New Business Incubation

Jelto Smits CEO Technology Incubator Lighting and Innovation Analysts Day September 28, 2007

Disruptive Innovations Offer Greatest Returns

Disruptive innovations do not start in mass markets, rather in niche markets that value the unique selling point (Innovators Dilemma) Require new capabilities, non-traditional ways of working and patience, similar to the venture capital approach Therefore we established a novel way of working: A staged new business development process Run by dedicated, agile organizations Supervised at board level and Executed by entrepreneurs

New Businesses Incubation

Transfer to existing Philips businesses Contract R&D (adjacent) Corporate Research (disruptive) Spin Up New Business Spin Out

Spin Off Patent / Technology licensing

Focus Areas of Incubators

Healthcare, Lifestyle and Technology

applied marketing

Healthcare and Lifestyle Incubators Market 2006 Break Away Innovation Innovation

new

Technology Incubator 2002

existing

Cost Innovation

Feature Innovation

existing

new

applied technologies

New Business Development Boards

Three New Business Development boards, handling incubator and sector New Business Development Chairmen: Philips board members Members:
Philips board members Philips CTO Business CMO, CTO M&A Incubator CEOs

New Business Stage-Gating

Bell-Mason approach

New Business Development Boards

1. PreIdeation seed Gates Expansion 5. Growth & Value Capture

2. Seed

3. Alpha

4. Beta

Research Incubators Sectors

Critical Dimensions of New Business Development

PRODUCT/SERVICE Business Plan Delivery Marketing Sales Management Team Venture Board Cash FINANCE PEOPLE MARKETING

Product/Service Venture platform Control Financing

New Business Monitoring Process

Following best practices of VC industry
1. PreIdeation seed Gates
PRODUCT/ SERVICE
Business Plan Delivery Marketing Sales

2. Seed

3. Alpha

4. Beta

Expansion 5. Growth & Value Capture

MARKET

Product/Service

Venture Platform

Management

PRODUCT/ SERVICE
Control Financing Team Venture Board Cash

Business Plan Delivery Marketing Sales

MARKET

Product/Service

FINANCE

PEOPLE
Venture Platform Management

PRODUCT/ SERVICE
Control Financing Team Venture Board Cash

Business Plan Delivery Marketing Sales

MARKET

Product/Service
PEOPLE

FINANCE

Venture Platform

Management

Control Financing

Team Venture Board Cash

PRODUCT/ SERVICE

Business Plan Delivery Marketing Sales

MARKET

Product/Service

FINANCE

PEOPLE
Venture Platform Management
PRODUCT/ SERVICE
Business Plan Delivery Marketing Sales

MARKET

Control Financing

Team Venture Board Cash

Product/Service

FINANCE

PEOPLE
Venture Platform Management

Control Financing

Team Venture Board Cash

FINANCE

PEOPLE

Technology Incubator Scope and selection criteria

Scope: Philips Corporate R&D Laboratories

Selection Criteria: Capable & motivated team, willing to deal with the risk Disruptive technology with distinct USP Technology relevant for large markets with multiple products
Potential sales >EUR 100 m., preferably >1 B

Technology well protected by intellectual property Technology relevant for Philips

Incubation Pipeline
Portfolio Technology Incubator

Ideation

Pre- Seed Seed

Business Alpha Beta Growth

Prepare transfer

Capture the value

Spin-outs
Polymer Vision (Dec-06) and Silicon Hive (Apr-07)

Polymer Vision received EUR 21 million investment from Technology Capital SA (Lux) to commercialize the Readius rollable display Philips keeps minority shareholding Wins 2007 3GSM Global Award Silicon Hive received investment from NVP (USA) and TVM (D) to expand configurable processor business Philips keeps minority shareholding

First Exits from Technology Incubator

Laser Sensors, transferred to Philips Lighting (Jan-06) Potential Market >1 billion units
Notebook Remote Control Watches Gamepad

ultra low power design all terrain detection system single component system

Portable Devices Printer

Mobile Phone

1st
PC Mouse

New Business Leveraged through Sectors

amBX gaming peripherals launched by Philips CE (Aug-07)

amBX scripting software enables (supplier)

CEs gaming peripherals (customer)

New Business Leveraged through Sectors

3D, a fascinating example of disruptive innovation

3D often spontaneously mentioned during consumer groups as an anticipated next step in creating a more immersive and captivating experience.
- Philips 3D consumer research