In Part One of this post, we stated that it was a joy for us at Intelligent Management to read an interview with Frans van Houten, CEO of Royal Philips (over 80,000 employees worldwide) and to discover how much it mirrors the work we are doing with our own clients. It is a constant source of satisfaction for us to help clients transition from being simple “suppliers” to become providers of systemic, integrated solutions that are unrivalled in the market place. We can’t take the merit of Philips’ success, but we do have a precise method. Our focus is helping companies take a leap ahead in their performance, organizationally, operationally and financially, by leveraging systems science.
Here in Part Two we continue with the 20 highlights we have chosen from van Houten’s interview that we believe all companies should take to heart. You can find points 1-10 in Part One. If you are a company leader with the responsibility and authority to make real change, please read through these leadership points. If they resonate with you, we invite you to contact us to find out how to adopt these changes operationally in your own company.
Van Houten demonstrates that he is a CEO for our times because his approach is systemic. In other words, he understands deeply the interconnections among customers and suppliers and the need to shift relationships away from transactional to partnerships. These are indications that every company today would do well to imitate because we live in times of complexity where there is an unprecedented level of interdependencies. What worked before will not work in today’s scenario. It requires a different kind of organization and a new kind of leadership.
20 Leadership Takeaways: 11-20
11. Invest time in solutions-based answers for your customers
Van Houten points out that it takes time to propose solutions-based answers to customers because it requires a culture and attitude and different view of the relationship between hospital and vendor. We would say that this is true in any sector. Those companies who have the courage to take the time to think through what it takes to shift their culture and their relationship with clients will have the advantage over those who do not. As Dr. Deming put it, “Learning is not compulsory, but neither is survival.”
12. Tear down silos
“You need to start tearing down the silos between your own business units.” This is a foundational piece of advice that we have been giving companies for over two decades. Our approach is based on a systemic understanding of organizations that dates back to Deming’s ‘Production Viewed as a System’. Companies that still today are organized into separate “functions” without seeing the interdependencies create artificial barriers to speed of flow. Digitization has accelerated the need to overcome this anachronistic view of how a company can work.
13. You are part of a bigger system
Van Houten comments that a sheer consequence of transformation is that you need to have an open system. This is because no company can provide all the pieces so you have to offer something that can work with what other vendors are offering and nobody wants to be “locked in”.
14. Partner with your clients
“The more we partner with providers the deeper our clinical knowledge becomes, and as a consequence, our competitive advantage goes up.” We would say that in any sector, the effort to truly interact with and learn from clients, rather than just sell them something, is an investment that pays off through a competitive advantage.
15. Innovate with your client
“We have shifted from being a hardware supplier to being an innovator of the clinical procedure. We innovate in these procedures together with the doctors and the thought leaders, and consequently we can advise other hospitals…” This implies adopting a new mindset, once again, of true partnership with those clients who are open to it. The benefits are a deepened relationship with the client as well as increased knowledge that can serve other clients.
16. Create intimacy with the client
“To get the partnership going, you need to build deep intimacy with the provider – which is another investment. Before you get into a flow – when the rewards start to come – you are partly at risk…it is a complex but more rewarding path to go down.” There is no doubt that creating a partnership type of relationship with a customer is an investment, but the rewards will eventually come.
17. Make a bigger pie
Transactional relationships mean that you are competing for a piece of a pie. “We have seen that, if we are in transactional mode, we need to share the cake.” Dr. Deming taught that companies should go beyond the concept of purely competing. They should work collaboratively with competitors so that instead of sharing a pie, together you build a bigger pie.
18. Share R&D
“Given that you can never have enough R&D money yourself, it is important to participate in innovation ecosystems coming from the outside.” If a company as big as Philips states this, then the same is even more relevant for smaller companies. “Venturing and participating in start-ups and scale-ups is a great way to learn about new approaches and innovations.”
19. Leadership
Philips’ daunting transformation required “a lot of courage”. Van Houten states that he “needed to set a North Star several years out, and a strategic plan.” Without a precise vision and goal, a leader will struggle with any kind of transformation. We like to point out that organizations are networks, and as such, they must be oriented towards a goal. Helping leaders to create a precise vision, goal and strategic plan is one of the most enjoyable parts of our work at Intelligent Management. We are able to do this in a reliable, structured and systemic way by using the Thinking Processes from the Theory of Constraints.
“As a leader you need to have the ability to rally the team. A leader on his own is nobody.” Some leaders are charismatic, and this is not something that can be taught. But charisma alone is not sufficient. For leaders to get the buy in of their teams, they have to be clear about the goal and consistent and transparent in the message about how that goal is being achieved. The more vision, goal and day-to-day practices are transparent and systemically interconnected, the more a leader can be confident in the success of their mandate.
20. Global supply chain
Van Houten recognizes that the (medical) supply chain is global and interdependent. This is a systemic point of view that is true of all sectors and that has become even more obvious through the COVID pandemic. Protectionism is a short-sighted reaction. The more that business is built on collaboration and a win-win mindset, both locally and globally, the more all the stakeholders will benefit. It is not a utopian idea. It is the most sustainable way forward.
Intelligent Management works with decision makers with the authority and responsibility to make meaningful change. We have helped dozens of organizations to adopt a systemic approach to manage complexity and radically improve performance and growth for 25 years through our Decalogue management methodology. The Network of Projects organization design we developed is supported by our Ess3ntial software for multi-project finite scheduling based on the Critical Chain algorithm.
See our latest books Moving the Chains: An Operational Solution for Embracing Complexity in the Digital Age by our Founder Dr. Domenico Lepore, The Human Constraint – a digital business novel that has sold in 43 countries so far by Dr. Angela Montgomery and ‘Quality, Involvement, Flow: The Systemic Organization’ from CRC Press, New York by Dr. Domenico Lepore, Dr. .Angela Montgomery and Dr. Giovanni Siepe.
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