Cross-selling succsess in Shanghai
During my tenure as General Manager of Siemens’ largest overseas operation in Shanghai, I had the honour of welcoming two distinguished guests from our Munich headquarters: Group CFO Joe Kaeser (soon to be CEO) and the future Vice Chairwoman Birgit Steinborn. My then wife joined them for two days to explore the highlights of Shanghai. We were both impressed and reminded of Dr Busch, then General Manager of Siemens VDO Asia, whom we had met at a private Siemens management meeting.
The development and growth of such unique leadership talent within Siemens is the result of deep expertise and accumulated management experience in various business areas. These leaders, who consistently confront and manage complex organisational and product portfolio challenges on a global scale, reach top positions equipped with the industrial expertise and intercultural team management skills essential to create unique value for all Siemens stakeholders.
Siemens became my key account during my time as Kearney’s General Manager in Shanghai, before I became Siemens One President in China. This successful cross-selling initiative, originally launched by Klaus Kleinfeld in America, paved the way for him to succeed the charismatic CEO Dr. von Pierer, who led impressive globalisation efforts. I had the opportunity to work with both of them during my onboarding period. Within a year, our Siemens One team of about 30 top sales managers in China replicated the success of Siemens America, achieving €100-200 million in new orders and building a strong €500 million pipeline to complement Siemens’ €3-4 billion business in China. Key challenges included managing internal egos and overcoming organisational business unit boundaries.
Shared success in order intake
Proving the Siemens One team’s contribution to a win was often a challenge, as business unit sales teams were usually involved from the outset. It was more difficult to convince business unit headquarters of our role in a significant win. It was common practice to involve the Siemens One team only when a single, non-cross-selling deal was at risk of being lost. For example, ZPMC was an important customer for our Automation & Drive (A&D) business unit under China MD Peter Herweck, now global CEO of Schneider Electric. When A&D was about to lose a major contract for the Shanghai Lingang deepwater port to a Japanese competitor, our Siemens One team facilitated an urgent call between my predecessor as GM of Siemens Shanghai and Vice Mayor Jiang, who instructed ZPMC’s CEO, Mr Guan, to award the contract to Siemens. This relationship with ZPMC’s CEO later became invaluable, culminating in a memorable Chinese New Year dinner he hosted for my family.
The American MD of Siemens Healthcare in China was initially sceptical about our Siemens One team. A hospital director in Shanghai, loyal to Phillips, misled our sales team and ensured that Phillips won the last order before he retired. After this setback, our American MD asked for my help. I contacted the head of human resources at the Shanghai Municipal Government and arranged a meeting with the new hospital MD. Following joint efforts resulted in Siemens winning a major €225 million hospital contract in Shanghai, the largest single contract in the history of Siemens Healthcare and a significant achievement during my tenure as GM in East China. I also had the honour of hosting President Xi, then Shanghai’s Party Chief, during his visit to Siemens Healthcare.
Unfortunately for Siemens on a global scale, during the global financial meltdown triggered by the subprime crisis, GE’s financial services arm faced bankruptcy and had to be bailed out by Washington. As a result, the decision was made to weaken, sanction and punish Siemens, its most successful competitor, for business practices that were common in the industry at the time. An external CEO, who had only run one business unit, was brought in and struggled to cope with Siemens’ complex portfolio and organisational challenges, even with the support of his entire leadership team. As a result, the Siemens One cross-selling initiative became unworkable. After I moved to Paris, it was eventually discontinued globally. As a result of the impressive business growth in China, the most prominent Siemens managers from China became highly sought after worldwide, including by competitors, as Peter Herweck’s career shows.
Digitalization opportunities and management complexity
Siemens is a global innovation powerhouse with a diverse portfolio, unique brand recognition and a highly skilled workforce. Perceived weaknesses such as organisational complexity, integration challenges, dependence on international markets, high R&D costs and potential skills gaps have actually produced some of the world’s most capable industrial managers. Calls to simplify and divest Siemens’ portfolio overlook Warren Buffett’s key investment criteria: competent and honest management. Siemens’ management team is the epitome of industry best practice. Every Siemens shareholder, including the sceptics who are urging Mr. Busch to pursue further divestments, are overestimating their own portfolio management competence.
The manufacturing transition from Industry 3.0 to Industry 4.0 represents a paradigm shift from process automation to a data-driven platform architecture. Core elements include IT/OT data fusion, software-driven automation, and platform-based AI/big data analytics and decision-enabling technology.
This transformation presents both opportunities and challenges for Siemens. The challenges include potential declines in the traditional automation business, emerging competition from platform-based technology companies such as Microsoft and AWS, and gaps in integration capabilities for end-to-end solutions. However, Siemens is well positioned to address these operational challenges. Initiatives such as the Mindsphere industrial internet platform and the Xcelerator open digital business platform are key to this transformation. Although public cloud business models still face scepticism, they have the potential to gain widespread acceptance among potential manufacturing customers in a cloud transformation journey similar to Microsoft’s years ago. A successful transition here would lay a solid foundation for the next 10-20 years. Failure could jeopardise Siemens’ strategic leadership in industrial digitalisation.
Siemens’ future success depends on its strategic direction towards a data-driven platform architecture, integrating go-to-market resources, deepening industry know-how and closing capability gaps in AI/big data and IT/OT integration. Innovation in corporate culture and management mechanisms is also crucial for the transition from a traditional product company to a technology-based company.
Conclusion
Under Mr Busch’s leadership, Siemens (portfolio strategy) enjoys the trust of all key stakeholders. The main external risk is the German coalition government in Berlin, which takes a confrontational ideological approach rather than a business-friendly partnership. During my tenure as GM in East China, I had regular exchanges with the German Consul General in Shanghai and hosted visits from political VIPs, including Dr Braun, our global head of government affairs and later Germany’s ambassador to the UN. At that time, 60% of Siemens’ business was with government decision-makers. Today, public-private partnerships are more important than ever for industrial digitalisation.