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Innovation in the Digital Age - Lecture 2 | Case Summary
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Summary of the required case material for Lecture 2 of Innovation in the Digital Age: HBS "Open Innovation at Siemens" case.
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Innovation in the Digital AgeLecture 2 | Case Summary: Open Innovations at Siemens
- Norbert Lütke-Entrup was recently promoted to lead Technology & Innovation Management
group within Siemens' Corporate Technology (CT) unit.
- Thomas Lackner is the head of CT's Open Innovation & Scouting initiative.
- Lütke-Entrup and Lackner were having a conversation about the results of the last five years of
open innovation pilots within Siemens:
• According to Lackner, the overall outcome "You can see the successful performance in terms of
the number of engaged participants, geographical scope, high quality of submissions, and
feedback from participants. Most project sponsors and hosts have given us positive feedback on
the pilots."
• The first innovation project was launched in 2008. Since then, 35,000 employees from more
than 80 countries have engaged in nine internal open innovation pilot projects and their
external efforts have mobilized more than 2,700 external solvers on 20 projects.
• Key question → What to do next with the nascent open innovation efforts that had been
initiated?
• Lackner and his team had explored the use of open innovation practices to mobilize crowds to
create new product ideas, resolve important technology gaps, and solve inside the fence
challenges ranging from highly abstract business model innovation challenges to day-to-day
technological problem-solving for engineering and scientific staff. → This tryout has both ups
and downs.
• Lütke-Entrup, in charge of these programs, wanted to understand the impact of these
programs on Siemens' innovative capacity. To go forward with innovation, he suggested to think
about two things carefully: What metrics should we use to analyze the effectiveness? How might it
become a complement to Siemens' existing R&D processes?
• Based on Lütke-Entrup's questions, Lackner suggested turning the questions: "What if we
considered shutting down all the open innovation programs? What would the impact be? Would
it be noticed?" He posited that open innovation within Siemens should be shut down and the
burden of proof to build a positive case for it should be on them.
- Siemens Background
• 1847: Founded in Germany as a telegraph firm (constructed long-distance telegraph lines).
• 1866: Diversified into other industries, such as electric trains and lightbulbs, after the co-
founder discovered the dynamo-electric principle.
• 1907: One of the largest employers in Germany with over 34,000 employees.
• 20th century: Continued growth through M&As and core business expansion - boasted
numerous firsts: first telegraph line, first commercial light, first electric railway, first power plant,
first X-ray machine. It also actively built much of the modern world's infrastructure.
• 21st century: Globally operating and integrated technology firm.
• 2012: 370,000 employees in more than 190 countries holding 57,300 patents.
• Characterised by a decentralized operating structure consisting of four main sectors:
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, Innovation in the Digital Age
1. Energy 3. Industry
2. Healthcare 4. Infrastructure & Cities
• The four sectors were further divided into 18 divisions, which were split into numerous business
units (BUs). Also, there were cross-sector services, corporate units, regional clusters, and a central
division: Siemens Financial Services. Each of the above-mentioned were considered global
entrepreneurs and has P&L responsibility. The decentralized structure allowed for
entrepreneurial opportunities, but also made alignment among entities challenges.
- R&D at Siemens
• Adhered to a tradition of its co-founder: creating, protecting, and commercializing innovation.
• 2012: 29,500 researchers and developers were employed in 188 locations. 20 patents per day
were filed and the firm was continuously ranked at the top of the patent league tables in Europe.
• Majority of R&D was conducted by BUs, divisions, and sectors that focused on creating next-
generation products and solutions, but CT also carried out R&D.
• Strove to set trends and define markets by being a first-mover or a fast follower. It engaged
in the entire innovation process: idea generation, selection, conceptualization, and technical
development.
• In these efforts, it was guided by its Corporate Innovation Process, which emphasized
ensuring a timely identification of disruptive commercialization challenges, realizing their strong
potential business impact, having a stringent and holistic capital allocation decision-making
process, setting up clear operational ownership and continuous processes, and ensuring top
management attention. The firm also leveraged cross-sector collaboration through corporate
labs and external cooperation with universities, research institutes, suppliers, and customers.
- Corporate Technology: CT
• A centralized corporate-based innovation organization that worked across BUs, advising them
on long-term R&D initiatives and programs.
• 7,000 employees in six countries (Germany, US, Austria, Russia, India, and China) to have
proximity to internal clients and pockets of excellence.
• Contributed to all technological areas in the value chain (e.g. research into new solutions for
automation).
• Projects selected to optimize the allocation of R&D resources, with a balance between
support for current offerings and the development of long-term opportunities.
• Budget represented 17% of Siemens' total R&D expenses - either directly funded by BUs (70%)
or centrally funded (30%).
- Open Innovation
• Lackner worked for numerous divisions, initiated various innovation projects, and founded
several entrepreneurial initiatives. He, for instance, created the Siemens Technology
Accelerator (STA), which transformed the innovative non-core technologies into business
opportunities by spinning them off or selling or licensing them. This enabled collaboration with
people beyond Siemens → Lackner began to feel that a more open collaboration strategy
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