Creating Profit Through Alliances - business models for collaboration E-book | Page 57

Philips
Philips is one of the world's largest corporations in
healthcare, lifestyle and lighting, integrating
technologies and design into products and solutions.
With the brand promise of “sense and simplicity”,
Philips has created entirely new product categories,
often in collaboration with other brands. Ivo Rutten,
Vice-President for Strategy and Alliances, explains the
six-phase process that Philips uses for forging and
managing an alliance.
“Our corporate strategy, and the consistent business
strategies underneath it, drive our alliance strategy.
We like to create new collaborative solutions, as
these often solve user needs in a better way and also
are harder to copy for competition than pure product
modifications. This entry barrier works better if we
build an alliance cross-industry, with a partner active
in another field, than within one industry. Sustainable
alliances are hard enough to form and sustain within
an industry, but to copy a cross-industry one is really
difficult for competitors.
Philips also has in-industry collaborations, though.
The company is now relatively asset-light, and owns
much fewer factories than it did in the past. If we
have the opportunity to produce a new product with
another party, then this is often the preferred option.
This sort of collaboration may be more or less purely
commercial, or take the shape of an “in-industry
alliance”, e.g. where development of the producing
partner‟s production technology and of Philips
product technology are actively aligned for the sake
of improved innovative progress. If we invest in a
product- or a production technology ourselves, then it
is because we wish to retain a specific unique
technology, or perhaps for the benefit of vertical
integration that may outweigh the disadvantages of
owning production assets in a particular situation.”

Philips has a structured process to develop its
partnerships, that consists of an extended set of tools
and methodologies. The process instils discipline,
professionalism and it allows to capture learning,
best practices.
The first phase is a strategy review. The Philips
business units each have their business plan, which in
some cases requires teaming up with outside parties
in order to be executable. The more the company
changes and wishes to focus on new and adjacent
fields, the more evident the need for partners that
augment our own company skills becomes. This is
very much the case for Philips, which has been going
through a change from a high-volume electronics
strategy in the past, to a Health and Wellbeing
strategy nowadays. The review of a business strategy
with special attention for partnership needs helps to
identify the agenda for alliance formation and for
merger & acquisition activity. Whether an alliance or
an acquisition is preferred depends on many criteria,
but an alliance can be a good alternative if an
acquisition is not desired or not feasible. Conversely,
an alliance can be the „engagement‟ that precedes a
later „marriage‟.
The second phase consists of compiling a “long list”
of potential partners. For each potential partner, the
fit is gauged along a number of axes, such as the
technology fit, the cultural fit and the brand fit, etc..
Also the network compatibility is tested: in which
regions is this partner active and is the company a
competitor in a field outside the intended
collaboration? Do they perhaps already collaborate
with a Philips competitor? To make the point in a
field that is not a present Philips strategic focus: if
Philips wanted to introduce a new laundry
technology, it could aim to collaborate with, say,
55