Founded in Berlin in 1847, Siemens has grown from a small telegraph workshop to one of the largest electrical engineering and electronics companies in the world. Focusing on the businesses of Automation and Control, Power, Transportation, Medical, Information and Communications, and Lighting, Siemens has 360,000 employees in over 190 countries. In fiscal year 2011, Siemens had sales of more than EUR 74 billion with a net income of more than EUR 7 billion.
Research and development has always been important at Siemens. Innovation is one of the five core targets at Siemens, the other ones being taking responsibility, a focus on customers, a focus on people and a focus on value. As Siemens puts it on its website, “Innovation is our lifeblood, around the globe and around the clock.” In 2011, 27,800 individuals were employed in R&D. In the 2011 fiscal year, Siemens spent EUR 3.93 billion on R&D, accounting for 5.3 per cent of its sales. In a ranking by business consultants Booz Allen Hamilton of the 1,000 companies around the world with the highest levels of R&D expenditures in 2011, Siemens ranked as number twenty.
Siemens has been decentralizing its R&D activities since the 1980s. Siemens increasingly performs research activities abroad: R&D is now being conducted in 30 countries. Of the 27,800 employees engaged in R&D, less than half (42.5 per cent) are employed in Germany. Other major R&D locations include the US, China, Austria, India, Slovakia, Switzerland and the UK.
The role and scope of Corporate Technology
Despite having only 6,400 employees worldwide, Corporate Technology (CT) still performs a leading role within Siemens’ R&D operations. Its international network focuses on core technologies and international patent management, strategically important to Siemens. In Germany, CT’s activities are mainly concentrated in Munich, Erlangen and Berlin. Internationally, CT’s R&D units are located in Berkeley, California (US), Princeton, New Jersey (US), Vienna (Austria), Beijing and Shanghai (China), Singapore, Bangalore (India), Moscow and St Petersburg (Russia) and Tokyo (Japan).
The R&D units in China and Singapore were only established recently. For example, CT Beijing opened in 2006 and CT Singapore opened in 2008. Most of these units are relatively small. The total staff in Beijing, Shanghai, Singapore and Tokyo added together is just over 200.
Siemens corporate research
Employing 430 staff, Siemens Corporate Research (SCR) in Princeton, New Jersey, was Corporate Technology’s first research institute outside Europe. It started in 1977 as a small development facility in New Jersey to support its US manufacturing operations. In the early 1980s, however, Siemens decided to invest heavily in SCR to solidify further Siemens’ leading technology position. SCR is now a leader in the fields of information technology and software, computer graphics and imaging, and multimedia technology within Siemens.
Global technology fields
Within Siemens CT operations, the company has implemented the Global Technology Fields (GTF), to develop CT capabilities that stretch beyond divisional boundaries. Teams consist of highly specialized employees from across the world who possess strengths in specific research areas. An aspect of GTF includes ‘lighthouse projects’ whereby Siemens creates a team to focus on specific challenges entailing both new foreseeable demand and alternative resources. Examples of projects taking place in 2012 include energy storage and smart grids.[ii] Lighthouse projects provide a good indication of where Siemens R&D is heading, as these areas are selected as beacons for the long term focus of the company.
GTFs provide the opportunity for knowledge development and transfer within this diversified company. This programme creates a unique bond for employees as R&D responsibility is placed on the organization as a whole, rather than on specific divisions with traditional location advantages.
Building the R&D unit in India[iii]
In October 2004, Corporate Technology opened a research laboratory (CT India) in Bangalore, placing it under the organizational umbrella of Siemens Information Systems Ltd (SISL).
For this new R&D unit in India, the objective was “to establish a leading industrial research center, which will attract the best talent, promote cooperation with universities and research facilities, and allow Siemens to tap into India’s strengths, particularly with regard to information technology”.[iv] Siemens chose Electronics City, one of the major industrial parks in Bangalore, as the site for the R&D unit. Bangalore is India’s fourth largest market and ‘India’s Silicon Valley’, hosting a large number of information technology companies. Electronics City is a location of choice for both major multinational companies such as 3M and Hewlett Packard, and major local Indian giants such as Infosys and Wipro.
In April 2004, 43-year-old Mukul Saxena was given the mandate to establish this new research centre. An engineer and manager, he first worked for General Electric’s (GE) global research and development team in the US before returning to India in 1997 to work for an automotive supplier for four years. In 2000, he rejoined GE to lead a 140-member research team with members in both Bangalore and Niskayuna, New York, and was made a member of the Board of Directors of GE Medical Systems, India.
By 2005, Saxena had been able to attract a young research team of 39 members for the new Siemens research centre. Saxena’s top priority was to work closely with SISL to apply its technology quickly to end products.[v] Close coordination with SISL would also help fulfil his ultimate goal of “doing research in India for the Indian market and successfully implement[ing] cost-effective solutions there”. Saxena asked, “What’s driving the local market? And how can we adapt solutions that cost $1,000 in the US to the Indian market, where they shouldn’t cost more than $100?”[vi]
At the same time, CT India was also working closely with Siemens researchers located elsewhere. Romain Moreau-Gobard, a French scientist who had worked at SCR in Princeton for four years, was the liaison with SCR. In addition, CT India also worked closely with other Siemens R&D units around the world. For example, a team headed by Rita Chattopadhyay worked closely with SCR and with Siemens researchers in Karlsruhe, Germany, on embedded software for security cameras and optimized solutions for camera systems in traffic monitoring.
The slogan of CT India for 2006 was ‘Made for India – in India’. Looking into the future, Saxena expected that CT India would become more embedded as an insider in the Indian market and better integrated into Siemens’ existing innovation network.
Siemens’ Corporate Technology will continue to internationalize its R&D activities. According to Professor Claus Weyrich, a member of the Managing Board of Siemens AG and the head of Siemens Corporate Technology, “we also need to be represented in regions characterized by fast growing markets and dynamic innovation processes. Besides, Siemens needs more than 10,000 highly qualified young people a year. We therefore need to develop networks with foreign universities. Finally, it’s a matter of corporate citizenship.”[vii]
Siemens moving forward
In 2008, Siemens continued its R&D expansion by opening a CT lab in Singapore. Singapore’s unique conditions in terms of lack of fresh water for human consumption created an attractive area for Siemens to open up a research lab.[viii] The company’s research focuses on finding efficient techniques to desalinate water and remove organic material. The lack of local water resources has created positive pressure to find innovative solutions to meet the needs of Singaporeans. As R&D efforts begin to concentrate more on the demands of developing markets, research located in South East Asia is gaining in importance.[ix] Siemens has also been tweaking its products with the goal to simplify them, and to decrease their prices in emerging markets. However, Siemens Chief Financial Officer, Joe Kaeser, has acknowledged that the R&D labs in Germany are still “a vital part of Siemens strategy”.[x]
In 2012, Siemens remains dedicated to improving its R&D outputs and is currently developing over a thousand new partnerships a year, involving inter alia numerous universities from around the globe.[xi] Universities are often selected based on their location advantages in terms of linkages with the local industry. By partnering with universities that have connections to local industry,
Siemens can gain a better understanding of trends prevalent in the local market. Universities benefit through receiving funding and opportunities to study current industry issues.[xii]
Siemens uses as incubators those universities that develop innovative technology and market this to the local industry[xiii]. The University of California, Berkeley and Shanghai have been designated as ‘Technology-to-Business (TTB)’ centres for Siemens. Research labs are operating in close proximity to these university campuses. Both TTB centres are located in areas where intensive innovation is prevalent within the businesses competing there. The University of
California, Berkeley is located in San Francisco where a thriving venture capital market exists that focuses mainly on technological developments. TTB Shanghai is a valuable location for Siemens as it provides access to the large Chinese market. The research lab aims to provide cost-effective solutions that can compete with technologies currently being used in China.
QUESTIONS
- Can you categorize SCR and CT India as either home-base-exploiting sites or home-base-augmenting sites? Why? Did Saxena’s priorities support your categorization?
- Does Saxena meet the ideal profile of an R&D unit leader as described by Kuemmerle?
- What is the rationale for the choices of the location and the leader at CT India?
- Can you provide an update on the internationalization of Siemens Corporate Technology’s R&D, using materials available on the Web?
NOTES
[i] Siemens company information, 10 March 2012.
[ii] Siemens, ‘Global research at Siemens’, (2011), 4.
[iii] Siemens company information, www.siemens.com/index.jsp?sdc_p=t15ls5o1372623i1372572 cd1187 (5 January 2007).
[iv] Siemens company information, http://w4.siemens.de/ct/en/technologies/fue/index.html (5 January 2007).
[v] Siemens company information, www.siemens.com/index.jsp?sdc_p=t15ls5o1372623i137 2572cd1187 (5 January 2007).
[vi] Ibid.
[vii] Siemens company information, www.siemens.com/index.jsp?sdc_p=t15ls5o1320009i1319 932cd 1187140fmu20n1319932pFEz3&sdc_sid=26004352353& (5 January 2007).
[viii] Siemens, ‘Global research at Siemens’, (2011), 32.
[ix] Daniel Schafer, ‘Development tooled to fit the demands of emerging markets’, Financial Times (17 March 2011).
[x] Ibid.
[xi] Siemens, ‘Worldwide cooperation with leading research institutions’, (2012).
[xii] Siemens, ‘Global research at Siemens’, (2011), 34.
[xiii] Ibid.