Siemens CEO: Automation, digital twin and grit

Very welcome.

So that's already one answer to your question, which is, we are automating everything. We automate manufacturing sites. Is it discrete? or process manufacturing? We automate trains.

We automate buildings. So we automate grids. So this is one element. The other point is talking about buildings, for example, building technology. You cannot walk a block in New York without passing by a building which is automated by Siemens technology.

Eventually, roughly a little bit shy of 50% of the electrons which the world consumes is running through Siemens technology. We are running SCADA system for all countries. We are automating grids, as I said. We make electrification in low-voltage products, medium-voltage products for data centers, but also for national grids.

We are about to sell our share there completely. We used to make communication technology. This is where our founder started, Telepointer, which was bringing communication to the people. So we were market leader in communication networks and we missed the boat in innovation. So this is not with us anymore.

We used to produce household equipment. We still have the brand out there, but it's not our business anymore. So Siemens transformed itself all over again and again. This is the reason why I do believe that companies survive. They're not just survivors.

We are one of the leading companies, technology companies in the world, if it comes to industrial and technology. And what I'm saying to my people is that we are in the midst of another transformation, with one difference. This is the fastest one in our history, because it's driven by digitalization, by software, by AI, and this accelerates everything what we do.

We combine the real and the digital world. That's how it is.

You can develop your whole world, your products, the manufacturing lines, where you originally produce it, even the maintenance phase. You can plan it fully digital. And when you're happy with it, you build. it. Saves your time.

It's much, much faster, saves you. Then, whenever you bring software into a process, you can increase your yield, your productivity, your quality level. So it is...and the point about leveraging the value and accelerating the way how you work with your assets is driven by digital technologies. And this is the beauty and the power of combining the real and the digital worlds. You need to have both.

Maybe at the end of the day, you don't need them anymore, and then you build it. Meant for trains, you do that already. When you build a train, obviously, you cannot test it. Then it runs 40 years. So you simulate it, that it has this kind of lifetime stability, and then you build it.

So that's an absolutely powerful way. And I'll give you one example, which is for me a mind-blowing one, and we do that all over again. We built a brand new plant in China, in Nanjing, and we built it twice. We built it once in a digital world. The shelf, the whole building, the lines, even the people working in the line, we optimized it.

We shift things around. We put robots in. And once we were really happy and really got rid of all the hiccups, which we had, then we started building it in the real world. We sent excavation machines. This saved us a year of building time.

We got it right the first time. We have 20% higher space productivity, 20% less energy consumption. And at the same time, we run a plant which is much higher in terms of flexibility of the variants you can build. And here comes the beauty. This digital twin is still alive.

So if my plant manufacturer says, I want to introduce a new AGV or new robot, he can test it in the digital world, optimize it, and then he shuts down the line, maybe by a day rather than a week, in order to run it all over again. The robot which comes in is already programmed because you optimize it in the digital world, you run it in the digital world, you even program the robot in the digital world, and the same program sits then on the real control system of this robot and runs it straight away.

Physics based means that, and I was differentiating between an animation and simulation, when you animate, that's what the gaming industry does, you can run a robot very smoothly as fast as you want. When you simulate, then you recognize if you're too fast, your robot arm starts swinging, and that's what you don't want because of safety reasons, it's not precision anymore. So the physics behind this is very important. And this is basically the idea that when we bring that further to the next level, we will have it connected and we select, we get all the data, the relevant data uploaded to the cloud. And then you start optimizing based on the data you get, you're analyzing, what is your outcome?

Why is your yield going down? What is the combination or the information which you combine? So data are making the digital world valuable, and the more data you get, the more algorithms you can run and optimize your system.

Why am I saying that? And this is the second answer to your question, is a smart city goes for all nine yards. It's not only about automating your traffic management, it's not about automating your grids, but it's also driving digitalization in your healthcare system. So having a digital passport for people.

What you need is lithium. I don't need, I don't think that you find lithium in Norway, but we have to import it anyhow from, from the mines globally. And then what you then need is battery manufacturing is high tech manufacturing. You need good people, educated people who can run that. I would say you can't find good people, educated people, in Norway.

At the same time, the big difference is made by the people who run it, who have to make a decision on which partners they're working with. These are eventually 19 process steps, which you put in sequence to produce a battery. If you have a, assume now you have a yield of 99.5 for each, multiplied by 19,, then your yield is completely bad. So what I'm telling you is that you have to bring, each step has to be, and these are complex steps. The stacking of battery, very complex.

The mixing of your sludge, very complex. The coding of your material, very thin material with high precision, extremely complex.

You have to buy globally. anyhow. It's the energy cost. And this is the way how you run your, how you run your manufacturing side. It's all about yield.

If you bring your yields to 90%, you're in the game.

Moving, tacking a bit here, you are one of the most important German companies. Do the politicians kind of help. you decide where you should have your footprint?

They are looking into investing in other places, in particular, United States. It's cheap energy, Inflation Reduction Act. So they are really pulled there. At the same time, the German government is also giving support subsidies, so about semiconductors for Intel, for TSMC. They talk about hydrogen, they support hydrogen quite a bit, so new technologies, green technologies.

And therefore, it's a mixed bag. Germany is an aging society. If you don't get our immigration policy right, getting the best talent in the world to come to Germany, education and training system is so-so, we have to invest there. So what I'm saying here is that we are still good. And this is the reason why Siemens is also investing in Germany.

But they have a lot of homework to do in order to stay competitive.

Is it universities? Including a proper and really well-thought immigration policy, we have to attract the best talents. And the third one would be, I don't talk about tax reductions, this is a thing which we can do, but the third one would be that they decide precisely where to invest and support new technologies, the future, with subsidies, which maybe OPICS credits, talk about hydrogen, for example, they don't only support the CAPEX of a hydrogen plant, but you say for the first years, this is done in the United States, for the first five years, you can have a tax reduction on your hydrogen because you're not producing at the market prices, so that you really stimulate. These are the three elements which I would wish.

I mean, the big car manufacturers are not just good because BMW is good or Daimler, it's because they have these suppliers, they're Bosch, they're Contis, ZFs, Schaeffler. These ecosystems are outstandingly competitive because of their structure and the way how they're built over the years.

They have also a kind of a, I do believe we have very great engineers who are producing, and the combination of great engineers and great blue-collar workers who really know how to stitch things together and make it work and make high quality. And this is embedded in the German DNA, so to speak.

you can find it in a positive or negative way. These guys are really, really geared up for quality and constantly asking, can it be done better? Can it be done better? At the same time, this is a kind of a treat, which you find also negative, because these are people who are, it's always something wrong. I mean, the server is not good enough and here you complain about it and whatnot, so, but.

This is damn hard, because you have to make your money on your existing business while doing the new one. So, and the new one is, again, it's not only hardware anymore, it's also software, it's the complete stack, it's combining hardware and software. You need to know the digital space and you need to know the OT space. And there are very, very little people who know, who can go in both worlds and are literate in both worlds. So therefore, it means then I have to get talents from the outside world who know how new technology looks like, bring this technology, give them a chance to really prosper and to bring their knowledge into the organization.

And, at the same time, educate and train people to go beyond.

The other one is people who really go abroad, who go from one technology, other one, from hardware to software. So in both dimensions, we are promoting people.

two steps. So, rather than going five years and more, another five years before you promote, you just believe in the people and they learn, and they learn fast.

it is like, hey, wait a second. What just happened to that?

So I tell you a nice story. When I was sitting in China with my management team, in China it makes some eight billion. So we have four people running this business. So it's two billion each. So it's substantial business.

It was the CEO, the CFO, their HR as well. And I said to the people in the room, I bet with you, everybody in this room who are sitting where you are had at least one time in your career the experience of getting at least one or a double step, eventually twice. All of them were nodding, and you can recognize from their faces that they were thinking of the very same moment when somebody told them this is your new job. And then I asked these guys, now, tell me, how many people do you have in your organization on a single or double stretch right now? It was death quiet, because it requires guts.

Most of them have chosen the safe way of promoting people who are very safe hands to put the next step, next step. So it was a wake up call. You need guts and you need to know what you're doing.

And I was running through strategy. I was never in operation, neither in manufacturing nor did I develop a product or in sales. But I did have a quite good insight in the quality and the process management, but also in strategy. And there was a board member of this business, of this eight billion company, who said, I trust that you could do everything. And I give you the responsibility for a one billion business, radar navigation systems, completely screwed up, making 200 million losses.

It's a three times acquisitions, not integrated, five different navigation system platforms which have to be consolidated. And, by the way, we have five projects with customers which are about to miss their start of production. And this was the double stretch I got. And the next three years, I didn't have holidays. I worked day and night.

I experienced my physical limits. I mean it literally. I convinced my, for example, for BMW project, 400 people to work without holidays for three years, selectively.

And sometimes I really sent people to say, no, you go off because you need holidays. But again, this was my double stretch. I managed this business. It could have gone wrong, but it went right. And then they sent me to China, which was the next stretch.

Continuing on leadership, I mean, you've got 300,000 people. It's like a big city working, it seems. How do you actually know what's going on?

So and I'm a lifetime for Siemens, so I'm working 30 years now with this company. So I have my networks of people. And the most important element, so therefore you learn a lot and you get to know the important things. The most important thing is that the higher you come, the more difficult it is that you have this kind of speak up. If people come to you and speak up and say, I have a problem here.

I want to bring it to the table. And they do it because they know that you help or you step in when needed. You don't kill these guys because of problems, you don't go nuts and crazy. You need this openness of people who are still coming to you. It could be somebody you even don't know who just sends me an email and said, I have something here.

It happens. Some emails are crazy, which you should not react to, but very often you should. These are my direct reports, who are very open to say, I just want to know, to let you know we have a problem here, but I don't want you to do something. And I follow the rules. But it's a constant effort to give credit to the people who speak up with their problems and don't overreact.

This is another one. You have to develop a kind of a coolness that you say, if you react all the time, then you make mistakes. You have to really balance. also, how much pressure, which I get from the upside, from the market, how much pressure do I give to my people? How much do I filter?

And if you bring that to a right balance, and I'm traveling quite a bit, and I'm talking to customers too. Customers give you a lot of feedback on what's right or wrong once you have a good relationship and they give you an honest answer.

Then I went to China, was another complete turnaround of businesses. Then they brought me back and they gave me this infrastructure and city sector, which was the back bank of the company. So I had so much of critical situations in my life that nothing really scares me anymore. So I developed a kind of, I wouldn't call it coolness, in the sense of that you are not taking care, but you know how to deal with things and you know there is an answer. And don't jump on every tree somebody puts in front of you.

But if you simplify the world, then you can. So that means you have to separate the important from the unimportant, make it as simplified as possible, and then you have a chance to put it into numbers in your formula. And that's what I do in my world. When somebody comes to me, I'm trying to really figure out what's important, what's less important. When people come to me with an approval process of a train, a train project, and this is very complicated, it's different technologies.

People tell me, this is amazing. If you have one problem field in our 50 pages stack, it requires me two or three questions and I sit on this point. So this is a kind of a gift from my education that I can see through. Also, a technology background helps you, because you know the principles, how things work. But you can separate the important from the unimportant and you focus on what's really important, and that helps quite a bit.

So what I learned also is, if you have a problem, I can dive as deep as you want, but I don't stay there. I know that if I do that, then I, I mean, time is too short. So I come back and I try to manage and empower my people. So therefore, that's a combination.

It speeds up your company. It makes fun more for everybody. It leverages the capabilities you have in your management. But you have to also make sure it's a two-way street. Empowerment is also about accountability.

I want the people also to deliver and that they try as hard as they can to really do what they need. If they need help, that's all fine.

In what ways?

Guess what? They feel appreciated, because I'm talking to these guys and it spreads in the organization. So that means, I mean, if Bush wants to know about this stuff, I want to know about that stuff too. If I go deep on any kind of POC, how it works, others say, okay, if Bush knows that, and if Dell dives deep, I want to do that too. So it gives the feedback to the people that I appreciate what they're doing.

And I do believe I can ask some smart questions and I know what to appreciate, because it's really cool technology. That sends such a strong signal, not only to our people, but also to the outside world, to our customers. And at the same time, I would be the last to cut our R&D budget. If it's going completely south in our numbers, I would, but this is the last thing where I would cut. Because I do believe this is so important for the company to differentiate in technology.

So in that sense.

Let's say you have two M&A opportunities, left and right, and you analyze it to death. You finally cannot bring it down to numbers and say, no, I did up and I have a five here and a four here, so I'll go for five. It does not work. At the end of the day, it's a judgment. It's a judgment.

But the only point is, if your gut feeling is too early and comes before you make your numbers and before you make your homework and make your deep dive, 360 degree, you have to look in everything. What is the market? What is the technology? What is your competitor doing? Can you defend it?

Whatever. It's a business model. After all that, and sometimes the facts bring you to a point for a decision point. That's easy. But if they don't, then you have to, at the end of the day, get your feeling.

And this is maybe an advantage of the CEO of a big company. I see so much in the world. Customers' perspectives, political things, where are things going, technology. And this adds up into, finally, the gut feeling, which gives, hopefully, better decisions. But again, don't take me wrong.

It's really make your homework first. And if there's no clear answer out of all the facts and figures, then, obviously, you have to decide. And this is where your gut feeling comes in.

I said, OK, what's the difference then? And then I recognized I have no clue about cells. But I recognized that the cells are what an atom is for physics, or a quark, if you want. The cell is for biology. So I started off digging out a book on cells.

There's a very good one from a guy called Good Cell.

And I started reading it. And this triggered really a bunch of reading up to the really chemical books on cells to study a completely different world, which is so amazing. You won't believe how complicated it is and how brilliant it is. Even a single cell, so a virus, for example, like a COVID virus. And then we have so many cells in our body and how this whole functions.

This is the most fascinating thing I ever found. And I dived extremely deep in this one. So really, I spent time.

I love it.

And when you start taking, regardless which one, and you start reading it and compare it to a modern book, you know why. Why these books are number one. And so check out for this list and you'll find great literature.

But I mean, I could pick many others which are important.

And the last one is, but everybody talks about it, you have to read it. in the original version, is Sun Tzu's book on war, The Chinese Journal.