Case study 10.6 Royal Philips Electronics This case is adapted from Capell, K. (2006). Thinking simple at Philips. Reprinted from December 11 2006 issue of Bloomberg Businessweek, p. 50, by special permission, copy- right @ 2006 by Bloomberg L.P. and from the Philips website www.philips.com, accessed 23 June 2010.) In late 2004, British fashion designer Sara Berman received an unexpected telephone call from Andrea Ragnetti, chief marketing officer for Royal Philips Electronics. Figuring the Dutch company wanted her to design some sort ofwearable technology, she was prepared to politely decline the proposal. In- stead, she spent an hour engaged in a freewheeling discussion on the mean- ing of simplicity, and by the end of the chat she had accepted Ragnetti's invitation to join Philips' Simplicity Advisory Board, a new panel of outside experts. What does a fashion designer know about technology? Not much. But that's the point. To drive change following a radical restructuring, Philips reckoned it needed a fresh perspective from creative types with no ties to the company. So it formed the simplicity board, a group of specialists in health care, fashion, design, and architecture. 'Philips was too inward-looking,' Rag- netti says. 'To really embed simplicity into the company's DNA, we needed an element of vision.' Change agents The five-member board's mission is to help Philips focus on 'sense and sim- plicity,' which is what the company called a new branding initiative to under- pin its transformation from a high-volume electronics maker into a design-led company concentrating on health, lifestyle, and technology. Each member of the Simplicity Advisory Board comes from a different cul- tural and professional background. While the board members bring a mix of experience and cultures, they all share the company's passion for simplicity. Berman, who heads a successful clothing label, is helping the company explore new opportunities in consumer products. Dr. Peggy J. Fritzsche, a radiology professor in California, advises Philips on its $8 billion medical-equipment business. Gary Chang, a leading architect in China, serves as a brand ambas- sador in the mainland. John Maeda, a graphic designer and professor at Massachusetts Institute of Technology, is working to fine-tune the emotional appeal of the company's wares. Ken Okuyama is active in automotive and transportation design and is a professor at the Art Center College of Design in the United States. On a practical level, the board is helping Philips rethink what its cus- tomers want. For two years, members met for several days every month or two in cities such as Rome, Paris, or New York. Today they no longer meet as a group, but each is on call to help Philips create intuitive, easy-to-use prod- ucts that meet specific needs. 'In the past, companies just developed the tech- nology and hoped someone would buy it,' says Ragnetti. 'Now we are starting from the point of discovering what exactly consumers want a prod- uct to do.' 'Mind-opening' Philips has given the board members free rein to kick the tires. When the con- sumer electronics unit was ready to launch its Wireless Audio Center, a sys- tem for listening to different tunes in multiple rooms around the house, Maeda gave it a whirl. His verdict: Too much computer jargon such as 'boot- ing up, please wait.' 'His suggestions were mind-opening,' says Geert vanKuyck, Philips' senior vice-president of global marketing. Maeda's input 'made us ask questions we hadn't asked before.' The outside perspective came in handy when assessing Philips' fast- growing medical business. As a practicing radiologist, Fritzsche noted that medical equipment is often too complex. Although the quality of images has grown dramatically, Fritzsche says the greater detail and quantity have in- creased the burden on radiologists. Offering so much data led to information overload instead of better diagnoses. With Fritzsche's insights, Philips is working to make its gear more intuitive, allowing doctors to spend more time with patients and less grappling with technology. For Philips, the promise of simplicity isn't just about making products that are easier to use. The bigger challenge is rewiring the entire organization. The board's primary contribution, says Berman, is 'using creative chaos to affect lasting change.' That' s trickier than it might sound. 'Simplicity,' says Maeda, 'is actually a very complex topic.' Inpracticalterms, theboard acts as athinktankand soundingboard for Philips, providing counsel and guidance on a number of projects and issues in the healthcare, lifestyle, and technology areas. Questions 1. Evaluate the use of the Simplicity Advisory Board by Philips. Is this really a good idea for such a company? Explain your answer. 2. Could other types of companies nd value in creating similar boards? If so, what types of companies? 3. Is the use of advisory boards limited to one on the desire for simplicity or could other types of advisory boards be valuable giving advice on such matters as cost savings, market penetration, etc.? Explain your