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The results across the enterprise suggest the Accelerate effort produced as expected. Though not all benefits were directly attributable to IT operating model changes, it was commonly viewed at Philips that IT-enablement was critical to the successes of the overall Accelerate effort. Olive described IT as “advancing digital capabilities as our beacon or North Star.”In support of their product-related goals, freeing up resources from other efforts, Philips reinforced its commitment to innovation by increasing health-related research & development from EUR 1.6 billion (7.1% of sales) in 2011 to EUR 1.8 billion (7.3% of total sales) in 2012. In support of customer-related goals, Philipsintensified its focus on addressing local issues and touched the lives of 1.7 billion people in 2012. The company was recognized externally as well for their branding and sustainability efforts. They were named a "Supersector leader" in the Dow Jones Sustainability Indexfor the second consecutive year and in the annual Interbrand ranking of the Top 100 global brandstheir brand valuation reached a record performancelevel. For operations-related goals, Philips achieved a noticeable improvement in employee engagement (based upon internal surveys) from 2009 to 2012. Their cost reduction efforts – aimed specifically at reducing overhead and support costs – delivered (ahead of targets) a cumulative savings of EUR 471 million in 2012. This outcome was coupled with sales growth and higher productivity of non-manufacturing resources. Succeeding in the Transformation Economy However, social, economic, and technological change would put pressure once again on the IT operating model for Philips. As part of market analysis involving social and technological advancement, Philips leadership identified global forces affecting macro-economic trends for how businesses would be successfulin the future. The current and unfolding economy-type, knowledge economy, required companies to use social technology to better engage customers - providing them a voice in product design and development Created in support of Information Management learning objectives (mad, Fall 2013)Page 4of 8
Philips IT Governance and Sourcing (continued)efforts. In addition, more effectively and efficiently engaging other stakeholders (beyond investors) becamemore critical. For example, in 2008 Philips began publishing a more integrated annual report that aligned with "triple bottom line" metrics of profit (financial), people (social), and planet (environmental) performance indicators. Philips believed that the next type of economy would be seen as a "transformation economy" where global companies would need to leverage cooperation at local levels, across the value chain, to effectively and efficiently solve local and global problems. To be competitive, companies would be forced to communicate, coordinate and cooperate internally and externally like never before. Whereas information systems in the knowledge economy would help enhance Philips' ability to maximize participation, in the transformation