In today’s knowledge-based economy, intellectual property (IP) has become one of the most valuable assets for companies across industries. However, many organizations still struggle to fully leverage their IP portfolios and integrate IP strategy into their overall business strategy. One company that stands out as a leader in strategic IP management is Philips, the Dutch multinational technology company.

The Evolution of IP at Philips

Philips has a long history of innovation, obtaining its first patent in 1906 and establishing a dedicated IP department in 1924. However, it wasn’t until the late 1990s that Philips truly revolutionized its approach to IP management under the leadership of Ruud Peters.

When Peters took the helm of Philips’ IP department in 1999, he recognized that the traditional reactive approach to IP was no longer sufficient in a rapidly changing business environment. Despite having a large IP department with 250 employees across six countries, Peters believed that the limited responsibilities and siloed structure meant that Philips wasn’t realizing the full potential value of its IP assets.

Creating Philips IP & Standards

Peters’ vision was to transform the IP function from a cost center on the periphery of corporate strategy into a profit-generating powerhouse at the center of business decision-making. In 2000, with support from Philips’ board of directors, Peters established Philips IP & Standards (IP&S) as an independent business unit within the company.

The mission of IP&S is clear: “create IP solutions to support the growth, competitiveness and profitability of Philips’ businesses”. This mission statement emphasizes the close connection between IP strategy and overall business strategy that Peters sought to foster.

Key Principles of the Philips Approach

Philips has revolutionized its approach to intellectual property management under the leadership of Ruud Peters. By transforming IP from a cost center to a strategic business asset, Philips has developed key principles that have positioned the company as a leader in IP strategy. These principles focus on aligning IP with business objectives and creating tangible value.

  • Speaking the Language of Business
    One of the fundamental shifts Peters implemented was ensuring that IP discussions were framed in business terms that resonated with C-suite executives and board members. Instead of focusing solely on technical or legal aspects, the IP&S team learned to articulate the value of IP in terms of costs, profits, margins, value creation, growth, and competitiveness.
    For example, rather than simply discussing patent expirations, the team translates this into concrete business impacts like potential drops in profit margins. When addressing IP-related risks, they provide clear assessments of potential business damage under different scenarios, rather than getting bogged down in legal jargon.
  • Aligning IP Strategy with Business Strategy
    At Philips, there is no single overarching IP strategy. Instead, IP strategies are tailored to each of the company’s diverse businesses, from medical imaging equipment to LED lighting solutions and consumer appliances.The IP&S team works closely with each business unit to develop customized IP strategies based on factors such as:
    • Market characteristics (B2B vs B2C, growth stage, barriers to entry)
    • Philips’ market position and goals
    • Existing IP portfolio strengths and weaknesses
    • Technological leadership status

This close alignment ensures that IP strategy directly supports and enables broader business objectives. IP portfolios are built strategically to achieve specific business goals, rather than accumulating patents for their own sake.

  • Running IP as a Business
    Peters transformed the IP function at Philips by running it as a true business unit with its own profit and loss responsibilities. Key aspects of this approach include:
  • Customer focus: The IP&S team views Philips’ business units as their primary customers, focusing on providing customized solutions rather than one-size-fits-all approaches.
  • Responsiveness: While IP processes often operate on long timelines, the team strives to match the faster-paced business dynamics of their internal clients.
  • Ownership of IP issues: IP&S has taken ownership of all IP-related activities across Philips, from litigation to domain name management and IP risk assessments in product development.
  • Strategic talent acquisition: The team recruits professionals with diverse skill sets beyond just technical IP expertise, including business, finance, and economics backgrounds.
  • Integrating IP into R&D and M&A
    IP&S plays a central role in shaping Philips’ R&D strategy and M&A activities:

    • R&D strategy: The team works closely with Philips’ research labs to develop detailed annual plans that align R&D efforts with strategic IP goals. This proactive approach ensures that research investments translate into valuable IP assets that support business objectives.
    • M&A due diligence: IP&S is involved from the earliest stages of potential acquisitions, assessing target companies’ IP positions, identifying risks and opportunities, and sometimes even driving deals based on IP considerations.

Creating Value Through IP

Philips IP&S has revolutionized the company’s approach to intellectual property, transforming it from a cost center into a strategic asset that drives value creation across multiple dimensions. By employing a diverse range of strategies, Philips extracts maximum value from its IP portfolio, supporting business growth and competitiveness.

  • Licensing income: Philips generates substantial revenue through strategic licensing of its IP assets. This approach not only provides a direct financial benefit but also helps establish Philips as a technology leader in various fields.
  • Enhancing market share and profit margins: Strong IP positions allow Philips to differentiate its products and command premium prices. This strategy helps the company maintain a competitive edge and increase profitability in key markets.
  • Reducing costs for market access through strong IP positions: Philips leverages its IP portfolio to negotiate favorable terms when entering new markets or collaborating with partners. This approach helps minimize licensing costs and other market entry expenses.
  • Supporting joint ventures and start-ups: Philips uses its IP assets to forge strategic partnerships and support innovative ventures. This strategy enables the company to explore new business opportunities and stay at the forefront of technological advancements.
  • Facilitating cross-licensing agreements: Philips engages in cross-licensing deals to gain access to complementary technologies and ensure freedom to operate. This approach helps the company navigate complex technological landscapes and avoid potential IP disputes.
  • Driving IP-based M&A activity: Philips strategically acquires companies with valuable IP portfolios to strengthen its market position. This approach allows the company to quickly expand its technological capabilities and enter new markets.

The team also actively seeks opportunities to in-license valuable external IP and collaborates with partners through open innovation initiatives.

Demonstrating Results

While specific financial targets are not publicly disclosed, Peters emphasizes that IP&S consistently meets or exceeds its goals. The unit’s performance is closely monitored through monthly reporting, quarterly forecasting, and regular reviews with Philips’ top leadership.

Peters has direct access to Philips’ board of directors, participating in annual strategic reviews and quarterly meetings to discuss both financial and non-financial aspects of IP management. This high-level engagement ensures that IP remains a strategic priority for the company.

Challenges and Future Outlook

Philips’ innovative approach to IP management has yielded significant success, but challenges persist in this rapidly evolving field. Ruud Peters, CEO of Philips IP & Standards, recognizes several key areas that require ongoing attention to maintain the company’s leadership in strategic IP management.

  • Talent acquisition: Finding professionals who possess a rare combination of IP expertise, business acumen, and financial skills is an ongoing challenge for Philips. This scarcity of talent highlights the need for specialized training programs and recruitment strategies to build a team capable of executing Philips’ multifaceted IP strategy.
  • Measuring value creation: While licensing income provides a clear metric for IP value, quantifying the full spectrum of IP-driven value creation remains complex. This challenge underscores the need for developing more sophisticated valuation methods to capture the diverse ways IP contributes to business success, from enhancing market position to driving innovation.
  • Keeping pace with business dynamics: Reconciling the long-term nature of IP processes with the fast-paced needs of business units demands constant effort and adaptability. This ongoing challenge requires IP managers to develop agile strategies that can respond quickly to market changes while maintaining a long-term perspective on IP development and protection.

Lessons for Other Companies

Philips’ innovative approach to IP management offers a blueprint for companies aiming to transform their IP functions into strategic assets. By implementing these key lessons, organizations can elevate IP from a support role to a central driver of business success and value creation.

  • Integrate IP strategy with overall business strategy at all levels: This approach ensures that IP initiatives directly support broader business objectives. By aligning IP and business strategies, companies can maximize the value of their intellectual assets and drive innovation that meets market needs.
  • Develop IP professionals who can communicate effectively in business terms: IP experts must be able to articulate the value of IP in language that resonates with executives. This skill enables IP professionals to effectively advocate for resources and demonstrate the strategic importance of IP to the company’s success.
  • Treat the IP function as a profit center with clear value creation goals: Viewing IP as a business unit with its own profit and loss responsibilities drives accountability and results. This approach encourages IP teams to actively seek opportunities to generate value from intellectual assets.
  • Involve IP experts early in R&D planning and M&A activities: Early involvement of IP professionals in strategic decisions can shape research directions and identify valuable acquisition targets. This proactive approach ensures that IP considerations are integrated into key business processes from the outset.
  • Customize IP strategies for different business units and market contexts: Tailoring IP strategies to specific business needs and market conditions maximizes their effectiveness. This approach recognizes that different products, markets, and competitive landscapes require unique IP strategies to create value.
  • Seek board-level engagement on IP issues to drive company-wide alignment: Regular board involvement in IP matters elevates its strategic importance across the organization. This high-level engagement ensures that IP remains a priority and is integrated into the company’s overall strategic vision.

Conclusion

Philips’ transformation of its IP management approach under Ruud Peters’ leadership demonstrates the potential for IP to become a true strategic driver of business success. By aligning IP strategy with business objectives, speaking the language of the C-suite, and running IP as a value-creating business unit, Philips has positioned itself at the forefront of strategic IP management.

As the global economy continues to be driven by innovation and intangible assets, other companies would do well to study and adapt the Philips formula for IP success. With patience, persistence, and a business-focused approach, IP managers can elevate their function from a supporting role to a central pillar of corporate strategy and value creation.

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Further information:

Taking IP into the boardroom

The Philips formula