Siemens retreats from the consumer
The giant is shifting onto its backfoot. But it will need to hone its
consumer marketing skills to retain its position in med-tech over the next
At the height of the dot.com boom, it all looked so simple for Siemens. Like
many other electronics giants, telecoms was the place to be. And the hottest
action in telecoms was mobile.
Many investors, particularly in America, urged Siemens boss Heinrich von
Pierer to dump the company's slower moving big iron stock - especially its
ailing med-tech division. Von Pierer ignored their advice. Instead, he put a
young Americophile, Klaus Kleinfeld, in charge of the medical division. He
promptly shifted the point of gravity of that division westwards over the
Now the medical division is the biggest gem in the Siemens crown: the former
lame duck is now Siemens' most profitable business. Its boss, Kleinfeld, has
ascended to the top of Siemens, succeeding von Pierer as company CEO.
Affairs within the company's consumer mobile division are not nearly so
happy. The ICM division is now losing money hand over fist. In an echo of
their earlier advice to von Pierer, investors are urging Kleinfeld to dump
mobile. Rumours are rife that the division is for sale, or the chop.
So what? One division has turned around, another falters. But there are
signs that a more tectonic shift is underway at Siemens. For while the
mobile division is leaking money, the company's network infrastructure
business is booming. The company has gone on a spending spree to acquire
more heavy engineering and power generation assets.
So it seems that the lesson Siemens might be drawing is to stick to their
knitting - that sound McKinsey mantra. And in Siemens' case, their knitting
appears to be big gear, business to business industrial goods.
And of course that's just where Siemens is strongest. Its forays into the
consumer market expose the company's flanks to attack from much faster,
lower cost eastern rivals - like Samsung, responsible for so much damage to
the company's mobile business.
But Siemens needs to retain its consumer marketing edge if it's going to
maintain its position in medical over the next decade.
Healthcare technology is becoming increasingly commodified. The long term
trend is towards simpler, easier to operate and cheaper equipment. It's
happened at the lower end of the diagnostic market. There's every sign it's
now moving, slowly, towards the upper end of the market.
That means big diagnostic equipment will increasingly be found outside the
big specialist centres where Siemens, Philips and GE have their established
client relationships. Their medical divisions will have to learn to
communicate to a wider, less specialist audience. It also means that margins
will shrink, so volume of sales will increase in importance.
In short, medical divisions will have to master the consumer market —
channel relationships, marketing, media, and all. Where will they learn such
skills? Well, in Siemens case, the obvious answer is the company's mobile
division. Will their former boss sell it before Siemens medical needs it?