Helmuth Ludwig, CIO at Siemens, recognizes the potential power of digital disruption and is working hard to ensure his firm, with its 170-year history of technological innovation, is set to continue its success as a digital business in the future.
“You need to have a very, very strong vision,” he says. “We have described a picture of the future and have invested heavily in our product portfolios, our software and our simulation systems. But you must also make sure your internal processes are ready for digital services and for fast cycles of improvement.”
Ludwig says his firm’s corporate technology team is focused on how innovation can help change the business for the better both now and – more importantly, perhaps – during the next two decades. Here, he talks to Hot Topics about the keys to successful transformation, both in terms of achieving internal growth and meeting customer expectations.
Defining the characteristics of a digital business
Disruption is frequently associated to pioneering newcomers, yet Ludwig says truly digital businesses often emerge from a traditional background. He points to Siemens’ analysis of its development, manufacturing and service processes. Ludwig says the business recognized significant change could only occur if it embraced digital technology in an integrated fashion.
Ludwig says Siemens gave itself the challenging goal of reducing time to market by 50%, an objective that was achieved by implementing a radical toolset. Digital technology is now used to simulate design and manufacturing processes in real time, meaning Siemens can virtually test thousands of prototypes simultaneously. “This approach allows us to create much better products quickly,” says Ludwig.
This digital-led change creates big business benefits, not just for Siemens but also for its customers. Ludwig says an integrated approach to design and manufacturing allows his firm to guarantee 99.9% availability of train services to Spanish rail firm Renfe. Such guarantees mean customers can opt to travel by train rather than by air.
Ludwig says Siemens has achieved its transformation aims by focusing on long-term goals. By thinking 15 or 20 years ahead, the firm has been able to carefully consider which parts of its portfolio are most important. With this in mind, the firm has invested €10 billion in its software business during the past decade.
“This has enhanced our offering from electrification, to automation and on to digitalization,” says Ludwig. “You must have a clear idea of where you want to go – if you have that, you can go back and think about what kind of actions will help your business meets its digital priorities.”
Ludwig recognizes digital transformation is a work in progress. Siemens ran its first company-wide hackathon at the beginning of the year, where 1,700 participants worked on creative concepts. Many of these ideas are now set to be implemented, both for the benefit of customers and to help improve internal processes.
Ensuring digital innovation is prioritized
Siemens’ meticulous attention to developments means that employees at every level of the business are aware of the power of technology-led transformation. Ludwig says board members, for example, spend a large proportion of their time engaging with clients to appreciate their demands.
“We live in a complex, uncertain and ambiguous world,” he says. “To lead, you must deeply understand technological change and customer priorities, and you must be able to implement transformation quickly within your own company.”
Delivering change on a global scale requires an advanced IT infrastructure. Connectivity is crucial, says the CIO, and workers must be able to collaborate in cross-border teams. Siemens looks to source new technologies to help its workers connect and to help its customers succeed, including the recent acquisition of automation specialist Mentor Graphics.
Siemens runs a centralized global IT team that helps ensure strong governance and the creation of a single platform strategy for the entire business. Yet success, says Ludwig, means line-of-business executives around the world must be able to use this solid platform to source and use their own application solutions to the business challenges they find.
This kind of flexibility helps Siemens meet customer expectations. “We are only effective if we are successful in the market,” says Ludwig. “I expect every member of my team to reflect with their business colleagues about their real needs. If you have a close interaction, you can ensure you are delivering in the right way.”
Once engagement is established, Ludwig and his team then focus on implementing the support structures to help the business meet its objectives. “IT, in this way, becomes the trusted delivery partner of our individual business units,” he says.
Building a platform for long-term growth
Meeting customer demands in a digital world also requires a degree of openness that might have been anathema just a decade ago. Ludwig says Siemens uses its MindSphere platform to give its customers a foundation for software-enabled growth. MindSphere is an open, cloud-based IoT operating system.
This openness gives companies an opportunity to source technology from a broad church of suppliers. Yet, despite the positives of openness, Ludwig also recognizes that information security plays a crucial role in successful digital transformation.
‘You can never be 100% secure but you must establish clear governance, you must have a highly-dedicated team with great knowledge and you need a network of providers that you can trust,” he says. “Our team is fully dedicated to securing our own products and we bring those benefits to our customers.”
Long-term attainment, says Ludwig, will mean Siemens has embraced digital transformation and continued to evolve. “We want to see great financial results, not just in the future, but also along the journey,” he says, before outlining three measures of success for digital transformation.
“You must invest in your external markets and your digital business has to grow. Internally, you must have the right processes, so you can source great ideas and re-invent the business again and again. And you must ensure everyone in your business is ready for change.”