Design Intervention

By: Jennifer ReingoldWed Dec 19, 2007 at 8:14 AM

At Philips, a place long known for big ideas and small numbers, can there be too much of a good thing?

Cash Crop: Philips's Ambilight TVs were introduced in 2004 and have roughly doubled the company's market share of LCD sales.

For Simone, what counted was not the technology itself but quick access to the information she needed. Alexandra's room, by contrast, struck a lower-tech note, with objects such as a table with changeable mood lighting. Justin's had a vast array of gadgets to create visual displays and allow him to access his thousands of CDs, sorted by album cover and music type.

The look, feel, and capacity of everything on display that day was the result of a project called "Lifestyle Home," in which Philips designers and researchers in the consumer-electronics division visited 75 households in four countries to figure out what people crave at home. Before coming to Eindhoven, I'd participated in a condensed version of the study, filling out a complex questionnaire focused not on my product preferences but on my values and desires. If I'd been a real research subject, I would have spent several hours with the team in my home as well.

I knew the beautiful, cutting-edge stuff in Simone's living room would make my life easier. But even though everything worked in Eindhoven (Philips makes working prototypes, rather than mock-ups or sketches, in the belief that everyone reacts more naturally to a real product), it's still a long way from Wal-Mart. In fact, as with the New York event, it's a very open question whether I'll ever get my hands on any of these things. "It's not that we have an idea of a product in our mind," says Stefanie Un, senior research consultant.

"I don't have to deliver cash to the company," says design chief Marzano. "I have to deliver talent, knowledge, ideas."

Given the rap on Philips as a company with bright ideas that often go nowhere, that sort of statement provoked some head-scratching on my part. No idea of a product? I found myself wondering if this was a business or an ivory tower. Marzano argues that it takes a combination of both in an era when consumers control the marketplace. "Innovation is not a linear process," adds Ragnetti. "There's a lot of waste and useless discussion, but you have to try stuff."

Adding to the confusion, Philips has experienced the perils of this process before. A 1995 Philips Design project called "Vision of the Future" was conceptually very similar to the Simplicity extravaganza in Manhattan--a flood of flash-forward products and ideas. Indeed, the concepts unveiled back then read today like a laundry list of the technologies that are changing our lives, including personal digital assistants and voice-recognition systems. Three years later, though, Philips went back to see how many of those concepts had actually gone into production and discovered that while a laudable 60% were already for sale, only 3% of them were made by Philips. "Their design and technical specs were usually good," says Enrique Dans, a professor at Instituto de Empresa Business School, "but they were disconnected from the market." That's a disconnect that Philips can hardly afford to continue.

At a company such as Apple, integrating design into virtually every business decision seems a relatively straightforward task. The visual vocabulary is the same, the products all exist within a narrow functional spectrum, and the audience for them is well defined and understood. Philips, however, is a very different animal, a sprawling company with constituencies that include doctors buying complex medical equipment, music-loving teenagers, and urban planners ordering massive streetlights. Creating a consistency of design isn't easy. And while Philips has shown major improvement--its stock has risen 47% over the past two years as it expanded into health-care equipment and sold off most of its ailing semiconductor business--it is hardly out of the woods. Its consumer-electronics business has fallen from an estimated 11% of the market in 1999 to 6.5%, where it has stalled. Most Wall Streeters, meanwhile, couldn't care less about what's happening at Marzano's funky office inside a former lightbulb factory (in Europe, no less). "The things they've done have been modestly clever," says Geels, the analyst with Sanford C. Bernstein. "They're doing a better job, but we haven't had a big hit. They really have to get out products in the near-term."

In a nod to the analysts, CEO Kleisterlee admits that the notion of simplicity-led design as embodied in Philips's new branding campaign, "Sense and Simplicity," will seem abstract and even absurd to those who've tracked its recent travails. "This is a long journey, and we're just at the outset," he says, although he is two years into the process. "But we're increasingly confident that we have created a business driver that is transforming Philips both inside and out." Kleisterlee believes that short-term thinking will never lead to the breakthroughs needed to take the company from middling behemoth to world leader.