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Joe Kaeser's Tie-Less Vision for Siemens

joe kaeser_siemens_9.12._dpa_matthias balk
Siemens chief executive Joe Kaeser is presenting the company's new strategy in Munich this week.
  • Why it matters

    Why it matters

    Siemens chief executive Joe Kaeser wants Siemens to regain its repuation for innivation and quickness, a move that he hopes will boost profits and growth.

  • Facts

    Facts

    • Siemens is forming joint ventures with a series of promising startups.
    • Siemens plans to increase R&D spending by €300 million in the current fiscal year.
    • One of its biggest competitors is GE.
  • Audio

    Audio

  • Pdf

Even traditional companies want to be young nowadays. As if to make that point, they are eschewing pinstriped suits, pocket squares and ties, the symbols of an old and different era.

The board members of German electronics giant Siemens was clearly making the point when they presented its new innovation strategy on Tuesday – without neckties.

Meeting them was Arcady Sosinov, a young, Ukrainian-American start-up entrepreneur. He is used to wearing jeans and sweaters in Silicon Valley but had decided to wear a suit for this meeting, to discuss a joint venture with Siemens.

Mr. Kaeser himself spent many years working in Silicon Valley and he wants Siemens to create a culture where employees are encouraged to come up with their own designs.

Mr. Sosinov’s company, FreeWire Technologies, invented a mobile charging station for electric vehicles, and a pilot program is now underway. The underlying concept is that electricity is brought to cars rather than the other way around. Siemens’ “Technology to Business” unit discovered the startup and arranged the joint venture.

Mr. Sosinov told Handelsblatt cooperating with Siemens has helped him deal with the two major hurdles facing young companies: financing and production expertise.

Siemens for its part, needs companies like FreeWire Technologies to give it a new lease of life.

Siemens has had a growth problem for years. Partly as a result of spin-offs, the group is significantly smaller today than it was more than a decade ago, and it has lagged behind the competition when it comes to growth. The company’s rivals have also had higher gross margins recently. By offering more innovative products, they were able to justify charging prices.

With his “Vision 2020,” Mr. Kaeser wants to bring Siemens back in league with the best in the industry. The sartorial statements on display Tuesday were part of a far wider strategy: an entire package of measures designed to boost the company’s innovative strength.

 

Siemens in Numbers-december 9,15

 

He chose to make the announcement at the German Museum in Munich, where 200 items demonstrating the innovative strength of Siemens, at least in the past, are on display. “Innovation is party of our DNA,” insisted chief technology officer Siegfried Russwurm, who Mr. Kaeser referred to on the stage as “Siegi.”

Siemens intends to provide generous funding for this innovation. Investments in research and development, or R&D, will be increased by €300 million ($327 million) in the current fiscal year, bringing the total up to €4.8 billion. Overall investments have increased by a fifth from last year. The R&D ratio is 5.9 percent, and it will remain at around 6 percent in the coming years, said Mr. Kaeser.

By comparison, archrival General Electric (GE) wants to invest an average of 5 percent of industrial sales in research and development. GE spent $5.3 billion on R&D last year. The two rivals compete directly in many areas, such as medical and energy technology. GE recently unveiled the world’s most efficient gas turbine, ousting Siemens from the top spot.

To ensure that the company will remain a technological leader in the future, Mr. Kaeser wants to establish an “Innovation Inc.” for start-ups. Siemens has already launched more than a dozen young firms itself. It has also invested €800 million in 180 young companies.

But the innovative arm of the company has so far been part of the financial subsidiary, where it doesn’t belong. It would be far better if innovations benefited the company’s operational business. The new unit is intended to provide employees with the freedom to experiment, and with the help of Siemens, they will be empowered to launch startups. The new division, which reports directly to Mr. Kaeser, is also expected to develop new business fields. Mr. Kaeser himself spent many years working in Silicon Valley and he wants Siemens to create a culture where employees are encouraged to come up with their own designs.

His company, however, could still use some improvement of its corporate culture. There are periodic complaints about bureaucracy and people who stand in the way of progress at the company. Mr. Kaeser’s predecessor, Peter Löscher, faced similar problems. But Mr. Kaeser insists he can overcome it.

The company already has many joint ventures with start-ups today. In fact, Siemens is one of the more enterprising of the companies listed on Germany’s benchmark DAX index, said according to one industry insider. The question now is whether these investments can be turned into solid profits.

It will be a few years before it becomes clear whether Mr. Kaeser has truly achieved a cultural change. It’s the sort of thing business leaders promise periodically. But the innovation offensive also has to be reflected in the numbers, Mr. Kaeser explained. “At the end of the day, we aren’t just doing this for fun.”

 

Axel Höpner is the head of Handelsblatt’s Munich office, focusing in particular on Allianz and Siemens. To contact the author: hoepner@handelsblatt.com

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