One on One Prof. Dr. Ralf P. Thomas, CFO and Member of the Managing Board, SIEMENS AG

No, I don't play anymore.

When I joined, that was in '95. It's close to 30 years. I had little excursions in between, but at the end of the day I believe there are three major criteria that make a difference between the Siemens of back then and now. Back then we had 15 different lines of business—divisions as diverse as semiconductors to high-speed trains. We still have high-speed trains, but we don't have semiconductors anymore, so we're more focused. And I also dare to say we are more agile now. Agility—you discussed that before—I don't want to go back to all that. But agility is not about being faster in the beginning; it's about arriving earlier than others. The entire discussion around what needs to be changed is easily spelled but not that easily done from a position of strength, because many of our peers also had the opportunity, as Siemens had for example in telecoms, to experience what it feels like when you literally fall over a cliff. Back then telecoms were in the hands of Siemens—more than 70% of the world market—and it took us less than a decade to make ourselves completely obsolete by missing one paradigm shift in technology only: the importance of the Internet Protocol for telephones. Our longtime publisher was Helmut, the former chancellor of Germany, who many of us would wish back at the helm of the chancellery these days. He used to say that Siemens is more like a bank with some electronics business added on, because you shift your productions and your focus, parts get sold, other parts get bought, the IPOs. What do you answer to that?

Back then the pension trust was completely embedded into the operations from a cash availability point of view. So many things have been changing since then. I dare to say, with a free cash flow of 10 billion one year after the other from operations, we are no longer depending on the financial assets only. What it actually meant, I believe, is that we were turning a lot of dollars or euros without making money with that. Back then, and I think that picture has been changing substantially—be it from a portfolio perspective, I think we may say that we are shaping our portfolio proactively; be it from a relevance point of view—making a company like Siemens at least slowly but steadily look like a digital and software-based enterprise. That's quite a change journey. And back then it felt—at least that's what people tell me—that it is safe hands if you have an interest income instead of just being in risky businesses and finally ending up with zero market share.

There are definitely a few people better than myself, especially our CEO Roland Busch. I'm mentioning that because he's really driving the pace of change. As I said before, from a position of strength, change is by far more challenging than sitting on a burning platform with a desperate need for change. What is Siemens out for? I think we are at the moment in a really sweet spot of market developments. We have been building our portfolio around electrification, automation, digitalization, and sustainability. Even though I have to admit I feel a bit of a lack of discussion on ESG matters throughout the last 24 hours, I'm sure whether or not presidents may like it, it will come back. And if we miss that bus, we may pay twice. We are out to combine the dots in these areas—electrification, digitalization, and automation—with the purpose of serving sustainability, or let me translate it differently: making the best possible use of scarce resources. This is what we owe the generations to come. Therefore you may call it the race for productivity or the race for ESG—it doesn't matter to me. It's about making sure that you get the best out of something. In the past, Siemens was maybe more about input—you can easily spend billions on R&D without moving. Now we are more output-focused, and one of the key ingredients is pace. In digital business models it's not only about pace; it's also about scale, about ability. Therefore you need to address markets that grow rapidly and allow, from a regulatory framework, that new ideas are scalable and standards get in place. At the end of the day, it's about setting standards instead of trying to follow fast.

No, I mean in a financial sense, you need to make sure that you understand the intent of those voices. We listen to them carefully. Many of them are owners of the company, and we have a lot of respect for them. But all owners of the company also have a wish that we combine the desirable with the doable and do it at a meaningful point in time. After taking out five great businesses in a PE style, as we call it—not fire-selling them but shaping them into a format that is worth now more than 7 and a half billion, starting more or less from educating them to be self-dependent—all that has been, I hope, contributing to building trust and credibility. And therefore, at the moment, it feels like the market understands that we are moving with the right pace to achieve ambitious targets. That will not take away the pressure, and the pressure is part of the premium that we need to earn.

First of all, I think we need to look back. In 2008-2009, when we started to embark on the digital journey and started to acquire industrial software companies—which we did, more than 35 grand total, more than 15 billion—and combined that with the domain know-how of the product industries we have been in, that was quite a change journey. It took some time to learn, and some of the lessons were painful and expensive. But now we more and more understand that combining the real and the digital world brings the biggest part of the value to our customer base. Many of them appreciate that, in particular when it comes to sustainability matters, because changing from A to B in that field isn't that easy, and being trustworthy makes a big difference to customers. Making 12% is not the end, obviously, and we are inspired to do more. You may have heard that we intend to acquire—and we'll close—an acquisition worth 10 billion USD, Altair. We are moving more and more into that space, and what we do see is that the business models are changing with that. Turning a company of 325,000 individuals on our payroll around the globe, it makes sense to think about the next step before you start running. But pace is of the essence, and we have a very ambitious leadership team. I'm quite confident that we are going to make it. Doubling—that's what I said in an interview just lately—is the minimum that we aspire to, to be seen as a reasonable player in that field. Even though 12% doesn't seem to be a lot, 12% translates still into one of the biggest fleets of software engineers around the globe. We belong to the top 10 employers when it comes to software engineering. I think that puts things into a different perspective.

I could easily say I wish, because there's a regulatory framework and we need to adhere to and anticipate everything that is doable in that field. I think the universe of opportunities isn't that big in that specific place, but we also see adjacent fields, and enlarging the business model into different directions is quite a meaningful thing to do these days.

Maybe what applies to companies is also applicable to economies as such. Germany used to be a role model of coming back from scratch, doing the impossible, getting growth momentum done. Then Germany benefited a lot from globalization—export-oriented industries prospering a lot. Now it's about making sure that we are a relevant player as Germany or as Europe in the next step, the next sigma curve of technology. Even though you rightfully said let's not talk about artificial intelligence again, I think AI in the industrial space is maybe the game changer for corporate Germany and the industries there—if not for Europe. If we miss out capitalizing on that opportunity, it will be hard to come back and will take time. We need to be assertive, we need to be focused—that's also applicable for Germany. What we also need is a mindset that is execution-oriented. We are making big plans, have the best concepts, and then it takes three years to implement. In those three years, others are bypassing us, taking over the lead. Once you lose the lead in newly developing markets, you lose the capacity to set standards. If you miss out on standards, the entire invention never translates into a meaningful innovation showing up in the marketplace.

First of all, my personal view is that Germany and also Europe has many ingredients that are critical success factors. It's about being assertive, finding the right pace, and not trying to polish the gravestones on the curves—that takes a lot of energy and doesn't take you anywhere. I don't think we need great advice from billionaires and the like. What I believe it takes is a paradigm shift in thinking and also in mindset. There is a term—we brought something on the way, it's a great first step—but there's a tendency in politics to believe then the job is done. I believe then the job begins. That may hopefully change under new leadership. Does it take completely different individuals? Maybe a bit of new ingredients in Berlin and Brussels would be helpful to change the mindsets. But I don't think it's a question of capacity or existing individuals that may contribute; it's more about changing perspectives in the meaning of being output-oriented instead of effort-oriented. What you put into something is meaningful and hopefully pays back, but the final yardstick is competitiveness and output. I think Berlin can improve on that matter.

Taking too long to form a new government.

Thank you.