Alcoa's Digitization

Pedal to the Metal

alcoa
Alcoa is one of the world's largest producers of aluminum.
  • Why it matters

    Why it matters

    The digital revolution will bring many changes to the way companies operate, even companies like 127-year-old aluminum producer Alcoa.

  • Facts

    Facts

    • Klaus Kleinfeld joined Alcoa in 2007 after resigning as head of Siemens in the wake of a bribery scandal.
    • The company makes aluminum, nickel and titanium products.
    • It had revenues of $23.9 billion (€22 billion) and net income of $268 million in 2014.
  • Audio

    Audio

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It’s early Wednesday morning, and he is already surrounded by the usual Davos conference frenzy. But Klaus Kleinfeld remains completely calm, despite the fact that immediately after the interview he is scheduled to join Hewlett Packard chief executive, Meg Whitman, and Boston Consulting president, Rich Lesser, on the podium. The topic of their discussion also affects his own company, Alcoa: The digital revolution and what it means.

Mr. Kleinfeld, 58, has been working in senior positions at the U.S. aluminum producer since the summer of 2007, first as chief operating officer and, since 2008, as chief executive.

Before that, Mr. Kleinfeld worked for Siemens for more than 20 years. He headed the German electronics giant’s U.S. operations and, in 2005, succeeded Heinrich von Pierer as chief executive. He resigned in 2007 after a corruption scandal, in which Siemens later admitted paying bribes, engulfed the firm.

 

Handelsblatt: Mr. Kleinfeld, everyone is talking about Industry 4.0, Germany’s push to automate and digitize its factories. What does it mean for an Old Economy company like Alcoa?

Mr. Kleinfeld: First of all, it’s wonderful that this critical issue in industrial policy is dominating the agenda here in Davos. Many of the central changes we are now experiencing are ultimately driven by technology. Alcoa is 127 years old and is very concretely taking advantage of this revolution in many areas of research, development and production. For instance, it now takes us three weeks to manufacture the large prototype cast components that used to take 24 months to make – and at a fraction of earlier costs. New materials, 3-D printing, sensor technology – these are all important fields for us.

In the context of this development, is Silicon Valley a threat, a competitor or more of a driver?

All of the above… and also a partner. I spend a lot of time in Silicon Valley, not just because I’m a member of the board of directors of Hewlett Packard, where I pay very close attention to what happens there and where the next opportunity lies. Nowadays, as a chief executive you also have to be the supreme disruptor in your own company…

…which you undoubtedly are at Alcoa. You are currently initiating a separation of the company. Beginning this fall, the aluminum business and the high-tech materials division will go their separate ways.

That too is ultimately an expression of the fourth industrial revolution. The bigger companies get, the more bureaucratic they become. Changes need to be driven from within. One of our principles is “Think louder, act faster.” We have to learn that change is not only desirable but essential to survival.

 

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Klaus Kleinfeld has been attending meetings at this week’s World Economic Forum in Davos. Source: Bloomberg

 

Who will be the losers in this revolution?

All those who fail to think quickly enough and adapt. But that can’t be attached to companies, industries or even countries. The cards are being reshuffled. The next upheaval has just begun. Two years ago, McKinsey analyzed 12 disruptive technologies. Over time, I recognized that even for Alcoa, it isn’t just some but all of those technologies that are relevant. Even biotechnology.

What biotechnology?

Because we need to know, for example, how modern refineries will have to be built in the future. The radicalism of thought can be concentrated into a new imperative: Be more Schumpeter!

So let’s hear it for creative destruction?

Exactly. I can advise everyone to do that, especially those who are supposedly established.

The United States or Germany – which country has the edge?

The United States still has greater expertise in digital technology, while Germany is very far ahead in industrial terms. Germany has also cultivated an extremely effective research environment, with organizations like Fraunhofer and the Max Planck societies, to name just a few. The German Mittelstand (small and medium-sized businesses) also has a touch of Silicon Valley, with fantastic clusters, not just in the machine-building industry.

 

124 Alcoa - Neu 21.01.16-01

 

What role does the political world play?

Germany is exemplary in promoting research, especially when it comes to practical networking. But hasn’t industry already created policy in the best sense of the word?

Where?

Thanks to technological innovations like digital telephony and high-speed trains, Europe has also grown a little closer together. I think that’s very important in the present day, as the old political polarization comes to an end. Ian Bremmer coined the term “Zero Gravity World”…

…one in which many things are flying all over the place?

Everything, really. And everyone needs to reestablish where he or she belongs.

 

Thomas Tuma is a deputy editor in chief at Handelsblatt. To contact the author: tuma@handelsblatt.com

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