Siemens Presents New “High-Value” Growth Strategy
With a shiny, new strategy, Siemens lays out its tech-focused plan for "high-value" growth.
As part of its virtual Capital Market Day (24 June) named “Accelerating High-Value Growth,” Siemens AG is presenting its new growth strategy. The company aims to deliver growth through technology by focusing on things like sustainability, combing real and digital worlds, updating its Financial Framework with new financial targets and seeing comparable annual revenue growth of 5 per cent to 7 per cent over the business cycle.
“Our customers benefit from our ability to combine the real and digital worlds. This unique capability enables Siemens to support its customers in a way that no other company can”, says Roland Busch, President and CEO of Siemens AG. “Digitalization, automation and sustainability are growth engines for our business. Here, our core business and our digital business reinforce each other in a virtuous cycle.
“This effect forms the foundation of our growth strategy for achieving more profitable growth. As a focused technology company, we want to strengthen our position in all our markets and enter adjacent profitable markets. And we’re now making our commitment to sustainability clearer than ever. Thus, in times of major global challenges, we’re creating clear added value for our customers, our stakeholders and society”.
Following the spin-off of Siemens Energy (2020), the company says it is addressing industry, infrastructure, transportation, and healthcare and has the technologies needed to enable companies and economies to boost their productivity, efficiency, flexibility and sustainability. The addressable markets for Digital Industries, Smart Infrastructure, Mobility and Siemens Healthineers alone amount to a volume of €440 billion (with 2020 as the base year). These markets are set to grow 4 per cent to 5 per cent per year until 2025.
At the same time, Siemens intends to enter adjacent markets with an additional volume of €120 billion. To tap these markets, the company is focusing on a combination of organic and inorganic growth, with the acquisition of Supplyframe – a leading global marketplace for electronic components – an example of its intentions.
The company is also driving its technology portfolio with software and automation solutions and an IoT platform, plus core technologies in areas such as artificial intelligence (AI), digital twins, 5G, industrial edge and cybersecurity. Since Siemens’ core business and its digital business will increasingly reinforce each other in the future, the company expects to see profitable growth above the market average. For the future, Siemens expects its fiscal 2020 digital revenue of €5.3 billion to grow at a compound annual growth rate of around 10 per cent over the business cycle until 2025.
Starting in fiscal 2022, Digital Industries (DI) will begin a business model transformation as it transitions a significant part of its software business to Software as a Service (SaaS) and – in addition to the established performance indicators – begins reporting annual recurring revenue (ARR). DI Software plans to introduce new SaaS offerings that will offer greater accessibility, collaboration and scalability to help customers accelerate digital transformation. Siemens predict the SaaS transition will lead to more resilient and predictable revenue for DI and drive growth by opening access to new vertical markets, users and customers, especially in small and medium-sized companies who can reduce investment in complex IT infrastructure.
The company’s focus on sustainability meanwhile, is driven by a new framework called DEGREE, which stands for “decarbonization, ethics, governance, resource efficiency, equity and employability”. This new framework will apply to all activities across the company’s businesses worldwide. The DEGREE framework includes systematized, measurable and specific long-term targets for the environment, social and governance (ESG) dimensions. In addition, the company is officially adopting the topic of sustainability as an additional strategic imperative for its investment decisions.
“Sustainability is in our very DNA. It’s not an option. It’s a business imperative”, explains Judith Wiese, Chief Human Resources Officer, Chief Sustainability Officer and member of the Managing Board of Siemens AG. “Based on our successful track record, we’re now setting ourselves even more ambitious targets. We’ll accelerate our efforts and raise the bar to create considerably more value for all our stakeholders. Sustainable business growth goes hand in hand with the value we create for people and our planet”.
With its tech, Siemens states that it can support the public and private sectors in the digital transformation of industrial operations, building and grid infrastructure, transportation, and healthcare whilst offering innovative solutions with a compelling business case to drive the transition to a carbon-neutral economy. DEGREE includes numerous other targets – for example, for safeguarding the long-term employability of the people who work for the company and for fostering inclusion, respect and equal treatment. The company is pursuing its declared goal of ensuring that women account for 30 per cent of the people at the top management level by 2025.
Siemens also presents an updated Financial Framework that, beginning in fiscal 2022, will set financial targets whilst providing more transparency and clarity. Siemens is aiming, among other things, to achieve comparable annual growth of 5 per cent to 7 per cent (previously: 4 per cent to 5 per cent) for Group revenue over its business cycle of three to five years.
You can find more information about Siemens and its growth strategy on its website.
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