Siemens: Management Innovation - Case Study Example

Siemens: Management Innovation at the corporate level case study

1.0 Introduction

The success of Siemens is dependent on innovation, customer focus and competitive edge, and the commitment to innovation is evidenced by the company’shigh spending on research and development activities. The customer focus ensures that the company meets the changing customer needs and preferences rather than just offering products. The company has enhanced its global competitiveness by using and optimizing all the parts of the value chain that are spread across more than 190 countries (Siemens 2017). The company is geared at attaining high performance and excellent business results through innovation that creates sustainable value and commitment to its ethical values. The case study paper will analyze the external and internal business environment ascribed to Siemens to determine its competitive strengths and weaknesses in the market. The paper will also discuss Siemen’s Top + program implementation and the best course of action that will lead to competitive advantage for the company.

2.0 Company background and case study

Siemens was founded in Berlin to manufacture and install telegraphic systems and has existed for more than 155 years since 1847 due to diversification in cross-cutting technologies (Siemens 2017). The company has a market presence in more than 190 countries across the world. Its primary business segments include the information and communication networks, power generation and transmission, medical solutions, and industrial automation and control. Siemens restructured its operations at the beginning of the 21st century to meet the changing market needs (Hitt, Hoskisson, and Ireland 193). The restructuring was motivated by the sluggish market conditions affecting Europe, and the economic crisis that faced East Asia in 1996. Although many analysts criticized Siemens for being slow to respond to new market demands and global challenges, the management was able to implement a three-pronged strategy that aimed at fostering innovation, contributing to business growth, and cost-reduction. The Chief executive officer (CEO) von Pierer was determined to maintain market leadership and streamline the business operations by selling the underperforming business units such as the highly cyclical semi-conductor business. In 1998, the restructured Siemens included four business divisions that include industry, power generation, rail systems, and information and communications (Siemens 2017).

3.0 Product groups

The company product groups are divided in to three categories that include energy, manufacturing, and health care. The top+ program has facilitated research and development activities that have contributed to the product extension in the three product groups. The innovation aims at enhancing the efficiency of the products, improving the functionality, and reducing the expenditure to the customers.

Energy

Siemens energy products include the generators, compressors, gas and steam turbines, wind turbines, power transformers, and high-voltage switches. The energy products also include the current transmission systems, the power automation products, and the high-voltage switching products. The company also produces the light emitting diodes, opto-electronic semiconductor, high voltage laser diodes, high-intensit and Xenon lamps (Siemens 2017). The continuous innovation has expanded the energy product offering to include electronic ballasts, LED luminaries, light management systems, and light control systems. The Top+ program has changed the stationery energy systems and storage devices to include the converter and controller elements. Siemens offers high quality and industry standard energy systems that are proven in offering reliable energy transmission, storage, and control in different sectors of the economy. The program facilitated the manufacture of the intelligent power electronics that offer high power efficiency, reliability, and robust power management. A clear real life example is the Freqcon GmbH that is utilized in compressed air reservoirs and pumped storage plants to save energy and attain balanced and secure supply of power (Siemens 2017). The company has focused its efforts in renewable energy technologies that offer a backup for high network stability, protect blackouts, relieve the loaded systems, and optimize the power consumption. In this case, the top+ program has resulted to additional benefits to the target consumers such as the efficient engineering energy solutions, the reliability in harsh environments, the simple installation of the power devices, and the shorter market time and reduced customer expenditure.

Manufacturing

There is a wide range of manufacturing products that are produced by the company. The products in this category include the heavy duty motors, the compressors and pumps, oil and gas pipelines, conveyor belts, drives for the rolling steel mills, automation equipments, wind turbines for the manufacturing companies, water processors, and raw material processing plants. The research and development activities have contributed to the manufacture of cement mills, automated manufacturing equipments, and control systems for the industrial sector. The manufacturing division also comprises the building technologies that are aimed at offering customers with safe, energy-efficient, and secure infrastructure (Siemens 2017). The decades of experience and passion for innovation has led to the manufacture of a comprehensive range of building automation systems such as air conditioning systems and cooling applications that entail minimal installation costs. For instance, the Desigo building automation system elements include flexibility, ability to programme, and easy operation thus making is preferable by the engineers. A new innovation that is offered in this product category is the GAMMA building control and electrical applications tool that integrates elements such as heating, ventilation, and air conditioning thus providing additional benefits to the customers (Siemens 2017). The automotive manufacturing is a norm in all manufacturing industries across the world and Siemens innovation supports the new era of digitalization of manufacturing facilities. The Top + program has embarked on creation of efficient and large-scale manufacturing batteries and solutions for the entire automated value chain. In this case, the company offers design software that is utilized in the production planning, product assembly, factory automation, and electrode coating. The leading innovations in the product category include the SCADA system that is used in production control centers to ensure transparency and laser welding machine that automates the assembly of lithium-ion cells and makes them safe to the customers (Siemens 2017). The customers have access to faster, automated, and efficient manufacturing and control solutions that offered added benefits such as cost reduction and elimination of manufacturing waste.

Healthcare

The healthcare products and equipments that are offered to the market by Siemens include the computed tomography, magnetic resonance imaging equipments, hearing instruments, clinical information technology systems, fluoroscopy, radiation and oncology equipments, x-ray tools, molecular imaging ultrasound equipments, and mammography equipment that is common in health facilities across the world (Siemens 2017). The company has invested funds in research activities aimed at improving the angiography and particle therapy equipments. The healthcare is transforming to patient-centered care and Siemens has responded to the challenge by innovating the mammography to improve the breast care and reduce the patient discomfort. The company magnetic resonance imaging has reduced the scan times for knee examinations and eliminated the routine work of the radiologists thus boosting the productivity of MRI in medical facilities (Siemens 2017).

A new innovation that has boosted the health care division is the simplified structure of artificial neural network that will transform the diagnostic imaging and meet the high demand for medical examinations. The company has increased the CT scanner portfolio to covers all the clinical requirements, reduce the medical errors, and improve the potential patient experience. The products integrate the different surgical and radiology requirements as evidenced by the One Suite multimodal imaging equipment that enables the health professional to accomplish multiple imaging tasks at the same time (Siemens 2017). Siemens health division engineered the compact ACUSON P 500, which is an ultrasound system that is portable and powerful in facilitating accurate diagnosis and supporting procedures in critical care and emergency situations (Siemens 2017). In this case, the new innovation offers InraCardiac Echocardiography (ICE) that has imaging capabilities. In this case, the product improves the imaging quality and offers a variety of innovative applications that make diagnosis and therapy examinations standardized and less complicated. The top + program has led to the production of the Atellica that is scalable and automated to support immunoassay and clinical chemistry analysis thus assisting in various applications in health facilities (Siemens 2017).

4.0 Matrix organizational structure

Siemens has a matrix organizational structure that blends the functional and project reporting structures. Matrix is multi-dimensional and maximizes the strengths while minimizing the weaknesses associated with both the functional and project structures. All the engineers report to the engineering department manager although they are associated with different projects such as the manufacturing and control engineers, healthcare automation engineers, and the power plant engineers (Hitt, Hoskisson, and Ireland 90). The matrix structure is common in manufacturing industry and in companies with global operations due to the sparseness since it enables for close inspection of the final products and coordination of the different business units. The structure has made the top+ program objectives clear and attained project integration due to the coordination across the functional lines. Accordingly, Siemens has experienced efficient use of resources such as manufacturing machinery, facilities, and personnel due to growing the innovation works in terms of projects. The structure facilitates both vertical and horizontal information flow at the various management levels thus improving the project completion rates and easing the decision-making process (Hitt, Hoskisson, and Ireland 98).

In summary, Siemens’s should use its strengths such as brand quality, financial stability, global presence, and innovation to pursue the top + program and minimize the adverse effects of the threats in the market. The company should realign the corporate structure to facilitate better communication and effective decision-making since the product lines are unrelated. In this case, the company should establish a matrix organizational structure that will have heads of product divisions and heads of various projects (Hitt, Hoskisson, and Ireland 75). The matrix organizational structure will facilitate the coordination of more than 350,000 employees in different production facilities across the world. In this case, the different project managers will supervise the innovation efforts and report to the product division managers in the different locations of operations. The matrix structure is best suited since it will allow for diversification of the product portfolio through partnerships and acquisitions thus strengthening the company offerings in the market (Hitt, Hoskisson, and Ireland 76).

However, the matrix structure implemented by Siemens suffers certain weaknesses since it faces challenges of monitoring and control. In this case, the company embraces automation to and modern computer technology to monitor the innovation progress. The availability of several supervisors at the middle level management can interfere with the reporting relationship and contribute to task duplication. There is also a loyalty conflict between the line management and project managers and difficulties exist in monitoring the independent teams.

5.0 Mission and Vision statement

The values of innovation, excellence, and responsibility are core to Siemens in attaining high performance and excellent business results. The mission and vision is to make real what matters by establishing the benchmarks in the way the company automates, electrify, and digitize the world. The company has selected innovation to drive sustainable value and the actions are driven by the existing market dynamics. The vision is to be the market leader by setting the standards for competitors, and attaining superior financial performance in the markets of operation.

Case Summary

6.0 Top+ program

The top+ program was motivated by the need to meet the changing customer needs and overcome the negative financial results that faced the company. The program focuses efforts on innovation, business growth, and cost-reduction. Business analysts commended von Pierer’s visionary restructuring as the move contributing to the doubling of profitability levels. The company has continued to focus efforts towards emerging and profitable telecom equipment and mobile phone business. Another strategic move has been the closure of non-essential manufacturing factories. The main business subsidiaries include Acuson Corporation, Siemens Airfield solutions, Fujitsu Siemens computers, and Siemens Industrial Solutions (Siemens 2017). The company is headquartered in Munich, Germany and has 285 production facilities that are situated across the world. The current diversified product portfolio includes energy products, manufacturing, and healthcare. The existing company divisions include power and gas, power generation services, energy management, building technologies, digital factory, process industries and drives, and health care (Siemens 2017). The company has concentrated efforts in relentless innovation that has contributed to 7,400 inventions, 3,600 patent applications, and numerous partnerships with universities across the world.

7.0 History of management

The company management has changed over the years since the inception of the top+ program. Gerd Tacke served as the chairman of the company until 1997 when von Pierer was the Chief executive officer. Von Pierer initiated the top+ program that has led to remarkable innovations and new product development.

8.0 Pros and Cons of Top + program

The company experienced worse financial results in 1998 and the management needed to reevaluate how to align the company strategy to attain profitability and meet the changing business needs. According to the management, the company needed a centralized and corporate level top + program that would develop and implement innovation across all the product divisions (Hitt, Hoskisson, and Ireland 193). The program would involve fostering innovation by setting the trend in new technologies and investing in research and development activities. The other element of the program is the customer focus that aims at increasing the company revenue and global market presence by new customer acquisition and cross-selling initiative. The third element of the program entailed attaining global competitiveness through initiatives such as venturing in to the software market, establishing shared services, asset management, project management, and implementing a global production concept. In this case, the program would be advantageous since it would deliver business value by ensuring quality of the products and streamlining the manufacturing processes across the world (Hitt, Hoskisson, and Ireland 194). The program would attain the primary objective of increasing the economic value added (EVA) for the product portfolio. However, the program would still be costly since it would require realignment of the corporate organizational structure and establishment of new reporting systems. The various programs under the different CEOs shifted the emphasis of the program and variations existed between product groups. Accordingly, there was a need of various management tools that would ensure both internal and external benchmarking.

9.0 SMC (the in house consultancy SMC)

SMC is a top management consultancy of Siemens corporation that provides support in finding challenges to the 21st century challenges. The SMC works on stimulating project strategy and offers strategic advice to all the business units. SMC shares the values, objectives, and perspectives, and acts as a launching pad for careers within Siemens. SMC prepares the company for future market developments, new competitive situations, and societal challenges. The in house consultancy is expected to conduct market and trend analysis to determine the changing consumer needs. SMC ensures better consolidation of the centers of innovation in to one group thus ensuring better coordination of the resources and innovation initiatives. The option will eliminate the redundant cost structures and ensure stronger brand due to better coordination of corporate innovation activities and better decision-making (Hitt, Hoskisson, and Ireland 193). However, the option may not have a long-term impact on the structural change in the company.

10.0 Changes in the top+ program throughout

The top+ program started in 1998 as a ten-point program that was mainly independent of the corporate-level programs. However, it was increasingly intertwined with other corporate programs and initiatives throughout the years. The ten-point program aimed at attaining sustainable performance until the NYSE IPO in July 1998 when the company offered its shares for innovation financing (Hitt, Hoskisson, and Ireland 193). The ten-point program restructured the semiconductor business and optimized the business portfolio. In 2000, the company defined the margins for each group and the margins were attainable in 2003 when the attention shifted towards five important actions referred as the Operation 2003 (Hitt, Hoskisson, and Ireland 193). The company top+ program now shifted to ensuring a high performance culture, attaining operational excellence, and focusing on the three sectors that include industry, energy, and healthcare. The initiatives included fostering open innovations, ensuring global supply chain management, and focusing on organic growth while leveraging the efforts on the previous acquisitions. The management aimed at attaining an optimal capital structure and a return of capital employed of 14 to 16 percent. CEO Klaus Kleinfeld joined in 2006 to spearhead the attainment of vision 2020 that aims at fostering innovation, ensuring customer focus, and attaining global competitiveness. The main initiatives implemented include the trendsetting technologies, cross-selling of company products, and observing the global production concept (Hitt, Hoskisson, and Ireland 193). The 2020 vision will be also be attained through project management, software initiative, and shared services.

Siemens has successfully proven its ability to anticipate the changing market trends and innovate its products towards the future needs and thus should fold the top + program in to the in-house consultancy. The option will drive business performance by fostering strategic direction of the company and consolidating the operations that are geared at innovation. The course of action will establish research and development center that is well coordinated and provide budgetary allocation for the various research initiatives (Hitt, Hoskisson, and Ireland 193). In this case, top+ program contributes to business optimization through use of the core strengths to exploit market opportunities such as expansion in to East Asia markets. The option will accelerate business growth and performance by creating a culture that embraces accountability and business expansion through innovations and acquisition. The cultural changes will instill behavioral change among the employees and sustain the brand loyalty by ensuring that customers are guaranteed of superior and quality products.

8.0 Conclusion

Siemens is headquartered in Munich, Germany and has attained global market presence due to aggressive expansion and continuous innovation. The brand is associated with quality while the stable financial position is essential in pursing growth in the energy, manufacturing, healthcare solutions business units. The company should aim at maintaining global market leadership by expanding the product portfolio by investing in research and development projects that will contribute to new product development. The Top+ program should be folded within the in-house consultancy to ensure optimum resource use and coordination of the innovation activities. The aim is to attain a structural change and foster a culture of innovation. Siemens should aim at increasing its market share in emerging and developing economies of the world such as China and India. The company should develop additional products through the natural growth or acquisition.