CHICAGO, Ill. -- By Lee Han-soo/Korea Biomedical correspondent – After navigating a tumultuous period marked by supply chain complications and an expansive global recall of its respiratory devices in 2022, Philips has shown signs of a robust recovery in the latter half of 2023.

The Dutch multinational company had faced significant headwinds that cast a shadow over its financial performance during the Covid-19 pandemic. In 2022, Philips' sales marked 17.8 billion euros ($19.4 billion), a 3 percent drop from 2021 sales,  due to operational and supply challenges and expansion of the global recall of its continuous positive airway pressure (CPAP) devices.

However, recent reports suggest a promising turnaround as Philips effectively tackles challenges that previously jeopardized its market position and customer trust.

Under the strategic leadership of CEO Roy Jakobs, who started his position in October 2022, the company has not only rectified its course but also initiated innovative measures to prevent future disruptions.

Korea Biomedical Review sat down with Jakobs during a roundtable with international reports on the sidelines of the Radiological Society of North America (RSNA) 2023 conference held at the McCormick Place Convention Center in Chicago, Ill., the U.S. on Monday.

Since his appointment, Jakobs has launched an ambitious three-year plan to focus on creating value with sustainable impact based on three pillars -- focusing on strategic focus, groundbreaking innovation, and improving execution.

"The goal I set out to achieve was to turn Philips into a company that actually makes sure that it delivers value to its customers and patients as we are focusing more and more on healthcare," Jakobs said. "However, it was important we do it in a way that actually gives back to different stakeholders, meaning both from a sustainability perspective to society and planet as well as to our shareholders."

After a year in office, Jakobs has made an impact on all three pillars.

Notably, the company has demonstrated remarkable financial resilience.

"Our performance has surpassed our ambitious plans," Jakobs claimed. "We had initially planned to get back toward a low single-digit sales trajectory, a high single-digit profitability, and a cash flow of 700 to 900  million euros."

However, the company is actually ahead of the plan and has upped its guidance twice now, he added.

According to Jakobs, as a result of the latest guidance update, Philips now expects to deliver 6-7 percent comparable sales growth and adjusted earnings before interest, taxes, and amortization (EBITA) margin of 10-11 percent for the full year 2023, with free cash flow at the upper end of the target range of the 700 to 900 million euros.

"This is important because despite having to deal with the CPAP device recall, Philips was able to dial up on the rest of its business and was able to deal with the consequence of the recall."

For the final year of the third year plan, Jakobs stressed that the company has amitions to maintain mid-single digit growth, profitability to mid-teens, and cash flow perspective towards a 1.5 to 2 billion euros cash generation per year.

Revolutionizing healthcare access and innovation

During the roundtable with global reporters, Jakobs also shone a light on the company's mission to tackle the pressing global issue of healthcare access through innovation and productivity.

"The cornerstone within the healthcare sector is the treatment of patients, and if we zoom out, we must ask ourselves where health and healthcare are heading," Jakobs said. "Access to care is increasingly under pressure, not only in rural and emerging markets but also in developed cities like Chicago."

The CEO linked the challenge to a growing and aging global population, resulting in a larger number of patients and chronic illnesses, a shrinking number of healthcare providers, and an increasing financial burden for governments to address healthcare problems.

"The combination of more patients, fewer caregivers, and constrained funds means there's immense pressure for productivity in healthcare," he said.

The CEO detailed Philips' approach to addressing these challenges through innovation. "We're looking at how we make the system more productive," said Jakobs. "Healthcare needs four levers for systemic change -- innovation technology, clinical practice's ability to adapt, necessary financing, and a supportive regulatory framework."

He also reflected on the changes during the Covid-19 crisis, where there was a massive shift towards remote patient care.

"However, we have seen a regression from these advances due to financial systems no longer supporting them, which is a downside," he said. "To address these concerns, Philips aims to reroute its innovation power, traditionally product-focused, to a system combining products with software, AI, and services."

Philips is asking itself what the system of a product combined with AI can do for productivity in healthcare, he added.

He proudly referenced Philips' work in CT and lung cancer screening, which leverages AI to improve diagnosis and bring sustainable care to remote areas using solar-powered mobile solutions.

"We're not just providing care to more patients; we're doing it in a responsible and sustainable way," Jakobs said.

Jakobs also emphasized the importance of scalable solutions, from hospital to province and country levels. "We think about productivity solutions and their impact on patient diagnosis, care, and outcomes."

The vanguard of AI in healthcare

Philips' integration of AI into every aspect of its portfolio is central to its strategy.

"AI is not an afterthought; it's the cornerstone of our innovation," Jakobs said. "We are acutely aware that there is a tremendous amount to do, with abundant opportunities for value generation."

It's thrilling to be at the forefront, showcasing how Philips evolved and pushed the boundaries of how it innovates, he added.

Jakobs pointed out the significant role of software and AI in enhancing Philips' healthcare solutions, stressing that the delivery of software and AI is adding immense value to its offerings and is rapidly accelerating its capacity to deliver more value into healthcare.

The CEO shed light on the company's considerable investment in innovation, with a staggering 1.7 billion euros allocated annually.

"Over half of this investment is channeled into software," he said. "We have a dedicated team of over 500 data scientists specializing in AI, ensuring that every Philips solution you encounter today is empowered with AI."

He also touched upon the continuous evolution of AI in their operations.

"AI is not a new venture for us—it's a field we've been cultivating for a long time," he said. "Yet, the true beauty of AI lies in its ongoing evolution, with generative AI marking the next stage, and this opens up a suite of new application opportunities for the next generation of AI."

While Philips continues to innovate in hardware, the incremental advancements in software and AI are where it currently sees the most potential to expand and enhance its healthcare solutions, he added.