The CEO of Philips, 60- year-old engineer Gerard Kleisterlee, has spent his entire career working for the Dutch conglomerate. He took over as CEO in 2001, just as the tech bubble was bursting and Philips' shares plunged from €40 to €9 in less than a year. In 2006, Kleisterlee sold Philips' highlysuccessful semi-conductor business to private equity buyers for €6.4bn in order to reinvest the proceeds in growth lines such as lighting and medical devices as well as a multibillion euro share buyback.

SIMON HOBBS Philips is changing quite dramatically under your leadership. How would you describe the set of businesses that you took over in 2001?
GERARD KLEISTERLEE Philips' used to be technology-focused – semiconductors, components, consumer electronics were seen as the heart of the company. But our other set of businesses, particularly medical systems, lighting and domestic appliances, produced good solid cash flows but didn't have spectacular growth.

SH Philips had almost gone bankrupt before the restructuring, but you've had a great record of invention: the rotary head shaver in 1939, the compact cassette in 1963, CD and DVD formats through the '80s and '90s.
GK Absolutely. Philips has always been strong at Research and Development. However, it was not always consistent in exploiting in the market what it had in terms of in-house technology.

SH You were born in Germany in 1947, just after the war, and raised in the Netherlands. What sort of child were you – were you a clear leader when you were growing up?
GK Frankly speaking, the rst time that I discovered that people were following me was during military service, when I became a platoon leader. It was clear that there were certain leadership qualities that I had not utilised before, but once discovered they got me in the right direction at Philips.

SH What in your career gave you the leadership set that made you CEO?
GK In the rst years in medical systems I learned a lot about people from all walks of life because I dealt with the engineers, product managers, but also with the ladies on the shop floor who made wiring harnesses. This gave me a skill set to deal with different types of people in different circumstances in their language.

SH In the late 1990s, you spent time in Taiwan and China. What are the lessons of your experience in Asia?
GK I learned to lead through influence and not through hierarchy, because I had a position that did not put me in control of any business. You need to gain influence by showing that you can add value, even when you are not in charge. That was an important lesson which has influenced how I look at organisational design in Philips.

SH When you took over in spring 2001, the tech bubble was bursting and you were faced with the biggest losses in the company's history. How did you get a strategy, a vision, and motivate people?
GK You must stay cool, composed, diagnose the issue and take effective action. Communicate in clear terms internally and externally what you are going to do about it, then consistently deliver against what you have promised to do.

SH When you launched the one-day summits which all your staff could go to, how important do you think that was in determining Philips' direction?
GK They were very important to understand the set of options at hand to get clarity in the organisation. But I also used the crisis to break down the silos and say 'we are one Philips', we're in this boat together and we have to pull together and work more effectively.

SH But how did you put that into practice?
GK You put people on the same site and convince them. In this situation there are three groups of people. People who welcome change, people who can be convinced through reason, and people whom you cannot convince and you have to get them 'off the bus' because they will slow you down.

SH Now you want the operational margin of the next three years up from 7.5% to 10%, and you've got €20bn to spend on acquisitions or share buy-backs. How difcult do you think it will be now to teach the business to grow?
GK It is Philips' biggest challenge because it has been focused so long on resolving portfolio and operational issues that it almost has lost the sense for growth. However, we see fantastic growth in our appliance division and it's one of the rst environments where things have really started to come together in terms of innovation, leadership and risk-taking. Now we need to migrate that model and culture to other divisions.

SH In terms of the booming industry of healthcare, both professional and consumer, your competitors GE and Siemens have been aggressive in their acquisitions, spending €18bn over the last four years. But although you have €20bn available, you have held on to it. Why the delay?
GK It's not delay but a matter of choosing a different route. We're not GE or Siemens – we have a unique position of being both a strong consumer brand and a healthcare professional.