India might get sick before it gets rich: Krishna Kumar

India might get sick before it gets rich: Krishna Kumar

Among the earliest multinational corporations that started business in 1930, Philips India, a subsidiary of Royal Philips of the Netherlands, ruled the consumer electronics market in India for many years. But it could not hold on to its position and lost out to competition from South Korean, Japanese and Indian companies. Philips has now changed its focus and positioning. While it has stuck to its core lighting technology, healthcare now gets more importance and consumer lifestyle is a fast growing segment. In his first interview after taking over as Philips India's vice-chairman and managing director, Krishna Kumar speaks to Sounak Mitra on how the company is readying itself for the next few decades and the increasing importance of India to Philips' global operations. Edited excerpts:

After heading the healthcare division, you took over as vice-chairman and managing director of Philips India last December. Healthcare has become a major focus for Philips in India. Is it your mandate to turn healthcare into the company's largest revenue contributor?

My mandate is to build the future for Philips in India. Globally, Philips started 124 years ago with light, and light essentially took the company in two key directions. Healthcare as a division was started from imaging, which can't be done without light. In the 1980s, globally, Philips decided to have a purpose around the innovations it did. Before that we were very broad and very deep. So defining the core purpose was the key. And we decided to deliver meaningful innovations with a vision to improve the lives of 3 billion people in the world by 2025.

While we have three business verticals - healthcare, consumer lifestyle and lighting - in future, we'll have two, health technologies and lighting solutions. We are growing in all the three segments in India. Between 2008 and 2013, Philips India has been growing at 24 per cent in revenue. We are now at $1.2 billion, accounting for 3.5 per cent of Philips' global revenue. Most of the growth has come in the past five years, and we have big ambitions for the next five years.

You are ready with a five-year plan?

As a company that has been doing business in the country for the past 84 years, obviously we are planning for the next 100 years.

Which division contributes most, and which is growing fastest?

Globally, about 45 per cent of our revenue comes from healthcare, 32 per cent from lighting and 23 per cent from consumer lifestyle. In India, about 46 per cent is from lighting solutions, about 32 per cent from healthcare and the remaining 22 per cent from the consumer lifestyle business. Healthcare is a business that we started in India about 25 years ago and here we have seen the biggest swing in the past three years with a growth rate of 32 per cent in revenue. India is the first country in the world that might get sick before it gets rich, contrary to the western world, where they got rich and then they have fallen sick as they grew old. Also more than 75 per cent of the people in India have limited or no access to healthcare, both financially and geographically. So, healthcare is bound to be a focus.

How is Philips positioned in the medical devices space? Do you intend to tap healthcare services in future?

We currently play in six verticals of healthcare, radiology, cardiology, oncology, critical care, respiratory care and healthcare services. Healthcare services is a new category we started about a year ago. Until 2010, we were the No 3 player in most of the verticals and every category is full competitors with critical care the most crowded segment. We have become No 1 in all the categories except oncology. And in healthcare services, we are the only player.

We are there in more than 70 per cent of new hospitals with 150 beds. In cardiology, our market share has gone up to 63 per cent from just 36 per cent in 2010. Also, about 90 per cent of life-support ambulances are equipped with Philips devices. Mother and child care is another area which is in its infancy but growing fast. We are here for the long haul in healthcare.

Besides categories, how do you identify focus areas? What is your success mantra?

There's no magic formula. I believe in growing talent capabilities, which in turn will grow the business. This is what will boost our sustainability for the next five years, and this was what has helped us in the past five years. We see horizons of growth in the next five years.

We at Philips India will focus on existing large businesses. We will develop new markets and new categories within existing markets for sustainable growth.

We believe in building capabilities, assets and possessions (market share). Asset is what we can leverage, the brand. It's not that we are the aam admi brand. That's no more what Philips is. Our reach and network - we are the deepest penetrated player in lighting, and the second deepest in healthcare.

Capabilities for us are the talent pool and getting the future pipeline ready. India is the second biggest talent exporting nation for Philips.

How hopeful are you about lighting and consumer lifestyle?

In lighting, we play in almost every aspect, home, business, public, office, hospitality, hospitals, industries, street, sports, entertainment and retail. The opportunity is huge. About 40 per cent of India is not yet lit and India will be third largest energy consuming nation. We need to invest to save energy. Over the next few years, India will move into digital and connected lighting. We have grown at 80 per cent in professional LED lighting while the market has grown at just 40 per cent in the past few years. LED as a segment will definitely grow faster, and we have been shaping the market. But even the conventional lighting technologies will not die in India. GLS is still about 50 per cent of the total light points in India. Innovations will play a key role here. And we plan to expand our retail presence with about 1,000 light lounges in the next 3-4 years.

Consumer lifestyle is a rocking category in India. Here we focus on healthy living, healthy eating, healthy lifestyle, wellness, personal health and healthy beverages. And each one is growing fast on relatively small bases. We are driving the change in people's habits. The target group is different for each sub-category. We have clear leadership in consumer lifestyle, and we are also creating new markets in this segment. We choose to play in certain categories and we dominate.

From 12 factories, Philips had come down to two, and then added three. Also, you have expanded your research and development centre in Bangalore. Is it the local demand, or is India's importance increasing for Philips globally?

Local for local is definitely a key. With high customs duty, we need to have local development and manufacturing, especially in a price sensitive market like India. About 95 per cent of our lighting products, 60 per cent consumer lifestyle products and 10 per cent healthcare products sold in India are locally manufactured. And we do export some in all the categories.

We have 9,500 people in India. Of this, 3,000 are in research and development, which was just about 1,000 in 2009.

We are already recognised as top class in innovation, R&D and manufacturing. We do see India becoming the R&D hub for Philips globally, essentially for growth markets like Latin America, Russia, India and China that account for about 37 per cent of Philips' total revenue. Some products are already being developed at the Bangalore R&D facility exclusively for these countries and for global markets.

Exports are also growing, and India will become an export hub for Philips in the years to come. India will also be among the top five or even top three markets in revenue for Philips. But that'll take time.