Philips – embracing new business models and coming out on top

Kodak – the company that failed to take notice and suffered the consequences

Megatrends matter, and understanding this is imperative

The changes we’re experiencing – and the speed at which they’re happening – are unprecedented. The implications of these changes are profound; shaping – no, disrupting – our future and presenting us with risks as well as opportunities. These profound technological, environmental, and socioeconomic changes are called megatrends; long-lasting, fundamental, global shifts. Some examples are climate change, the depletion of our natural resources, the rise of the digitisation of society, and the rapid expansion of the global population. Megatrends transform the way we live, and each and every organisation, in each and every industry, will be reshaped by them.

It’s important for businesses to be aware of megatrends, acknowledge them, and understand how they impact their organisation. Megatrends are events with significant, already unfolding ramifications, many of which are global in scale and present unique and transformative opportunities for the companies that are capable of grasping their impact and adjusting their strategies accordingly. Generally, companies don’t have much influence over megatrends and it’s not easy to predict how they’ll impact a business. And although finding ways to adapt your business strategy to incorporate the influence of megatrends is complicated, it’s by no means impossible. Megatrends offer various ways to reimagine your business and ensure its future survival.

Philips – embracing new business models and coming out on top

The pace of change is relentless, and in virtually every industry we see new business models popping up. And companies that constantly reinvent themselves, innovate, and embrace new ways of working have the best chances to come out on top. Those who don’t are likely to become dinosaurs.

Megatrends unfolding in the many markets where Royal Philips operates are important aspects of the electronics behemoth’s strategic planning. Its main markets – lighting, consumer lifestyle, and healthcare – are all impacted by global factors, such as the growth of the middle class, the ageing global population, and new lifestyle, food, and diet trends. The company’s aim is to improve people’s lives and focus on the importance of environmental and social issues, which requires a systems-level shift across the entire business.

“We believe that adopting a circular economy approach to our business models, materials reuse and design will further give us a competitive advantage, while making the world more sustainable”, says Henk de Bruin, the head of group sustainability at Philips. De Bruin is confident that this approach will unleash new opportunities. “Business innovation really is the solution for the planet in 2050 where we have nine billion people looking for a high quality of life.” De Bruin continues, “I strongly believe that Philips’ approach to the circular economy will be successful when it is woven into the fabric of everyone’s job, mindsets and reaches the very highest levels of the company. We realize that the circular economy is not a strategy you can pursue alone. It requires relationships with recyclers, retailers, consumers, resource providers, regulators and so forth: basically, everyone involved in a company’s value chain, from start to finish”.

Philips has entered into a partnership with the Ellen MacArthur Foundation (EMF), a non-profit dedicated to promoting progress towards a more circular economy. EMF has compiled training materials for an in-house university for Philips employees. De Bruin says that they also really want to learn from other EMF members like Cisco, Renault, and B&Q, companies that started with the circular economy approach before Philips did.

Kodak – the company that failed to take notice and suffered the consequences

Many companies are tempted to adopt short-term views as they grapple with day-to-day operations and the immediate challenges of unpredictable and volatile markets. When companies spend too much time looking back, focus predominantly on the immediate challenges, and don’t devote sufficient effort and resources to scanning what lies ahead, company survival and sustainability are at risk. There are various examples of companies that failed to identify (the power of) megatrends and ultimately perished as a result.

One of the most well-known is Kodak, a leader in the photography business for over a century. Kodak’s founder initially did adopt disruptive technology by replacing photographic plates with roll film and shifting from black and white to colour photography. What made Kodak lose its reign, however, was the result of it holding back on developing digital cameras out of fear that it would kill its film business. Ironically, digital photography was invented by the Kodak engineer Steve Sasson in 1975, long before the digital age. When Sasson and his team presented their device to management, they were met with blank stares. Even Sasson himself wasn’t fully aware of its potential.

He told The New York Times that their bosses’ response to his digital camera was basically “that’s cute – but don’t tell anyone about it”. Sasson later wrote on the Kodak company blog (which is no longer live): “It is funny now to look back on this project and realise that we were not really thinking of this as the world’s first digital camera. We were looking at it as a distant possibility. Maybe a line from the technical report written at the time sums it up best: ‘The camera described in this report represents a first attempt demonstrating a photographic system which may, with improvements in technology, substantially impact the way pictures will be taken in the future.’ But in reality, we had no idea”.

Megatrends matter, and understanding this is imperative

There are many factors and forces that reshape the world and change how we live, manage our companies, and spend our money – now and in the future. And it’s not easy to stay relevant. But megatrends matter. The successful company of the future understands this and capitalises on these changes. Now really is the time to take action – there’s limited time to determine whether the future poses substantial threats or offers new opportunities. For companies like Philips – that adapt to our changing world and get innovation, collaboration, and investment right – the future looks bright. For companies like Kodak – that hold back and fail to change – there might be no future.