Siemens: Case Report

Siemens is a well-known German company that successfully functions internationally offering a variety of innovative goods in the areas of healthcare, technologies, energy and infrastructure development. Staying innovative is one of the major challenges that Siemens faces after experiencing many obstacles. Therefore, an open innovation program initiated in 2008 became a serious factor in remaining profitable and being oriented towards future achievements. Generating new ideas, seizing existing technological gaps and overcoming staff problems remain the serious issues that need effective solutions. In addition, the public image of the company is another issue that deserves specific attention.

The Siemens case reviews the well-known company as the worldwide innovator in the spheres of energy, healthcare, industry and infrastructure. Primarily, company’s innovation managers consider open innovation the best way to develop and make new R&D more marketable. Both internal and external forces influence company’s innovation. Therefore, it is necessary to emphasize the creation of internal social and knowledge-sharing networks as well as usage of the third party principles to introduce internal and external contests. Collaborative online environment is the prominent factor that contributes to the efficient management of the open innovation. Nevertheless, even with the careful approach to company’s development, the managers have to meet numerous challenges and search for the best solutions. In case of Siemens, such challenges include human resources optimisation, insufficient motivation, lack of persuasiveness and public trust. Given analysis is aimed to focus on possible recommendations to these issues including the development of managers’ skills and awareness, performance control, improvement of employees’ motivation, enhancement of strategic planning and overall public image of the company. In some cases, open innovation is effective enough to fulfil these recommendations and to show that the company undergoes efficient changes. However, this case requires more efforts to make Siemens even more progressive on the global market.

Background
Siemens was found in 1847 and was initially known as a telegraph company (Zhao 2004). However, throughout the 20^th century, it has undergone considerable changes growing into a strong and many-sided business with the headquarters in Munich, Germany. Nowadays, the company functions in 80 countries and owns 289 manufacturing plants internationally (Lakhani et al. 2015). Apart from manufacturing facilities, Siemens has a great number of offices, warehouses, development organizations and sales sites worldwide. However, such position demands continuous innovation in business that must ensure confident market position and positive public image of the company. The open innovation project has been contributing to enhancing company’s position since 2008 (Lakhani et al. 2015).

Promotion of the Technology and Innovation Management group has become a crucial step towards Siemens’ innovation and development (Lakhani et al. 2015). The customers have approved the new effective approach of the company to business. In particular, oil, gas, fossils, wind, solar power generation, transmission of electrical energy application, industry automation, drive technologies, new approaches in diagnostics in the area of medical imaging and in-vitro diagnostics, therapy systems and clinical products development, rail systems, mobility, logistics innovations and a number of related activities have provided many interesting options to people (Lakhani et al. 2015). However, it was not easy to present and support company’s activities as claimed. The company offered numerous innovations as well as faced many problematic issues. Nevertheless, the company remains the employer of 343,000 workers worldwide with its profits reaching €78.4 billion in 2014 (Lakhani et al. 2015).

Despite many challenges that a prominent company faces, it responds to the interests of customers in a timely and appropriate manner. Siemens has to stay innovative throughout time and continuously offer new and interesting solutions to their customers. Therefore, the biggest challenge is associated with an open innovation programme that Siemens has initiated. This program had introduced innovation in the creation of new product ideas and resolution of various technology gaps as well as commonly met scientific and engineering issues (Lakhani et al. 2015). It has also initiated the crowdsourcing contests, competitions and information distributing networks. Participation in the program was relatively high. During five years, 35,000 employees were involved in twenty projects (Lakhani et al. 2015).

Challenges

In attempts to reach long-term effectiveness, Siemens faces some difficulties. One of them is the need for better optimization of human resources to achieve company’s goals. There is a serious gap between what is important for the company and its abilities to perform to reach the success in the long-term perspective (Rainey 2010). The main problem is unclear goals for the Siemens` employees, which seriously reflects in the performance results. Such negative consequences are strongly undesirable due to their impact on the overall company’s performance.

Another issue that Siemens may face is a dismal inefficacy that preceded Siemens` cross-functional organization-wide boards. The main source of the failure is the inability of the cross-functional implementation across the units that definitely varies across organization`s diverse specialties. Cooperation between these units is essential in ensuring the proper links between different departments. The lack of motivation across the units to work together toward sustainable solutions development can be a serious problem (Rainey 2010). Hence, the company must focus specifically on the employee motivation.

Some other challenges can arise from the competitions with other companies. A bright example was observed a decade ago. Siemens’ message about its commitment to the climate changes had to distinguish it from others. However, despite a strong message from the top management, no slogan and action plan to assure the public about company’s serious commitment to the climate changes were provided. As a result, the public image of the company has suffered and remains weak nowadays. At the same time, other companies like ABB and GE had convincing programs to attract the customers, investors and the publicity in general (Zhao 2004). Therefore, the actions of the competitors always must be considered.

In addition, the public image is closely connected to the notion of trust. Dietz and Gillespe (2012) point out that trust is the basis for company’s success. The reputation and trustworthiness of Siemens is not as solid as desired. In 2006, the company was accused of systematic bribery and potential documents’ incrimination (Dietz & Gillespe 2012). Related scandals brought shame to the entire company as well as pushed off potential clients. Denial was only partially effective and Siemens lost many customers. In addition, company’s reputation has severely suffered since even after ten years the public reports disputable trust to the company.

Events that have also contributed to the low trust level are associated with other public scandals. Based on these issues, which have created serious barriers to achieving long-term effectiveness and excellence and a lack of public trust, one can get a fuller understanding of Siemens problematic position. Company’s first conflict happened when Siemens participated in the Oil for Food program and it became known that it had to pay surcharges to the government of Saddam Hussein. Later an organization was under strict attention for the corruption deals that cost 1.3 billion euros. Finally, the company was also demanded to pay a 300 million dollars fine to the German court for the corruption issues abroad. Moreover, Siemens also had to deal with the lawsuit in Chattanooga for the sludge treatment and plant`s poor design (Zhao 2004). Therefore, it is possible to conclude that Siemens has to fight not only for the public trust but also for the government contracts. All these issues can become an obstacle toward achieving long-term effectiveness.

Although these conflicts took place a decade ago, they still have to be addressed. Otherwise, the company will continue experiencing negative consequences and financial losses. The first solution is connected to better optimization of the human resources. The lack of understanding from own employees is a critical problem that has to be solved immediately (Rainey 2010). This will only lead to negative performance rates, because the employees do not understand company’s goals. This problem leads to the next one, which is a lack of employee motivation to work together across units. If Siemens does not deal with this challenge as soon as possible, the company will fail and its performance level will suffer. Without good results long-term effectiveness is impossible, because organization`s fundament is its employees and their desire and readiness to work productively. The next two challenges are related to each other and they have to be met urgently, otherwise Siemens will incur serious economic losses. First, it is critical to be highly competitive and have a good public image in comparison to other companies. Moreover, it is crucial to support company’s public messages with appropriate actions (Zhao 2004). In addition, without good image the publicity can turn away from a company, which can also lead to serious financial losses. Therefore, if the company does not reinforce public trust and enhance employee motivation, it can lose its customers and investors.

How It Works

Recommendations

Siemens’ successful functioning and innovative program depend on many factors. There are several recommendations that can improve the situation of the company. First, it is critical to develop the skills of social responsibility and enhance management`s awareness. Second, the company has to exercise performance control to help improve productivity (Bandyopadhyay & Nair 2015). These steps should improve the human resources` optimization. Management`s awareness and social responsibility skills will help explaining company’s goals and what is expected from the employees. Moreover, the performance control will help achieving better results. Third step is the motivation improvement. This will help people from different departments to work as a team and provide higher performance results. Finally, the company has to improve its communication to make its vision clear enough for the stakeholders (Zhao 2004). This will also help employees to better understand their major responsibilities and demands of the company including company’s goals. When employees realize company`s goals, Siemens will have less problems. Moreover, to increase company’s sustainability, operational excellence and performance it is crucial to integrate all these aspects into Siemens’ strategic planning.

Except for these recommendations, it is important to understand that Siemens has to consider rapid development of the industry`s most efficient products. Product efficiency is the main paradigm because of the global recession`s emphasis on the efficiency and environmental changes. Companies with the most efficient products are able to reach success outperforming its competition (Hitt 2014). Nowadays, many organizations have impressive results because of effective financial and managerial strategies. Therefore, it is critical to understand what issues have to be considered to compete effectively.

Furthermore, it is crucial to improve public impression and provide effective advertisement campaign supported with appropriate actions that will help to forget previous scandals and mistakes and focus on further results. Without public trust and recognition, it is impossible to reach long-term effectiveness and success, because the company is based on three main elements including employees, consumers and investors (Deiser 2009). Considering the scandals that the company has experienced, it is necessary to realize the importance of ethical behaviour. Currently, it is important for Siemens to restore stakeholders’ trust, demonstrate its honesty and monitor compliance with all codes of conduct to be perceived as an attractive company worldwide. Without the support of employees, consumers and investors, an organization will definitely fail.

Conclusion

The issue of open innovation is relevant for almost all big companies nowadays. However, given case puts an emphasis on the choice of the ways to be innovative, which is crucial to remain successful and overcome many potential challenges. The example of Siemens can be used to show that a sustainable approach to open innovation is the first priority when dealing with such changes. In general, successful implementation of the open innovation relies on in-depth knowledge about the company. Therefore, real challenges can be identified and overcome. In case of Siemens, such knowledge has helped to identify internal and external areas of change. Internal solutions include mitigating the evaporation of knowledge and information, effective collaboration, increasing employee productivity, inspiring cultural change and motivating employees. External areas for improvement include low cost access to external information, greater solution space, and availability of dynamic technologies and generation of ideas for aggressive R&D. Research shows that another challenge of Siemens is optimization of human resources. Employees have to be aware and involved in the problem resolution. Misunderstanding of company’s goals and problems is very likely to lead to serious negative consequences. The next challenge is a lack of employee motivation to work together across units. Only cooperation based on employees’ desire and readiness to provide results can lead to long-term success. The final two challenges imply remaining highly competitive and having a good image in comparison to other companies. Therefore, careful representation of the social responsibility and monitoring the code of conduct is demanded. Finally, improved strategic planning must become helpful in tackling all listed issues. Regarding open innovation, its positive effect on the future success of the company can hardly be denied. However, it is obvious that its implementation needs careful analysis and must be accompanied by various changes associated with both internal and external factors that influence company’s performance.