Impact of COVID-19 on Innovation (Siemens)

Expert Profile

Section 1: Immediate Impact

1.1. How would you describe the innovation process within Siemens pre-COVID?

We do have a lot of different innovation approaches, but let’s start with the basic one. The most common and the most strongly implemented one, is our classic innovation process, which is centered around two information inputs. One is really customer driven and the other is internally driven from our employees. This is where the ideas come from on which topics we should address in the future. We start, let’s say six month prior to our fiscal year, with the ideation phase of different topics, from the different sources. So internal and external sources, talking about, “What are the expected benefits? Is it feasible? Can we realize them? Is it fitting to our strategy or to our portfolio? Which customer pain points are we addressing with that?”.

We met all the different questions and areas together, in order to prioritize the topics that we have. Naturally we do have budgets restrictions at the end, and we have to find out which topics we want to develop, execute, in the context of that budget amount. We will start prioritizing them based on different criteria. Of course, that’s a classical business case based on strategic importance, for example it could be very strongly customer driven. We will then start planning our staffing and technology required to do so that at the beginning of the next fiscal year, when everything is set, the budgets are clear. This was our classic, innovation R&D process pre-COVID.

One of our key roles within digital transformation is to identify the future hot topics, whereby we scan the market looking for relevant business areas. For innovation topics, we are supporting the strategic portfolio and establishing the main topics that we should focus on for the future horizon within the next 5 to 10 years. Of course, every year we have to challenge that again.

1.2. What has been the impact of COVID-19 on your innovation processes? How has it changed?

Our CTO has said that during the COVID pandemic our number of patents being applied or handed in, dropped by 80%. This is one major KPI for us to see how innovative we are. Obviously, our innovation dropped drastically because the number of patents was dropped radically, and we’ve tried to find the root cause. One of the main root causes was really, thinking about how does innovation start and how do you generate great new ideas. In most case, it’s really because you talk to your colleagues in the office, often in a casual sense.

Here you will share the idea that you had with a peer or with somebody who was able to challenge your idea, or has a similar idea, and then you start developing the ideation process itself. This is because you get some other insights or different directions for your idea, and this has been completely missing in the last few months. We just didn’t have that personal interaction and our regular meetings, where you could just meet somebody to discuss novel ideas. This was just gone because everybody was sitting at home.

We tried to overcome that by implementing some kind of virtual coffee kitchen, but that’s a very fixed time slot that everybody has on the calendar. Whoever wants to can dial in and just chat but to be honest, this cannot replace the real office talk, or the real lunch that you have with your colleagues. This was the biggest immediate impact the pandemic had on our innovation process. This is really touching the ideation phase, the development itself, wasn’t too badly affected by the pandemic.

1.3. What have been some of the unexpected innovation success stories during this pandemic?

I have to say unlike other companies our productivity didn’t really drop through the pandemic. The reason for this is because most of us were already used to working remotely. We have video calls, Microsoft Teams or Zoom meetings, so we were used to do so, because we were working on very international projects anyway whereby people are located in different parts of the world and working together in different times zones. From the technology point of view, and where you’re working, this didn’t have too much of an impact. Therefore, our IT infrastructure was very solid and is something that we are very proud of. We managed to complete the remote transition very well and in a very quick manner, it was almost seamless. If we compare that to our competitors, in the first four weeks they were almost not able to work properly.

We had remote collaboration prior to the pandemic, we did have different solutions, more or less implemented, when it comes to remote service. For example, our workers in the field, within projects, might be at factories. In many cases, we already used video remote technologies like, glasses or tablets and augmented reality to support our colleagues in the factory or onsite.

However, due to the pandemic this is really now a use case, not only to be used for our internal colleagues, but also, we can use it for our customers. For example, if we want to do some factory acceptance tests before we hand it over to the customer, the customer needs to make an acceptance test. If everything is really being developed and manufactured as expected.

Let’s take a train, which is something we develop. We develop and build trains for customers and of course, the customer wants to see if the train is really running; they want to sit inside the train and have a test drive. Of course, this couldn’t happen, due to the pandemic, because we were not allowed to have so many people within the carriage. What we did was do a remote factory acceptance test, which we haven’t done ever before, with our customer. Thank God that the customer was accepting to that approach, and said, “Let’s try that out because what is the alternative?” So, we did an acceptance test remotely with our customer. They had one expert, rather than several people coming from the customer, on site. We demonstrated the performance of the newly developed solution to that expert, who was also able to stream it remotely to his colleagues from his area so that everybody could have that acceptance test. The technology that we used to do this remote acceptance was well received. So, we believe that could be one key point for the future. We haven’t done that ever before, because why should we, but now that the pandemic forced us, this could be integrated into the company for the future.

Section 2: Lasting Impact

2.1. Could some of the changes made to the process as a result of the pandemic last? Which changes will last? Why?

The speed of innovation approval times will definitely remain post COVID where it makes sense. I don’t think that it can be adapted for every innovation that we’re doing in the future, but I believe where it makes sense, there is a definitely a solution to speed the process up. Now, let’s assume you don’t have the pandemic, and the customer can really come to the factory and approve the performance. This might be a solution in the future, to overcome this because you can just perform this remotely and very quickly. Moreover, everybody sitting around the world would be able to log into it.

If you have a topic that you really just need to work on, it’s very well possible to do it remotely. It’s not really necessary to have a physical project team sitting together so this is really one takeaway. However, the ideation phase is something that needs to still be done. So this is also finding a learning from ourselves, this cannot be done remotely. The personal interaction still remains very important and can’t be replaced. So at least, we did find a solution to replace that for innovation.

2.2. Will future innovation processes be increasingly based around a “fail-fast approach”? Could this be the case with yourself?

The vision is yes, it should be a learn-fast, fail-fast system. But the reality, unfortunately, also driven from the management, is different. We are still facing, in many cases the challenge that before we start with an innovation, you’re not 100% sure about the outcome, because you just don’t know to what extent an innovation can be successful. Is the innovation feasible, what is the implementation cost but still, the management in many cases asks, “Do you have the ideation phase for a business case?” which kills an innovation, before it even started.

We have also come up with different ideas and solutions to overcome that for very radical innovations. If we talk about incremental innovation, where the outcome is more or less foreseen, there is still work to do, but you can foresee what the development effort is, what the success is, and it’s fair to calculate to give a business case, especially for smaller topics. If you’re talking about really radical innovation, until a POC phase, you just don’t know if it’s worth following or not.

We have come up with some kind of innovation funding board. We have different approaches where everybody can apply for funding, they just need to pitch their idea, their vision, and sell their idea and the personnel standing behind it. Here, they need to show what impact it might have in the future. This won’t be challenged too much, either you believe in that idea or not, that’s pretty much it. Then you have the opportunity to go forward, to get funded for your idea, to develop that, you will become the CEO of your own idea and receive full ownership.

Of course, we do have checkpoints. This is the idea that we would meet up again in three months and see, if it’s worth going for a second round of funding. Then of course, in any case, it becomes mandatory that you show a business case, but then your idea is pretty mature. You can do that or if it was worth trying, but it’s not going well, then it’s fine. It is part of the expectation management for that, in radical innovation ideas, it’s okay to fail. Then we know very quickly, we didn’t spend too much time and money to also know what doesn’t work.

2.3. Will the process be more externally or internally driven?

It’s definitely a combination of the both, this is more our approach. We do have very strong internal driven innovation department topics, where we have a good understanding, very good domain knowhow, about what is driving our business. However, we do also have a very strong network of external partnerships with universities or startups. We have implemented our own portfolio company called Next47; this is a venture capital company whose role is to identify very highly innovative upcoming ideas from the market. The aim is also to identify startups with two different goals. Firstly, to find topics, where you can collaborate and learn from the startups and develop something together. Secondly, if you find a company out there, worthwhile to acquire, then we can go for it. The company will perform all the due diligence, calculations and the business model behind that, in order to acquire the smaller companies to be part of the bigger picture.

2.4. Will innovation processes become more imbedded into Siemen’s culture in the next 3-5 years? What might this look like in practice?

I think the whole hybrid remote working structure is definitely something that will become a bigger part of the innovation processes at Siemens in the long run. One of the key findings during the pandemic was that it was still possible to be productive when mobile working. It’s basically one key finding, which means that the future of our company will allow mobile working half of the week, might it be two or three days for everybody. In the past, pre-pandemic, everybody stayed home on Fridays, because everybody could make home office on Friday, so that was fine and was well accepted. Now, the management board decided that they can extend that because the productivity hasn’t dropped.

In some cases, it even increases, if people can work within the environment, which suits them best. However, there will still be several days a week where you need to be together which can be scheduled accordingly. Here, you can use that time, where you are together in the office, to really talk about those ideation topics. It will be a hybrid way forward in the future and this is exactly what we are intending to do so. This will allow us to use that personal time that we have with our colleagues to discuss those very important personal topics and use the remote time to really work on projects and still align on different topics.