Siemens’ marathon man

Siemens took the world by surprise when it chose 47-year old Klaus Kleinfeld to lead the US$100 billion group. But twelve months into the job, he is proving a hit. He spoke to Anil Bhoyrul during his first official visit to Dubai last week.

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By  Anil Bhoyrul Published  February 12, 2006

|~|00-Klaus-200.jpg|~|QUITE A CHARACTER: Not one to shy away from publicity, Kleinfeld once threw a journalist’s Nokia mobile phone into a bucket of water, declaring, “I’m going to drown the opposition.”|~|Klaus Kleinfeld is everything you wouldn’t expect from the president and chief executive officer of Siemens AG. He has personally promised to make every one of the US$100 billion group’s twelve divisions profitable by January 2007. This has meant ditching 158 years of German corporate culture, kicking out loss making parts of the business, and most importantly, dragging some of his 430,000 employees into the twenty-first century. It is little wonder that his critics describe him as ‘arrogant’ and ‘cocky.’ “I’m neither, you know,” he says, seemingly hurt by the suggestion. “Some people make comments like that without knowing me. Arrogant is not a quality of mine. And cocky? What do you mean? How can you say that?” He becomes genuinely upset when asked to pose in a “serious” manner for the photo shoot. “Now you want to make me out to be angry, don’t you? That’s not fair. I can’t look tough. I’m a mellow kind of guy. I just don’t get angry.” Right now, Kleinfeld probably has very little to be angry about, even if he forced himself. A year ago, few analysts had total, or even moderate, confidence in the 47-year-old Kleinfeld being able to “fix” Siemens. There was the loss-making mobile phones division, and the rather bigger problem of the conglomerate operating as several different independent companies, be that in light bulbs, power plants, airport infrastructure or auto parts; Siemens had grown into a multi-disciplined giant, and only a few people really understood it had a common goal. What a difference a year makes. Orders across the group in the three months to December 31st last year shot up 31% to US$32.1 billion. Even though net income fell 10% to US$1.7 billion, the financial markets were practically dancing in the aisles, marking Siemens shares up 6.5% in a single day. The word on the financial streets is that Kleinfeld has earned his respect despite the fact that, prior to his appointment some might have seen him as a risky choice, as too ‘new fashioned’ and probably still too young. In some markets such as India, the rise in orders since he took the helm is over 100%. In the Middle East alone, the figure is 70% in a year. “Okay the profits figure that we published shows a 10% fall, but in reality they actually went up,” says Kleinfeld, before explaining that huge losses relating to the sale of its mobile phone division to BenQ deflated the figures to the tune of US$419 million. So is he still confident of making all Siemens divisions profitable by this time next year? “If you’re asking me if I feel under pressure for saying that, the answer is no. Good leadership is about being a role model. Goal setting is the most important thing for any leader. That’s why I set goals,” he says, adding: “If you look at the last twelve months for us, yes, they have been very interesting. Being CEO of Siemens is one of the most fascinating jobs anyone could have. The world is changing fast and Siemens is right in the middle of that change. But to be really successful, you don’t just adjust to change, you have to spearhead it.” He has certainly done that. Siemens has strengthened its portfolio in the field of energy with the acquisitions of VA Technologie and Bonus Energy. Kleinfeld snapped up Photoscan to broaden the company’s security offerings, and in the medical field it bought CTI Molecular Imaging. Indeed, 10 of the 12 divisions are now profitable, and there are big efforts being made to get the same result at Siemens Business Services (SBS) and the Communications Group. SBS has been badly hit by overcapacity, competition and cost pressures. But Kleinfeld has installed a new management team and is looking for US$1.8 billion of savings in the next two years. At the Communications Group, the painful sale — at a considerable loss — of its mobile phones division to BenQ is now history, but major problems remain at the Fixed Networks and Enterprise Networks. Can they be fixed? “I would argue that we had some big achievements last year, but are we there yet? No, we still have more to do. That’s why I’m here in Dubai. The Siemens portfolio is targeted towards infrastructure. We now have 1800 employees in this region. The rise in orders of 70% is good, but I have told my people here that I want to see more. There is much more opportunity here. Quite literally, in Dubai the sky is the limit. If there’s one thing we need to be better at, then maybe it’s getting more people to understand what it is we actually do and what we can bring to the table.” Part of this has involved launching Siemens One — a new one-stop shop for all Siemens services and products. Officially, the concept is to help customers get easier access and better service from Siemens, rather than have the company's products acting completely independently — something that hasn’t always endeared Siemens to its clients. And part of the reason why Siemens has often played second fiddle to General Electric in the past. Kleinfeld explains: “I wouldn’t go as far as saying some of the divisions were too independent. It is a question of entrepreneurial power. It is about how much value you can bring to the customer. But you need guiding principles. That is why we have established Siemens One. If we are working on an airport project for example, the client does not have to talk separately to different people about different things. And I think it works. The strongest bond within a company is formed when you see that you can win in front of a customer.” And there has been a fair amount of winning in the Middle East. Siemens LLC — the regional arm covering the UAE, Bahrain, Qatar, Oman and Yemen — was only founded in 1999, but has already managed new orders in the past quarter of nearly US$2.4 billion. Power generation has been a cash cow, with contracts in Bahrain, Yemen and the UAE. There have also been impressive orders coming from the Automation and Drives division for the Dubai International Airport, and the Dubai Police awarded the company work for its new state of the art control and communications centre. Kleinfeld says: “What we are doing here is good, and it’s a good place to do it. You know, this is only the second time in my life I have actually been to Dubai. And I remember the first time, many years ago, how different it looked. So when I landed at Dubai International Airport, I really thought I was in the wrong place. I couldn’t believe how much it had changed — but I was pleased that we are ready to fit into this new world.” He adds: “It’s all about taking a long term view. Right now, we spent US6.7 billion a year on research and development. We have 47,000 employees doing nothing but R&D. And you know what? It really pays off. Around 75% of our sales come from products that are less than five years old.” It looks as though the numbers are really starting to add up for Siemens. And the decision to make him the 11th man to run the company in 158 years looks to be paying off. He was an unlikely choice to succeed the legendary former boss Heinrich von Pierer, seen as a “national hero” in Germany. Nonetheless, Kleinfeld joined the company in 1987, and is perceived as a protégé of von Pierer. However, whereas von Pierer was dour, extremely corporate and happy to stay with the status quo, Kleinfeld couldn’t be more different. Having been responsible for a successful turnround at Siemens’ US business at the start of the decade, he has inherited a fast-talking, smooth operating US management style. In the US, it certainly worked: based in New York, he oversaw 65,000 employees and part of the group worth US$16.6 billion; when he left in 2003, it was left in very good shape. But his American experience means he is outgoing, outspoken and not adverse to controversy. He once famously grabbed a Nokia telephone from a journalist and threw it into a bucket of water, before explaining, “I am going to drown the opposition.” While Germany is used to hiring chief executives that keep low profiles, Kleinfeld is the opposite — he is just as at ease discussing his marathon running pastime, (“I did Berlin in less than four hours”), as he is explaining the benefits of Siemens' US$1 billion worldwide Angiography, Fluroscopy and X-Ray Systems business. But there is no danger of it going to his head. “I like to think that my best qualities are listening, learning and motivating. Power as such has never been a strong motivator of mine. “The concept of power means that you have to be very responsible with it. I believe in the old fashion style of leadership — that of being a role model.” To the majority of Siemens’ near half a million employees across the world, he already is. For many years, the group has been laden with the tag of ‘second best' compared to General Electric. Throughout the 1990s — when Siemens was slowly negotiating its way through the minefield of German labour regulations, high taxes and general business inertia — General Electric managed to build itself into one of the world's greatest ever companies. And in Jack Welch, the US giant found itself a leader with a rock star presence. Of course, it is early days yet, with Kleinfeld having only been at the helm for just over a year, but already the comparisons are being made. Even Kleinfeld says: “I am very lucky to be doing this job. As I've said, it is a fascinating position to be in. “I didn't necessarily sit around every day thinking that one day I would be in charge of the whole of Siemens, but it wasn't entirely a surprise. When things like this happen, there are normally a few signs beforehand. I had a feeling I was in the running. And I knew I had done a good job before this came up. And most importantly, this is a job that I knew I could do, and one I was confident I could do." For now, few would disagree with him. How long for, time will tell.||**||

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