Case Study Description of Digitalization at Siemens
The case discusses the digitalization strategy of Siemens AG, a German-based company operating in manufacturing and electronics. The increasing impact of digital technologies on all of its business units had prompted the CEO Joe Kaeser and his team to put digitalization at the core of the new corporate strategy, alongside electrification and automation. The challenge was to balance this corporate initiative with the many business units within Siemens, which were used to being independent and had very specific offerings for their clients. For its new analytics platform, Siemens had opted for a push and pull approach to involve business units in its creation, rather than conceptualizing the platform centrally and imposing it on the business units afterwards. The jury was still out whether this approach would drive digitalization within Siemens fast enough, given the exponential developments in data generation and analytics.
Swot Analysis of "Digitalization at Siemens" written by David J. Collis, Tonia Junker includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Siemens Digitalization facing as an external strategic factors. Some of the topics covered in Digitalization at Siemens case study are - Strategic Management Strategies, Competitive strategy, IT and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Digitalization at Siemens casestudy better are - – there is backlash against globalization, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, etc
Introduction to SWOT Analysis of Digitalization at Siemens
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Digitalization at Siemens case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Siemens Digitalization, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Siemens Digitalization operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Digitalization at Siemens can be done for the following purposes –
1. Strategic planning using facts provided in Digitalization at Siemens case study
2. Improving business portfolio management of Siemens Digitalization
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Siemens Digitalization
Strengths Digitalization at Siemens | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Siemens Digitalization in Digitalization at Siemens Harvard Business Review case study are -
Learning organization
- Siemens Digitalization is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Siemens Digitalization is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Digitalization at Siemens Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Siemens Digitalization are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Analytics focus
– Siemens Digitalization is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David J. Collis, Tonia Junker can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to recruit top talent
– Siemens Digitalization is one of the leading recruiters in the industry. Managers in the Digitalization at Siemens are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Siemens Digitalization has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Digitalization at Siemens HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Siemens Digitalization in the sector have low bargaining power. Digitalization at Siemens has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Siemens Digitalization to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Siemens Digitalization
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Siemens Digitalization does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Siemens Digitalization has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Siemens Digitalization has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy in the Digitalization at Siemens Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– Siemens Digitalization is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Siemens Digitalization in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Strategy & Execution field
– Siemens Digitalization is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Siemens Digitalization in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Digitalization at Siemens | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Digitalization at Siemens are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Digitalization at Siemens, in the dynamic environment Siemens Digitalization has struggled to respond to the nimble upstart competition. Siemens Digitalization has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Siemens Digitalization is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Siemens Digitalization needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Siemens Digitalization to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Siemens Digitalization supply chain. Even after few cautionary changes mentioned in the HBR case study - Digitalization at Siemens, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Siemens Digitalization vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Digitalization at Siemens, is just above the industry average. Siemens Digitalization needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Lack of clear differentiation of Siemens Digitalization products
– To increase the profitability and margins on the products, Siemens Digitalization needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Siemens Digitalization, firm in the HBR case study Digitalization at Siemens needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Siemens Digitalization is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Digitalization at Siemens can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Digitalization at Siemens HBR case study mentions - Siemens Digitalization takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Siemens Digitalization needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Digitalization at Siemens HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Siemens Digitalization has relatively successful track record of launching new products.
No frontier risks strategy
– After analyzing the HBR case study Digitalization at Siemens, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities Digitalization at Siemens | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Digitalization at Siemens are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Siemens Digitalization can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Siemens Digitalization to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Siemens Digitalization in the consumer business. Now Siemens Digitalization can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Siemens Digitalization can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Siemens Digitalization can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Siemens Digitalization can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Siemens Digitalization can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Creating value in data economy
– The success of analytics program of Siemens Digitalization has opened avenues for new revenue streams for the organization in the industry. This can help Siemens Digitalization to build a more holistic ecosystem as suggested in the Digitalization at Siemens case study. Siemens Digitalization can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Siemens Digitalization can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Better consumer reach
– The expansion of the 5G network will help Siemens Digitalization to increase its market reach. Siemens Digitalization will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Siemens Digitalization can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Digitalization at Siemens, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Siemens Digitalization can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Digitalization at Siemens suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Siemens Digitalization has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Siemens Digitalization can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Digitalization at Siemens External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Digitalization at Siemens are -
Technology acceleration in Forth Industrial Revolution
– Siemens Digitalization has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Siemens Digitalization needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Siemens Digitalization will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Siemens Digitalization
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Siemens Digitalization.
High dependence on third party suppliers
– Siemens Digitalization high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Siemens Digitalization in the Strategy & Execution sector and impact the bottomline of the organization.
Consumer confidence and its impact on Siemens Digitalization demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Siemens Digitalization can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Digitalization at Siemens .
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Siemens Digitalization can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Siemens Digitalization needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Digitalization at Siemens, Siemens Digitalization may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Siemens Digitalization with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Siemens Digitalization.
Weighted SWOT Analysis of Digitalization at Siemens Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Digitalization at Siemens needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Digitalization at Siemens is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Digitalization at Siemens is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Digitalization at Siemens is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Siemens Digitalization needs to make to build a sustainable competitive advantage.
