April 2014 Consumer Lifestyle 1 Open Innovation Steven Vaassen April 2014 Philips Consumer Lifestyle

April 2014 Consumer Lifestyle 2 Content Background: Open Innovation in theory – What is “Open Innovation”? – “Not Invented Here” syndrome – “Want Find Get Manage” Framework – Opportunity and Risk Open Innovation in practice – Philips CL objectives and approach – Community of Practice – Open Innovation Toolbox – SimplyInnovate portal – Scouting partners – Success Stories

April 2014 Consumer Lifestyle 3 What is “Open Innovation”? The world is our labThe lab is our world Closed Smart people work for us Discover, develop, ship Create most ideas Control closed IP Open Smart people tap into the world Profit from Research by others Use most ideas Trade IP Market R&D Source: Henry Chesbrough, Open Innovation

April 2014 Consumer Lifestyle 4 What is “Open Innovation”? The formal discipline and practice of leveraging the discoveries of unobvious others as input for the innovation process through formal and informal relationships Source: Frank Piller, Professor of Technology & Innovation Management

April 2014 Consumer Lifestyle 5 “Not invented here” syndrome “Not invented here” is the philosophy of social, corporate, or institutional cultures that avoid using or buying already existing products, research, standards or knowledge because of their external origins and costs. The reasons for not wanting to use the work of others are varied, but can include fear through lack of understanding, an unwillingness to value the work of others […] The opposite predisposition is sometimes called "proudly found elsewhere" Source:

April 2014 Consumer Lifestyle 6 “Want Find Get Manage” Framework Source: Gene Slowinski, Good Practices in Open Innovation

April 2014 Consumer Lifestyle 7 Opportunity and Risk Disclosing your strategic needs and knowledge Partner selection (best competence, idea, technology, IP) Win-win deals (shared investment, shared benefit, long-term position) Control of innovation process (time, structure, requirements, resourcing) Intellectual Property: novelty, ownership, exploitation, enforcement Source: Jim Euchner, The Uses and Risks of Open Innovation

April 2014 Consumer Lifestyle 8 Philips CL Open Innovation ambition & approach Philips delivers innovation that matters to you We do this by being Caring, Innovative & Impactful Open Innovation – is not a goal in itself, it is an important enabler to accelerate innovation – delivers business impact from finding better solutions quicker – thrives in a culture of proudly-found-elsewhere with outward-looking mindset – success is measured by # key product differentiators from outside (KPI) We aspire to have at least half of new product introductions leverage OI

April 2014 Consumer Lifestyle 9 Philips CL Open Innovation ambition & approach Bottom-up: Program based on 4 pillars Top-down: Explicit integration in strategy and sponsorship by senior management Fill pipeline with differentiators from Outside-In Make it easy to connect & collaborate Drive culture ‘proudly-found- elsewhere’ Embed Open Innovation in organization

April 2014 Consumer Lifestyle 10 Bothell South China Singapore Klagenfurt Gaggio Montano Bangalore Drachten Shanghai Eindhoven Suzhou Community of Practice Small central team plus an OI Champion for each innovation team OI Champion drives local implementation of OI practices via coaching, making tools available, training, reward & recognition Change agents, evangelists Monthly meetings to share cross-site, inspire and leverage knowledge

April 2014 Consumer Lifestyle 11 Open Innovation Toolbox External expert search Internal knowledge management Patent Landscapes Supplier Market Scans Internet searches ConnectUs Co-creation platforms Idea Portal Conferences Supplier Roadshow University collaboration Competitor benchmarking philips.com/

April 2014 Consumer Lifestyle 12 SimplyInnovate portal Boundary conditions: – Process protects both inventors and Philips – Innovators should have IP in place before submitting What: External idea submission portal that provides a channel for inventors to collaborate with Philips (open call) Why: Source of outside-in innovation and reinforces brand reputation (becoming Partner of Choice) How: – Inventor submits idea through secure channel Simply Innovate – Evaluation teams per product area (Business and IP) evaluate ideas and engage with submitter

April 2014 Consumer Lifestyle 13 Scouting partners Scouting: Pro-actively reaching out to identify external sources of knowledge, technology, IP, prototypes or products (targeted search) Want: Business and competence needs feed into the search briefing Find: Appropriate scouting partners (int/ext) broadcast and search Get: Legal / IP, procurement supports deal-making with short-listed company Manage: Execute alliance (JDA, contracted, supply) to jointly reap benefits Our internal and external scouting channels – Scouting agencies (NineSigma, Strategic Allies) – Individual scouts (geographical focus Asia, USA, Israel, Europe) – Internal network (experts, ‘connectors’, ConnectUs)

April 2014 Consumer Lifestyle 14 Consumers are looking for solutions to prepare the foods they love, in a healthier way We went looking for a compact and affordable technology to enable people to cook food quickly, with less oil We partnered with SME from whom we license Rapid Air Technology We took this global innovation to market in a highly locally relevant way The Philips Airfryer is now available in over 100 markets worldwide and Euromonitor has confirmed that Philips is the world’s #1 low fat fryer brand Example: Air Fryer

April 2014 Consumer Lifestyle 15 Example: Open campus (2003)

April 2014 Consumer Lifestyle 16 x Example: Hue

April 2014 Consumer Lifestyle 17 Concluding remarks Open Innovation is not a goal in itself, yet complements and accelerates internal innovation power (focus on outside-in) Open Innovation bring opportunities but also introduces new risks It requires (other) efforts to employ and continuous attention to maintain (mindset) A lot can be learned from achievements of others Networking and entrepreneurship are crucial to success and fun

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