction of customers as
part of a process which supplies value to the customer
Hundreds of customer surveys are carried out every year.
A highly motivated workforce.
Employee surveys have been carried out throughout
Philips
Detailed quality framework to systematically assess
business performance
Financial results are checked at every level and in all
units of the organization

Consolidating
gains and
producing
more change
Continued investment in research and development (R&D):
management team continued to invest in R&D to develop
innovative products and technologies. The company
established new R&D centers and increased funding for
existing centers to accelerate the pace of innovation.
Expanded into new markets: The company entered into joint
ventures and strategic partnerships with local companies to
establish a foothold in new markets.
Strengthened strategic alliances: management team
strengthened strategic alliances with key suppliers,
distributors, and customers. The company worked closely
with its partners to improve product quality, reduce costs,
and increase customer satisfaction.

Consolidating
gains and
producing
more change
Improved employee engagement: Philips focused on
improving employee engagement and morale by
providing training and development programs,
promoting teamwork, and recognizing employee
contributions. The company established a
performance-based culture that rewarded high-
performing teams.
Streamlined supply chain: The management team
streamlined the company's supply chain to improve
efficiency and reduce costs. The company
implemented a just-in-time inventory system,
improved logistics and distribution, and optimized
procurement processes.

STEP 8:
EMBED THE
CHANGES IN
CULTURE
• Discuss the successful stories related to change initiatives on
every given opportunity.
• Ensure that the change becomes an integral part in your
organizational culture and is visible in every organizational
aspect.
• Ensure that the support of the existing company leaders as
well as the new leaders continue to extend their support
towards the change.

STEP 8: EMBED THE CHANGES IN CULTURE
4 pillars of rejuvenated culture
Thrive to be the best at what they do and refuse to accept that their best efforts
cannot be bettered
Value the contribution of each individual and the power of a team with shared
ideas and beliefs to make a real difference.
Wider responsibility to customers, partners, local communities and shareholders
Continually evolve to meet the changing needs of customers

Anchoring
new
approaches in
the
organization's
culture
• Leadership development: Focused on developing leaders
who could drive the change initiative forward. The
company provided leadership training and development
programs, coaching, and mentoring to equip its leaders
with the skills and knowledge needed to support the
change effort.
• Communication and engagement: Communicated the
change vision and progress to employees, customers, and
other stakeholders through regular communication
channels. Encouraged feedback and participation from
employees, customers, and partners to foster a sense of
ownership and engagement.
• Organizational design: Philips redesigned its organizational
structure to align with the change vision and strategic
objectives. The company implemented a flatter, more
flexible structure that allowed for faster decision-making
and more efficient resource allocation.