Siemens healthcare to operate as independent unit

In a corporate reorganization designed to streamline bureaucracy and add $1 billion to its balance sheet, Siemens CEO Joe Kaeser unveiled a new strategic plan at a press conference yesterday, revealing that 16 business units will be reduced to nine, and healthcare will be given a large measure of autonomy to run itself.

Although the division will continue to be subject to corporate governance functions, healthcare will be set up as a separate unit with the ability to allocate resources where needed and make research and development decisions.

Kaeser, who professed the company’s continuing commitment to the sector, cited the move to value-based payment, the move from experience-based to knowledge-based healthcare and the migration of healthcare into the patient home in the decision.

“To be able adequately respond to these profound changes, and to keep a hand at the helm and be able to react properly, healthcare will be set up as a separate unit within Siemens,” he told a room full of reporters and financial analysts in the conglomerate’s Berlin offices.

In addition, Siemens audiology unit will be publicly listed. “The principle we are applying here,” Kaeser explained, “is to allow businesses without synergies in the company to develop and allocate resources independently.”

Siemens has considered spinning healthcare off in the past, according to a report on the new strategy from Reuters. Instead, Kaeser did away with three of the four big business sectors introduced by Kaeser’s predecessor, the ousted Peter Loescher— industry, energy and infrastructure—and liberated the fourth, healthcare. New divisions include power and gas, wind power and renewables, energy management, building technologies, mobility, digital factory, process industries, power generation services and financial services.

Into the Future

Long-term, Kaeser intends to lead the company along what he called the value chain of electrification and automation, “manifesting opportunities presented by digitization” that will enable the company to reduce and close profitability gaps.

Kaeser expressed particular interest in data analytics, where profit margins of up to 30% are achievable. “We are not afraid of Google, because we are here,” he said, offering several examples of Siemens devices that originate data. “Each high-end CT scanner generates 2 TB of image data each month. We have 20,000 devices out in the field.  Imagine the knowledge you can generate if you perform analytics on this data?”

Every large gas turbine from Siemens, he said, contains 1,500 sensors. “We will make investments in a cross-divisional platform and also a comprehensive cloud platform,” he added.

In a question-and-answer session following the press conference, Kaeser reiterated the company’s commitment to healthcare, and said the current healthcare action was to prepare the unit for up-and-coming competition as healthcare moves to the patient.

He recalled a time when Siemens was a world leader in communications technology. “We were a world leader, then there was a paradigm shift, which we missed,” he said. “We will give this asset the possibility to position itself anywhere with any technology so that they can act.”