Summary
Since the Siemens Media Summit 2008 in London, Siemens tries to market it's green portfolio. While other companies like GE or Philips have embarked on this strategy since several years, Siemens is now suddenly claiming to be the global No. 1. But how do they measure their portfolio? And why do they act only now? And most importantly: Will they be successful with this new marketing theme?
Analysis
What is the Siemens green portfolio all about? Siemens, the Europe’s largest technology conglomerate, has all of a sudden discovered it’s “green” side. Major competitors such as GE and Philips have started a lot earlier: GE started it’s campaign “Ecomagination” in 2005 already, Philips “Ecovision” campaign is even older. Major competitor ABB has been using the sloagan "power and productivity for a better world" for a long time. In the summer of 2008, Siemens gave for the first time an aggregated view of it’s “green” products. According to the Siemens definition (see below), Siemens reaches the highest overall volume of green portfolio (€ 19 billion compared to GE’s 13 billion and Philips 6 billion), and the highest share from the industrial business (25% vs. 14% and 23% for GE and Philips respectively). But what is that definition? And is it comparable to the others? GE for instance counts it’s nuclear activities as part of it’s eco-portfolio which might not be an unchallenged choice. Siemens found it’s own definition, together with Boston Consulting Group, of “Environmentally intelligent products and solutions”. These products and solutions adhere to “significantly superior environmental standards in comparison to the installed-base average”. This means for example that a modern gas turbine like the 340 MW world record holder that Siemens is installing in Irsching with 40% efficiency is a prime example of a “green” product. In combination with a steam turbine, the efficiency reaches 60%, which is 2% points better than the previous generation, and 15% point better than 1992 (which might be considered the average installed base). Therefore, this power plant will still produce ~ 2 million tons of CO2 / year. Is that green? Not in the sense that the more gas turbines are produced, the better the planet fares. However it is considered „green“ because that is 40.000 tons better than the previous generation, and 265.000 t better than a comparable installation from 1992. Replacing more and more infrastructure with more advanced solutions could in fact help to reduce existing green house gas emissions. While gas turbines usually reach their technical end of life, it is not unusual to replace other infrastructure, e.g. high voltage lines or electrical drives and motors, due to their economic end of life, where energy savings justify to switch to a new product although the old one is still working fine. Other offerings include water treatment, air pollution treatment, wind energy, carbon capture and storage, efficiency enhancing solutions for buildings, rail systems, lightning etc. Some would also meet stricter definitions (e.g. wind power). But why is Siemens embarking on this campaign now? There is a growing number of investment funds specializing in “sustainability”, which includes such topics as “green” portfolio, corporate citizenship and compliance. More than 30% of the global top 50 institutional investors are believed to invest into that kind of stock specifically. And how is Siemens hoping to show a more coherent picture to the public? There is now a “sustainability board”, headed by the recently appointed new board member Barbara Kux, also responsible for the purchasing volume at Siemens. Martin Goetzler, CEO of the light daughter ORSAM for the Industry Sector, Rene Umlauft, head of renewable energies for the Energy Sector, and Bernd Montag, head of the Imaging and IT division of the Healthcare Sector are on the board, as well as representatives from Corpoarate Technology, Corporate Personel and Compliance. Is that going to work? I a marketing sense, I believe it will. But past that, there is really not such a big synergy between an energy saving light diode from OSRAM and a High Voltage Direct Current transmission network from the Energy Sector. In the past, Siemens-wide boards have failed times and again to come up with cross-unit solutions. While patents, purchasing volumes or sales channels might be shared, the businesses have not had an incentive system to develop cross-group offerings. The synergies there are should now be exploited in the new 3-Sector structure. Will they be able to sell their strength to the public? Siemens marketing struggles for a clear communication. When Siemens withdrew from the consumer goods market, notably with the mobile phones sale to BenQ, it stopped it’s “global network of innovation” marketing campaign. However, when the corruption affair around slush funds of 1.3 billion € (~1.65 billion $) tainted Siemens’ public image, CEO Peter Loescher ordered a new marketing campaign, costing “a low 3-digit million € amount per year”. This campaign was called “Answers”, and focuses on what Siemens can do to solve challenges for mankind in the 21st century in the areas of Healthcare, Energy and Industry. This strategic positioning is roughly aligned with the communication to analysts, where already Loescher predecessor Klaus Kleinfeld tried to focus the company on what he called “mega trends”. While these trends were somewhat refined over time, they are now “aging population”, “urbanization” and “climate change”. And now the latest idea is to stress the “green” portfolio. At least that fits with the “climate change” mega trend. The campaign so far has led to > 200 news paper articles around the globe, re-stating Siemens’ claim for the no. 1 environmental portfolio.
