A Bright Future for Philips
Philips embraces the Internet of Things with its Philips Hue smart lightbulb
“Smart, connected products are changing how value is created for customers, how companies compete, and the boundaries of competition itself. These shifts will affect virtually every industry, directly or indirectly.”[1]
This statement on the impact of the Internet of Things (IoT) on value creation should be a resounding call to action for companies around the world. Technology is changing the way we interact with everyday products and companies will have to either adapt and change with the advance of technology or get left behind.
At Philips, the company has recognized this need to adapt and innovate and is working hard to create products that satisfy customer’s connectivity demands. Pieter Nota, the Executive Vice President, Chief Executive Officer of Consumer Lifestyle says, “The ‘Internet of Things’ has become central to how we innovate at Philips – and how we listen to, engage with and take inspiration from our consumers…smart products must constantly evolve according to the desires of our consumers and we must be agile to satisfy them and create value.” With that commitment to IoT innovation, Philips has created several connectivity based products such as a “wearable device called ActiveLink, that collects data about the user’s activity levels,” the Philips Smart Air Purifier, which “provides families with a real-time overview and control of indoor air quality via their smartphone,” the Philips AVENT Smart Baby Monitor “which connects to and is operated by a smartphone, ensuring parents are never disconnected from their baby,” and most notably, the Philips Hue light bulb, a light bulb that gives a user the ability to change its brightness and color from a smartphone. This light bulb has been Philips’ most public foray into the world of the IoT. It has created many business opportunities for Philips to serve corporations or organizations interested in taking advantage of this new technology for their customers like the city of Los Angles or Cisco and SAP. Additionally, Philips sells the bulb direct-to-consumer as an innovative way to light up one’s home.
Nota proclaims, “the ‘Internet of Things’ puts the consumer in the driving seat and allows us at Philips to ensure our products are more personal, relevant and impactful than ever before. The consumer has always been at the heart of what we do. This interconnected world presents new ways for Philips to work with consumers to help them to be healthier, live well and enjoy their life.”[2] In service of this goal to create products that improve consumers’ lives, Philips participates in a program called Plug and Play, which “introduces start-ups to corporations and investors to accelerate their commercial development. It will work with Philips to filter hundreds of IoT-orientated start-ups that match Philips’ most relevant technology needs.” This openness to partnerships will allow Philips to be on the forefront of IoT innovation and will give start-ups the necessary scale to propel their ideas forward in a successful way. Philips is wise to take advantage of this opportunity and is dedicated to adding value to its existing business model by focusing on “innovators in sensor data, analytics and connected lighting for buildings and smart cities.”[3]
Philips’ 10K claims that, “recognizing that the growth and profit pool will shift to digitally connected lighting products, systems and services, our goal is to become a lighting solutions company capturing superior growth and profitability.”[4] In order to become the successful lighting solutions company Philips wants to be, they will need to double down on IoT product innovation to continue to push the envelope in lighting technology and stay relevant to consumers. Beyond direct-to-consumer uses, Philips should consider more partnerships with governments and large corporations. Imagine city streetlights that could be more actively controlled based on climate and lighting conditions, or corporations that could have more control over how their office buildings were lit, hour-by-hour. These two sectors provide a huge amount of growth opportunity for Philips, especially if they position the light bulbs as a long-term cost savings to customers due to the more efficient use of electricity gained by being able to dim or turn off lights with greater ease. If Phillips can continue to improve upon their IoT technologies and gain market share, their business model will be able to sustain itself through the digital transformation age.
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[1] Porter, Michael E., and James E. Heppelmann. “How Smart, Connected Products Are Transforming Competition.” Harvard Business Review, November 2014. Accessed November 16, 2016.
[2] Nota, Pieter. “How the Internet of Things Empowers Us All.” Philips. Accessed November 16, 2016. http://www.philips.com/a-w/innovationmatters/blog/how-the-internet-of-things-empowers-us-all.html.
[3] Macovei, Diana. “Philips Taps into Silicon Valley’s Start-ups, Accelerates Innovation in Connected Lighting for IoT.” Internet of Things Event. August 10, 2015. Accessed November 16, 2016. https://iotevent.eu/big-data/philips-taps-into-silicon-valleys-start-ups-accelerates-innovation-in-connected-lighting-for-iot/.
[4] Philips, 2015 Annual Report, p. 55, http://www.philips.com/corporate/resources/annualresults/2015/PhilipsFullAnnualReport2015_English.pdf, Accessed November 2016
Interesting post! As a customer of Hue light bulbs, I definitely think Philips did a great job in being a first mover and staying ahead of the curve in the light bulb industry. I was introduced to these light bulbs through a friend and was initially skeptical because I didn’t see a need for the product. I think Philips could face this hurdle with other consumers as well because there’s a high upfront investment cost and involves changing customer behavior towards light bulbs. However, after I tried the product myself, I was converted and believe that Philips should provide more opportunities for customers to try the product, in order to convince them. For example, I think the Philips partnership with Amazon that allows the Amazon Echo to control the Hue lights is great in reaching out to a similar customer base that would appreciate the convenience, and I wonder if Philips has done other similar partnerships? When there’s a large adoption by customers, I think governments and businesses would also be more willing to try Philips as well.
I am also curious if there’s overlapping, similar technology in Philips’ other products, such as the air purifier or baby monitor? Or if Philips is able to leverage existing competencies in those products? Although these may all be home products, I think Philips working on a broad range of products may be less effective and more confusing for consumers, than if Philips focused on just one product and really developed the best technology and become known for that product.