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New Business Incubation

Jelto SmitsCEO Technology Incubator

Lighting and Innovation Analysts Day

September 28, 2007

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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

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New Businesses Incubation

NewBusiness

Patent / Technology licensing

Spin Up

Spin Out

Spin Off

ContractR&D

(adjacent)

Corporate

Research(disruptive)

Transfer to existingPhilips businesses

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applied technologies

existing new

appliedmarketing

existing

new

Cost

Innovation

Feature

Innovation

MarketInnovation

Break AwayInnovation

Focus Areas of Incubators

Healthcare, Lifestyle and Technology

Technology

Incuba

tor

2002

Healthcare and Lifestyle

Incubators2006

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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

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New Business Stage-Gating

Bell-Mason approach

Expansion

& Value

Capture

5. Growth4. Beta3. Alpha2. Seed

Gates

1. Pre-seed

Ideation

New Business Development Boards

Research

Incubators

Sectors

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Critical Dimensions of New Business

Development

PEOPLE

Management

Team

Venture Board

PRODUCT/SERVICE

Product/Service

Delivery

Venture platform

MARKETINGBusiness Plan

Marketing

Sales

FINANCE

Cash

Control

Financing

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New Business Monitoring Process

Following best practices of VC industry

PEOPLEFINANCE

PRODUCT/SERVICE

MARKET

PEOPLEFINANCE

PRODUCT/SERVICE

MARKETBusiness Plan

Marketing

Sales

Management

Team

Venture Board

Cash

Financing

Control

Venture Platform

Product/Service

Delivery

PEOPLEFINANCE

PRODUCT/

SERVICE

MARKET

PEOPLEFINANCE

PRODUCT/

SERVICE

MARKETBusiness Plan

Marketing

Sales

Management

Team

Venture Board

Cash

Financing

Control

Venture Platform

Product/Service

Delivery

PEOPLEFINANCE

PRODUCT/SERVICE

MARKET

PEOPLEFINANCE

PRODUCT/SERVICE

MARKETBusiness Plan

Marketing

Sales

Management

Team

Venture Board

Cash

Financing

Control

Venture Platform

Product/Service

Delivery

PEOPLEFINANCE

PRODUCT/

SERVICE

MARKET

PEOPLEFINANCE

PRODUCT/

SERVICE

MARKETBusiness Plan

Marketing

Sales

Management

Team

Venture Board

Cash

Financing

Control

Venture Platform

Product/Service

Delivery

PEOPLEFINANCE

PRODUCT/

SERVICE

MARKET

PEOPLEFINANCE

PRODUCT/

SERVICE

MARKETBusiness Plan

Marketing

Sales

Management

Team

Venture Board

Cash

Financing

Control

Venture Platform

Product/Service

Delivery

Expansion

& Value

Capture

5. Growth4. Beta3. Alpha2. Seed

Gates

1. Pre-seed

Ideation

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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

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Incubation Pipeline

Portfolio Technology Incubator

Prepare

transfer

BusinessSeedPre-

Seed

Ideation Capture

thevalue

Alpha Beta Growth

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Spin-outs

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

Polymer Vision received EUR 21million investment from TechnologyCapital SA (Lux) to commercializethe Readius rollable display Philips keeps minority

shareholding Wins 2007 3GSM Global Award

Silicon Hive received investment fromNVP (USA) and TVM (D) to expandconfigurable processor business Philips keeps minority

shareholding

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ultra low power design

all terrain detection system single component system

First Exits from Technology Incubator

Laser Sensors, transferred to Philips Lighting (Jan-06)

Potential Market >1 billion units

PC Mouse

Printer

Portable

Devices

Remote Control

GamepadMobilePhone

Watches

Notebook

1st

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New Business Leveraged through Sectors

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

amBX scripting software enables (supplier)

CEs gaming peripherals(customer)

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New Business Leveraged through Sectors

3D, a fascinating example of disruptive innovation

3D often spontaneously mentioned during consumer groups as ananticipated next step in creating a more immersive and captivatingexperience.

- Philips 3D consumer research

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