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Siemens Reorganizes


Observers of the industrial automation market will probably debate for years whether the huge corporate reorganization at Siemens AG, which became effective last month, was a planned or largely spontaneous event.


Advocates of the spontaneity theory will argue that the bribery scandal that engulfed Siemens for much of 2007 and claimed the company's two top executives not only forced the reorganization, but also required that it be broad and deep. Others, including new CEO Peter Loscher, will take the view that Siemens was already in the process of self-examination based on an analysis of demographic and market trends and would have reorganized regardless of the scandal.


In such a debate, the timing of the reorganization becomes the real variable, but what's indisputable is that both things — the scandal and the market analysis — occurred in parallel and now present what Loscher evidently sees as both an immediate opportunity to restore confidence in Siemens and a far more significant long-term play to transform the company for the years ahead.


And it is that second objective, the long-term opportunity, that underscores that the reorganization announced in late November, in which Siemens has restructured into three business units encompassing 15 divisions, each with its own chief executive, is really just the first step in a transformational journey that may last for several years.


That journey includes important objectives. Growth, of course, is the all-encompassing goal. But close behind are alignment with what Loscher calls the "megatrends" in energy, climate, and technology; the need to speed up decision-making; the ability to address new customer segments; and the need to inject fresh managerial talent at all levels.


In remarks that received scant attention in November, Loscher and other Siemens executives indicated some of the transformation's longer-term objectives. "We're using the process to have the right people at the next level," Loscher said. "It is a process that will take several years. We want to give young managers a chance, those that have huge potential within the company."


Heinrich Hiesinger, the new CEO of the Industry Sector, summed up the rationale for the new CEO structure. "The structure is a lot simpler," he said. "Now we have CEOs who can make decisions. Manageability has increased."


Division heads who can be more entrepreneurial will be important, particularly where Siemens will address new customer groups. Case in point: the new Industry Automation division, which includes UGS, the product lifecycle management software vendor acquired last year. The division's unfolding digital factory strategy, which envisions a seamless connection between design and production technologies, will depend upon reaching more senior-level influencers than Siemens has been used to dealing with in the automation market.


That, of course, will take adaptability and flexibility. And that's really what the reorganization of 2007 and beyond is about. But transforming a ?72 billion, 475,000-employee organization isn't easy and won't be done in a few weeks' time. What Loscher has done, with the bribery scandal as a triggering event, is to embark on the creation of a 21st century Siemens — a global powerhouse with the agility and speed of a local competitor. The months and years ahead will determine how quickly and fully his creation will come into being.

Source:   Editorial from the February 2008 issue of Managing Automation,  Siemens Reorganizes, by David R. Brousell, MA Editorial Staff

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