Appendices
1. CODING SCHEME
51 2. LIST OF CODES
Categories Codes Level 1 Codes Level 2 Ambidexterity
Balance Renewal &
Replication 10-20% innovation in value chain
70-30% rule
Balance of BMs
Continuous innovation balancing dilemma
Leadership and communication to balance BMs
Nonoptimal balance due to existing BMs
Strategic Fit Imperfect fit but profitable BM
Managerial fit for BMI
Strategy fit & link to existing BM
BMI BM development 10% revenue to R&D
BM cooperation with customers
Conviction as start of BM
New BM focus not on revenues
Old to platform BM
Path to profitability
Think-through supply chain with new BM
Too much freedom at value proposition
Evaluating BMs Cross functional teams
Market or customer pilot
RoI as criteria
Structured BM evaluation
NBX Clear gates and structure for BM transition
Criteria during NBX life cycle
Innovation roadmap
Pre-seed validation
Scaling small ventures
Set up business case in Alpha
Scaling BMs adapting and scaling telehealth
Go into value chain dungeons when scaling innovation
Tailor demand flexible and efficient background for BMI
BMI Enablers Innovation at Philips AI & ML disruptive BMs
AI toothbrush & Behavioral change
Continuous innovation
Difference Personal health vs. Connected care
HealthSuite Platform
Innovation differences between segments
52
Phililps Design
Organizational
context Innovation capability Philips
Innovation driven design
Innovation strategy department guides innovations
Many BMs
Philips Business System
Philips Research
Policies to establish BMI
Project-based
Telehealth
Conflicts Managing Tensions Agile against tension of change in existing teams
Agile on BMI
Business & Market tension
Change management
Critical factor in optimal integration-separation trade-off
Limited resources
Managerial practices
Old & new BM tension
Operational backbone tension between BMs
Performance management tension between BMs
Tension Measures
Separation Separate BM elements
Separate business enablers
Separate strategy and focus
Strategy & Innovation separate from businesses
External Factors
Dynamic
Environment Dynamic Ecosystem
Fast digital transformation (Covid)
Global requires adaptive
Increase in transparency
Industry dynamic on BMI
Major shift due to Covid
Rapidly changing demand
Sector-Market and innovativeness affect integration
separation
New Solutions
Service & consumer
solution BM Co-creation
Consumerization of Health
53
Customer-first solutions company
Long-term consumer relationship
Total Solution BMs
Up- & downgrade with long-term relationship
Towards
sustainability Integrated SC sustainability
Sustainability push
Sustainable circularity
Old BMs No growth in old BMs
Product businesses
Synergies Exploit Synergies Assets anchoring
Brand leverage
Configurable systems
Growth & Cost Synergies
HealthSuite
Integrations for leveraging BMs to
Leverage backbone & infrastructure
Leverage connectivity
Leverage consumer-market expertise
More personalized and in home healthcare - more synergies
Strategic fit synergies
Supply chain harmonization
Synergies from cross segment initiatives and integrated solutions
Integration Capability Harmonization
Data leveraging
Informatics central
Integrated architecture
Integrated IT landscape
Integrated Supply Chain
Integration at strategy & value proposition
Low integrated value propositions
Operate according to value chains
Platform integration
Soft-Hardware architecture
Value propositions
54 3. INTERVIEW TRANSCRIPTS
Interview 1
Interviewer: The following interview will form the basis of our research aimed at uncovering relevant insights concerning business model innovation and dual business models. Our research focuses on unveiling the specific integration mechanism, Phillips adopts to exploit synergies running a dual business model devoted to continuous innovation. Along with it, we aim to shed light on the optimal degree of integration or separation of a second business model, specifically focusing on value chain activities and organization environment. Last but not least, since innovation is a never-ending process, as well as because organization must reap the benefits from their business model innovations. We aim at discovering when and how a disruptive business model is deemed ready to proceed from renewal to replication. Do you have any questions about the topic?
Interviewee: No.
Interviewer: Okay, the following interview will last about 30 minutes, it will be recorded and transcribed. And then the transcript will be sent to you for validation of the interview. And your name and information will remain anonymous at all times. Unless otherwise allowed by yourself only. And Is that okay with you?
Interviewee: Yeah, that's okay.
Interviewer: So, we can begin with the interview. The first question is, what is your role at Philips in terms also of department or division?
Interviewee: Yeah. So, I'm a senior manager in the Strategy Team, I work in their personal health and highly focused on consumer health. I've been with Philips for two years now.
Interviewer: your typical working day, can you tell us how it works for your specific responsibilities and duties?
Interviewee: Yeah, so my responsibility is to drive the strategy for the cluster, the personal health cluster with the team. So, it really it's a project-based kind of work. So, it depends on the questions that senior management has. I tried to give support and answers to each of the questions. So, it can be anything from organic questions instead of the geographic expansions or a can be adjusted sees, like a new basis models and new ways to approach the market. Or it can be also inorganic work. So, like looking outside in the market, like for inorganic targets, that Philips might be interested in that fit the strategy of course.
Interviewer: So, it's a very dynamic job that depends on what is to be done. And on what is the point of the company?
Interviewee: So, it's very, I guess, it's very broad. Yeah Interviewer: I mean, you worked on many different projects?
Interviewee: Yeah. So, in two years, I spent the first year mainly looking at big inorganic targets for personal health. And then the second year, I spent most of the time looking at how we create a new business unit, which is now a consumer health, business development which focuses mainly on post-acute carrier and within that space.
Interviewer: In your point of view, what are the most pressing challenges on which generally organizations, and so also Philips focus nowadays?
55 Interviewee: I think that the big challenge for the organization is how we transition into the vision 2025 that that the CEO has. I think that the balance of having legacy business models versus the new ones that we need to make a and keep that innovation ready. I think that's the big intention of the company. Just because you know, you have people that are used to legacy type of businesses, and then you bring in new business models into the company and also creating new business models, and that that's a natural tension that people have, it is a lot of change management I think.
Interviewer: What do you think are the drivers that will render the new business models, the innovative ones of the 2025 plan successful, what are the aspects Philips has to focus on the most?
Interviewee: So, I think for us, when we look at new business model, it's very important that we see a path towards profitability, right? That's one thing that is important. Yes, you might have a new
business model that you bring along that that is not making any money today. But, when we look at the horizon, horizon two, horizon three ideally, you would like to see that that's one thing. The second thing I think is synergies with existing businesses, so anything that we bring in needs to fit somewhere the strategy that we have as a company, which is that big come in and help that company. So that fit needs to be super clear and synergistic for us, I think those two are probably the top ones.
Interviewer: Considering that, do you have like, established criteria both for evaluating the fit between two business models and for estimating in which time horizon they are, in which step of their life cycle?
Interviewee: That (criteria for evaluating the fit between two business models and for estimating in what life cycle stage they are) is usually project specific so, it depends on where the business in Phillips’ organization is. We have IGT, which is image guided therapy, we have a connected care businesses, we have a personal health businesses, and we have a precision diagnostics businesses.
Those are the four big clusters. And each cluster will have like a different model that fits their business model. I can give you two examples; image guided therapy is growing very quickly. And they're looking more for business models that give them a traction in terms of devices that they can attach to the big equipment, consumables, and all these kind of devices and business models. Instead, Personal Health, which is probably the other extreme is more like digital engagement, digital business models that go beyond the product and try that connection with the consumer or the patient.
Interviewer: So, you would say that the Personal Health department cluster is the most innovative in terms of follow up after treatment and going to platform based, or what area of Philips is the most innovative in terms of business model?
Interviewee: That's a tough one. And let me take a step back here, because I think we have something that is called HealthSuite, platform HSDP. That's the platform that we're trying to build on. Yeah, that's built on Amazon AWS. I think our goal is to lever on that platform to build applications across the health continuum, right. You have the health continuum, there is prevention on one side, then you go into diagnosis, treatment, and then you go back home in the post care, which I was working on, right. So, I really HSDP becomes a platform that allows you that interoperability between the hospital and home, that enables you to take that person before they get sick in the prevention stage, all the way into the post-acute care, right.
Interviewer: So, at the end, all businesses, ideally, will be built on HealthSuite platform, and it will run all businesses in a certain sense?
Interviewee: Yeah, I think. And this is a visionary kind of approach. And I think that's something that the innovation and Strategy Team is pushing quite hard. I think that's the vision. But to get there, it's going to take a few years, right? Especially because now, for example, you have HSDP is building a lot of applications for the hospital. And now we're starting to think look at what happens outside of the
56 hospital, right. And I think COVID is also dramatically changing that approach because hospitals don't want to have people that don't need to be in the hospital anymore. That push is what we call
consumerization of health. The action of pushing health into the home. I think it's here to stay and that's accelerated things. I think, if you asked me this same question, two years ago, I would say yeah, okay, that HSDP is going to take a while. But that is the change that now we're thinking, Okay, well, how we can use the existing platforms that we have to extend and give that capability. I can give you an example. Philips engage is exactly working on that first 30 day that I told you, right? We're moving a lot of these legacy platforms into HSDP. Now, which allows you that that interoperability, and now we're thinking okay, now how we can use that. Take advantage of that older technical work that we're doing and push beyond the 30 days, which is now outside of the hospital.
Interviewer: Do you have criteria for developing and exploiting synergies between your business models?
Interviewee: like specific criteria for looking at synergies ? Interviewer: exactly.
Interviewee: No, I think I think the strategy now. And the way that we're looking at it is to what are the assets? That's one thing. The first thing is what are the assets that we currently have, that we can anchor these new business models to? Yeah. Why we're doing post cardio, we have very strong assets in the health system. So, in diagnosis and treatment, we have very strong assets that we can anchor all that right. And being able to anchor these new business models to existing value propositions, or businesses, I think that's a big criteria that will apply across all that. Other than that, right now, I don't think anything has popped into my mind, because then I think the next step will be specific to each different business.
Interviewer: So, it's like, really business specific. Aren’t there than overall criteria for new business models except for the vision of the company?
Interviewee: Yeah, so it needs to fit the strategy. They need to be clear a links to existing business models. Those two will be across all other businesses. And I think there is an innovation component as well. Each business has like their innovation roadmap, and they already identified some of them. So, they will be prioritized based on that.
Interviewer: did any conflict happen between the different business models? The innovative ones and the legacy ones?
Interviewee: Yeah, there is always a conflict on that. I think that is a healthy tension. So, for example, you have a “Pregnancy Plus”, they focus on what is best for them and they're trying to engage the mom on that. But then the business, the “mother and childcare” business as baby bottles and all that;
they would like to have more presence there right? So, you have that tension on what is good for each business, it's very hard to conceal that. And actually, I need to go back to work on that. So, we created another direct-to-consumer business. it isn’t an area, but it is a business, they have their own P&L.
And the job also is to focus on how to drive engagement. Right. So, you need to start thinking beyond the typical financial metrics, and thinking new ways to measure your business, which is not typical for failures, right? That's the tension that is exist.
Interviewer: And would you say that there are common managerial practices that Phillips uses to manage this tension between dual business model setting?
Interviewee: No, no, I think Philips innovation company, so they're used to it. Management, in Phillips, people that get to senior levels, in my opinion, they have that ability to be able to reconcile views. Phillips is also organized. Such that you have the businesses and then you have the markets.
And that creates a natural tension there that allows people that is in the business to manage overlaps
57 between businesses and markets. So, the organization is assigned to do it. And also having innovation and strategy separate, I think that's a big one, right! Yes, you have innovation and strategy within the business, but you also have a big team outside. That's very important, because these people are not thinking on a P&L, right? These people are thinking beyond the P&L. And then also, it's very important we have data artificial intelligence team. And all those you need to separate the enablers from the businesses to make sure that you build the capabilities that you need to create those new, innovative business models.
Interviewer: So, could we regard the innovation strategy department that is outside as a way to manage the tensions, because think about innovation then, if they tell other departments, as committed care businesses and personal health? Okay, look, we have studied this and then we have to focus on these matters. I mean, choices come from them from their department, right? And so other businesses just have to apply, they do not develop strategy?
Interviewee: Yeah, I think the key to drive innovation even for business model is to try to design the organization for that, hoping that there will be one. And then when you have the organization designed for that, then you need to make sure that their managerial practices are fit for purpose, right. And what I mean is that you design policies that allow the idea to market to be segmented and add different stakeholders. And I think that is what works quite well in Philips.
Interviewer: We know that nowadays, Philips is focused on personal health and divested other businesses. And it's continuously innovating across its business centers. Our question is, at some point, do innovative business models, the new ones will have to enter a replication phase in which they will become the one driving revenues of the company? In Philips, when it's such an innovative business model, ready for this moment of transition to go to the replication phase?
Interviewee: Usually, I think there are different phases, right. When we have something very innovative, we try to pilot it within a market, maybe within a customer. Yeah. So, we'll do that first.
And then Okay, it works, we take it to the next place, we have something that is called NBX. It is like new business development, right. It is a very structured approach; I don’t have it in top of my mind. It is like pre-seed, seed, alpha, beta, and all that. When you have proven, every single part of the
business model, it works and you are profitable, then you're ready to take it to the next level. And then you start prioritizing markets to expand. And this is super structured in Philips. I don't know it by heart, but I can send you an overview via email or something.
Interviewer: At what point do you believe that? The innovative business models that Philips is now rolling out and focusing on, also the focus HealthSuite platform organizing all customers health continuum will be that one, the main business model for Philips? Let's say do you think in three years, five years, how long will it take to complete this transformation?
Interviewee: So, what? you're talking about the health sector transformation?
Interviewer: I'm talking about the focus specifically on health divesting all others. With that business being the main one?
Interviewee: I think by 2025, which should be there. We are almost there. One way you can look at the P&L. That's one way to do it. And yeah, when you look at the P&L, I think the only ones that probably don't fit perfectly, you have male grooming, the Shavers. And then you have the beauty part, but the beauty part, they have some strong strategies to become Healthtech businesses, but the male grooming business is very profitable. Other than that, healthcare makes sense, modern childcare makes sense, and the rest is pure Healthtech. So, and then from the financial point of view, we are already achieved that goal financially.
58 Interviewer: Okay. And so, you told already that you have the kind of framework for evaluating the business models when they have to rolled out, and that also evaluates the business model in the life cycle, right?
Interviewee: yeah. So, and that (the framework for evaluating the BMs during life cycle) is super structured. Like, it's amazing how well organized that is. I think it's a little bit annoying because it's too bureaucratic. I mean, that is a good way to do it but we should be more lean sometimes.
Interviewer: Actually, we are done. Last question is, if you want to give us any other suggestion concerning business model innovation and dual business models at the end of the interview, now that you understood what is our focus?
Interviewee: Yeah, I think if you continue doing this, It would be nice to know exactly. If you have a focus, like if you narrow the focus on a business model, that would be nice. Because that might help, you know, drive the conversation.
Interviewer: you mean a specific business model, let's say male grooming compared to pregnant plus?
Interviewee: Yeah, something like that. That would be nice. But I understand also that it's very complicated.
Interviewer: So yeah, we are done. The transcript will be sent to you and says to be validated. Thank you.
Interview 2
Interviewer: First of all, thank you for joining and for helping us in this research on business model innovation and dual business models. The focus specifically is on Philips because of the
transformation plan and the renewed focus on specifically health sector and the innovative business models that Philips is rolling out. We aim to understand the specific integration mechanisms and the degree of dependency and coherence between de legacy one and the innovative one. do you have any question about the topic?
Interviewee: No, good to go.
Interviewer: Is it okay if the interview is recorded and we send you the script for validation?
Interviewee: Yep that is okay, I also signed the confidentiality form.
Interviewer: So, what is your role within Philips? also in terms of departments and division.
Interviewee: At this moment I am a global process owner of procurement. So, within the supply chain, within the supply chain department.
Interviewer: okay, a bit more specifically what is your typical working day?
Interviewer: So i look after a number of process domains, so strategic sourcing everything related to rft’s the contracting process so how the contract get approved and signed and then I’m also responsible for the different ordering process the ones around pill of material with replenishment models mainly the sap and the planning and the indirect material procurement more catalogs and services up to connecting the demand with the third party component for our sales for our solution business. And for that I do the processes the systems and then the related measurements on that.
Interviewer: so, you work across different department in Philips? Like both for personal health and connected care businesses?