Philips: sharpening its competitive edge

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Royal Philips Electronics of the Netherlands has an 80-year history of attention to product design. But new CMO Andrea Ragnetti and Stefano Marzano, head of Philips Design, Philips' autonomous creative division, have gotten together to help make design the company's most important strategic driver these days.

That imperative covers not only how the Dutch consumer-electronics company actually designs products for aesthetics and functionality, but also how Philips prioritizes product attributes, what kind of customer research it conducts, how it allocates promotional dollars and how it structures its marketing staff. And because Philips seems resolute about the continuing importance of design to its brand, Messrs. Ragnetti and Marzano are likely to have much to say about the company's future as well.

"Design is the history of Philips," says Mr. Marzano, 56, a 28-year veteran of Philips Design and its head since 1991. "But we needed to maximize design as a competitive weapon at a time when several areas of technology are getting mature. The fact that Andrea has this sensibility and this understanding has created a kind of accelerator to exploit what actually had been created over time."

Mr. Ragnetti, 46, welcomed Philips' emphasis on design when he arrived in 2003-after a career feeling underappreciated in a consumer-package-goods industry that only recently has begun embracing the power of design to boost brands. He's actually the company's first CMO. And at first, Mr. Ragnetti's arrival merely underscored Philips' poor existing brand position in the U.S. market. It long has trailed Japanese rivals in sales and image in America, in part because the company continued to support lines such as Norelco while struggling with how to make itself a household brand.

Arguably, the company only recently started to figure things out, as executives from CEO Gerard Kleisterlee on down coalesced behind design's importance. Philips began successfully leveraging design in its marketing five years ago, with a U.S. TV-advertising campaign that showcased the decorating versatility of its flat-screen TVs. Beginning in 2004, it also made marketing hay out of its new Ambilight TVs: stylish flat-panel models that project soft light onto the wall behind that matches program colors.

But also two years ago, Messrs. Ragnetti and Marzano helped initiate a series of efforts to intensify the role of design in Philips' branding, and vice versa. They settled on a concept they called "simplicity-led design," which emphasizes making high-tech devices user-friendly as well as beautiful. "The core idea is to allow consumers to benefit from the sophistication of technology without dealing with the complexity behind it," Mr. Marzano says.

The two men also have helped overhaul how Philips gathers consumer opinion about its products, designs and marketing. Now it is drilling deeper for insights that will make both design and marketing better. Such research demonstrated, for example, that men and women look at TV design differently. "Men want to show off the size of the TV, and women don't like TVs and want them to be out of sight in the living room," says Mr. Ragnetti. "So we've interpreted these insights to get something as close as possible to a flat screen, so that it can be as big as you want it but not too invasive."

Philips' design-intensive approach already has led to product innovations including Click&Go, a food processor that disassembles easily for cleaning, and the Welcome project, an effort to make sure consumers aren't frustrated by packaging and product layout when they open a new device from Philips.

The company also created what it calls the "ambient experience" around patients' visits for medical examinations such as MRI scans; it features the use of a credit-card-size "mood token" that controls projectors in the waiting room that show images and lighting on the walls and ceiling in a theme chosen by the patient-cartoons for children, for example. "It's not just aesthetics but a concept that starts with a deep appreciation of how patients relate to the environment and how technology, through design, can provide a solution," Mr. Ragnetti says.

These days, Messrs. Ragnetti and Marzano also are infusing Philips' marketing with a new design consciousness. For example, the company made ambient experience part of its new branding campaign "despite the fact that it is still almost non-existent as a business," Mr. Ragnetti notes.

Philips also is shifting marketing resources from traditional advertising to event marketing that promotes its new design ethos. Last fall, at the first such show, in Paris, Philips touted products and design strategies that it plans to roll out over the next three to five years. A second exhibition is slated for New York in April.

This focus is even affecting personnel decisions. Design within Philips long has been part of the marketing organization; and Mr. Marzano has been a member, along with the CMOs of Philips' five divisions, of the company's CMO board. But now, the two are increasing the number of one-year exchanges of marketing and design personnel.

And more of Philips' high-achieving young managers are being rewarded with stints in the corporate design arena or in Philips Design. "We are making design, in the strategic life of the company, a much more aspirational place to be," Mr. Ragnetti says.
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