Siemens Corporation

Siemens 2019: The recent history of the changes of the Siemens corporate structure clearly demonstrates the general problem large companies face in regard to their allover portfolio:

  • Production: how many divisions are necessary for cost efficient production.
    General rule: The smaller the number of different products in one production unit, the more cost effective is the manufacturing of products – i.e. the higher the number of divisions the smaller the number of different products, i.e. the more cost efficient are production costs.
  • Customers: how few divisions are optimal to serve customers best – endeavoring: one face to the customer
    General rule: the larger the number of different products in one organization unit, the more thorough are the services to customers – i.e. the smaller the number of divisions, the higher are the number of products in one organizational unit – i.e. the more thorough are services to the customers

After restructuring Siemens many times in recent years, in 2019 the corporate structure is:

  1. Gas and Power
    (for 2020 planned new stock company as “Siemens Energy”, including 59% of Siemens Gamesa)
    e. g. oil and gas business, compression equipment, small/large turbines, high voltage switch gear & devices, field service support, etc.
  2. Smart Infrastructure
    e. g. contactors, low voltage protection, building automation, medium voltage switch gears, grid planning, fire safety
  3. Digital Industries
    e. g. IoT operating software, engineering software, machine tool systems, power supply systems, digital services
  4. Siemens Mobility (Siemens Mobility GmbH)
    e. g. product & system solutions for passenger and freight transport, rail electrification, systems for passenger information
  5. Siemens Renewable Energy (special company: Siemens Gamesa); planned to be merged in 2020 with Gas and Power
    e. g. onshore-, offshore-products, services
  6. Siemens Health (separate stock company)
    e. g. computed tomography, diagnostic products, imaging for radiation

Primarily this looks like a strictly product oriented company. However obviously the divisions themselves are customer oriented. Reason: they are that large that they themselves have several sub-divisions for their quite different product groups and have presumably customer groups of their own, customers of the industry branch the division is delivering its products to.

Besides production units there are central units, achieving services/products for all divisions and for customers. They are Financial Services, Global Business Services (administration process consulting), Real Estate Services, Corporate Development with IoT Services, CT (Corporate Technology – Research and Development), Next47 (Start-up activities), Portfolio Companies. – Especially Financial Services are delivering services for financing the products of the main divisions. (In general central units tend to be less cost effective than production units).

So far the corporate structure is more or less logical. But still a very general problem has to be tackled. The sales operations have to be added and integrated into that structure. And dividing labor for sales operations must be done by the criterion customers or customer groups. Addressing customers by one person/unit has long been proven to be the only and most successful attitude. The utmost goal is “one face to the customer” and with Siemens this “face” is in sales offices in about 160 countries.

Since sales workplaces have (only) special knowledge of customers and their needs and product workplaces have (only) knowledge of their products the problem has to be solved how to link production workplaces with the different, very fanned out sales workplaces. And even more important who has deciding priority and who is responsible for the economic results.

With Siemens the priority obviously has been assigned to production divisions. The Siemens sales offices report to central management (?) and to board members with crossed over responsibilities – product plus country.

P. S. These considerations are based on public information in the media. They are to illustrate theoretical findings. If the used assumptions prove to be different, different conclusions might possibly to be taken. – Comments welcome, see impressum.

—  More? See: Business Organization System Theory 
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