Pictures of the Future    Fall 2006

One Step Ahead

To make money from innovations, a company must be versatile and able to motivate its inventors and innovators. Companies must also give their creative people plenty of intellectual elbow room, while nevertheless ensuring that their efforts are in line with business strategy and that customers are involved from the word go. Siemens' goal is to become the world leader at this difficult juggling act.

The man was certainly a great inventor, but he was much more than that. He protected his ideas with patents and turned them into highly successful commercial products. He knew how to motivate his employees and inspire his customers. He was also one of the first people to work across international borders and had the courage to take calculated risks. In short, he was an innovator par excellence. His name? Werner von Siemens.

Siemens’ inventions not only helped lay the basis for modern tele­communications, but also for the entire field of electrical engineering. For instance, he developed the pointer telegraph, and his young company was responsible for the first telegraph cable to join London with Calcutta, some 11,000 km away. In 1866 Siemens discovered the principle behind the electric dynamo. And by connecting his dynamo to a steam engine, he created the first practical method of generating and transmitting large amounts of electricity economically.

Unlike many other scientists, Siemens immediately recognized the enormous commercial potential of his inventions and secured the necessary protection rights. "Ideas are of little value in themselves. The value of an invention is in its practical application," he said—anticipating today’s definition of the word "innovation," as something that can be translated into a marketable product. Werner von Siemens also understood how his dynamo could be exploited for practical applications. "It has a lot of development potential and could pave the way for a new era in electromagnetism," he wrote to his brother in London, enthusing about cheap electricity, light, electrical machines and power plants—with the benefits to the customer always uppermost in his mind.

Over the next few years, he did much to advance the cause of his invention with his own company. Lighting for factories, for shopping areas and stations; the first electric railway; the first electric elevator; the first electric streetcar—all of these breakthroughs were innovations from the Siemens company.

Innovation, Investment and Jobs. Werner von Siemens also established a tradition that is still adhered to in his company today. The leading themes of Siemens’ corporate history have been innovation, early globalization and a strong focus on customers. "Innovation is in our genes," says Siemens President and CEO Dr. Klaus Kleinfeld. "There’s no profitable growth without innovation and no innovation without profitability." This two-way relationship is a feature of every successful trend-setting company. To be a leader in today’s markets, a company needs to have innovations that offer its customers high added value. Market success, in turn, safeguards jobs and the profitability that ensures that a company can continue to invest in the technologies of the future.

Booz Allen Hamilton (BAH), a strategy and technology consulting company, has conducted a survey of the world’s top 1,000 companies with a focus on investment in research and development ( Interview Steven Veldhoen). According the their findings, two factors play a key role in determining whether the innovation process can succeed: a first-class innovation culture and the quality of the company’s innovation processes. Both have long enjoyed a rich tradition at Siemens.

To ensure that its employees have the best tools to do their jobs, the company set up its top⁺ Business Excellence Program eight years ago. This was followed three years ago by three further company programs: Innovation, Customer Focus and Global Competitiveness. "Methodologies to cope with almost all the challenges of global business were developed here to world-class standards, and tailor-made for Siemens’ needs," says Dr. Gisela Fuchs, head of the company’s Innovation program.

More than Technology. Siemens’ innovation activities are based on the company’s Innovation Framework, a matrix that defines what makes innovation successful. Along with technological know-how and knowledge of customers needs and market trends, the factors affecting business success are specialized sector know-how, excellent innovation processes and, above all, highly motivated, highly skilled employees. "We use this program to help the business units to become trendsetters in their markets and thus ensure their success in the long term. Ultimately, the Siemens businesses that systematically anticipate innovations are the most profitable," says Fuchs.

"It’s important to understand that innovation is not just about technology, but also about developing new service and business models," Fuchs emphasizes. "To bring innovations to the market successfully it is absolutely necessary to have a solid knowledge of the specific industry involved and a clear understanding of the benefits the innovation can ultimately bring to customers."

This is where the industry know-how that Siemens experts have across a diverse range of sectors can help. Regardless of whether it’s steel production or the pharmaceutical industry, building technologies or airport lighting, health services or water purification, power plants or traffic control—Siemens has experts who know customers’ needs in each sector.

And when it comes to innovations, customers are involved in the development processes from an early stage. "Using our Lead Customer Feedback methodology we can find out not only which innovation fields are really important for our customers, but also how we compare with our competitors. We use this information to plan our operations," says Fuchs.

Innovation Radar. Innovation benchmarking is a topic particularly dear to Fuchs’ heart. "It helps to pinpoint areas where we are lagging behind our competitors and need to catch up," she says. "It also shows us where we have to implement measures that will improve our performance. We developed this methodology together with Siemens Corporate Technology (CT)."

More than ten employees at CT spend their time on innovation benchmarking. "Using this methodology we analyze our innovation strategies and capabilities in detail," says Mark Engelfried, senior consultant in the Competence Center for Innovation at Siemens CT. "With our innovation radar we can detect all the success factors behind the innovation—from strategy and culture to technology and processes. Of course, in practice we don’t carry out a full assessment of every project. Instead, we focus on areas of potential weakness, such as the innovation portfolio or innovation processes."

Employees in the Health Services Image Management Department at Siemens Medical Solutions (Med HS IM) were the first at Med to use this method to analyze their innovation process in 2004. "With support from CT, we wanted to find out just how innovative Med HS IM really is, which trendsetting technologies could be important for us in the future, and how to improve our innovation process," reports Dr. Ernst Bartsch, Innovation Manager at Siemens Med HS IM.

Two years later, the innovation cycle has been accelerated following the analysis and implementation of associated recommendations. "As a result of these changes, we not only increased the transparency of our innovation process, but, for the first time, were able to compare various innovations. We also developed processes that enable us to carry out innovation management in a systematic rather than an ad hoc way," says Bartsch.

In the meantime, benchmarking has been carried out for activities accounting for 48 percent of Siemens’ business volume. "This method needs to become as routine as the regular comparisons with competitors that every division carries out," says Fuchs. "Of course, innovation benchmarking is a complex process that requires time, but it’s definitely worthwhile. Innovation benchmarking is one of the keys that will help us to make our businesses’ activities No. 1 or No. 2 in the world—and ensure that they stay on top."

Trendsetter Strategy. In line with Siemens’ strategy of being a trendsetter when it comes to innovation, the company is striving to occupy a strong technological position—particularly with regard to key and pace-setting technologies. Expertise in these areas will determine which companies will enjoy a competitive advantage in the future.

Furthermore, the company must also be well-positioned to exploit disruptive technologies that are capable of revolutionizing the market. In addition, trendsetters must closely align their R&D activities with their business strategy and also be in possession of key patents. A trendsetter also needs to have a clear vision of the future—which is why Siemens developed its unique "Pictures of the Future" process (see Pictures of the Future). Using this highly structured methodology, which combines extrapolation from today’s products and technologies with "retropolation" from holistic future scenarios, it is possible to not only sketch a visionary picture of the future, but also describe a path that will take the company there.

Given Siemens’ diversity, synergies play a key role throughout the company. Examples of such synergies include the joint development of multiple-impact technologies and platform strategies. For instance, it is possible to develop software as modules that can be used in diverse applications, such as security technology, voice recognition, image processing, and control technologies suitable for use in industry applications or in the energy sector. Similar interdisciplinary functions arise in materials research, covering a spectrum that extends from intelligent sensors and new light sources to piezo valves and turbine coatings. A good example of a successful platform strategy was the development of the syngo user interface that is compatible with a number of medical technology systems ( Innovators at Siemens (Wangler)). Similar platform strategies could be implemented more frequently in other areas—for example, in the service sector and in industry automation.

Learning from the Best. Best practice sharing is also of great importance. "At Siemens CT, for example, we keep a best practice database," says Engelfried. "At the moment, it has a total of 150 entries. What’s more, the database stores both external and internal examples. This is another example of how we greatly benefit from our global networking activities with universities and companies." ( Learning Together)

Fuchs also stresses the importance of seeing the bigger picture: "In the future, " she says, "we will need to identify best practices in a more targeted way and use the information we gain as a systematic aid. Here, the most important thing is timely inclusion of our local companies in innovation activities."

All these methodologies are important aids when it comes to developing innovations, says Dr. Thomas Goldbrunner, principal at Booz Allen Hamilton. "The best way for companies to outstrip their competitors is by implementing rapid and effective innovation processes," he says. "The key to success lies in identifying the areas where optimizing processes will have the greatest effect." But there is no sure-fire recipe for optimum innovation processes.

Ultimately it’s the employees who make the difference, along with a productive innovation culture that both challenges and supports inventors and innovators.

Inventors and innovators are themselves as diverse as the innovations they produce. There are visionaries whose ideas turn traditional wisdom upside down and transform whole industries. And there are dedicated plodders who work steadily and painstakingly on improving existing products or introducing new production processes (see examples  Innovators at Siemens).

But all innovators have one thing in common: a different way of doing things that sheds light on new approaches and opens up new markets.

Focusing on Innovation Culture. The priority Siemens gives to its innovation culture is clear to see in many of its initiatives and programs. For example, Siemens presents the "Inventor of the Year" award to around 12 outstanding inventors each year. It also presents the top+ Innovation Award for exemplary innovations. Employees are motivated when they see that inventors are rewarded for outstanding ideas.

The Groups also promote idea workshops, where experts brainstorm creatively to find new ways of doing things and find solutions to problems. Innovation managers from all of the Siemens Groups also meet regularly to exchange experience in the Community of Practice Innovation Management. In the Innovation working group, Chief Technology Officers, R&D heads from the Groups, and representatives from the regions discuss current issues related to innovation, technology and other topics.

Siemens’ healthy innovation culture is further demonstrated by the fact that innovation is taken very seriously at the management level. In fact, the chief managers responsible for innovation at the Groups discuss and decide on innovation issues at the corporate level in the Innovation Steering Committee. But managers at lower levels are also required to support the development of innovations and give employees the space they need to promote innovation.

In addition, in the so-called Executive Circle Innovation training program, Siemens executives who are responsible for the business units discuss how they can best support innovation and determine which levers they can apply to achieve their goals.

Management consultant Fons Trompenaars makes the point that "a significant success factor in innovation leadership is dilemma reconciliation." Trompenaars, who has authored a number of books on cross-cultural communication, runs through specific examples with managers in executive circles—things like conflicts between centralized and regional R&D units, or between local and global developments, or short and long-term profit maximization. "The most sensible solution is never an either-or, but a combination of the best elements from extremes," says Trompenaars.

Bernd Gombert from Siemens VDO, who developed the electronic wedge brake and has set up several companies to market earlier inventions, addresses the classic dilemma. "Everyone talks about innovations, but very few people really want things to change," he says. "As a result, innovators need more than just good ideas. They need enormous determination, a great deal of persuasiveness, and a talent for selling their ideas.

In addition," he adds, "promoting innovation is ultimately a job for top management. Without support from the very top of the company, the innovation flower simply can’t flourish. New plants always start to grow in a niche before seeding themselves somewhere else. And while they’re still in the niche they need care, protection and a great deal of good fertilizer."
                                                                                                         Ulrike Zechbauer