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Arcus Innovation Leaders Series 

How business leaders use innovative approaches to shape their strategies.

 

Siemens’ view on the Innovation Imperative: An interview with Mr. Dirk Miller, Vice President, Corporate Communications. Mr. Miller believes investments in research and development are the best investments that can be made in a company’s future.     Download the Arcus      Innovation Leaders    Report.    Unilever    Maple Leaf Foods    Siemens    Domtar

 

 So Siemens is driven by the top three mega trends?

 

Mr. Miller: We have identified three trends. The first one is urbanization, the second one is the demographic change—the population in total on this planet will grow from six billion today to eight billion by 2025. The [third one] is that we have an increasing global life expectancy. This means that in 1950 we had an average life expectancy of 46, 47 years. By 2025, the average life expectancy will be 72. That's significant. 

 

Again, we have the same situation in Canada as is seen in worldwide trends. The population is aging. An aging population means we have challenges in infrastructure. You need a different type of transportation. You need a different environment in regards to access to buildings. You need different offerings when it comes to culture, restaurants and public infrastructure- it must become more efficient infrastructure. You have a higher demand on healthcare and elder care. Siemens brings a lot of innovations to the table.

 

For example, we have computer thermographs and MRI systems. Due to these technological advancements, for example, health care practitioners can do examinations in  a very short timeframe, without additional medication, increasing the efficiency of a hospital’s workflow while decreasing waiting time and pressure on patients.

“I think we are one of the few companies that has proven testimony on the volume of CO2 abatements we produce.”

 The environment is on everyone's minds right now.

 

Mr. Miller: It's on our agenda as well. In fact we have a really good position in regards to this because today our portfolio is all over it. Our global turnover is already 19 billion out of 80 billion. It is already driven by products and solutions for environmental protection and energy efficiency. It's growing very fast. It will be 25 percent. Now it's around 18 or 19 percent. It will be 25 percent of our overall turnover by 2015 or so.

 

 Is the environment is a business opportunity for Siemens?

 

Mr. Miller: Absolutely. A very great and important one. And there's another very important aspect of this. By using our products, for example, you already contribute to a reduction of CO2 emissions, twenty-five times higher than our own footprint. We get this on a global basis and it's verified by an independent audit. I think we are one of the only companies who really have proven testimony on how many CO2 abatements we produce. In 2007 our greenhouse gas emission was 5.1 million tonnes. And our products already realized an abatement of over a 140 million tonnes. And this will be almost doubled and more than doubled by 2011. Using our products in different areas—and this is calculated mathematically—our customers will reduce the CO2 abatement of 275 million tonnes. This is the equivalent of six major mega-cities a year, combined—Rome, Hong Kong, Singapore, London, New York and Tokyo.

 

Innovation really starts and ends with the customer. It's related to the three mega trends we have identified: urbanization, demographic change and climate change—environment. And we really have a culture of innovation which is embedded in every single office within the company. We know we have to be innovative in order to define the future--to establish a good future financially, a sustainable future for our country.

 

 If you were to advise CEOs on how to make their company more innovative, what would be the three things you would tell them?

 

Mr. Miller: I have two things to say, anyway.  I would say the first thing is to be as specific as possible with your R&D and your innovation programs—that means you have to listen to your customers and you have to screen your market very carefully. You cannot just do innovation for the sake of innovation. You need someone who really needs it. Give more meaning to the whole process. It's not always a good approach to do what is possible technology-wise; you really have to find a market for it as well.

 

It starts with a market and start with the customer. The second thing is that you have to embed this in your business models because it's proven—and we already have a lot of numbers and figures internally that can really show this—that if you define markets and if you can determine the technology of the future and you have a very fresh product portfolio, you can normally generate more profit than if you are just a follower. These are the basic two principles of economics—either you lead by product, by benefit, by advantage, or you lead by cost. There's more profit available, more margins available, if you are a technological leader. But you have to make this basic position.

 

 Please comment on today's business environment and on whether innovation is taking a backseat—Is it innovation focused on cost instead of growth?

 

Mr. Miller: That's a good question. I'm not too decided on what is right and what is wrong in this situation. I strongly think that just focusing on the cost and being the cheapest or the most cost-efficient supplier of products [makes the] potential to become better and to be more efficient very limited. You can do some global sourcing, you can do some off-shoring, use some low cost countries, you can you can improve your processes as best as possible. But at a certain level you have your cost and you cannot further improve your cost position.

“There needs to be some conviction at the top to innovative consistently, especially in difficult economic times.”

We try to focus on both cost and growth, but that's the advantage of a large company like Siemens with 400,000 employees worldwide. We have two programs which are pretty much on the same level of importance. One is focusing on growth opportunities, gaining market share, fostering an innovation culture and launching new products and defining new markets, addressing new markets and so on. It's pretty much listening to what the customer needs. That's one major pillar. The second pillar is all our efficiency programs, cost reduction programs, global sourcing, shared services, all those programs which really try to optimize cost position. We are doing both. The most competitive companies have already made the move towards the latter whereas the less competitive ones are still focused on outsourcing and all those other things you are talking about.

 

You can see this, especially in this current economic situation. It's very difficult to predict the future. Whenever you adjust being compared by cost, it's very difficult. Currency exchange rates change, the oil price changes all the time. Let's have a look at the Canadian manufacturing industry for example. A few months ago everything moved to Mexico and elsewhere because Canada was not cost competitive enough. Now, if you take the currency exchange rate to the US dollar, the situation looks quite different again.

 

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