Siemens Interview

Running From Bears to Industry 4.0

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Siemens CEO Joe Kaeser plays with spiders and isn't afraid of Elon Musk. Source: Bloomberg

It’s not a preview for the new Transformers film being presented on stage at the Boston Convention Center. This isn’t science fiction, but reality – a discussion on the fourth industrial revolution. Siemens CEO Joe Kaeser has brought with him two guests: a pair of robots that look like over-sized spiders. To him, they represent the start of industrial automation and perform beyond a person’s wildest dreams.

Miriam Meckel: Mr. Kaeser, what are those two doing here? 

Joe Kaeser: They’re friends of mine. Both are autonomous robots. We call them “spiderbots,” because they move like spiders. They’re equipped with artificial intelligence software and can work with other robots on 3D printing projects. They are a prototype developed by Siemens researchers at Princeton. One day, bots like these will be able to shape the structures and surfaces of large, complex objects, such as airplane fuselages or ship hulls. This is an exciting vision of the future of manufacturing: machines working together to build new machines.

Before our interview, one of the robots told me it’s nice to be here in Boston. Why make it speak?

Because we still need a human interface. The robots communicate digitally with each other – in ones and zeros. But ultimately the focus is on people. The bots have to be able to communicate with them.

You once said that Industry 4.0 will determine the fate of German industry. How confident are you that the outcome will be positive?

The good news is that value-creation chains will become more efficient. The bad news for some is that these chains will be severely shortened; segments that don’t bring any added value will be eliminated. Soon many jobs won’t exist in the form we know them today. But new activities and many new jobs will also be created. The challenge will be to provide people with the skills required for the new jobs.

In the 1930s, John Maynard Keynes was already speaking about technological unemployment. What’s new about the present situation?

People have found themselves in this kind of situation many times before. But today there is a massive difference to the previous industrial revolution: When the steam engine or electricity put to household use, there was no possibility of communicating in real time. But today, there is a globally connected society that is well-informed about the transformation and seeks an active voice in how it is shaped. As a society, we have to see to it that as many people as possible are included in this transformation. Not everyone is a software developer or a Harvard graduate.

That was also true in previous processes of change.

One thing particularly concerns me: If we don’t manage to make the digital era inclusive, then the fourth industrial revolution will get stuck in the mud because society won’t participate. That can already be seen today in many industrial countries where people yearn for a return to the era when the coal and steel industries were flourishing – they want to go back to when they had secure jobs and social status. That’s a fruitless longing, we can’t bring back the past. Today we’ve got to give people a chance to get further qualifications. It’s the only way we can make them capable of participating successfully in this new world.

If we don’t manage to make the digital era inclusive, then the fourth industrial revolution will get stuck in the mud because society won’t participate.

When Donald Trump recently signed a law canceling Barack Obama’s policies to harness more clean energy, he said to a group of miners who were present: “Soon you’ll have jobs again.” When you hear that, is Trump spreading fake news?

I’d call it alternative facts. (laughs) He didn’t say they would get their old jobs back. He said they would have jobs again. Of course it’s crucial for an economy as important as that of the USA to have a strong industrial base. There will always be cycles in technology and therefore in the industries affected by technological change. But we have to manage this process extremely well. When I accompanied the Chancellor a few weeks ago to visit President Trump, we spoke a lot about workers’ qualifications. My impression: The German model of dual training – education at both a company and a vocational school – could become a real export hit.

The founder of Microsoft, Bill Gates, recently called for a tax on robots to cover the costs of this training and transformation.

Bill is not the only one making that suggestion. I’ll grant him this: He’s recognized exactly where the challenge lies. If, in the future, intelligent production allows us to perform work that once took 1,000 hours in 100 hours, then the value-creation change will be not the only thing that gets dramatically shortened. It’s also important to note that today, these 1,000 hours of labor also finance the social system; salaries are calculated according to it. How do you intend to finance all that with 100 production hours? So Bill says: If these robots reduce work income, then we have to tax the value-creation performed by the robots. However, it’s interesting that 25 years ago when software began to replace a lot of human labor, Bill didn’t propose a tax on software. As the founder of a big software company, he had other ideas…. Today he has to acknowledge: There have been much more gains in productivity through software than through robots.

Siemens has to come to grips with a host of technological changes. On the other hand, you have to take along your workforce. How do you handle that challenge personally?

We’re in the process of figuring this out. What we’re doing, in any case, is investing in our employees. Each year we spend more than €500 million in ongoing and advanced training. And we invest in innovation: year after year, more than €5 billion goes to research and development. There is intense discussion throughout the company about what digitization means and how we can make use of the opportunities it brings.

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First Harvard, then Merkel. Siemens CEO Joe Kaeser introduces his Industry 4.0 ambassador, the Spiderbot, to German Chancellor Angela Merkel and Polish Prime Minister Beata Szydlo at the Hanover Fair. Ms. Merkel was even presented with a mini-me spun at Siemens. Source: DPA

Germany lost out in the first developmental phase of the Internet to US firms like Google and Amazon. Do things now look better from a German perspective?

It’s true that there will be a massive challenge to our leading role as an industrial nation, for example, with regard to the most innovative auto industry in the world or our strong small and medium-sized companies. How are we doing at the moment? Not badly, I believe. We’re well-prepared, particularly in the area of Industry 4.0. We have the know-how, a worldwide network of customers along with an understanding of their needs and processes. But we have to remain alert. The “winner takes all” logic of the Internet will spill over into industry. So we have to carefully examine which business models work in the future, where the weakest link in the value-creation chain is and how we can occupy the position in the value-creation chain where value is actually created. The Internet is quite simple: it eliminates the valueless middleman. So we have to be vigilant: Always keep focused on your suppliers. Keep focused on your customers, on the customers of your customers. Because if you don’t, you’ll wake up one morning to find they’re gone. Then what?

Exactly: Then what?

That’s like the tale of the two hikers. One day in Yosemite Park, they meet up with a hungry bear. The one says, “This doesn’t look good.” The other says, “It’ll be okay. I’ll put on my jogging shoes and run away.” The first says, “How do you expect to run faster than the bear?” The second replies, “Faster than the bear? I just have to run faster than you!”

Isn’t the man without jogging shoes the head of a 170-year-old company, and the man with the jogging shoes the challenger from the tech world. Who will survive: Joe Kaeser or Elon Musk?

Ask the bear.

Are you sometimes afraid of these people in fancy jogging shoes, the Elon Musks of this world?

Yes, if we’re talking about the ones only concerned with fancy sneakers – less so with Elon Musk. He’s the classic example of an entrepreneur who is ready to travel completely new roads and to risk a lot – perhaps too much. But I believe the division into “old world” and “new world” is incorrect. Siemens has provided Tesla with automation for various facilities and is playing a significant role in the new gigafactory. Our software is also being used in the SpaceX project. We have long been part of this so-called new world. That means that hyperactive company founders also want nothing but the best!

It’s no use to copy Silicon Valley; you have to understand what it actually is.

Why are there so few German Musks?

There are outstanding entrepreneurs in Germany, particularly in the auto industry – otherwise we wouldn’t be so successful. In this country, there is some lack of the start-up mentality, the urge to pursue new business models all the way to success. That’s too bad because start-ups weren’t invented in Silicon Valley, but in Germany. Think of the “Founders’ Era” in the 19th century. They hadn’t yet even built garages in Silicon Valley when in Germany we already had start-ups in back courtyards. And today? Today everyone makes a pilgrimage to Silicon Valley in order to get a view of the future. But that’s the wrong attitude. In your heart, you have to have the will to shape the future. It’s no use to copy Silicon Valley; you have to understand what it actually is. And the most important thing about Silicon Valley is the approach. In German, we talk about “mindset”: Handle new ideas creatively and don’t be afraid of failure. Risk something, think big. The Bundestag can’t pass a law to create this mindset. It has to come from an inner urge. Companies and universities carry responsibility here to promote the spirit of innovation.

But doesn’t that have a little bit to do with legislation? In the USA, there is much more freedom to set up a company. Don’t you sometimes envy US firms for this freedom?

No, I don’t. I respect them, but envy is the wrong word. The comparison with the USA is more about determination, about the resolve to exert ourselves here in Germany to establish equally strong ecosystems for founders. Of course that requires the appropriate legal framework. For example, with regard to financing, there is still room for improvement in Europe. In Germany, if a founder with a really good idea goes to a bank, the first question is “Do you have collateral?” If you don’t, then you need bondsmen. Then the bank consults the national credit bureau. If the records don’t show a perfect rating, then you can forget financing – regardless of how good your idea is. That’s just crazy.

How can you compensate for Silicon Valley’s advantages?

Take Siemens. With all due respect for the achievements of my predecessors, we can’t say: We’ve been around for 170 years, and that will be the case for the next 170 years. The world isn’t like that anymore. Siemens has to reinvent itself, day after day and we’re doing just that. For that reason, we want make each of our almost 360,000 employees capable of thinking ever more like an entrepreneur and assuming responsibility. At Siemens, we call that entrepreneurial culture. Our motto is: Always act as if this were your own company. Of course, we haven’t yet reached the goal of establishing that sort of thinking everywhere, but we’re making good progress.

The transformation won’t be possible without growth. But up to now, the tech economy hasn’t contributed much to progress in productivity. How can that be changed?

Let’s take Industry 4.0. There we have clear gains in productivity and improvements in efficiency through digitization. The further the fourth industrial revolution evolves, the more it will have an impact on economic indicators. What would the alternative be? To neglect the opportunities offered by IT for making value-creation chains more efficient? If we leave a gap open, others will come – possibly from China – and fill it. Each of the three previous industrial revolutions ended up improving the world by giving people prosperity and making their lives easier. The same thing will be true with the fourth. But that will go hand in hand with far-reaching changes – as well as redistribution.

 

Miriam Meckel is editor-in-chief of Wirtschafts Woche. To contact the author: miriam.meckel@wiwo.de

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