{"id":14424,"date":"2016-11-13T16:57:33","date_gmt":"2016-11-13T21:57:33","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-digitalization-journey-of-a-german-manufacturer-how-siemens-is-increasingly-becoming-a-tech-company\/"},"modified":"2016-11-13T20:33:00","modified_gmt":"2016-11-14T01:33:00","slug":"the-digitalization-journey-of-a-german-manufacturer-how-siemens-is-increasingly-becoming-a-tech-company","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-digitalization-journey-of-a-german-manufacturer-how-siemens-is-increasingly-becoming-a-tech-company\/","title":{"rendered":"The digitalization journey of a German manufacturer: How Siemens is increasingly becoming a Tech company"},"content":{"rendered":"

Omnipresent mobile devices, greater processing power and faster internet connections. The world is witnessing one of the most disruptive transformations of our history: the digital transformation. According to Cisco VNI Forecast(1)<\/sup> \u2013 a well-known study published by the largest network devices company in the world \u2013 there will be a massive increase in connectivity levels over upcoming years. More importantly, the number of machine to machine (M2M) connections (i.e., connections between two or more microprocessors), largely used in automated factories or assembly lines, will grow substantially. This trend clearly shows an opportunity for digitalization to disrupt the industrial equipment & services space.<\/p>\n

Table 1. Evolution of selected indicators according to Cisco VNI Forecast<\/em><\/p>\n\n\n\n\n\n\n
\n

Dimension<\/strong><\/p>\n<\/td>\n

\n

2015<\/strong><\/p>\n<\/td>\n

\n

2020<\/strong><\/p>\n<\/td>\n

\n

Growth per Year<\/strong><\/p>\n<\/td>\n<\/tr>\n

\n

Connected Devices<\/strong><\/p>\n<\/td>\n

\n

16.3 billion<\/p>\n<\/td>\n

\n

26.3 billion<\/p>\n<\/td>\n

\n

10%<\/p>\n<\/td>\n<\/tr>\n

\n

M2M Connections<\/strong><\/p>\n<\/td>\n

\n

4.9 billion<\/p>\n<\/td>\n

\n

12.2 billion<\/p>\n<\/td>\n

\n

20%<\/p>\n<\/td>\n<\/tr>\n

\n

Internet Traffic<\/strong><\/p>\n<\/td>\n

\n

1.7 exabytes \/ day<\/p>\n<\/td>\n

\n

5.3 exabytes \/ day<\/p>\n<\/td>\n

\n

25%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

One successful example of embracing the digital transformation in the industrial equipment & services space is provided by Siemens. The company, a \u20ac76 billion in revenue (2)<\/sup> giant, was founded in 1847 and since then has been a leading supplier of systems and engineering solutions for several industries (e.g., Energy, Healthcare, Process Industries, Financial Services). Traditionally, Siemens had a relatively simple business model: it manufactured and supplied equipment for large industrial players<\/strong> \u2013 who relied on the German company to install trains, wind turbines or automate assembly lines.<\/p>\n

However, Siemens has decided to undergo a reinvention \u2013 with a new business model, placed at the intersection of physical and digital worlds<\/strong>. Recently, the Germany-based company included digitalization as a key element of its strategy, focused on incorporating IT and data to craft new solutions for its clients. The left-hand side of [Figure 1] shows concepts that one would hardly associate with Siemens a few years ago.<\/p>\n

Figure 1. Siemens Digitalization Pillars<\/em><\/p>\n

\"siemensslide\"<\/a><\/p>\n

Many of the rising trends in segments serviced by Siemens are only enabled via big data and advanced analytics. To protect its leadership position, Siemens started to morph into a technology services company \u2013 investing to develop state-of-the-art software and algorithms<\/strong>. The goal is to continue providing competitive advantage to its customers \u2013 even if it requires developing new skills. Very emblematic of its new phase is a tool Siemens recently launched, called Sinalytics(3)<\/sup>. Sinalytics is a Siemens-owned tool that can securely connect to a variety of installed Siemens systems worldwide, remotely monitor them and extract real-time data. Through cutting-edge analytical methods, Siemens expects to analyze the data, recognize opportunities to improve the performance of the equipment, maximize the availability of the equipment and predict properly when maintenance will be needed \u2013 all that in addition to saving energy and reducing costs. Sinalytics is the latest addition to a business line that has been performing well: Digital Services and Vertical Software delivered, combined, around \u20ac3.7 billion in revenue in 2015(4)<\/sup>.<\/p>\n

Video 1. Sinalytics and Siemens\u00a0Digital Services<\/em><\/p>\n