Siemens AG: From Small Workshop To Global Company
From a small beginning 163 years ago, Siemens AG has steadily grown over the decades into one of the world’s largest companies, with presence in more than 190 countries; asserting its leadership in the information and communications, automation and control, power, medical solutions, transportation and lighting industries.
Its business success story does not only inspire and motivates, it also provides valuable lessons for entrepreneurs and business managers to discover the keys and strategies that have made its gigantic success possible, and to apply on their own business.
Siemens AG, as it is known today was founded in 1847 in Berlin by the duo of Werner Von Siemens, and J.G. Halske. The business, which began in a small back building workshop was to exploit the booming telegraphic communication system industry by producing and installing telegraphic systems. It was known as Siemens & Halske, and was driven mainly by Siemens, a former artillery officer in the Prussian army, and an engineer who already had a profitable patent for electroplating.
The business grew steadily, and in 1853, only six years after its establishment, it won a contract to build a massive telegraph system in Russia. The following year, the company’s London office participated in developing the first successful deep sea telegraphic cable, leading to the office becoming a full fledged independent company with its name changed to Siemens Brothers by 1865.
Siemens Brothers prospered. It landed a contract to build an 11,000-kilometer telegraph line linking London to Calcutta, which was finished in 1870. The next year, it built a telegraph line from London to Tehran. To facilitate its efficiency and power to deliver, Siemens Brothers acquired its own cable laying ship in 1874, which it named Faraday and laid the first direct transatlantic cable from Ireland to the United States the following year.
With Alexander Graham Bell’s new telephone reaching Berlin for the first time in 1877, and realizing the huge market for the product, Werner Siemens quickly developed an improved variety, secured its patent and began producing it. As the 1880s emerged, Siemens & Halske, using the knowledge of dynamo electric principle, which Werner Siemens discovered, developed and produced electrical lighting and power generating equipment.
In 1892, Werner Siemens died, but this did not stop the company from moving ahead. In the same year, the company built a power station at Erding in Bavaria and established a subsidiary in Chicago, U.S.A, Siemens & Halske Electric Company, which was however shut down in 1904.
With eye for profitable business opportunities from inventions and discoveries to exploit, Siemens & Halske secured the first patent for an X-ray tube in 1896 after Wilhelm Conrad Roentgen discovered the X-ray the previous year.
As the company entered the new century, it showed great flexibility in its operation and product creation, an attribute that was crucial to its continued success in responding to the changing needs of its customers, in a world that was frequently undergoing change.
It set up a subsidiary, Siemens Schuckertwerke GmbH, in 1903 to exploit and focus on the electric power engineering industry. It developed an automatic telephone exchange in Munich to serve 2,500 customers. And when World War I broke out, the company turned its expertise and operations to producing communications devices, fire control system, and aircraft engines for the military. It also made explosives, and gun locks for rifles.
At the end of the War, Siemens lost two of its major foreign subsidiaries. Its St. Petersburg subsidiary in Russia, and Siemens Brothers in Britain were seized by the governments of those countries. Though a very big blow to the parent company at the time, Siemens & Halske soon put the misfortune behind it and started building the company again.
In 1923, the company entered the consumer market by building radio receivers, and realizing the emergence of Japan as industrial power, it established a subsidiary, Fusi Denk, later known as Fuji Electric in Tokyo, Japan.
The decade brought Siemens & Halske great deals. The company won contacts to construct a power station on the Shannon River in Ireland in 1925; construct hydroelectric power station for the Soviet government in 1927; and built railway network in suburban Berlin in 1928. As the decade closes, Siemens & Halske was clearly the market leader in the electrical manufacturing industry in Germany, producing one-third of the industry’s output.
During the great depression of the early 1930s, the company was compelled in order to remain financially solvent to halve its dividend, and cut down large number of its employees.
Having been devastated by the Second World War, Siemens & Halske gradually got back to business. By the early 1950s, the company had started once again to produce railroad, medical, telephone, and power generating equipment, in addition to consumer electronics products.
And in the middle of 1950s, the company set up a subsidiary in New York, Siemens Inc., in 1954. It entered the fast growing data processing and nuclear power industries, introducing its first mainframe computer in 1955, and launched its first nuclear reactor at Munich Garching in 1959.
The company continued to be creative and innovative through the 1960s. Its disc seal triode was used in the transmitter of the American space probe Mariner IV in the mid-1960s; it launched its 03 high-speed passenger train in 1965; and started constructing the first nuclear power station in South America in Argentina.
In 1966, the company was reorganized, and the name changed from Siemens & Halske to Siemens A.G. It formed a joint venture with Allis Chalmers, an American engineering company in 1977 to market turbine generators in the United States.
This union was so successful for Siemens that it quickly moved to the top of world market dominance in electrical manufacturing. According to a Fortune’s article in 1978, Siemens had become the second largest electrical manufacturer in the world only behind General Electric. By the close of the decade, Siemens worldwide sales amounted to DM 10 billion.
To keep pace with, and become a world leading business in high technology in the 1980s, Siemens’s strategy was to acquire relevant businesses, and invest heavily on research and development – It spent $24 billion for this. It acquired Rolm Systems from IBM, which was the third largest supplier of PBX telephone switching equipment in North America.
Entering the globalization era of the 1990s required Siemens to reorganize by changing its slow, and predictable corporate culture to be able to quickly exploit high-growth market particularly in Asia, and be more competitive with Japanese companies.
To achieve this, the company, under the leadership of Dr. Heinrich von Pierer took the following measures: replaced the company’s hierarchical structure and engineering focus with a new emphasis on innovation and service; managers in local markets were given power to cut cost and bid for projects; younger generation of managers in their 40s were appointed; workforce was reduced by 7.5 percent; operating expenses were reduced by $3.6 billion by 1995; and non-core businesses were sold for $2 billion.
The company was being positioned to be flexible and changing, to be able to swiftly respond to change in technology and customer needs. Siemens continued to restructure into the 21st century to remain profitable and more competitive.
Today, Siemens is Europe’s largest engineering company in three main business sectors, including Industry, Energy, and Healthcare, employing about 420,800 people in over 190 countries.
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