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Siemens Industry: Three Pillars Bolster the First “Big Thing”

Feature Article | December 28, 2015 by Andreas Schmitz

In Siemens Industry’s service organization, several hundred employees are tasked with developing ideas and new business models to strengthen the division’s service business. The organization’s first “big thing” is Siemens Cloud for Industry based on SAP HANA.

“Walking skeletons” is how Peter Weckesser refers to products that are not quite complete but already viable enough to demonstrate the principle of a fundamentally new idea – like a skeleton that can walk but still needs “fleshing out”. Weckesser, the CEO of Siemens Industry’s service business, is focusing particularly on developing new business models, markets, and customer groups. “Because this,” says the physicist and doctor of computer science, “is where we’ll see growth happening in the future.” The driving force behind this shift in focus is the digital transformation.

1. Lean start-up model

It’s the job of several hundreds of employees in Siemens Industry’s service organization to investigate new technology-based services, or “value-add services.” As well as opening up new avenues for business, it’s also about “adopting a different attitude to risk,” says Weckesser, who has no problem in accepting that new ideas may as easily fail as succeed. His motto is that it’s better to reach a crossroads and ditch a project early on than to finance a topic for five years before finally having to face the fact that it’s not the right thing for the market.

However, in terms of personnel, the “non risk-averse” members of Siemens Industry’s 10,000-strong service organization are still in a clear minority. And that’s not without good cause. Because Siemens Industry’s existing business portfolio has been built up over decades and typically includes contracts that run for more than ten years, and sometimes for anything up to 30 years. These provide assurance for Siemens’ industrial customers that they will be able to obtain replacement parts for power stations, auto-building machinery, and pumping stations in ten or even 30 years’ time – though the related technologies do not, of course, reinvent themselves as quickly as, say, digital services do.

The members of Siemens Industry’s service organization, which was established four years ago and which operates along the lines of a start-up, come from a range of disciplines: development, product management, and sales. They include business experts who are familiar with product integration and interfaces and who have long-standing relationships with customers – and new recruits with the ability to assess the possibilities offered by new technologies and to channel their insights into the innovation process.

What CEO Weckesser and his colleagues are succeeding in doing is to radically shorten the often years-long product development cycle – from requirements catalog through development and production. He refers to the approach his business unit follows as a “lean start-up model”, which makes it possible to get a “minimal viable offering” to customers “very fast” so that feedback is available quickly for integration into the product in the next step. The new skill here lies in recognizing which functions are absolutely essential for market entry and, equally, which aren’t. “The tricky part is deciding what to leave out,” says Weckesser.

2. Service models

This approach naturally means a change in the company’s traditional relationship with its customers. But, and Weckesser has no doubts on this point, the service business is destined to take on a far greater significance in the future. The only real question mark concerns the degree to which customers will adopt new services and how great the impact of these services will be on their own products. Cloud platforms make it possible to identify and resolve problems, such as those that typically occur in bottle-filling units or compressors, remotely. And they can also measure machine performance parameters, including energy consumption, downtime, and bottle-filling rates.

Looking ahead, Weckesser is sure, “the focus will be more on the production asset’s output than on the production asset itself”. This means in practice that customers who operate production facilities will place more emphasis on the total cost of ownership when they select machinery in the future. New technologies and business models will make it increasingly possible for machine manufacturers to market the output of their products – that is, the number of bottles they fill or the number of parts they produce. If a machine breaks down, it will clearly be in the manufacturer’s interest to get it up and running again fast. Because, in the future, the word “downtime” will be synonymous with “lost revenue”.

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Siemens launched just such a cloud platform at the end of November when it presented Version 1.0 of “Siemens Cloud for Industry” at the SPS IPC Drives electric automation technology trade show in Nuremberg, Germany – seven months after it announced that it would base its solution on the SAP HANA platform. Thanks to the new platform, every single control system, convertor, and drive unit manufactured by Siemens will be able to communicate directly with the cloud via device-to-cloud connectivity in the future. As such, millions of Siemens devices will be able to exchange data with the cloud so that – in the same way as iPhone users access photos and music from the iCloud – enterprises will have a wealth of valuable information about their production assets at their fingertips.

The launch of the new platform is the “start-up” business unit’s first “big thing.” Not only will it prove to those who built it that even the development of such an eagerly anticipated platform does not have to take forever; it will also prove that this particular “walking skeleton” is not just viable but that it’s beginning to breathe by itself.

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