Industry Journal Creating sustainable value through technological leadership 03 | 2010

Creating sustainable value through technological leadership

03 | 2010

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Innovation How successful companies How newly industrialized Why high-speed trains are
turn good ideas into countries are developing into often the preferable
www.siemens.com/industry not necessarily reflect the opinion of the publisher. This
magazine contains forwardlooking statements, the accuracy
management marketable products global technology centers alternative to flying
of which Siemens is not able to guarantee in any way.
02 Industry Journal | 03 | 2010 | Editor’s note
 Industry Journal | 03 | 2010 | Editor’s note 03

Editorʼs note

Dear Readers,
Worldwide, financial monitors are indicating growth again. Innovation is
the single, most effective way of supporting this upward trend. This is why
we have spotlighted innovation management in this edition of the Industry
Journal. Within this context, we shed light on the various innovation strate-
gies of global corporations, and provide some insight into our own “innovation
toolbox.” 30,800 Siemens AG researchers and developers use it very success-
fully. A total of 56,000 registered patents, 7,700 invention disclosures, and
4,163 initial patent applications, in the 2009 fiscal year alone, speaks for itself.

In addition, we deal with the topic of venture capital in this edition, which is a Prof. Dr. Siegfried Russwurm,
successful instrument for generating inventions and making them marketable. CEO of the Industry Sector
This type of collaboration benefits both idea-rich companies and investors
equally.

Furthermore, we cast an eye on the BRIC countries. Whereas innovations have

long been considered the exclusive domain of companies within the high-tech
nations, the picture is beginning to change. Newly industrialized countries are
catching up, are prioritizing innovation with increasing confidence, and are
proving attractive development locations for globally operating companies.

It would have been easy to issue a monothematic edition of the Industry Journal
on the subject of innovation. However, one of the attractive features of our
journal is its variety. For this reason, we present you with informative reports
from other fields, on topics related to our sector. These range from the future
of high-speed trains and hybrid buses, and the various possibilities of integrat-
ing sustainability into core business, to the significance of oceans as sources of
raw materials and much-needed climate control.

Sincerely,
Siegfried Russwurm
04 Industry Journal | 03 | 2010 | Contents

Focus: Innovation management

10: T
 he secret behind innovations 21: Master plan for progress 27: The BRIC states are catching up

There is no ideal way of making
innovations successful. Three
essential factors are central to
its success, however – formal
development processes, consis-
tent commercial evaluation, and
market orientation.
For the first time in its history,
the Organization for Economic
Cooperation and Develop­ment
(OECD) has published its own
innovation strategy on how
the urgent problems facing
humanity should be solved.
An increasing number of inno-
vations are coming out of Bra-
zil, Russia, China, and India. A
report about changes spanning
from the workbenches of the
world to the research centers of
industrial nations.

Performance
10–20: The secret behind innovations
There is no silver bullet for successful
innovations. Find out why some corpora-
tions have been successful innovators for
decades.
37–41: Promoting stable growth
The demand for steel is growing in China
and India. Large, environmentally friendly
production facilities are set to meet the
demand.

21–23: Master plan for progress

The innovation strategy of the OECD is to
support the world in planning its future. 06–09: Spotlights
Economic, scientific, and technology
24–26: Improve or innovate? news: from cellular phones with LED
Developing products further can be very flash, and automatic passenger systems,
clever – if you know when it’s time to stop. to nanotechnologies for road coverings.

27–33: Smart strategies in newly 42–47: Changing sides:
industrialized countries Learning from lions
The BRIC countries are increasingly shed- What African lions can teach western
ding their image as merely economical managers.
production locations.
82–83: How does …
34–36: The hunt for new ideas … safety work in the chemical industry?
How young companies and established
corporations use venture capital to jointly 84: Imprint
create innovations.

48: Get there fast – get there relaxed
High-speed trains are developing more
and more into environmentally friendly
competitors to air traffic. Countries like
China, Russia, and even the USA, where
the car reigns supreme, are recognizing
their potential, and taking to the tracks.
Urbanization
48–55: Get there fast – get there relaxed
Report across three different continents
about the future of high-speed trains.
56–58: For a short time only
Flexible airport terminals are one of the
solutions for quickly building up and
dismantling processing capacities.
59–61: Turbo rate of return for
real estate
Real estate increases its rate of return by
getting certificates from “green building
organizations.” However, only very few
of these quality seals are acknowledged
worldwide.
62–63: City of the Future
In Singapore, Siemens uses an interactive
showroom to show what city planners
have to watch out for.
Industry Journal | 03 | 2010 | Contents 05
Contents
64: Good from the bottom up
Less research has been done on our oceans
than on outer space. Not for much longer,
though. The reason is that the importance of
the world’s oceans as a supplier of raw mate-
rials, as environmentally friendly energy
carriers, and as the climate control unit of
the world is becoming increasingly apparent.
Environment
64–69: Good from the bottom up
Oceans can contribute greatly to resolving
the serious problems of humanity.
70–73: In the green zone
How a chemistry plant increased safety,
productivity, and environmental friendli-
ness using modernized installations.
74–76: Brake and you’ll win
How hybrid buses convert braking power
into energy, and reduce environmental
stress on cities.
77–79: Interview with Alexander Holst
The sustainability expert discusses the
integration of sustainability into core
businesses.
80–81: Certificate for green solutions
What is green? Siemens has developed an
objective evaluation system, together with
renowned universities.
06 Industry Journal | 03 | 2010 | Spotlight

Spotlight
Package sorting system for China

Siemens has received an order from China Post

to equip its new logistics hub, the Nanjing China
Post Air Express and Logistics Hub. By the end of
2011, the system will go into operation as the
largest express and logistics center in Asia, and
the third-largest in the world. Siemens is deliv­
ering and installing ten package sorting sys-
tems, including the Variosort XB central control
system. When complete, the system will have a
sorting capacity of 96,000 packages per hour.
This high sorting performance will drastically
reduce the transport and processing duration
of mail shipments. In the future, the new sys-
tem will be able to process more than half of the
country’s domestic express mail. The order is
valued at 45 million Euros.

Record times for record golf club

American golf professional Rickie Fowler is only lead times and testing times. As a result, Adams
21 years old. At the PGA’s Memorial Tournament Golf has managed to reduce market introduction
in Dublin, Ohio this past summer, Fowler tied times by 50 percent, securing a significant com-
the 36-hole record of 131 strokes, which has petitive advantage.
been unmatched since 1987. One reason for his
success was an innovative club from Adams Golf:
The Speedline Driver is the first club whose aero-
dynamic properties were optimized in a wind
tunnel. Its smaller face area is a significant fea-
ture that reduces air resistance. For this design,
as well as for its other golf clubs, Adams Golf
has used the Siemens NX PLM flow software.
Adams Golf is considered a market and innova-
tion leader in the golf club industry. NX plays
a critical role in the design as well as in testing
and production. Its use has reduced production

Environmentally friendly dedusting system for the steel industry

A steel producer Since the end of 2009 alone, five comparable

in Northern China systems have gone into operation there. The
has contracted current order, in addition to all the mechanical
Siemens VAI Metals equipment, includes the corresponding electri-
Technologies for the cal and automation technology. Siemens will
delivery of a dry de- also provide monitoring services for production
dusting system. This and assembly, system testing, and start-up.
order adds to the After start-up, which is planned for Fall 2010,
company’s presence the emission thresholds of the steel plant will
and helps build its meet European standards. The project also in-
market leadership cludes a gas recovery system that collects and
in dry dedusting prepares the converter gas for subsequent en-
systems in China. ergy generation.
 Industry Journal | 03 | 2010 | Spotlight 07

Cell phones with LED flash

Osram Opto Semiconductors has developed an

LED flash specifically tailored to cell phones and
smart phones: Oslux is only 2.5 mm thick, which
makes it particularly suitable for mobile devices.
Additional benefits: At 150 lux, the light output
is one-third higher than the previous model.
Thanks to integrated UX:3 technology, the LED
flash can illuminate a wider area and provides a
more uniform light distribution. As a result, it is
more efficient at higher currents than previous
LEDs. Oslux is available with two different lens
types, which are already integrated and matched
to the beam characteristics of the UX:3 chip. This
ensures smooth, rectangular illumination of the flash evenly illuminates a diagonal of 90 cm. As
subject. The light distribution depends on the a result, sharp pictures can be taken even in low-
lens used. At a distance of one meter, the LED light conditions.

First turnkey railway system in India

Limited (RMGL), a joint venture of ITNL ENSO

Siemens has implemented a turnkey railway
system in India for the first time. The order
was placed by Rapid MetroRail Gurgaon
Rail Systems Ltd. (IERS), IL&FS Transportation
Networks Ltd. (ITNL), and Delhi Land and
Finance (DLF). The planned metro line will
connect Gurgaon Cyber City, the new business
and residential area some 30 kilometers south
of central Delhi, with the rest of the capital’s
metro network. In addition to the vehicles,
Siemens is providing all the electrification
and signaling technology. During peak traffic
times, this will allow trains to arrive every
90 seconds. Up to 30,000 passengers per hour
will be transported. Completion of the 6.1-
kilometer metro line is expected by the end
of 2012.

New material for more efficient inverters

Frequency inverters for large electric motors

could become more efficient, powerful, and
reliable through the use of new materials. For
example, replacing silicon with the semiconduc-
tor silicon carbide as the diode material would
reduce power losses in the inverter by up to 15
percent. The economic potential is enormous:
large devices such as pumps for pipelines, com-
pressors for liquidizing natural gas, and ship pro-
pulsion systems are driven almost exclusively by
electric variable-speed motors. Their energy ef-
ficiency depends in large part on the use of high-
performance frequency inverters. This summer,
Siemens and a number of partners established German Federal Ministry of Research and Educa-
a corresponding research project, funded by the tion to the tune of around 1.7 million Euros.
08 Industry Journal | 03 | 2010 | Spotlight
Spotlight
UNEP Report on Latin America and the Caribbean
Latin American and the Caribbean require long-
term environmental policies. It is the only way to
protect the region’s vast resources. This was the
conclusion of the recent “Latin Ameri­ca and the
Caribbean: Environment Outlook” report pub-
lished by the United Nations Environment Pro-
gram (UNEP). Due to demographic growth and
increased agricultural production, the region’s
demand for drinking water has increased by
Streets clean the air
Road surfaces could be used to bind hazardous
materials in the air, and reduce the percentage
of nitrogen oxide by up to 45 percent. This is
according to scientists at Eindhoven University
in the Netherlands. By using nanotechnology,
they were able to replace conventional concrete
with titanium dioxide. The titanium dioxide
acts as a catalyst, providing a self-cleaning road
surface. It captures the ultraviolet sunlight and
causes oxygen to bind with environmentally
damaging nitrogen oxide, which would other-
wise contribute to a rise in ground-level ozone.
Instead, this process produces harmless nitrates
and nitric acid, which would be washed away
when it rains. Nanomaterials are among the key
technologies of the twenty-first century. They
are already in use in many consumer products,
for example, as UV filters in suntan lotions, as
corrosion protection, or in scratch and stain-
resistant paints.
76 percent in just 15 years, to 264 million cubic
kilometers per year. At the same time, there are
50 million people in the region with no access to
fresh water. According to the UNEP report, fight-
ing poverty is critical to establishing authorita-
tive environmental policies. Furthermore, it is
a prerequisite for greater environmental aware-
ness and the effective implementation of sus-
tainable technologies.
 Industry Journal | 03 | 2010 | Spotlight 09

Energy for Peru’s Highest Hotel

Siemens has realized a com-

prehensive building solution
for the highest hotel in Peru.
At the 5-star “The Westin
Hotels & Resorts” in the capital
of Lima, Siemens implemented
systems involving power sup-
ply, building automation, and
security. The order was award-
ed by the Bovis Lend Lease real
estate group in recognition of
the well-known flexibility of
Siemens as well as the breadth
of its portfolio. As an additional
advantage Siemens products
and solutions operate in accor-
dance with NEMA/UL and IEC,
electronics standards that are
recognized worldwide. “The
Westin Hotels & Resorts” is
located in the center of Lima’s
financial district and sets new
standards in terms of security,
service, and comfort. It is al-
ready viewed as a symbol of
the continued growth in the
Peruvian economy. The hotel
is expected to open on the 1st
of May, 2011.

Driving without a driver

In collaboration with the Instituto Pedro Nunes

(IPN), an independent center for technology
transfer at the University of Coimbra, Portugal,
Siemens has just developed the “Move” autono­
mous transport system. This new solution is a­
small, environmentally-friendly transport system
for airports, hotels, natural parks and leisure
parks, that can be operated without a driver. The
“Move” mobility system was used for the first
time at a rehabilitation center in Tocha, Portu-
gal. There, the system has made the transpor-
tation of patients on the premises much easier.
The non-manned vehicle is steered by a Simatic
S7-300 control device, supported by various sen-
sors and actuators used to control vehicle mo-
vement and minimize collision hazard. Siemens
also supplied a range of devices for the “Move”,
including pulse counters, servo control units,
and an RFID reader. The RFID reader is used to
control both the stops and the various speed
phases of the vehicle.
10 Industry Journal | 03 | 2010 | Performance

Focus: Innovation management

The secret of successful

innovations
Decade after decade corporations have been looking for reproducible formulas

that transform new ideas into marketable and profitable products. They analyze

champions of innovation, benchmark, research, and test. And more often than

not, what they finally come away with is that the rules for success used by other

corporations and markets are not transferable. Yet nearly all innovative corpora-

tions live by three essential truths.

 Industry Journal | 03 | 2010 | Performance 11

“Managers who forget how to

dream and envision throw away
the future of their companies.”

Peter F. Drucker, US economist

12 Industry Journal | 03 | 2010 | Performance

It costs the pharmaceutical industry a

fortune when developments go wrong.
That’s why companies like Bayer AG
(top) use a specially structured innova-
tion management process.

Money alone can’t buy happiness. And it won’t
make you innovative, either. These were the
rather sobering conclusions that Booz Allen
Hamilton, an international consulting compa-
ny, reached in 2005. Across the globe the sales
numbers of 1,000 companies with the highest
budgets for research and development (R&D)
were compared. These efforts were for naught
because it was not possible to draw a correlation
between the trends for sales, earnings, or share-
holder value and the size of the R&D budget.
Equally futile is the option to drastically re­
duced R&D activities, because companies that
fail to create avenues for new products are tra-
veling down a dead-end street. “Companies that
produce have to be innovative to differentiate
their products from the mass market. Innova-
tions are often the only way to obtain suitable
margins, especially in stagnating markets ruled
by strong competition,” claims a current study
by Bain & Company, a global management con-
sulting company.
Innovations are natural enemies of what
exists
according to Rolf Berth, a German psychoanalyst
and ma­nagement consultant, every single per-
son interested in change is opposed by five other
people equally interested in maintaining the sta-
tus quo. “Large companies tend to defend their
success. Innovative ideas are usually put on the
back burner,” says Reinhold Achatz, head of Cor­
porate Research and Technologies of the Central
Research group at Siemens. “The objectives of a
business unit are frequently aligned with quick
rates of return. This makes it difficult for new in-
novations, especially those of seemingly disrup-
tive and radical nature, to be given the neces-
sary time before they turn profitable,” confirms
Klaus Streubel, CTO of Osram. “Large companies
like Bosch that are not listed on the stock market
do not need to hurry innovations to market.”
“Never change a winning team” – this soccer
rule can apply to products as well. And occasion-
ally – usually in low-tech fields – there is a Coca
Cola, a Big Mac, or a Post-It Note, products that
change only slightly over the years but continue
their success story for decades. But even compa-
nies that profit from these proven workhorses
innovate to enter new market segments.

Many companies are faced by this dilemma. In- Companies that rely for too long on proven prod-
novations are the natural enemy of what exists, ucts, especially in technology-driven sectors,
what works, and ergo what should be continued disappear quickly from the marketplace. For
for these very reasons. In large organizations, example, as established by the industry associa-
 Industry Journal | 03 | 2010 | Performance 13

tion Spectaris, more than 30 percent of sales in

the German medical engineering sector is gen-
erated by products that were not on the market
three years ago. For the overall German econo-
my, the Center for European Economic Research
(ZEW) in Mannheim determined that new prod-
ucts accounted for a good 16 percent of sales.
Innovation methods specific to the industrial
sector
But how will companies be successful with new
products when money and good ideas alone
simply fail to pass muster? The answer lies in a
system that may vary greatly from country to
country, from sector to sector, and from com-
pany to company. Google proved this point by
allocating 20 percent of the employees’ work
hours for projects that had nothing to do with
their actual jobs. It helped the company to stay
in touch with real-life needs and to recognize
new opportunities. The technology company 3M
has set aside 15 percent of work time as well as
a financing fund called “Genesis” to give its em-
ployees the means for developing innovations –
again, proposals and follow-up are tied into a
structured process.
However, in the food or automobile industry,
classic market research appears to be successful.
It does have its limits when the objective deals
less with detecting needs and adapting product
developments than with defining new products.
Years ago, when General Motors developed a
questionnaire designed to find out what the
average customer wanted in a perfect car, the
results looked very much like a – Toyota.
Cooperation leads to success
Siemens’ ongoing interest has the company enter
into new and highly promising cooperative agree-
ments with universities, research institutes, and
industrial partners to expand its innovation portfolio.
“It has helped us to generate numerous solutions that
sustainably support our business,” reports Dr. Dieter
Wegener, CTO of Siemens Industry Solutions. The
closest form of cooperation is the “Center of Knowl-
edge Interchange” (CKI) with academic institutions
worldwide. They are established directly on the cam-
pus of partner universities and headed by a Siemens
manager. Responsible for a wide range of activities,
this manager coordinates the cooperative efforts,
identifies the most important cooperation partners,
organizes workshops, and places students with the
Siemens student programs. Currently, ten different
CKIs are active, among these are the TU Munich, DTU
Copenhagen, Tsinghua University, Beijing, MIT in
­Boston, and the University of California in Berkeley.
Even closer forms of cooperation for more innova-
tions are Technology to Business Centers (TTB). A
number of Siemens Divisions participate financially
as well as professionally in independent young com-
panies that are working closely with partner univer-
sities. For example, California start-up company Pro-
gressive Cooling has developed an extremely bright
and efficient light source (see photo below) from LED
lamps, which is based on a concept developed at the
University of Cincinnati. The TTB in Shanghai is also
involved in LEDs. In its Outside-In-Innovations strate-
gy, TTB includes potential vendors who can be used
for introducing technologies from third parties.

Lots of studies, lots of recipes for innovation

Because new products are so important for the

success of a corporation, there are always stud-
ies underway trying to determine the secrets
of innovative companies. In a study by McKinsey
& Company, a corporate consulting company,
three elementary characteristics were deter-
mined after examining how innovations were
produced at 28 American and European cor-
porations. Corporations that showed the best
results recognized their project goals early on
and defined them quite clearly. They favored a
strong project culture and were in close contact
with their customers for the duration of the
project.

A study by the European Foundation of Quality

Management (EFQM) reached a different con-
clusion that does not necessarily contradict the
other results. The findings of the EFQM: The
most important factor for successful innovations
14 Industry Journal | 03 | 2010 | Performance
Predicting the future
Siemens has two central tools in place for detecting
trends and possible business models early on:
“Picture of the Future” and “Innovation Benchmark-
ing.“ The “Picture of the Future,” a central tool for
innovation management at Siemens, is used to get
a clear idea about how to move successfully into the
future. For one, road mapping is applied, that is, to
update known technologies and product families for
the future. This method estimates at what point in
time certain technologies will be available as well as
needed.
Known disadvantages: it is not possible to predict
leaps in innovation or discontinuities. To be able to do
just that, Siemens developed future scenarios for 10,
20, or 30 years from now in parallel to the “Picture
of the Future.” These scenarios also include, for exam­-
ple, assumptions regarding social or political changes,
developments in the world economy, demographics,
or changes in climate. From these data, Siemens de-
rives tasks that have to be resolved today to be suc-
is good corporate governance and management,
followed by corporate culture, market research,
and, last but not least, the structure and organi-
zation of innovation processes.
Results after decades of research
The mountain of scientific and empirical research
shows that there are no surefire formulas. Inno-
vation researcher Holger Ernst, professor and
chair for Technology and Innovation Management
at the internationally renowned WHU Otto Beis-
heim School of Management near Koblenz and
head of the “innovation success panel to improve
innovation management by benchmarking” com-
pared dozens of innovation studies over several
decades. The bottom line is that although every
market situation is different, there are a number
of elements that have been of steady importance
to the success of innovations for decades, across
industrial sectors and continents.
cessful tomorrow. The combination of these meth­
ods helps to identify areas with growth potential
and broad effects as well as to detect future cus-
tomer expectations and business possibilities. In the
final analysis, the technology selected by Siemens
hinges on two questions: How large is the market
and what is the expected market growth? And what’s
more, does Siemens have the necessary expertise
or can it be obtained for the right price? “This trend
diagnostic method has proven to be excellent,” says
Dr. Albert Wick, CTO of the Industry Automation and
Drive Technologies Divisions.
Innovation benchmarking, on the other hand, is a
valuable basis for improving innovation manage-
ment. Business Units are analyzed to determine
whether or not they have the prerequisites for suc-
cessful innovations. Based on a number of criteria,
strengths, and weaknesses as compared to the com-
petition are defined.
1. Formal product development process
It has to include the entire process and be fully
defined for all areas of the project. It is not just
a question of getting volatile elements like crea­
tivity or inspiration back on track again, but rath­
er on how to proceed in a structured manner
from the very beginning.
As Holger Ernst knows, “the quality of plan­-
ning prior to entering the development phase
decides the success of the product.” As part of
this process, Siemens uses, for example, the
“Picture of the Future” method (see box above)
for the early detection of trends and future
technologies. Within its Strategic Management
Innovation (SIM), Osram has gone as far as es-
tablishing a central special department for dis-
ruptive innovations – new products that usually
meet with the greatest resistance in-house. At
Bayer AG, innovation management includes a
“Stage Gate” process: To minimize the risk for

development projects, gates (stopping points)
are defined early on. When reaching one of
these gates, the development is tested and – if
required – even stopped. There is rarely a suc-
cessful international company that does not use
a formalized, although widely differing, model –
be it Phase Gate (BASF), Integrated Innovation
Management (Beiersdorf), or SIMPL (Procter &
Gamble).
2. Continual commercial evaluation
Innovations as such are not valuable – they
have to create value. At times, in their state of
euphoria, participants in the process could lose
this simple connection. The study “Next Genera-
tion NPD” by Droege & Comp., a consulting com-
pany, claims that 85 percent of all CEOs noted
the lack of sufficient information about the in-
trinsic value of new products within the frame-
work of innovation control. That’s why it is
necessary to separate the wheat from the chaff
Industry Journal | 03 | 2010 | Performance 15
The next LED generation: organic LEDS (OLEDs)
are extremely thin light-emitting assemblies
that can be both transparent as well as flexible.
An employee makes a visual inspection after
metallizing the organic semiconductor mate-
rial.
at exactly defined points within the innovation
process – similar to Bayer’s Stage Gate process.
“The market is changing rapidly, due in part to
new competitors from the IT field who want to
get into our business. For this reason, we put a
lot of energy into commercializing new software
applications in our products, for example ener-
gy efficiency or building energy management –
and we are going to step up these efforts in the
future,” says Helmut Macht, CTO of Siemens
Building Technologies.
The most important for Holger Ernst is the de-
cision made at the end of the design phase for
an innovation. Personnel and finances increase
drastically for the subsequent development
phase – meaning that resources should be fo-
cused on the most promising products. One of
the most innovative chemical corporations in
the world, 3M in the US, has made this reaso-
ning its mantra. Three out of four designs for
16 Industry Journal | 03 | 2010 | Performance

Moving toward a digital factory

When it comes to optimizing the production pro-
cess, the Siemens Industry Automation Division is
renowned as a trendsetter around the globe – from
product development and planning to production
planning and manufacturing. The product portfolio
of the Division integrates both the real and digital
worlds of products and production. This is highly
beneficial for customers, as they particularly profit
from a drastically shorter time to market.
Universal system for all data
In the beginning, new products are nothing more
than mere ideas in the minds of engineers and mar-
keting experts. But once they are put down on paper
or in the computer, they take shape. To become real,
they need to be produced. The cycle from idea to
market introduction includes many individual steps.
Currently, they are based on closed standalone sys-
tems.
For an optimal process run, all data have to be sys-
tematically integrated across the entire value-added
chain in a universal system. Siemens realized early
on the need for integrating industrial software. With
the “Totally Integrated Automation” solution, the
company created a worldwide leading concept in
automation technology on the basis of these prod-
ucts that are for one individually competitive, but
also offer customers significant additional use when
integrated.
Homogenous information structures
Siemens traveled a similar road in the product life­
cycle management (PLM) area with the “Teamcenter”­
solution. This platform combines product data gen-
erated during the development with information
from many other parts of the company – even up
to data from vendors. This interaction guarantees
homogenous information structures that are the pre-
requisites for a digital factory.

new products don’t clear the internal hurdle.
Not because they would have been so awful, it is
just that other products are even better.
3. Customer orientation
Customers are not just the recipient of innova-
tions but quite often the actual trigger. Keeping
those from heads of business units (35 percent)
and in-house R&D departments (33 percent). An
excellent example for close cooperation between
customers and developers are the innovations for
liquid crystal production at Merck in Darmstadt.
Cell phone and TV producers decide on the ideal
characteristics for their next screen – and Merck

41%
this in mind, innovative corpo- goes ahead and locates the right
rations work closely together liquid crystal mixture. Another
with their customers. “Creative corporation, Procter & Gamble,
entrepreneurs have to know is going as far as planning to
what is technically possible; create half of its new products in
they also have to know what of companies consid- response to customer proposals.
customers want, how the glob­ Most notably, in the invested
al value-added chain can be er their customers assets sector, vendors in their
optimized, and how solutions to be the most impor- role as worldwide specialized
can be brought to market,” says problem solvers in development
Reinhold Achatz, the head of tant source of inspi- partnerships are increasingly
­Siemens Research. ration for innovation. adding to the creation of inno-
vations.
A study on service innovations
at Oestrich-Winkel, a European business school, Customer feedback as a standard tool
shows that managers consider customer pro-
posals the most important source for ideas. A To understand customer needs and as a method
questionnaire by the European Intelligence Unit for determining market changes, questionnaires
confirms these findings. Accordingly, 41 percent are required that are based on clear evaluation
of companies worldwide consider their customers criteria, allow for comparison among compe-
as the originators of their best ideas, followed by titors, and also target improvements. Siemens
 Industry Journal | 03 | 2010 | Performance 17

Worlds grow together

Product development, production, and production

automation have been separate worlds so far in
terms of data processing. This will change in the
coming years thanks to an extensive integration
approach from Siemens. Using the “integration
platform” solution, product data will be digitally
and seamlessly used for the planning, simulation,
and control of production processes. The result: in­
creased performance of the individual products and
a considerably improved working environment.

Currently Siemens, together with important custom-

ers in their respective industries, is developing con-
sistent concepts and is ensuring their practicability
in order to accelerate time-to-market by up to 50
percent. Siemens’ own experience as an industrial
company plays an important role in this process, as
challenges equal those of the customers when it
comes to increasing productivity, flexibility, and ef- Using software from Siemens, com-
ficiency. panies can carry out virtual develop-
ment and testing of their products and
production processes – the complete
lifecycle.

sends out these types of questionnaires on a
­regular basis as “Lead Customer Feedback.”
However, innovation researcher Hugo Wernst
warns against catering too much to individual
customer needs: “When the focus settles too
much on just a few customers, niche products
may be developed that reduce the success of
new products.” He also recommends looking at
market requirements as such. “If Henry Ford
would have listened only to the wishes of his cus-
tomers, he would have upgraded horse-drawn
buggies instead,” warns Stefan Thomke, profes-
sor at the Harvard Business School.
Yet that very year, the Toyota Prius came on the
market, using a similar technology. It was Toyo-
ta who managed the breakthrough. Today, ap-
proximately 400,000 vehicles are sold per year,
primarily in the US, followed by Europe and
Japan. And that in the face of massive resistance
from the manufacturer’s own people. For a time,
as Holger Ernst tells it, the developer at Toyota
was joined by just one other fan – the Chairman
of the Board.

But even if a corporation does everything right,

successful innovation cannot be guaranteed.
The bumpy road of a product, highly praised
today, is well illustrated by the example of the
hybrid engine. It was developed and brought to
market by Audi, one of the most innovative car
manufacturers. In 1994, the Audi 80 duo was the
first hybrid production car worldwide. Unfor-
tunately it did not sell. It may have been priced
too high, or the time was not right for the drive
concept, or perhaps it was some of both.
Anyhow, the car was taken out of production in
1997.
18 Industry Journal | 03 | 2010 | Performance

Innovations that Siemens Industry predicts for

its fields of business until 2020

Industry Automation

It will be crucial for producing companies to bring goods to

market faster and to produce more flexibly to meet individual
needs and fast-changing markets. Siemens integrates product
and production engineering – from the first idea to the com-
plete product. With industry automation and industry software,
the entire value chain of producing companies is optimized –
enabling customers in both factory and process automation to
reduce their time-to-market by up to 50 percent.

Mobility

The key requirements will be sustainability, multimodality, and

efficiency during operation and will be met by innovative prod­
ucts. In turn, this will lead to products such as a zero-emissions
train, a train concept where no emissions are created, from pro-
ducing energy to operating the train. The Vectron generation
of locomotives, which already exists, points the way forward: it
can be applied nationally and across borders for passenger and
freight trains. The different performance classes and voltage
systems enable flexible configurations, and country-specific
automatic train control systems are easily replaced or supple-
mented. There will also be completely new fields of activities,
for example, in electromobility.

Drive Technologies

In industrial facilities, highly-efficient electrical drive

technology such as compressor stations for oil and
gas, or electrically powered vehicles, are used to re-
place comparably less efficient combustion engines.
Intelligent status monitoring of the entire drive train
would increase the productivity and reliability of
production systems, and machines. Customers are
being encouraged to install energy-efficient motors
in production (see image).
 Industry Journal | 03 | 2010 | Performance 19

Industry Solutions

In the area of environmental technology developments and

solutions will emerge that help reduce environmental damage.
These could involve reducing or converting CO2, or preparing
and desalinating water in an energy-efficient way.

Siemens’ saltwater desalination is based on separating electri-

cally charged sodium and chloride ions of the salt. In the picture
to the left, a water sample is taken from the pilot installation for
ocean water desalination for a taste and odor test.

Building Technologies

In the future communication will be entirely IT and

IP based. This sector will see net zero-energy build­
ings. In decentralized Smart Grids, smart buildings
will effectively coordinate energy supply and stor­
age. The Green Building Monitor will not only visual­
ize current energy consumption, it will also provide
information for the useful incorporation of abstract
data. In addition, building information models (BIM)
will arrive on the scene; that is, integrated building
models ranging from planning to operation.

Osram

Soon enough, there will be special energy-saving lamps, mod­

ules, and lights (LED, OLED) as well as new designs, including
the integration of light into the construction material. Another
step is light-management systems that are as easy to operate,
as the Internet, and will be integrated into building manage-
ment systems. Other interesting developments involve off-grid
lighting systems. Additionally, there are high-performance laser
and LED projectors like the pocket projector by 3M that can be
connected to notebooks, cell phones, or cameras.
20 Industry Journal | 03 | 2010 | Performance
Disruptive and radical innovation research at Siemens
Open Innovation (OI) – this term describes how to
generate approaches, competencies, expertise, devel­
opments, or suggestions from experts, customers, or
suppliers outside the corporation. It includes top uni-
versities and research institutes from all over the world
as well as customers, think tanks, other industrial sec-
tors, start-ups, venture capital companies, employees,
and even competitors. “For companies with a global
base that possess a great deal of in-house knowl­
edge, Open Innovation is a wonderful opportunity.
Researchers from different departments are able to
bundle their knowledge and leverage synergies,” said
Frank Piller, professor for Technology and Innovation
Management at RWTH Aachen. Huschke Dietmann,
CTO of Siemens Mobility wholeheartedly agrees: “We
are applying diverse Open Innovation approaches
to utilize ideas from outside established networks.
They will gain in importance.” For the systematic use
of OI, Siemens has established an OI department for
internal and external activities. Siemens won second
place for its knowledge management and OI activi-
ties associated with the study “The European Most
Admired Knowledge Enterprises (MAKE)” by the mar-
ket research company Teleos. For OI, Siemens relies
essentially on four methods: Internet-based network
developments, competitions regarding ideas with and
for customers, moderated Internet discussions, and
personal roundtable discussions.
Expert networks
Online networks proved to be especially successful. In
this case, e-brokers are included when dealing with es-
pecially challenging research. They get external prob­
lem solvers to contact Siemens: Siemens publishes
research questions and explains the problems involved
on the Web pages of e-brokers, for example NineSig-
ma, vet2come, or Innocentive, and offers a reward for
the best solution. And that solution could come from
Research institutes
Universities
Additional
industrial sectors
Public contracting
entities
Think tanks
a large IT company in India or from a student in Korea,
a professor in the US, or a hobbyist in Germany. To
date Siemens has managed to solve about half of its
problems – one of them was for an especially fast and
efficient mail automation.
Employee network
TechnoWeb is based on the same principle. It is a
closed Internet forum for registered Siemens employ-
ees. Every employee can offer his or her solution to
problems or answer questions ranging from compli-
cated technical issues to operating difficulties with
Microsoft Word. This also makes TechnoWeb a tool for
networking researchers from different departments
within the company.
Innovation jams
Innovation jams are Web-based, usually company in-
ternal, moderated discussions with hundreds or even
thousands of participants. In 2009 Siemens asked how
future information and communication technologies
like cloud computing could change business, and in
return received hundreds of valuable responses.
Ideas competitions and roundtable discussions
When Siemens holds ideas competitions, it calls on the
creativity of its customers by having them participate
in finding new product ideas, usually via online plat-
forms. Different from expert networks, the emphasis
in this type of crowd sourcing is not on technologically
mature solutions, but rather on innovative stimuli. In
2009 Osram held an ideas competition for low-cost
and simple lighting solutions, and received over 600
mostly marketable solutions. Moreover, researchers
at Siemens meet at least once a year with important
partners in the market, and these include colleagues
from Philips, a Siemens competitor.
Lead customers
Competitors
Start-ups/
Venture Capital
companies
 Industry Journal | 03 | 2010 | Performance 21

Angel Gurria is the Secretary-General

of OECD – recently the institute pub-
lished its own innovation strategy.

Focus: Innovation management

Master plan for progress

For the first time in its history, the Organization for Economic Cooperation

and Development (OECD) has developed its own innovation strategy. Its

economists view that a global growth in innovation activities is the central key for

solving humanity’s urgent economic and social problems. The OECD has

outlined three vital fields that will determine the innovation capacities of

companies and countries – and offers its support as an innovation consultant.

We simply can’t go on like this: the global year-
ly CO2 emissions will more than double if the
global economic development of the last decade
were to continue for the next four decades. Ac-
cording to the computation of the International
Energy Agency, this scenario will result in 62
gigatons of CO2 in the year 2050 – this is simply
inconceivable!
We have to stop this: the global yearly CO2 emis-
sions would be reduced by more than half if the
global economy decides to go in another direc-
tion during the next four decades. 14 gigatons
CO2 in 2050 – that means 40 gigatons less than
in the first scenario, as calculated by the IEA,
which is simply fantastic.
22 Industry Journal | 03 | 2010 | Performance
Contribution of key technologies to climate change mitigation
CO2 emissions in gigatons per year
70
60
50
40
30
20
10
2005 2010 2015 2020 2025 2030 2035
Technology makes the difference between these
scenarios. Forecasters at the IEA have planned a
considerable increase in research and develop-
ment for the sustainable path into the future –
for example for the efficiency increase in energy
production and distribution as well as improve-
ments in renewable energies (see figure above).
But while new technology alone can make
changes possible, it cannot effect them. To do
that, it has to be implemented in new products,
has to enter and sweep the market place. In
short: it has to become an innovation. And that
does not happen by itself. The invention of an
X-Y pointer at the Xerox Research Center in Palo
Alto did not advance humanity by one single
step. It took Steve Jobs borrowing the invention
and marketing a computer mouse that went on a
victory march around the world.
If humanity wants to solve the economic, social
and ecological problems of the 21st century, it
has to accelerate progress. This is why the OECD,
actually more of an economic research institute
of industrial countries, published an innovation
strategy for the first time. “Growth based on in-
novation activities,” so the organization “makes it
easier for governments to take measures for
coping with urgent social and worldwide chal-
lenges, for example climate change.” That the
OECD is taking the initiative right now is also
part of the developments that led to current
financial and economic crises.
Especially in those countries that created a real
estate bubble, such as the USA, Spain and Ireland,
CCS industry and
transformation 9%
CCS power generation 10%
Baseline emissions: 62 GT
Nuclear 6%
Renewables 21%
Power generation efficiency
and fuel switching 7%
End-use fuel switching 11%
End-use electricity efficiency 12%
End-use fuel efficiency 24%
International Energy
Agency (IEA); Basis: IEA World
2040 2045 2050 Energy Outlook 2007
strong growth was created but could not be sus-
tained – because innovative strength fell by the
wayside. According to the OECD this should not
happen again in the next economic cycle. “The
innovation activity connected to the introduction
of new or greatly improved products, actions, or
methods will play an increasingly essential role
as a motor for growth and jobs, as well as a higher
standard of living.” To this end, the innovation
strategy of OECD is activating three different
levels:
1. Human innovative potential
Human resources will increasingly become the
decisive production factor not only for corpo-
rations, but also for public and social organiza-
tions. To date, in countries such as Finland or
Denmark, the contribution of human resources
adds already more to the growth of labor pro-
ductivity than investments in real capital (see
the figure at top of next page). To increase hu-
man resources, according to the OECD, a reorien-
tation of the educational system as well as the
support of companies is needed.
In the educational field, the greatest challenge
is “to recognize the decidedly important role of
universities with respect to innovation activities
instead of just viewing them as a provider of
important public assets as is frequently the
case.” For that purpose, “independence, compe-
tition, excellence, corporate initiative, and the
flexibility of universities” have to be promoted.
 Industry Journal | 03 | 2010 | Performance 23

Intangible capital accounts for large share of labor productivity growth from 1995–2006 (in %)
7
Labor productivity growth

6
Contribution from tangible capital

5 Contribution from intangible capital

1 Source: OECD, based on Coinvest

(www.coinvest.org.uk) and
country studies
ia

ic

en

ce

lia

ria

ly
an
ar

nc
an
ai

pa

ai
US
bl

Ita
ak

ee

ra
ed

st

Sp
rit

nm
pu

rm
nl

Ja
ov

st

Au
Gr

Fr
Sw

tB

Fi
Re

Au

Ge
De
Sl

ea
h

Gr
ec
Cz

Additionally, special attention has to be given to
the education of future entrepreneurs because
they play a central role in both the development
and implementation of innovations. Although
this combination has been well-known for some
time, educational and training policies still do
not take this into account. Only a very small sec-
tion of the population receives an education that
prepares them for entrepreneurship.”
2. Corporate innovative potential
Without entrepreneurs it would not be possible
to convert ideas into products and jobs. This is
why OECD considers it necessary to facilitate
both market entries as well as market exits for
corporations. Young companies in particular
would benefit if requirements for founding busi-
nesses would be simplified. As experience tells
us, these young companies often seize opportu-
nities that are not implemented by already exist-
ing corporations.
But, a society’s capacity for innovation increas-
es also due to the market disappearance of
unsuccessful companies. “The reallocation of
resources for the benefit of more efficient and
innovative companies is of decisive importance
to innovation and economic growth.” When cor-
porations’ capacity for growth expresses itself in
success on the market, the next hurdle is already
waiting in the wings. In most countries, admin-
istrative, social, and tax regulations increase with
the size of a company – in short, growth is pun-
ished rather than rewarded. The OECD advocates
that all regulations that increase the cost for
growth are put under scrutiny.
3. Knowledge of corporations and society
While the markets for goods and finances have
been globally organized for some time, the
development of knowledge markets is still in
its infancy. The OECD addresses deficits in this
instance – these include the protection of intel-
lectual property as well as the transfer of knowl-
edge between business and the sciences up to
information access in the public sector. While
the last point addresses politics in the main re-
questing easier access and use of public data,
the OECD strategy agitates for “a multitude of
cooperative mechanisms” for knowledge transfer
and the handling of intellectual property.
The only problem that OECD faces with its inno-
vation strategy is that the agency itself cannot
implement anything. Instead, it relies on those
who seize its suggestions having their own edu-
cational, research, and development budgets.
Accordingly, their strategy concept does not end
with an action catalog, but rather with an offer:
“The OECD is ready to support governments as
well as international entities in applying the in-
novation strategy.”
More information and downloadable
innovation strategy (60 Euros):
www.oecd.org/innovation/strategy
24 Industry Journal | 03 | 2010 | Performance

Focus: Innovation management

Improve or innovate? Innovations

during the lifecycle of a product
By Ken Hutt, PhD, and David Rosenblum, principals at Deloitte Consulting LLP

Innovations must not necessarily be groundbreaking new inventions, they can also

be the further development of successful, existing products. However, only companies

that know the right time to cease developing existing products and turn their atten-

tion to new things, experience long-term success.

Managers who want to ensure healthy growth
patterns for their companies have to ask them-
selves two important questions: When is innova-
tion necessary? And what should it be?
To answer these questions, innovators of prod-
ucts and services often create competitive ad-
vantages that are improvements of existing of-
fers. However, every innovator knows the limits
of this approach. Simply because at one point or
another, the market no longer rewards additional
product refinements – even if they greatly improve
the quality of a particular product. And what makes
matters even more complicated for a manager is
that waiting for a product to mature, is a dead-sure
strategy for failure. A soft transition to the next
product generation requires that investments in
“improvements” or “innovations” are coordinated

early on in the process. Only when these prere
quisites are met, can managers count on conti-
nuous and profitable growth.
This lofty goal requires theoretically substanti-
ated as well as practical models that allow us to
estimate the developmental stages of a product:
Is it the next big thing, the dernier cri of today?
Or is it just a faint reflection of days past? The
favorite for managing this Herculean task is the
concept known as product lifecycle. Accordingly,
the product goes through four predictable stages:
introduction, growth, maturity, and demise.
The concept known as product lifecycle
The principle of this concept is basically a sim-
ple one: Invest heavily in improvements when
the product is in the introduction and growth
phase to earn as much as possible in the elated
marketplace. During its maturity and demise
use it as a cash cow to get as much investment
monies as possible for the next big thing.
At the core of the product lifecycle concept lies
the phenomenon that is consumers’ enthusi-
asm for innovations. They who always treasure
new things, buy first – everybody else buys
later. However, in more dynamic markets where
products change frequently and consumer re-
quirements develop at a similar rate, it is no
longer possible to sufficiently explain customer
reactions based on their enthusiasm for innova-
tions. What’s more: the key to understanding
is no longer the acceptance of a product, but
rather the size and growth of the market.
The product lifecycle mechanism in dynamic
markets
Let’s look at the problem from another perspec-
tive. In this case, it is not the product targeted
by the analysis. Instead, it centers on the inno-
vation that makes a product such as hardware
solutions dynamic, for example. The core of this
approach is that products change over time, and
that consumers select products that satisfy their
requirements more effectively than others.
Take Intel as an example. It is one of the most
successful companies of the digital age. Origi-
nally the company manufactured memory chips,
so-called DRAMs, however in the eighties the
Industry Journal | 03 | 2010 | Performance 25
company became famous for its processors. Ac-
cording to today’s standards, the first Intel chips
were not very performance-oriented. Back then,
they were not even good enough for the main-
stream market, namely, the manufacturers of
large processors and mini-computers. For this
reason, Intel had to try and enter a relatively un-
demanding market – the pocket calculator.
Yet in order to expand its business, the company
had to contact more demanding customers. As a
result, the company decided on higher proces-
sing speeds and power – although neither see-
med to be quite in the realm of the possible. But
the temptation – greater profitability and faster
growth – was enormous.
And the company’s efforts paid off. Intel ac­
tually managed to make a number of improve-
ments in processor speed and power previously
thought not possible. Different from what the
product lifecycle theory predicted, none of its
new chip generations went through the typical
introductory phase. Instead, it gave wings to the
growth already present in this industrial sector.
The three reasons for this: Early adopters, who
had already bought the new technology, realized
that they needed more and more processing
power. So they started to update. Newcomers to
the business concluded that the new computer
generations finally showed enough power to
meet their requirements for simple software
with intuitive graphical user interfaces. And the
increase in processor speed contributed – toge-
ther with improved storage drives – to replacing
mainframes and mini-computers with distribut-
ed computer architectures.
In essence, these improvements were sustain-
able, because they allowed Intel to continue on
the road to increased performance, a road that
could be labeled as one of “more speed and pow-
er.” Each new chip generation brought higher
prices and higher profit margins. And as long as
the market rewarded sustainable improvements,
Intel could consider itself in the growth phase.
The trick now is to recognize when this strategy
is no longer successful: the very time when im-
provements no longer meet customer require-
ments. This can be determined by studying the
decline in price of successive chip generations.
When the price has to be reduced shortly after
market introduction, it is safe to assume that the
26 Industry Journal | 03 | 2010 | Performance
demand of the mainstream market has dropped.
It is now high time to invest less energy into im-
provements and more into innovations.
From improvements to innovations
The new version of the product lifecycle con-
cept allows companies to detect impending
“overshoots.” Obvious indicators are higher and
sustainable prices for continuously improved
products. But that means only half the battle is
won. How should one react to this realization?
Intel’s competition, AMD, shows one possible
strategy. In 1999, the company introduced a
cost-effective chip that helped it reach about
44 percent of the desktop PC segment in the
US retail sector, outperforming Intel’s sales in
that space for the first time. This was due to the
increased sales of PCs with a price tag of under
1,000 US dollars. The clock rate of these chips
was slower than what was possible for other
“high-end” chips, but more cost-effective.
However, to manufacture more cost-effective
chips that have to perform at a certain level is not
considered an improvement. Instead, it is basi-
cally a new innovation. The challenges are not so
much technical know-how as they are a question
of the business model used. What is important
now are the cost structures and target groups.
Although still faced with considerable technical
requirements, Intel had to suddenly set other pri-
orities and radically reinvent its own business.
When the performance-driven market was
still in its growth phase, the price-dominated
market was entering its introductory phase.
This market, so successfully tapped by AMD,
was considerably smaller and less profitable
than the one that had captured Intel’s focus. To
maintain its growth long-term, Intel had to re-
route its resources – away from lucrative, dead
sure investments in continuously faster chips to
a market of less volume and lower profit mar-
gins. Products to date could not be improved
further using long-term innovations. Instead, a
new business model had to be created that also
reached customers not included in the previous
core business.
The necessity for this change results from the
underlying dynamics of technology. While Intel
chips have improved steadily since the eighties,
so have the processors of the competition. The
phenomenon of having a market leader attacked
by competitors, who earned their spurs in see-
mingly unattractive markets, is known as dis-
ruption.
When Intel finally introduced its inexpensive
Celeron chips line, the company subjected itself
to this kind of disruption as well. It gave Intel
the opportunity of enjoying continuous growth,
although the character of its innovations changed
from improvements (sustainable innovations) to
inventions (disruptive innovations).
Disruption theory as a basis for innovation
The concept governing the product lifecycle
explains the evolution of markets and the ac-
ceptance of innovations. However, to apply it as
a prognostic tool, it is important to understand
its basic mechanism. It is not enough to accept
the existence of product lifecycles as a given. We
have to understand why these types of lifecycles
exist. We use the disruption theory to illustrate
customer behavior in dynamic markets. This
theory makes product performance and custom-
er requirements the central point.
Performance improvements meet their limits
when customers don’t want to pay for them any
longer. That’s why every one-dimensional path
of a sustainable innovation will lead a company
from the pinnacle of success to saturation and
its ultimate downfall. If this occurs, pure prod-
uct improvements alone no longer allow the
company to grow further.
This is the time when the business model has
to undergo changes – changes that will realign
the company according to new target functions
while factoring in certain barriers. A company
will be able to translate continuous expansions
of the sector into growth and profitability only
by disrupting its own business model and in-
venting something new.
About the authors
The American, David Rosenblum (top), is di-
rector and national leader of corporate and
competitive strategy at Deloitte Consulting
LLP in Los Angeles. He also occupies a cen-
tral position in the Deloitte strategy and
operations business unit. His most recent
research projects concentrate on innovation
and growth in organizations.
Ken Hutt (bottom) from Scotland, has a
doctorate in physics. He is a consultant at
Deloitte Consulting LLP, and is a member
of senior management at the company’s
strategy and operations business unit. He
established the innovation and growth ser-
vice unit there, which applies the disruption
theory to make growth, and innovations,
foreseeable and repeatable.
This article was based on a chapter for the book ‘Innovations: Promise in the Future’
(Copyright 2004 Deloitte Development LLC), written by Michael E. Raynor
of Deloitte Consulting LLP, a Distinguished Fellow with Deloitte Research.
 Industry Journal | 03 | 2010 | Performance 27

Focus: Innovation management

Smart strategies in
newly industrialized
countries
In the past, newly industrialized countries like

Brazil, Russia, India, and China in particular were

renowned for their manufacturing. Recently,

however, these regions are increasingly becom-

ing sources of innovations that are subsequently

adapted to the demands of high-tech states.

28 Industry Journal | 03 | 2010 | Performance

In the Indian metropolis of Delhi, right in the
middle of the Quwwar-ul-Islam mosque, stands
a 7.3-meter-high steel column. Erected about
1,600 years ago, this colossus weighs a stag-
gering six-and-a-half tons. It bears impressive
testimony to the capabilities of the Indian met-
allurgists of old, not least considering that in its
1,600 years of existence, the steel column has
shown no signs of rust to date.
Until just recently, the secret behind this peculiarly
rust-free phenomenon remained undiscovered.
However, researchers at the Indian Institute of Tech-
nology in Kanpur have established that the iron in
the column contains large quantities of phosphorous,
which, under the local conditions there, forms a
protective outer layer against oxygen-induced rust.
Today, India is well on its way to becoming a pow-
erhouse of metal manufacturing. With plans to
expand its steel production extensively over the
coming years, it aims to become the world’s sec-
ond-largest steel producer by 2016. In around
ten years time, it is expected to generate an out-
put of 275 million tons of iron ore a year, com-
pared to 62.8 million tons produced in 2009.
Simple and economical manufacturing
Nevertheless, while high-technology countries
in Europe, and in the USA and Japan, all focus
firmly on the efficiency and flexibility of their
production, customers in India and China, by
contrast, want to produce their steel primarily
using simple, economical methods (see p. 37).
Whether steel, trains, building technology,
medical devices, automation technology, pow-
er plants, IT hardware, vehicles, or consumer
goods, this example illustrates a trend that is
currently a significant issue for international
corporations operating in traditionally industri-
al countries. Products for newly industrialized
countries such as the BRIC countries (Brazil,
Russia, India, and China) need to meet other
sets of demands, compared to those met by simi-
lar products in mature economies. “For the most
part, in these countries, the products which are
geared towards western markets are simply un-
affordable,” says Dr. Reinhold Achatz, director of
central research at Siemens. “That’s why ‘SMART
products’ are needed in these regions.”

India
With a population of 1.2 billion, India is one
of the largest markets in the world with an
average wage of a mere one US dollar an hour.
This calls for innovative and economical
solutions. Local conditions of this kind are
dealt with at best directly in the region con-
cerned, where solutions are sought and found
where they are needed, rather than from afar.
A typical example of this is Siemens camera
systems, which are both economical and low
maintenance.

Population: 1.2 billion

Average age: 25.9 years
GDP 2009: 3,600 billion US dollars
GDP per capita: 3,100 US dollars
 Industry Journal | 03 | 2010 | Performance 29

SMART products for newly industrialized workforce. Since 2004, Iriel, the Brazilian electro-
countries nics manufacturer, has been owned by Siemens
­Building Technologies (BT). The company de-
SMART is an acronym for simple, maintenance- velops switches and sockets specially designed
friendly, affordable, reliable, to meet the demands and the
and time-to-market. Time-to- purchasing power of local con-
market actually means time- sumers in that country.
to-market and profit, which
means that SMART products are Many industrial countries clas-
designed to generate profit as sify their products into groups
quickly as possible. “Of course, to designate them according to
applying knowledge of global of the international cor- the degree of technology they
technologies is essential here,” porations who increased represent. Siemens uses this
explains Mr. Achatz. “We orien- their investment in low- type of categorization in its prod-
tate ourselves on the market re- income countries gener- uct groups M1 to M3, for exam-
quirements of the newly indus- ally, in 2010, invested in ple. “M1 and M2 products are
trialized countries, however.” Latin America. geared towards the upper mar-
ket segment, and feature very
Building technology from modern design and technology
Brazil with some electric functions and light automation
functions,” explains Fernando Peiter, director
This also applies to Brazil. There, the demand of Siemens BT in Brazil. “For most consumers in
for affordable housing is high. In response to Brazil, these goods are too expensive. That’s why
the demand, the Brazilian government is push- we’ve developed affordable solutions with our M3
ing its national construction industry, which segment, which fulfill regional requirements and
employs about six percent of the Brazilian are produced locally.

Brazil
Preparations for large sports events are made
by the countries hosting them, long before the
events themselves. This also applies to Brazil,
which will host the world cup in 2014 and, two
years later, the Olympic summer games in Rio
de Janeiro. In preparation for these huge events,
the country is investing in twelve of its states to
modernize its infrastructure. Government policy
is currently placing an emphasis on the construc-
tion of new residential property. Both of these
policies call for SMART products (for example in
construction technology), which are adapted to
the needs of local consumers.

Population: 201 million

Average age: 28.9 years
GDP 2009: 2,000 billion US dollars
GDP per capita: 10,200 US dollars
30 Industry Journal | 03 | 2010 | Performance

China
From the workbench of the world to an empire of inno-
vation: 1.5 million researchers are employed in present-
day China. This amounts to 1.9 researchers per
1,000 employees. The difference between China and
high-tech countries like Germany remains significant
(7.2). However, with a total of 750 universities, the
country produces a staggering supply of young academ-
ics each year. In 2004 alone, the total number of grad-
uates amounted to four million. This is also reflected in
the number of patents produced in China, which mul-
tiplied sixfold between 2000 and 2009, while the USA
showed an increase of a mere 50 percent in the same
time period.

Population: 1.3 billion

Average age: 35.2 years
GDP 2009: 8,800 billion US dollars
GDP per capita: 6,600 US dollars

Upgrading simple products
The newly developed M3 switches and sockets
program from Iriel has also the potential to be
marketed throughout the whole of South Amer-
ica. This new program was designed also to
provide modules to new products within the M1
and M2 segments. This offers a clear cost advan-
tage for future launches of these products. This
approach is new and innova-
tive in that “almost” top-quality
products are being technically
trimmed to meet local demands.
More commonly, relatively
simple technologies are being
developed and then increased in
value. Siemens uses a dual mar-
ket strategy here. M3 products of Chinese companies
carry the Iriel logo, while M1 have declared
and M2 goods carry the Siemens innovation as their top
label. strategic priority.
“Contrary to popular thought,
the expansion of new develop-
ment capacity in the BRIC countries is not at the
cost of German engineers,” emphasizes Dr. Peter
Molnar, director of the strategy department of
Siemens Industry. “Two different paths of in-
novation are being followed here. In developing
countries, consumers are concerned above all
else with lifecycle costs, while in newly industri-
alized countries, the purchase price is usually
the deciding factor among consumers. Such sim-
ple solutions are best developed in the countries
where they are to be marketed, because native
engineers know best what is needed locally.” All
of this has contributed to the growth of the en-
tire organization.
“Since we began to concentrate
more intensively on the M3 mar-
ket, it has expanded greatly, and
in some business units it has
even doubled,” explains Mr. Mol-
nar. “The goal now is to in­crease
our market share in this segment
to the same level as our M1 and
M2 segments,” he explains.
“Today, the M3 segment accounts
for one-third of our global indus-
trial market. However, in this
segment we have a significantly
lower market share than in the
industrial average.”
Fire alarm systems from China
Fire detection systems from Beijing Siemens
Cerberus Electronics Ltd. (BSCE) are also typi-
cal M3 products, which, in just one year, were
 Industry Journal | 03 | 2010 | Performance 31

Russia
With a total land mass of approximately 17,000
square kilometers, Russia constitutes the largest
single land mass in the world. The country’s inter-
national significance as an industrial nation is based
in part on its wealth of natural resources, in oil and
natural gas in particular. However, its political and
economic aim is to reduce its dependence on the
export of raw materials and to increase its energy
efficiency. To this end, the government provides
extensive support to Russian research and develop-
ment in such initiatives as national target programs
to increase the salaries of scientists, the promotion
of young academies, and by setting up technology
parks nationwide.

Population: 139 million

Average age: 38.5 years
GDP 2009: 2,100 billion US dollars
GDP per capita: 15,100 US dollars

developed and successfully launched onto the
Chinese market in 2009. BSCE is part of the
Building Technologies Division, within the
framework of the “Global M3 Fire Safety” proj-
ect, to position its products on the entry-level
segment of the Chinese market and market them
in the other BRIC countries, too.
the entire value added chain is located here.
“We have implemented this by almost 100 per-
cent,” explains Mr. Guse. “Research and deve-
lopment for the entry-level segment as well as
the product management, the procurement of
materials, and the production itself are all loca-
ted here.”

BSCE’s portfolio ranges from components such
as central fire alarm systems, smoke and heat
detectors, manual fire alarms, and peripheral
devices such as connection modules for a range
of building technology requirements.
These were developed in China and fulfill all
requirements associated with SMART products.
High quality at a low price is the achievement of
these locally manufactured products which have
a competitive advantage over local competitors
on the one hand, and “on the other hand, our
Cerberus ECO, for example, is the most sim-
ple product to configure on the market,” says
Stephan Guse, CEO of BSCE and director of the
SMART competence center for fire protection
products in Beijing.
The center for fire protection products is also
located here, at the heart of one of the largest
and fastest-growing markets in this segment. In
order to be even closer to its customers,
In China, the Siemens corporate research de-
partment also has branches in Beijing, Shanghai,
and Nanjing, with a staff of 250 people working
on SMART and cost innovations. For the indus-
try sector, they have developed a condition diag­
nosis system for the pitching technology of wind
turbines, which positions the rotor blades in the
optimal position in response to wind direction.
This avoids damage to the pitch system and thus
to wind turbines. “Conventional systems use
vibration sensors which are relatively expensive
and require maintenance,” says Arding Hsu,
director of Siemens Corporate Technology in
China. “We are using a new method that analyzes
existing control and monitoring information
without the need for additional sensors.”
Openness to new approaches
The fact that these innovations are Chinese is
no simple matter of fate, says Mr. Hsu. “Develop-
ments in this country are shaped very forcibly
32 Industry Journal | 03 | 2010 | Performance

Strategic significance of innovation for companies (in %)

Brazil 27 37 33 3 Top priority

Top-three priority
India 35 44 21

Top-ten priority
China 41 51 8
Not a priority
BIC
36 46 17 1
countries

Mature 22 46 25 7 Source: BCG 2010 Senior

economies Executive Innovation Survey

0 20 40 60 80 100

GDP growth compared to previous year (in %)

Country 2010 2012 2014

China 9.6 8.3 8.1

India 7.7 8.2 7.9
Brazil 5.5 4.9 4.6
Eurozone 0.8 1.6 1.9
USA 2.5 2.0 2.3
Japan 1.5 1.2 0.9
Source: European Intelligence Unit

by market demands here, rather than by what
is technologically possible in and of itself,” says
Mr. Hsu, who incidentally lived in the USA for 30
years. “In China we need affordable solutions.
That’s why developers here are open to trying
new approaches.” In the long term, customers in
industrial countries also benefit from Chinese
technical innovations which can be introduced
to their markets later.
Innovations from Russia
Siemens Mobility is also working on tailor-made
innovations together with its local partner in
Russia for the growing market there. Together
with the Russian freight locomotive manufac-
turer OJSC Sinara Transport Machines, Siemens
formed a joint venture called OOO Ural Locomo-
tives as the basis for this cooperation. Siemens
supplies the electric drive components for new
locomotives and is currently building a develop-
ment center for rail transportation in Moscow.
“In Russia, we need to develop products that are
suitable for the track width of 1,520 millimeters
here. These products also need to be robust
enough to withstand our extreme climate condi-
tions,” explains Dr. Rolf Epstein, CEO of Siemens
Mobility in Moscow. “We are contributing our
expertise in the area of asynchronous drives.
These drives offer great coefficients of perfor-
mance and require minimal maintenance.”
Production of the first prototype is due to be
completed by the end of 2010. The first of these
new locomotives is due to take to the tracks for
the first time in 2012. Meanwhile, Russian devel-
opers at Siemens will be working on adapting
existing products like the Velaro high-speed
train and the Desiro regional train to local con-
ditions and requirements (see page 54).
Products like these have gained the interest of
the Russian market and those of practically all
other countries of the former Soviet Union. Fin-
land is also among the potential takers, since
Finnish railway tracks are of the same width as
those in Russia.
 Industry Journal | 03 | 2010 | Performance 33

Siemens VAI Metals is due to supply Economical, practical light switches

a single-strand slab caster to Jindal and lamp holders manufactured by
Steel & Power Ltd, India. Located in the Siemens owned Brazilian com-
Angul, the system is set to be one of pany, Iriel, currently hold 18 percent
the most modern in the country. of the market share.

The new Cerberus ECO fire protec- Russian developers at Siemens

tion system brings together high adapting both Desiro regional trains
safety standards with innovative (see image) and Velaro high-speed
technology and is developed in trains to meet local technical require-
Beijing, China. ments and climatic conditions.
34 Industry Journal | 03 | 2010 | Performance

Focus: Innovation management

The hunt for new ideas

The number of international corporations working with

young companies to expand their own product spectrum

with innovative solutions is growing steadily. One way of

making such cooperation possible is through venture

capital. It is money well spent, because both the investors

and the financed companies benefit in equal measure.


What do Google, Amazon, Facebook, and Yahoo
all have in common, aside from their meteoric
rise, that is? They were all financed by outside
investors, without whom these “stars” would
have remained largely unknown to most people.
According to a study by Deutsche Bank Research,
this type of groundbreaking innovation occurs
most successfully within young start-ups in the
USA that do not need expensive R&D depart-
ments.
Venture capital has long been used in the Unit-
ed States to help small companies on the path
to success. The money begins to flow as soon
as the entrepreneur’s own funds are exhausted
and professional financial institutions are un-
willing to get on board, due to the risk involved.
A survey on the extent to which venture capital
is accepted as a financing tool for small, innova-
tive entrepreneurs in the US has shown that in
California, venture capital investments repre-
sent seven percent of gross domestic product.
In Germany by comparison, in 2007 that venture
capital investment was a meager 0.05 percent.
The shortest route to innovations
However, this is set to change now. Large
companies increasingly want to leverage the
innovative strength of small high-tech firms
around the globe, and join them in opening up
new vistas in the business sector. Peter Molnar,
who heads the Strategy department at Siemens
Industry, knows why a growing number of cor-
porations are building on the creative support
of newcomers. “When it comes to risky inno-
vations, companies with a start-up culture are
more successful, because they follow a trial-and-
error approach. Large corporations, by contrast,
follow a decision-making process optimized to
safeguard innovations.”
Siemens aims to establish closer connections
with these entrepreneurial companies through
its own venture capital funds. To date, the corpo-
ration has invested more than 800 million Euros
in over 100 small businesses and 35 venture
capital funds. They are focused primarily on
growth sectors within the areas of energy and
environmental technology, industrial automa-
tion solutions and infrastructures, as well as the
healthcare industry.
Industry Journal | 03 | 2010 | Performance 35
From Seattle to the
world market
Powerit Solutions helps industrial firms avoid
peak electricity loads in their production pro-
cesses. The small company with some
70 employees links together all of the im-
portant energy consumers in its customers’
production processes, coordinates them with
one another, and contributes to overall ener-
gy efficiency. The system builds algorithms
that precisely determine when, where, and
to what extent a component can be shut
down – without having a negative impact on
the quality of the goods or the production
process.
The innovation by this start-up from Seattle
(USA) has caused a sensation in the North
American market. Sales double annually, and
the objective of its CEO, Bob Zak, is to position
the company on the world market.
Siemens Venture Capital (SVC) got involved in
May 2009. Mr. Zak expects the cooperation
to experience rapidly increasing demands for
its offering outside the USA: “Today everyone
wants to produce in a more energy-efficient
way – tailored to their processes.”
Bosch is proceeding in the same way. The com-
pany recently founded Robert Bosch Venture
Capital (RBVC). “In order to continue growing,
we need to bring innovations to the market in
ever-shorter cycles. Through venture capital,
we secure access to innovative technologies and
concepts. Our internal development depart-
ments simply cannot cover all market require-
ments,” explained RBVC Managing Director,
Claus Schmidt. Similarly, BASF, Intel, Deutsche
Telekom, and other multinational corporations
have recently established financing companies.
Double-digit returns on investment
However, such involvement is a matter of more
than just simply procuring technological know-
how and young vibrant teams. Investors also
expect to profit from considerable returns. The
economic success of such partnerships usually
equates to significant double-digit returns on
investment.
At the same time, investors know there is nev-
er a guarantee that the cooperation will be a
36 Industry Journal | 03 | 2010 | Performance

Small initially, but huge after an influx of venture

capital. Californian Mark Zuckerberg (left) founded
the online social network Facebook, in 2004. Today
it has more than 500 million users worldwide. The
Yahoo Web portal is ten years older. Headquarte-
red in Sunnyvale, USA, (right) its annual sales are
around 6.5 billion US dollars.

success. “Our venture capital investments as a of Transparent, a company in Pune, India, is

whole have to be profitable. The contribution
to success made by our venture capital partners
varies,” explains Mr. Molnar.
Flops are the exception
Complete mistakes are rare, because start-ups
are thoroughly audited before investors take
the plunge. After all, not every company is suit-
ed to venture capital investment. Often, the
problem is not really the business idea itself,
but the entrepreneur’s unwillingness to let go
of the project. “Our future partners have to be
willing to have their strengths and weaknesses
optimized by new members of the management
team,” explained Detlef Pohl, who is responsible
for the Industry Sector at Siemens Venture Capi-
tal. This is the reason why investors take a lot of
time to discuss in detail, review references, and
attempt to scrutinize their potential partners as
extensively as possible.
Companies use various means in order to find
promising start-ups. Through their global
networks and know-how, they often recognize
promising potential partners earlier than other-
wise. Special venture capital days for start-ups
and other events attract the heads of young
companies. Bhalchandra G. Kulkarni, the head
such an example. “We were invited by Siemens
to an innovation competition and we won,” said
Kulkarni. His company specializes in waste heat
recovery.
And last but not least, the in-house financing
organization reacts to information from its col-
leagues in the product areas, and analyzes the
markets around their worldwide offices. Increas-
ingly, however, young companies are searching
for partners on their own. Some venture capital-
ists see such initiative as a real plus.
Financing takes place in stages
If the management team, business plan, and
market opportunities for the innovation are
convincing, the money flows in – usually in a
number of stages. In general, the entrepreneur-
ial company receives between one and several
million Euros initially. The venture capital firm
also provides advice on organizational struc-
tures, negotiates partnerships, and frequently
opens doors. The investors generally forfeit
investment security, but remain involved in the
company for a period of three to ten years, on
average. Then, many look to be bought out of
the company and make significant returns of in-
vestment by selling their shares.
 Industry Journal | 03 | 2010 | Performance 37

Promoting
stable growth
China and India are currently experiencing unprec-

edented economic growth. Accordingly, the demand

for steel in these countries has increased dramat-

ically, resulting in massive investments in this

business segment. Yet to date, many steel producers

continue to work at considerably less-than-optimum

efficiency. Numerous small plants are being closed,

modernized, or merged. The objective is to estab-

lish large, energy-efficient and environmentally

friendly operations. Worldwide, the industry is

experiencing a massive market shift to southeast

Asia.

With a nominal capacity of 2.8 mil-

lion tons of iron per year, the new
No. 3 blast furnace at JSW Steel Ltd.
is the largest in India.
38 Industry Journal | 03 | 2010 | Performance
The steel industry is a major energy consum-
er and source of environmental emissions.
Siemens is providing green solutions for the
booming Asian market.
Whenever there is an amazing display of engi-
neering capability in Asia, it quickly draws
large audiences: Expo 2010 in Shanghai is such
an example. Each day, more than 25,000 visitors
pass through the pavilion of Germany. The total
number of visitors is expected to reach four mil-
lion by the time the expo draws to an end in
October of this year.
Germany’s largest and most expensive appear-
ance ever at a world expo is a thrilling expe-
rience, mainly due to its contradictions. The
interior presents sophisticated technology, from
microprocessors for leg prostheses to organic
photovoltaic systems. But the exterior is charac-
terized by heavy industry. Architect Lennart
Wiechell used 1,200 tons of steel for the building.
He wanted to show that even modern sectors of
the economy need a stable framework. It is a con-
cept that China has taken to heart.
China’s government knows that conquering ex-
port markets around the globe requires a function-
ing infrastructure at home. With its skyscrapers,
railways, and bridges, there is more construction
going on in China than anywhere else in the
world. The steel industry delivers the material
for the backbone of this economic wonder. “Steel
consumption is higher than ever this year,” says
Bernhard Schaaf, an expert from the Germany
Trade and Invest (GTAI) business development
association.
In the first half of 2010, steel production reached
a record 323 million tons, an increase of more
than 21 percent compared to last year. By the
end of the year, some 620 million tons of steel
will have been sold almost exclusively to Chinese
consumers. This amounts to 53 million tons more
than in 2009, which itself was a record year (see
page 40).
 Industry Journal | 03 | 2010 | Performance 39

Shipbuilding is part of the growth strategy to western environmental standards,” said

The enormous demand for steel is on view for all
to see on Changxing Island, a mere 25 kilometers
northeast of the expo site. Just a few years ago, its
residents lived from fishing and fruit cultivation.
Today, thousands of workers are welding together
steel freighters in record time. The government
in Beijing has declared the expansion of Chang-
xing to be of national strategic importance, with
the goal of making it the country’s largest ship-
yard. Numerous shipbuilders have moved their
production facilities here. STX, the world’s largest
supplier, has invested more than 2 billion Dollars
here. Last year, the manufacture of a 58,000-ton
freighter was completed. Within two years, the
company hopes to be producing 70 ships per year
in Changxing.
The increase in demand from Chinese industry
has resulted in a major shift in the steel market to
Asia. Today, more than half of worldwide produc-
tion comes from China. Neighboring India also
wants to expand its capacity, and hopes by 2016
to become the world’s second-largest steel manu-
facturer. That spot is currently held by Japan. But
rapid growth also presents problems for these
countries. “As in the past, China continues to
operate a lot of small mills that work inefficiently,
consume massive resources, and do not conform
Alexander Malkwitz, a partner at A.T. Kearney
management consulting firm.
Currently, there are more than 800 steel manu-
facturers in China alone, most of which produce
less than one million tons per year. “These oper-
ations not only damage the environment, they
waste money,” said GTAI expert, Mr. Schaaf. Tech-
nology from Europe could help these companies
solve problems.
A few large mills instead of lots of small ones
The Chinese government has a clear objective.
It wants to streamline the domestic industry and
make it efficient by significantly reducing the
number of small, obsolete plants, or by moderniz-
ing and merging them into large mills. The mod-
el already exists. The Luojing industrial park is
home to the most efficient and environmentally
friendly production facility in Asia. Using a mod-
ern process, not only has the Chinese Baosteel
Group managed to reduce CO2 emissions by a
third and sulfur dioxide emissions by 97 percent
by modernizing its technology, it has also reduced
operating costs by ten percent, due to a lower
energy consumption. The core component is a
Corex C-3000 plant, developed and delivered by
Siemens VAI (see page 39). The results have been

A model plant
The C-3000 plant in Luojing is the newest genera-
tion of environmentally friendly and cost-effective
Corex production facilities for hot metal. With an
annual production capacity of 1.5 million tons, it
is the world’s largest plant of this type.

In addition to considerably lower CO2 emissions,

the Corex process also significantly reduces waste-
water contamination by ammonia, phenols, and
sulfides. Export gas generated by the process is
used to produce electricity in a power plant as well
as for heating purposes in the steel mill. Contrary
to blast furnace operations, Corex plants use non-
coking coal as the primary source of energy and
only minimal quantities of coke are required. As
a result, there is no need for a coking plant to be
built on-site.
40 Industry Journal | 03 | 2010 | Performance

Asia dominates the steel market

Production in millions of tons in 2009 / changes compared to the previous year

China 567.8 + 13%

Japan – 26% 87.5

India 62.8 + 9%

Russia – 12% 60.0

USA – 36% 58.2

South Korea – 9% 48.6

Germany – 29% 32.7

Ukraine – 20% 29.9

Brazil – 21% 26.5

Turkey – 6% 25.3

Source: World Steel Association

impressive. In March 2011 a second Corex plant
of the same size will go into operation. Luojing
will then be able to produce three million tons of
hot metal per year, which can then be processed
into steel.
Lower costs as incentive
The cost argument should produce copycats.
“Iron ore is a raw material that is becoming increas-
ingly expensive,” said Mr. Schaaf. “The biggest
change producers can make for a brighter future
is to invest in their own plants.” The importance
of efficient production methods for Chinese in-
dustries can be seen in a study produced jointly
by the Deloitte management consulting firm and
the Chinese Steel Industry Development Research
Institute (CSDRI). It showed that steel producers
could save 10 to 30 percent of their expenditure
by using modern technology. “The lack of focus
on efficiency significantly hinders the industry’s
competitiveness,” said Rosa Yang, a consultant at
Deloitte China. “In the long term, it will become
necessary to streamline production in order to
raise the industry to a world-class level.”
Many Chinese steel producers are looking for in-
ternational support in the efforts to lower costs.
“While the demand for new steel plants in Europe
and the USA continues to fall, we expect more
than seven percent annual growth in Asia,” said
Tim Dawidowsky, head of the Siemens Business
Segment Casting & Rolling. To be successful in
threshold countries, technology providers have to
change their way of thinking. “We cannot simply
export existing technologies to China. That would
not work,” said Dawidowsky. “Instead, we have
to understand these new markets and change to
meet their requirements.”
China and India differ significantly from tradi-
tional industrialized nations. “These countries
are geared for different kinds of steel goods
compared to Western Europe and the USA,” said
A.T. Kearney’s Malkwitz. While western countries
look for high-quality steel grades, in China there
is a high demand for relatively simple structural
steel.
 Industry Journal | 03 | 2010 | Performance 41

New giants
Development of steel production in China and India

1999 123.3 24.3 China

India
2000 127.2 26.9

2001 150.9 27.3

2002 182.2 28.8

2003 222.4 31.8

2004 280.5 32.6

2005 355.8 45.8

2006 422.7 49.5

2007 489.9 53.1

2008 500.3 57.8

2009 567.8 62.8

Production in millions of tons

Siemens delivers the automation and
drive technology for three new LD
(BOF) converters to the Handan Iron
Source: World Steel Association
& Steel Co. Ltd. in China.

Success through local involvement
Only those willing to establish a local company
in China or India can benefit from Asian growth.
Siemens VAI has already recognized this trend.
The company currently employs 1,600 people
in Beijing and Shanghai in more than 20 sales
offices. In India, more than 800 people work for
the company in the cities of Kolkata and Mumbai.
And this involvement will continue to grow. Over
the next three years an additional 300 engineers
and 200 sales personnel will help to expand the
company’s market position in India and China.
China and India are not just sales markets, they
are a source of inspiration and creativity (see
page 27). Development, design, production, and
service of plant components such as for blast fur-
naces and rolling mills have been transferred to
the region in order to offer solutions that meet
local requirements. “We give the business re-
sponsibility where it originates, where it can
grow and should grow,” said Werner Auer, CEO
of Siemens VAI.
A history with a long tradition links the company
to this region. Siemens VAI, originally founded in
Linz, Austria, received its first international order
from India more than 50 years ago. At that time,
it was the revolutionary LD steelmaking process
in the city of Rourkela. The city grew up around
the steel plant that was financed with German
development aid.
Steel from India for the world
Today, local industry no longer needs develop-
ment aid. On the contrary, Siemens VAI will mar-
ket worldwide what it produces in India, in the
near future. “We want to offer the best services
in order to participate in the country’s growth,”
said Ashoke Pan, who heads the Indian business
of Siemens VAI. “This attitude will be the basis
for our future success beyond our domestic
market.”
42 Industry Journal | 03 | 2010 | Performance

Changing sides

Learning from lions

For more than 30 years, the game ranger Ian Thomas has been

studying lions in their natural habitat. By observing the way they

hunt, how they adjust to their changing environment, and how

they live together as a pride, the South African gains insights

into the success factors of their social behavior which he then

applies to the modern world of business. Business people and

athletes from all over the world come to his “wilderness lessons”

on such topics as developing strategies, change management,

and team building.

 Industry Journal | 03 | 2010 | Performance 43

“People hope that I can transform

their team in an hour. I can trans-
form their understanding of the root
causes of good and bad teams in an
hour, but most of these principles
take time to be put into place. It is
only after the presentation finishes
that the real work begins.”
Ian Thomas
44 Industry Journal | 03 | 2010 | Performance

Whether training and team building

or achievement of objectives, the
rules for success in the wild and in
business are comparable.

The sun stands low on the horizon and bathes For more than three decades, Ian Thomas has
the barren brushland in red-gold light to the been observing the king of the wilderness in
chorus of countless crickets. Suddenly, a dan- his natural habitat. Nowadays, he draws helpful
gerous roar fills the air. A full-grown lion runs analogies between lions and the modern busi-
at full speed towards a group of observers. ness world. The African savannah provides pic­
Weighing close to 200 kilo- turesque material for many coach-
grams, this lithe, sinuous king ing topics such as teamwork,
of beasts thunders dangerously strategy, change management,
close, its long tail whipping back My love affair with wild- and customer service. “The Pow-
life has been incredibly
and forth in agitation, eyes set er of the Pride” is a 75-minute-
rewarding. To me there
on the goal in front of it. After is nothing more beautiful long presentation that focuses
a few seconds, it draws to an than the grace and power on the hunting style of a pride
abrupt halt. Drums roll. Cut! of a big cat – nothing of lions.
The observers lean back and re- which represents the
lax, and the fear subsides. It’s no thunder of Africa more It consists of three parts, “The
real lion, after all. We are watch- than the full-blooded Hunt,” “Raising the Young,” and
ing a film. roar of a lion. “Safety.” The presentation con-
cludes with “Every individual
Nevertheless, it is the real Ian is only as good as his team, and
Thomas who is now standing on stage. The the team is only as good as its individuals.” This
game ranger and management coach from message may be rather familiar to one or the
South Africa is a master in capturing the attention other of his international audience of employ-
of his audience from the very beginning. Sitting ees from IBM, Nedbank, and Hewlett Packard,
in his audio-visual presentation, “Survival of athletes from the Transvaal cricket team and the
the Fittest,” we remind ourselves that, contrary Springbok rugby team, to mention but a few.
to what the film title might suggest, Ian Thomas However, Thomas brings this message across
has no desire to incite fear of these mighty crea- in a rather unusual context. The audience gets
tures in us. We are here to learn from them. to exchange its rational, objective, somewhat

Lessons of the wilderness
The secret of successful teams
Lions are the only big cats that hunt in packs or
prides. Since they do this in open grassland without
cover, their joint hunting and close cooperation
increase the opportunity to catch their prey. Ian
Thomas points to parallels how corporations are able
to develop successful teams. Key conclusion: “The
success of the team is because of the individual and
the success of the individual is because of the team.”
The team comprises strong personalities who know
where they excel. The objectives are challenging and
clearly defined.
• The team consists of powerful individuals who
know what they are superb at.
• The goals are demanding and crystal clear.
• Incentives reward success.
• Non-performance is confronted and rectified.
• Trust is built on consistent practical behavior.
• Training is serious but fun, and directly linked to
essential skills.
Thomas: “If there is any magic it is that these prin-
ciples must be put into practice. The fact that they
are talked about, or written down in some company
artificial world for the savannah, filled with
creatures of the wild, heat and dust, a world of
hunters and the hunted, where things are basic,
heroic, and instinctive.
Predatory competition seen in a new way
Wearing a game warden’s shirt rather than a
suit and tie, and rustic trekking shoes in place
of the conventional shiny wingtips, and his deliv-
ery peppered with a refreshingly stalwart sense
of humor, Ian Thomas presents himself rather
unconventionally as well. In place of sparkling
consultant rhetoric, we hear the sounds of the
animal world, typical presentation images on
PowerPoint slides are replaced by his own breath-
takingly spectacular photos, and the usual theo-
retical formulas one might expect are replaced
by the laws of the wilderness. Sights and sounds
of lionesses hunting together are used to illus-
trate how companies create value. Those of lions
fighting for territory serve to demonstrate how
to keep one’s competition off the market, and a
lioness with a cub is used to show how to inte-
grate a new team member.
On stage, this man with a mustache simulates
the graceful movements of these large cats he
Industry Journal | 03 | 2010 | Performance 45
statement only means that someone has recognized
their importance. You don’t learn to hunt or fight by
reading a book.”
Crises as an opportunity
Financial or business crises usually arise unexpected­
ly and impact every part of the system. However,
an attitude of wait and see can be fatal. The art is
actually to recognize imminent opportunities, to
make bold decisions, and to drive forward-looking
concepts. This applies in the hunting ground as it
does in business.
• Make decisions, even if they are difficult. To do
nothing is always dangerous.
• The objective has to be clear and the agreed
method must be understood by all participants.
• All participants have to be highly qualified, highly
involved, and highly motivated. Avoid followers or
dazzlers.
• It has to be possible to obtain considerably.
improved results in real time, while expending the
same amount of effort, or less effort.
• View crises as opportunities and emerge invigo-
rated from a situation.
has spent so much of his life observing, how
they cleverly stalk their prey as a team, keeping
their fellow hunters in the team constantly in
view, for support. Physically, his presentations
tax him to a degree that he has to warm up be-
forehand. Ian Thomas’ entire appearance is far
more a performance than a corporate training
session. The fact that he knows the wilderness
far better than the corporate workday of his par­
ticipants, does not take away from the meaning
or the value of his statements. His focus is to
pass on perfectly formed methods used by wild
animals to ensure survival. There are no fairy
tales to be heard here, assigning human traits
to animals. On the contrary. Thomas explains,
“Lions are the only big cats that hunt as a team.
They do that because their prey lives in open
grassland without cover – antelopes, gazelles,
gnus, as well as even buffalo and elephants. We
are talking about animals that are either too
fast or too large for a single lion to kill.”
As a group, lionesses have developed special
techniques for different roles. One stalks the
prey as closely as possible, the others circle it. If
the lioness moving in on a zebra does not kill it
outright, she can count on the help of the others
to do so. She is at no risk from dangerous kicks
46 Industry Journal | 03 | 2010 | Performance
by the victim fighting for its life for very long.
“A clear objective, role distribution according to
individual capabilities, and a great deal of trust
in one another – this combination helps lions to
successfully kill their prey – and corporations to
obtain top teams,” claims the game ranger.
Success through trust and communication
In his book, “The Power of the Pride,” Thomas
illustrates the importance of communication
when creating successful teams. One of the
pictures shows seven lions standing closely
together in the dusk, drinking at a watering
hole. One of the animals, a young male, holds
his head up, pricks his ears, and peers intensely
into the dusk. He is the only one that has heard
the nervous cough –“Pah! Pah!”, the warning
sound of an impala antelope. Two seconds later,
The prey of lions is often stronger,
faster, and more numerous. Nothing
less than an ingenious hunting strat-
egy and excellent teamwork saves
big cats from starvation.
Ian Thomas tells us, all seven lions raise their
heads and the pride quietly divides into two
groups, circles the watering hole, and the
second “Pah! Pah!” follows.
Ten minutes later the deed is done: the pride
has killed the unwary impala and starts to feed
on it. Only one member of the pride had heard
the noise, but it was enough, because all the
others immediately put their trust in him, with-
out any break in communication, acting coop-
eratively for the good of all. The lesson learned:
“There is no ego inside a lion pride and no com-
plaints about not getting the MD’s memo on the
subject of impalas. Team members must be alert
to communication.”
Ian Thomas does not address problems specific
to corporations per se. Crises such as recalls for

car manufacturers, dramatic stock market news,
employee strikes or dissatisfied customers, well,
lions don’t know anything about that kind of
thing. However, thanks to Ian Thomas, the king
of the beasts bears valuable testimony to the
fact that, especially during challenging times,
it is wise to listen more to the simple rules of
nature.
Industry Journal | 03 | 2010 | Performance 47
About the author
Since the mid-1990s, Ian Thomas has
been working as a professional coach in
more than 25 countries worldwide. Af-
ter completing his Bachelor’s degree in
Business Administration, he decided to
follow his dream and became a game
ranger for the Londolozi Game Reserve
in South Africa. There, he soon special-
ized in tracking lions. In recognition
of his outstanding service, the Field
Guides Association of South Africa
awarded him the official title of “Scout.”
Through the ongoing contact with
safari guests, Ian Thomas discovered
his talent for teaching and storytelling.
This realization led the 57-year-old
to a second career as a presentation
coach. Combining his know-how about
corporations with a thorough under-
standing of the laws of nature, he is
convinced that humans can learn a
great deal from nature. As a guest of Contact information:
numerous radio and TV shows, he talks E-mail: info@ianthomas.net
on subjects such as team work, achieve- Tel.: +27 (11) 883 2088
ment of objectives, and successful risk Fax: +27 (11) 883 2600
management. Ian is a member of the PO Box 651521
National Speakers Association of South Benmore, 2010
Africa (NSASA) and has consultancy cli- Johannesburg, South Africa
ents in Europe, Asia, the US, and Africa.
Suggested literature:
“The Power of the Pride”
During his years as a game ranger, Ian
Thomas has taken many spectacular
pictures of lions. Some of his best are
included in his book “The Power of the
Pride.” In it, he describes his observa-
tions and illustrates the lessons that
can be learned from them in chapters
under various headings, such as hunt-
ing. In this chapter, he explains the
rules of hunting as a pride and shows
what can be learned or derived from
them, for creating effective teams.
Order info:
www.ianthomas.net/order-form.html
Price: 20 Euros plus shipping costs
48 Industry Journal | 03 | 2010 | Urbanization

“Our country cannot successfully com-

pete in the global economy if we fail to
invest adequately in our domestic trans-
portation infrastructure, particularly in
cities and their metropolitan areas.”

Tom Cochran, Chairman of the US Conference

of Mayors
 Industry Journal | 03 | 2010 | Urbanization 49

Get there fast –

get there relaxed
Travel in comfort, take the train, get there fast, take an air-

plane? That was then. Nowadays, high-speed trains are not

only eco-friendlier; they are also faster on many routes than

their airborne counterparts. We traveled through three con-

tinents to witness their speed and efficiency at first hand.

50 Industry Journal | 03 | 2010 | Urbanization

Several million people each

year use the high-speed
Velaro E between Madrid and
Barcelona.

Things are much quieter these days at Barce- travel has proven to be the more economical,
lona Airport than they used to be, especially at comfortable, and faster choice compared to fly-
Terminal 1D, the so-called “Madrid terminal.” ing, at distances of up to 700 kilometers.
Air traffic there has dropped by
nearly half over the past year. Fast rail connections between
As recently as 2006, with 4.4 major cities provide not only
million passengers annually, greater mobility, an increased
the air link between the Catalo- standard of living, and growth,
nian and Spanish capitals was they also benefit the environ-
the busiest in Europe. ment. Spanish researchers have
calculated that each airline
After the new rail line between passenger on the Madrid-Bar-
these two cities opened at the Introduced at the Berlin trade celona route creates emissions
end of 2008, airline market sha- show in 1879, the first elec- of 71 kilograms of CO2. A high-
re dropped dramatically. With a tric train by Siemens & Halske speed train passenger on the
travel time of six hours compa- caused a sensation. same run only produces 13.8
red to a flight time of 55 min- kilograms of CO2, a mere fifth,
utes, few people saw the train by comparison.
as a viable alternative, until recently. Today,
however, almost half of travelers choose to go by High-speed trains are passenger trains with a
high-speed train. In just two-and-a-half hours, minimum speed of 200 kilometers per hour.
it completes the 600-kilometer-long route. Globally, the majority of them are in operation
That’s record time. in Europe, followed by East Asia and North Ame-
rica. However, the train is growing in impor-
This example shows the effect high-speed trains tance in other regions, too. The State of Qatar
can have on transit flow in a world of increased is currently planning to build a 180 kilometer
general urbanization and ever-growing cities. high-speed train link between its capital Doha
Given current check-in procedures and distances and the neighboring Kingdom of Bahrain, which
between city centers and most airports, rail will be connected via a 22-kilometer-long bridge.

According to a study,
investments in rail
transportation in the USA
would create hundreds
of thousands of jobs.
Qatar is investing 17.4 billion Euros in its
rail project. Last year the project secured the
support of German Rail. As one of the world’s
leading manufacturers of high-speed trains,
Siemens is currently working to win the order,
worth more than two billion Euros, to supply
the project with train technology.
German know-how is also in demand beyond the
Persian Gulf. The USA, China, and Russia are fol-
lowing the successful European rail model and
are expanding their high-speed rail networks.
USA: from the highways to the rails
The United States’ image as a land of unlimited
opportunity is due in some part to Dwight D.
Eisenhower. The 32nd President authorized the
construction of the first interstates more than
half a century ago. The age of major highways
had begun, and soon interstates were crossing
the country in all directions. Since then, unli-
mited mobility has been closely associated with
the American Dream.
But things have changed over the past fifty
years. Today, freedom has come to mean inde-
pendence from oil. The transportation sector is
Industry Journal | 03 | 2010 | Urbanization 51
Fastest series-produced train set in
the world
The Velaro E high-speed train operating in Spain is the
first of the Velaro range, and the fastest series-produced
train set in the world. It is impressive not only because of
its speed, but also because of the flexibility in the design
of its interior. It includes three classes of service, a cafete-
ria, and two compact galley kitchens which cater for Span-
ish Rail’s elaborate at-your-seat food service.
For the design of the Velaro E’s unusual and comfort-
able interiors, Siemens was awarded the “2008 Railway
Interiors Innovation and Excellence Award.” With a more
than 99 percent on-time arrival rate, the Velaro E is also
extremely reliable. The 26 high-speed trains built between
2002 and 2007 for Renfe, the Spanish national rail com-
pany, are used primarily on the Madrid-Barcelona route.
Completing the 630-kilometer-long route in around two
and a half hours, they outstrip their airborne competition.
responsible for two-thirds of total US oil con-
sumption, generating more than 30 percent of
CO2 emissions there.
The US Conference of Mayors, which represents
more than 1,200 cities across the USA, commis-
sioned the Economic Development Research
Group in Boston, to prepare a study on the eco-
nomic consequences of high-speed rail trans-
portation. Tom Cochran, Chairman of the US
Conference of Mayors, stated “Transportation is
the backbone of America’s economy. Our coun-
try cannot successfully compete in the global
economy if we fail to invest adequately in our
domestic transportation infrastructure – partic-
ularly in cities and their metropolitan areas.”
The researchers selected as examples four met-
ropolitan areas of different sizes: Los Angeles,
Chicago, Orlando, and Albany, the capital of the
State of New York. The results were similar and
the message was the same from all four cities:
investments in high-speed rail pays off. Long-
term, in all four cases, the investment in high-
speed rail was seen to create new jobs and sus-
tainable economic growth.
52 Industry Journal | 03 | 2010 | Urbanization
150,000 jobs and 20 billion Dollars in added
revenue
In Greater Los Angeles, up to 55,000 new jobs
could be created along with 7.6 billion Dollars
in added revenue. Chicago could see 42,000
jobs and 6.1 billion Dollars in potential revenue.
According to the study, Orlando could create
27,500 new jobs and add 2.5 billion in revenue,
while Albany, the smallest of the metropolitan
regions in the study with less than 1 million
residents, could produce 21,000 new jobs and
add 2.5 billion in revenue. In just these four met-
ropolitan areas alone, that amounts to a total of
150,000 potential new jobs and almost 20 billion
Dollars of potential new revenue per year.
These impressive figures are not only based on
the immediate economic impact of the construc-
tion and operation on jobs and revenues. They
also reflect the numerous positive benefits of
new high-speed rail connections to commut-
ers, business travelers, and tourists, that is, the
three groups that both use the new infrastruc-
ture and benefit from it most.
Cities linked to a high-speed rail line benefit
from the increased numbers of visitors. In the
study, rail station buildings and surrounding
streets could see their value increase consid-
erably. Further investment in business and the
service sector was also predicted for all four
Bremerhaven, 2008. Three cars of
the first eight-unit Velaro CN high-
speed train for China are loaded
on a freighter (right).
cities examined. A growth in day trips and week-
end getaways was also predicted, as travel in
comfortable and modern trains would become
less expensive, more convenient, and more at-
tractive to a broader sector of the population.
Improvements in trade connections
The planned high-speed connections will sig-
nificantly increase efficiency for business trav-
elers. The travel time in trains can be seen as
working time in a well-equipped rolling of-
fice that is more effective than an automobile
and much more comfortable than an airplane.
Transferring large volumes of traffic from road
to rail would reduce traffic jams and ensure in-
creased growth. After all, there is nothing less
productive than employees stuck in traffic.
In addition, the experts estimate that the new
high-speed connections would result in more
business travel generally and in increased busi-
ness relations between the cities connected by
the high-speed route.
Finally, high-speed rail represents enormous
potential for developing the local economy.
When competing for highly qualified employees,
job offers with good transit connections often
win out over the attractiveness of a location
itself. If a city can be reached from other
metropolitan areas by high-speed train, it is

more likely to win seasoned employees for the
local job markets from outlying areas. Employees
are rarely willing to get on an airplane each day
or drive hundreds of kilometers to get to work.
Experience in Europe and Asia has also shown that
commuters find traveling by high-speed train to be
much more attractive than by road or rail, because
it offers greater flexibility and comfort.
CO2 emissions fall by a third
In addition to the economic benefits highlight-
ed by the study, the environment would also
profit from the construction of a high-speed
rail network. According to Siemens figures,
introducing rail connections to the four met-
ropolitan areas reviewed would reduce overall
CO2 emissions from transportation by 2.8 mil-
lion tons per year, which is one-third less than
current emissions.
It is the first time that such precise data has
been available on the consequences of investing
in US rail transportation. What is needed now,
are policies to implement the investment pro-
gram and to drive planning of the high-speed
rail network. There are some positive indica-
tions that President Obama could go down in
transportation history as “the father of Ame-
rican high-speed trains,” just as Eisenhower is
immortalized as the founder of the highway
system.
Industry Journal | 03 | 2010 | Urbanization 53
China gets 45,000 new rail kilometers
China is banking on railways. Over the next de-
cade, more than 45,000 kilometers of rail will
be laid in the country, including 20,000 kilome-
ters designated for high-speed passenger rail
transport. The Beijing-Shanghai route will reach
speeds of 380 kilometers per hour. Given the
relatively short distances along the densely pop-
ulated east coast of the People’s Republic, rail
travel has developed into a serious competitor
to the airplane.
The government is relying on European know-
how for its train technology. This is how Siemens,
together with a local partner, received the
order in 2006 for 60 high-speed trains. It was
the birth of the Velaro CN, the second produc-
tion series developed in the Velaro range. Ex-
tensive modifications had to be made to adapt
the train that was originally introduced in Spain
as the Velaro E (see next page), to East Asian re-
quirements.
Car bodies had to be widened
“The greatest technical challenge was widening
the car bodies by some 300 millimeters. The
change meant the interiors could be equipped
with five seats per row, three on one side of
the aisle, two on the other, instead of the usual
four. This means a 200-meter-long train of this
type provides seating for 600 passengers,” says
Edzard Lübben, head of the Highspeed Subseg-
ment at Siemens Mobility in Erlangen.
The trains were built primarily in China, which
was challenging for the Siemens engineers.
Despite the challenges, however, the transconti-
nental technology transfer worked. Just in time
for the 2008 Olympic Summer Games in Beijing,
the Velaro, called CRH 3 (China Railway High-
Speed) rolled out on various routes around
the country, in particular between Beijing and
Shanghai, as well as Beijing and Tianjin. “Our
Chinese partners highly value the quality of our
trains,” said Lübben.
This positive experience is one of the reasons
why the Chinese-German success story contin-
ues to this day. Last year, the Chinese Ministry
of Railways ordered another 170 high-speed
trains. The train sets will be based on the
Velaro CN and manufactured by local compan-
54 Industry Journal | 03 | 2010 | Urbanization
Velaro –
a success story
ies in China. Siemens is providing critical com-
ponents such as the electrical equipment and
bogies. The new trains will operate on the route
between Beijing and Shanghai, completing the
1,318 kilometers at speeds of 380 kilometers an
hour, adding proof to the reality that China is in
the fast lane.
Trains for the Russian steppe
The second of May, 2009 was an historic day in
Russian rail history. During a test run, the Sie-
mens Velaro RUS high-speed train developed for
Russian Railways set a new speed record of 281
kilometers an hour for Russian trains. At that
moment, the world’s largest country in terms of
land mass entered the high-speed era.
This historic event was preceded by a costly
construction phase that brought many chal-
lenges. “A train had to be developed that could
handle the biting cold of the Russian winter, and
still maintain high speed and maximum effici-
ency,” says Edzard Lübben of Siemens Mobility.
In the late nineties, on seeing German Rail’s new ICE 3
for the first time, many people asked, “Where is the
locomotive?” The train, produced with significant
Siemens participation, was Europe’s first high-speed
electrical multiple unit. The push-pull locomotives
required in earlier ICE models were made obsolete
by distributing the drive motors across the entire
length of the train. To this day, it provides more
space on board, and it offers significant technical
benefits. Because the drive and brakes are distribut-
ed across multiple axles, the tracks are subject to
less stress during acceleration, and more energy can
be recaptured during braking than was previously
possible.
Developed by Siemens since 2001 as an ongoing
enhancement of the ICE 3, the Velaro train set
reaches record-breaking speeds of up to 403 kilome-
ters an hour, making it the world’s fastest of its kind.
In addition to its speed, the train is characterized by
its cost-effectiveness as operating and maintenance
costs have been reduced to a minimum.
Additional space was required to add thermal
insulation. “As with the Chinese variant, the
car bodies were widened,” explains Mr. Lübben.
Specialized materials ensure that excessive
amounts of energy are not required for heating.
Despite an outside temperature of anywhere
between minus 40 and plus 27 degrees Celsius,
a comfortable internal temperature of 22 degrees
Celsius is maintained at all times. The air con-
ditioning on board is achieved with a minimum
of energy, and all safety-related systems remain
operational at temperatures as low as minus 50
degrees Celsius.
In contrast to the Velaro E series operating in
Spain, cooling is provided through ventilation
ducts in the carriage ceiling, to prevent fine
snow from entering sensitive system parts.
Travel time cut in half
As is standard, the scheduled start-up of the
eight Siemens trains took place in cold weather.
In December 2009 the first trains raced through
the Russian winter along the broad gauge route

Its efficiency makes Velaro one of the most environ-
mentally friendly modes of transportation today.
Calculating the trains energy consumption in gaso-
line equivalence, when operating at full capacity,
the train would consume a mere 0.33 liters per pas-
senger over 100 kilometers. Even the most environ-
mentally friendly automobile when fully occupied,
cannot come close to it in terms of efficiency.
The elimination of the locomotive is just one reason
why the Velaro always has plenty of space on hand.
The interior was built based on the “empty shell”
principle. This means individual interiors can be mod-
ified quickly and easily to meet customers’ needs.
As a result, a 200-meter-long train, comprising eight
cars with two bogies each, for instance, can be con-
verted from its traditional 420 seats to 500 seats for
maximum space utilization.
The first of the Velaro series was the Velaro E
(which was developed for the Spanish high-speed
rail network, and stands for “España”, see page 33).
In addition, the Siemens train has also been deplo-
between Saint Petersburg and Moscow at speeds
of up to 250 kilometers an hour. The train, which
was named “Sapsan” (Russian for peregrine
falcon) by the railway company, completed the
436-kilometer-long route in 3 hours, 45 mi-
nutes. Previously, train travelers had to endure
a travel time of up to eight hours on the same
route.
The demand is enormous. On average, more
than 90 percent of seats are occupied. The train
will now be used on other routes as well. And on
the route between Saint Petersburg and the cap-
ital, maximum speeds of up to 300 kilometers an
hour will be reached. At that point, yet another
new chapter in Russian railway history will be
written.
Industry Journal | 03 | 2010 | Urbanization 55
yed successfully in Russia and China, and will soon
go into service in its German homeland. By the end
of 2011 under the name of Velaro D, the fifteen-unit
trains will run on Germany’s and Europe’s tracks –
and will replace some of the original ICE trains still in
use at that time. In addition, it will operate on new
high-speed connections into neighboring France.
Extensive innovations on the bogies of this fourth
generation train ensure highest safety and easier
maintenance. Sensor bearings (wheel set bearings
with an integrated sensor head) automatically report
component status on board. “Parts only have to be
replaced when it is technically necessary – and not
within strict maintenance intervals,” explains Edzard
Lübben, himself an engineer.
Another highlight is the redesigned nose cone on
the Velaro D. The installed coupling not only means
a smooth connection for double-traction train ser-
vice, it also gives the new high-speed train a much
sleeker appearance than its predecessors – all this,
without a locomotive.
The Velaro RUS withstands temper-
atures as low as minus 50 degrees
Celsius. It was tested in the most
modern cold chamber of its type
at the Rail Tec Arsenal in Vienna.
56 Industry Journal | 03 | 2010 | Urbanization

For a short time only

What to do when an airport’s capacity becomes insufficient for a longer period of

time due to a large event? Siemens Mobility provides a solution with CapacityPlus

flexible terminals that can be erected quickly to alleviate peak loads. The inno-

vative solution once again proved its effectiveness during the FIFA World Cup in

South Africa.

International air travelers are familiar with the
situation: the airplane has barely landed and the
first thing they encounter are incredibly long
lines that make for a negative first impression.
The probability of this happening is all the great-
er when a large event is taking place and the
destination airport does not have the capacity to
handle the influx of visitors. Seemingly endless
lines at check-in also count among the less than
pleasant aspects of air travel in peak periods.
South Africa, host of the 2010 World Cup, an-
ticipated problems like these well in advance.
More than three million people would pour into
the city stadiums to watch the final rounds of
World Cup matches. And many of those spec-
tators would fly in from all over the world and
cause a tremendous increase in passengers at the
airports of Cape Town, Johannesburg, Durban,
Bloemfontein, and Port Elizabeth – and test the
limits of especially the last two. For this reason,
Airports Company South Africa (ACSA) decided to
draft Siemens into its World Cup team.
Special tents for processing air travelers
For big events like these, experts in the Mobility
Division have a one-of-a-kind product in their
portfolio: CapacityPlus temporary terminals
that help handle peak crowds to avoid long lines
and frustrated passengers. Siemens quickly con-
structed a tent at the Bloemfontein airport and
the Port Elizabeth airport, each fully equipped
with everything needed to handle additional
crowds of up to 350 and 450 passengers per
hour, respectively. “Of course, these were spe-
cially constructed tents. For security reasons
they had solid side walls to prevent break-ins,”
explains Christian-Marius Wegner, Senior Vice
President of Siemens Infrastructure Logistics
Customer Services.
The history of a product
In 2004 CapacityPlus had its baptism of fire in Lisbon.
Within four months Siemens built a 7,000-square-
meter terminal housed in a huge tent and a convert-
ed hangar. The location was designed to process up
to 3,000 passengers per hour, and by the end of the
event some 700,000 had passed through the termi-
nal. Today another temporary terminal measuring
8,800 square meters for up to two million passengers
per year is helping operators deal with high passen-
ger numbers. The temporary terminal will continue
Industry Journal | 03 | 2010 | Urbanization 57
On the inside, the temporary terminals did not
differ from conventional airport terminals. Each
of the tents covered an area of 1,800 square me-
ters and provided travelers with check-in and
security systems, baggage handling and sani-
tary facilities. During the World Cup, some
10,000 passengers on international and domestic
charter and scheduled flights used the Capacity-
Plus terminal in Port Elizabeth. In Bloemfontein,
the majority of passengers were booked on
chartered flights or were VIP guests – including
the German national team.
Construction time of six weeks
From groundbreaking to start-up, just under six
weeks were needed for construction. This was
possible thanks to the involvement of an extreme-
ly well-tuned team. “Building a temporary
terminal is a highly complex undertaking. We
have to not only ensure security requirements
are met but also mobilize a great deal of tech-
nology in a very short time. That’s why we act
as a single source provider,” reports Wegner.
Siemens provides most of the technology. The
building is the only object provided by a third
party, and the Infrastructure Logistics special-
ists, based on their deep level of expertise, have
developed a detailed requirement catalog for
providers.
Prior to the start of a project, the team goes to
the customer to obtain important key data in-
cluding flight schedules, the types of airplanes,
amount of baggage per passenger, and local
security requirements. With respect to interna-
tional connections, customs and immigration
have to be located in the terminal as well. Based
on this information, experts develop the lay-
out of the CapacityPlus terminal and look for
a suitable building. “This could be a tent or a
lightweight construction.
its service until construction has been completed on
the new airport outside the city.
In Doha, in the Emirate of Qatar, Siemens Mobility
built an 8,000-square-meter terminal in 2006 fea-
turing Arabian-like tents and an independent power
supply.
After the 2010 FIFA World Cup in South Africa, ter-
minals are waiting to be built for the 2012 European
Football Championship in Poland and Ukraine.
58 Industry Journal | 03 | 2010 | Urbanization

The temporary terminal shown here at the airport

in Bloemfontein ensured that passengers were
processed quickly and efficiently despite peak
loads due to the 2010 FIFA World Cup.

Together with our colleagues we continuously
scour the globe for new solutions,” says Wegner.
The CapacityPlus experts come from Siemens
Portugal, where the idea behind CapacityPlus
was born. The event that triggered its incep-
tion was the 2004 UEFA European Football
Championship. The existing capacities at the
Portuguese airports did not suffice. And at that
time, UEFA requested that fans from different
countries be processed separately on their
homeward journeys, which required additional
handling capacities.
Implementation of an idea
“Back then we talked with the airport operator
and developed the idea to establish an addition-
al terminal in a tent,” remembers José Arsénio,
the head of Infrastructure Logistics in Portugal.
“The Portuguese Air Force also offered to clear
out a hangar, which we used to house a large
waiting area with restaurants and shops.” With
the help of experienced on-site employees,
Siemens Mobility was able to successfully im-
plement the unusual project. “Everything went
very well, and altogether the terminals proved
to be a fantastic idea,” says Arsénio. To this very
day, Siemens employees in Portugal handle
project management and monitor technical
constructions when an airport somewhere in
the world needs to be temporarily expanded.
Backed by the success in Portugal, logistics
experts started to develop the prototype into a
marketable product. They were treading virgin
territory since they were the first worldwide
to help airport operators temporarily expand
their capacities. In fact, Infrastructure Logistics
is still the only provider of this type of flexible
terminal.
Cooperation with regional companies
For all international projects, good cooperation
with the respective Siemens regional compa-
nies is decisive for success – as in South Africa.
“From the very beginning, colleagues in Johan-
nesburg fully supported the project and contrib-
uted a great deal of added value,” remembers
Arsénio. “By integrating a broad spectrum of
Siemens technology and know-how into an inno-
vative system solution, the Mobility Division im-
pressively applied the Siemens One credo with
CapacityPlus.”
Now that the FIFA World Cup is over, the termi-
nal experts from Siemens are not sitting idle:
“In the Middle East we are negotiating with a
number of low-cost carriers and in the United
States we are working on avoiding capacity bot-
tlenecks. Interest for CapacityPlus has also come
from Ukraine and Poland where in 2010 the next
European Soccer Championship will be held,”
says Wegner.
 Industry Journal | 03 | 2010 | Urbanization 59

Turbo rate of return

for real estate

National and international green build-

ing organizations are setting new qual-

ity standards for single-purpose build-

ings and, increasingly, for residential

buildings, too. Much-coveted certifica-

tion increases the value of real estate

considerably, once it has been awarded.

Occupants pay quite a bit more for low-

er operating costs and the prestige that

goes with having the “right address.”

60 Industry Journal | 03 | 2010 | Urbanization
Platinum for the Sierra Nevada College
Environmental scientists at the Sierra Nevada College work in
first-class surroundings, in a building combining state-of-the-
art technology with unconventional solutions, located in the
midst of pristine nature, between Nevada and California. A
Siemens building automation system, together with additional
installations, optimizes the environmentally friendliness of the
building. A combined heat and power plant significantly reduces
power consumption. A solar current installation generates
30 kilowatts of electricity. And sunlight creates comfortable
lighting by using lighting screens to break sunbeams by up to 9
meters. Old jeans and newspaper double as building isolation or
as part of the ceiling. The balance obtained is excellent: Energy
and water consumption are reduced by 65 percent as compared
to other building automation systems. The college takes well-
deserved pride in its LEED platinum certification.
Platinum, gold, and silver – these precious
materials are becoming much more popular
in real estate, but not as raw materials. In fact,
they are labels for the ecological correctness of
buildings. Siemens is vying for a LEED platinum
certification for its company’s new headquarters
in Munich. The Sueddeutsche Verlag already
managed a LEED golden certification for its new
headquarters. And that’s not all. There is a huge
demand for the US label. Currently more than
20,000 buildings worldwide have been regis-
tered as having passed the test in accordance
with LEED criteria for environmental respon-
sibility and energy efficiency. In addition, there
are another 60 Green Building Organizations
currently offering their own certification.
Added-value for buildings
There are good reasons for the eco-seal trend:
recognized buildings create higher returns,
fewer vacancies and better leasability at at-
tractive prices. Overall, they ensure a higher
resale value. Real estate experts talk about
rental incomes that are up to 12 percent higher
or revenues that have increased by as much as
16 percent. According to the figures of the US
Green Building Councils, tenants are 27 percent
more satisfied with commercially used “green”
buildings as compared to traditionally built or
renovated houses. What this also means is that
employees do not get sick as often and their gen-
eral motivation at work is significantly higher.
And let’s not forget, occupants save about 30
percent on energy, water, and garbage disposal
fees. CO2 emissions are reduced by one-third.
Small wonder that the US publisher McGraw
Hill expects the construction volume for green
buildings to have reached five times as high
as it is now, within the next two years. “Green
buildings are for real estate what jeans were for
fashion – a trend that takes a long time to catch
on and ends up as a long victory march,” pre-
dicts Thomas Beyerle, the research director of
Aberdeen Immobilien Kapitalanlagegesellschaft
headquartered in Frankfurt.
The battle of the certification agencies
The battle of the real estate appraisers is a fierce
one. The most recognized certificate worldwide
is the LEED certificate. Globally-oriented inves-
tors and managers of real estate funds in partic-
ular, value the label highly, because it provides
for an internationally defined and established
basis for comparison.
Deutsche Bank hired not one but two Green
Building Organizations to certify the ecologically
outstanding modernization of their two high-
rise office buildings in Frankfurt. The building
now carries the LEED quality mark and the
“German seal of approval for sustainable con-
struction” of the German Society for Sustain-
able Building (DGNB). “For this seal, they exam-
ine a great deal of criteria that addresses such
items as social, functional, and site quality,” says
Ullrich Brickmann. The Siemens expert for en-
ergy efficiency solutions believes that the DGNB
testing procedure could pay more attention to
such areas as energy efficiency and technical
building equipment. Aside from that, this

Summary of available certifications
Approximately 60 national Green Building Organizations
worldwide offer test procedures for buildings. Europe
alone awards close to 20 different eco labels. Here is a
summary of the most important seals of approval.
LEED
Leadership in Energy and Environmental Design
Established: Primarily in the USA and Canada
Areas: New buildings and extensive modernization,
buildings in inventory, residential buildings, intellectual
development, inlaid shell, etc.
Evaluation criteria (main criteria): sustainable site,
water efficiency, energy and atmosphere, room and envi-
ronmental quality, innovation, and planning process
Rating system for certification: certified, silver, gold,
or platinum
Energy Star
Established in: the USA
Areas: public/commercial buildings,
residential real estate
Evaluation: energy efficiency
Certificate: Energy Star seal
EU GreenBuilding
Established: in Europe
Areas: non-residential real estate
Evaluation: energy efficiency, ventilation,
savings recommendation
Certificate: GreenBuilding seal
rather recent test seal has yet to gain interna-
tional acceptance. In essence, only a seal with
worldwide recognition can provide the manu-
facturer of sustainable construction material,
energy-efficient components, and system solu-
tions with an image that withstands the global
field of competition.
Many certificates are only accepted nationally
Other national Green Building Organizations
that award eco labels are rather similar. For
the most part, their quality certificates are only
known in their own country. This is true, for
example, of the French HQE (Haute Qualité Envi-
ronmentale), the Australian Green Start Certifi-
cation and the Japanese CASBEE certification
system. To date, only the British BREEAM seal is
sought-after abroad.
Despite having certified approximately 185,000
buildings to date, the quality of the British
Industry Journal | 03 | 2010 | Urbanization 61
EU GreenLight
Established: in Europe
Areas: non-residential real estate
Evaluation criteria: energy efficiency for outside and
inside lighting
Certificate: GreenLight seal
BREEAM
Building Research Establishment’s
Environmental Assessment Method
Established: in Great Britain
Areas: residential and non-residential constructions
Evaluation criteria: management, health and comfort,
pollution and land use, energy consumption, CO2 emis-
sion, infrastructure, building material, water demand
Rating system for certification: passed, good, very
good, excellent
BUND energy-saving hospital quality seal
Established: in Germany
Areas: hospitals
Evaluation criteria: CO2 emissions, energy consumption,
energy management
Certificate and information plaque
DGNB
German Society for Sustainable Building
Established: in Germany
Areas: new construction for office, administrative, and
residential buildings
Evaluation criteria: ecological, economical, socio-cul-
tural and functional, technical quality, as well as process
and site quality
Rating system for certification: bronze, silver, and gold
testing system is actually known only to those
directly involved with it, for the most part.
This goes for the EU-initiated Green Building
Program, too, which has yet to make it beyond
Europe. The flood of certifications for sustain-
ably built or modernized real estate is on the
increase.
The German TÜV Süd presented its own certifi-
cation system at the beginning of 2010. Known
as SCoRE (Sustainability Certification of Real Es-
tate), the organization defines itself as “the first
German sustainability certificate for investment
properties.” And very soon, the German Energy
Agency (dena) will follow suit with a seal of ap-
proval for non-residential buildings. But Ullrich
Brickmann does not waiver: “We live in a global
environment. In the medium term, national
seals of approval won’t be able to keep up with
the pace set by international investors, who are
rapidly increasing in number.”
62 Industry Journal | 03 | 2010 | Urbanization

City of the Future

Cities are gaining in importance in the battle against climate change. At the “City

of the Future” exhibition in Singapore, Siemens is presenting its entire portfolio

of solutions and technologies for sustainable city development.

Currently, half of the world’s population lives in
cities. Although these cities comprise only one
percent of the earth’s surface, 80 percent of all
greenhouse gas emissions are produced by them.
By 2050, 70 percent of the world’s population
will be living in cities that will contribute more
than 90 percent of greenhouse gas emissions. In
addition, the number of megacities with popula-
tions of more than ten million inhabitants is on
the rise – exacerbating air, water, land, and noise
pollution, and compounding the already uneven
distribution of resources. Mastering these chal-
lenges for sustainable city development is the job
of city planners, public services operators, and
the industrial and manufacturing sectors.
Since March 2009, Siemens has been presenting
its comprehensive portfolio of solutions and
technologies for sustainable city management
at the “City of the Future” exhibition in Singa-
pore. The company’s partner in this undertak-
ing is the Singapore Economic Development
Board. The 1,485-square-meter exhibition space
displays more than 200 solutions and 90 case
studies. In the public gallery, visitors have the
opportunity to navigate interactively via Ubiq
screens through the entire range of Siemens in-
novative products and technologies for sustain-
able city development. These solutions provide
answers to such issues as water treatment, build-
ing technology, public mass transit, and comple-
te transportation. Just a few steps ahead, prac-
tical applications of these solutions are shown
at the “Reference Kiosk,” which offers detailed
information about existing Siemens projects
worldwide.
 Industry Journal | 03 | 2010 | Urbanization 63

In the “City of the Future,” experts can

choose to run through simulated exer­
cises that focus on building cities. Or
they can use the touch screen or models
to familiarize themselves with solutions
for sustainable city development.

The core of the exhibition is the “City Manage-
ment Solutions Center.” Visitors have the op-
portunity to test and expand their know-how of
city management. In the “City Game” they try to
manage a city in an interactive simulation game.
For example, they may be confronted with the
complex challenge of balancing the benefits of
building transport infrastructure like roads and
train systems against cost recovery and noise
and air pollution. And if the player does not pro-
vide sufficient water and energy, the metropolis
collapses.
City Cockpit and effective city management
Timely and accurate data is required for effec-
tive and efficient decision-making. The City
Cockpit provides just that – a software solution
that allows the display of city data such as finan-
cial, environmental, and transport-related data.
City decision makers can have relevant data dis-
played on a customized dashboard, and have the
ability to drill down to the specifics.
With its “City of the Future,” Siemens has cre-
ated a comprehensive work exhibition of the
company’s complete city management portfolio.
The project has developed into a global com-
petency center and forum for sustainable city
development. More than 500 high-ranking poli-
tical and business leaders worldwide have visit-
ed the exhibition so far. They use the forum for
socializing and exchanging experiences.
Singapore, ranked in 2009 as the most innova-
tive city in the world by the Boston Consulting
Group, is an ideal location for the exhibition.
The dynamic and vibrant Southeast Asian me-
tropolis is a testament to environmental and
resource consciousness in spite of its high
population density. Its five million inhabitants
live in an area measuring a mere 710 square
kilometers. This is three times as many inhabit-
ants per square kilometer as in Hamburg, which
has 1.7 million inhabitants living on 755 square
kilometers.
It is a result of deliberate strategies for sustain-
able city management. Singapore has developed
into a green city, leading the way for many
other neighboring megacities in Asia. In Singa-
pore, many exotic plants grow between street
canyons. A thriving rain forest is located just a
few kilometers from the center of the city, and
boasts a greater variety of trees than the entire
North American continent. This is vital to Sin-
gapore’s air quality, as green open spaces are
green “lungs” to urban metropoles, in that they
provide a natural source of air-conditioning. De-
pending on the size of the plants found in such
forests, the effect on the surrounding tempera-
ture can mean a reduction of up to four degrees
Celsius.
Singapore as a true experimental field
Singapore depends on the development of inno-
vative technologies and processes. Its govern-
ment focuses on close cooperation with interna-
tional corporations and research organizations,
and offers incentives to encourage them to
base their operations there. Optimal research
facilities prove attractive to corporations when
deciding to relocate to Singapore. Companies
are able to use the metropolis and its infrastruc-
ture as a true experimental field and to develop
ideas together with local universities, making
Singapore an innovation hot spot, today, and in
the future.
64 Industry Journal | 03 | 2010 | Environment
 Industry Journal | 03 | 2010 | Environment 65

Good from the bottom up

More than two-thirds of the earth is covered with water. Today, human-

kind is increasingly discovering how oceans could provide answers to

the problems that threaten our very existence. As savior of our climate,

supplier of precious raw materials, and as an environmentally friendly

energy source, oceans and the concept of their industrialization have

firmly captured our attention to become a major focus of scientific

research.
66 Industry Journal | 03 | 2010 | Environment
In Asia, algae are already farmed
commercially (left). Freighters
transport 90 percent of the
world’s trade goods (right).
Jules Verne, the 19th-century French author,
was clearly ahead of his time. “The depths of
the oceans hold zinc, iron, silver, and gold that
perhaps can be mined one day,” proclaimed
the character Captain Nemo in “20,000 Leagues
­Under the Sea,” Verne’s science fiction bestsel-
ler that was first published in 1870. What we
know of Captain Nemo’s prediction today is this.
Not only are the oceans of huge importance to
humanity because of their metal reserves, they
also hold tremendous resources of both energy,
in the form of methane hydrate, and food, in the
form of algae. They are one of the most impor-
tant regulators of our climate.
Microalgae are of tremendous importance to
our world. Invisible to the naked eye, they are
detectable only en masse in the form of thin
slime. About 100,000 different types of algae are
known worldwide. Some are as minute as bacte-
ria, while others are more than visible, in the
form of 50-foot-long threads, or even longer. Re-
searchers investigating alternative energy sour-
ces refer to microalgae as “green gold,” because
they can be used for a multitude of purposes, and
because they can be cultivated in closed systems
called photobioreactors, irrespective of their
proximity to large water sources. Furthermore,
an ocean alga doesn’t even need drinking water
to thrive. Contaminated water or salt water is
adequate. Another significant advantage of
algae farming over first-generation biofuel
feedstock such as rapeseed and corn is that they
do not compete with food cultivation for arable
land.
Microalgae as CO2 annihilators
More effective than any high-tech solar cell, micro-
algae change sunlight into energy via photo-
synthesis. In addition, algae require carbon
dioxide, one of the greenhouse gases, in order
to grow, meaning it eliminates waste gas bio-
logically, a highly useful side effect indeed. In
the future, energy providers may be able to feed
otherwise emitted CO2 from their installations
to algae instead of having to obtain expensive
emissions rights to emit it into the atmosphere
in the conventional manner. Accordingly, cor-
porations and research scientists have taken an
active interest in algae. Airlines are currently
involved in the process of developing biofuel
using microalgae. Algae-fueled airplanes could
travel longer distances without refueling, com-
pared to kerosene-fueled planes. In addition,
algae fuel generates far less carbon dioxide and
sulfur oxide exhaust than kerosene. For the first
time ever, during the International Luftfahrt-
messe ILA 2010 in Berlin, a small Diamond DA42
plane took to the air running purely on algae
fuel, alone, to the awe of spectators and the en-
ergy and aviation communities alike.

By 2040, half the fuel used for flying airplanes
could come from biological sources, according
to optimistic prognoses. Small wonder, then,
that the airplane manufacturer Airbus is heavily
involved in algae research. To date, the techno-
logy used to convert microalgae into fuel using
sunlight, water, and CO2 is as developed as the
technology for using algae fuel for air travel.
The issue of industrial production capacities
still needs to be resolved, however. At present,
passenger airplanes consume a total of 200
million tons of kerosene per year worldwide,
whereas the current yearly production of algae
oil barely reaches 10,000 tons. This amounts to
just a little more than the fuel requirements of a
large carrier such as Lufthansa, for instance, in
a single morning. The reason is this. The manuf-
acture of biological fuel from algae including
harvesting the feedstock, extracting the oil,
converting it to fuel and refining it is still too
expensive to be commercially viable. Currently,
the price ranges between 300 and 1,000 Euros
per ton.
Technologies for greener shipping
Approximately 100,000 ships traverse the earth’s
oceans. Quite often they are no more than notorious
polluters. Not only do they transport close to 90 per-
cent of the world‘s goods, they also produce huge
volumes of toxic substances. A study by the US weath-
er and oceanographic agency NOAA established that
a relatively low number of ships create about as
much particulate matter as 300 million cars. Accor-
ding to other studies, the world’s 15 largest ships
together produce as much sulfur dioxide as 800 mil-
lion cars worldwide.
A study carried out by the researcher James Corbett
from the University of Delaware, USA, shows that
60,000 people per year die from respiratory diseases
or lung cancer due to the emissions of ship motors.
In response to these problems, Siemens Marine Solu-
tions provides innovative technologies and solutions
for the “green ship.” These include the Waste Heat
Recovery System (WHRS) developed together with
Siemens partners. WHRS uses hot exhaust from the
ship’s diesel engines to drive turbo generators that
produce up to six megawatts of energy for the on-
board power supply. This reduces fuel consumption
and CO2 emissions by up to 12 percent. Energy costs
drop by approximately ten percent. An environmen-
tally friendly solution was also found for ships ancho-
red in port that conventionally get their power supply
from their diesel-driven generator sets.
Industry Journal | 03 | 2010 | Environment 67
“To competitively produce biofuel from algae,
we need to be able to drop the price to 150 Euros
per ton,” says Professor Laurenz Thomsen, geo-
scientist at Jacobs University in Bremen.
However, algae have a broad range of uses. They
help to ease food scarcity worldwide, for ex-
ample. The dark green nori leaves that are well
known to sushi lovers are rich in proteins, carbo-
hydrates, unsaturated fatty acids, vitamins, and
iodine, and contain only small amounts of fat.
Nori leaves are also used in the pet food industry
to aid digestion in fish and pigs. The pharma-
ceutical industry also uses them, in medication
to treat Alzheimer’s disease. Clinical trials have
also shown that microalgae have anti-inflamma-
tory, antispasmodic as well as vasodilatory prop-
erties, that they strengthen the immune system,
and are an antioxidant that protect against
harmful free radicals. As a result, many research
institutes are working on algae production
technologies. In Asia, large farms are already
specializing in raising macroalgae as a form of
vegetable and for the production of sushi rolls.
The new approach proved to be effective and ecolog-
ically sound. Today, ships anchored in port are sup-
plied with onshore current via a mains connection,
eliminating the need for ship generators and their
associated damage to the environment. And we are
not talking about small quantities here. A luxury
ocean liner such as the Queen Mary 2 requires 40
megawatts for its onboard power supply. That’s as
much as a West European town with 200,000 inhab-
itants.
Another problem for marine ecosystems is ballast
water. When ships have unloaded their cargo, water
is pumped onboard as ballast to stabilize the ship’s
tanks, only to be pumped into the sea again at a la-
ter date, together with all manner of foreign organ-
isms. Comb jellyfish from the coast of the US, for
example, have ended up in the Baltic Sea, multiplied
there and now threaten local fish species by eating
their eggs. In answer to this problem, Siemens has
developed a safe ballast water management system
called Sicure that prevents this type of bio-invasion.
Currently, Siemens Marine Solutions is working on
another method to enhance environmental protec-
tion, energy efficiency, and profitability on the water.
An operating management system is being designed
that helps ship operators to optimize their use of
energy and resources, thus saving costs as well as
energy in a wide range of onboard processes.
68 Industry Journal | 03 | 2010 | Environment

The oceans remain more unexplored than outer

space. There is much that still needs to be done.
Jellyfish are a source of fluorescent protein GFP
for the pharmaceutical industry (top left). Hazards
to polar microorganisms and their general impor-
tance (top right) or that of the Antarctic ice (right)
remain largely unknown. The glider RIMG (left)
measures temperature, pressure, and salt content.

Methane hydrate as an alternative energy source
Another important subject for oceanographers is
methane hydrate, which could soon become an
alternative to conventional energy supplies due
to its high carbon content. Also known as burn-
ing or fire ice, it consists of methane trapped in
cage-like ice crystals. When methane ice rises to
the surface of the water, it melts quickly and the
resultant methane enters the atmosphere. As a
greenhouse gas, methane is extremely harmful to
the environment in that it causes global warming.
Nevertheless, methane hydrate is highly in-
teresting, because it occurs in large amounts.
Geologists assume that the world’s oceans hold
around 12 billion tons of it. That’s twice as much
carbon as that found in all crude oil, natural gas,
and coal reserves put together. According to a
US Department of Energy prognosis, it should be
possible to start extracting methane hydrate in
approximately ten years and in an ecologically
harmless and commercially viable way.
Professor Peter M. Herzig, Director of the Leibniz
Institute for Marine Sciences at the University of
Kiel (IFM-GEOMAR), is one of the proponents of
commercial methane hydrate utilization. “It of-
fers tremendous opportunities in relation to our
energy supply.” Accordingly, his institute tests me-
thods that sound easy, at the very least. CO2, which
occurs during burning, is pumped into methane
hydrate deposits under the ocean floor and forms
a solid substance, due to the low temperature
and high water pressure found there. This solid
substance displaces methane hydrate, which is
brought to the surface via an additional borehole.
Many excavation technologies will have to be de-
veloped and security risks eliminated before the
system can work efficiently, both ecologically and
economically.
Manganese nodules as a supplier of raw
materials
Manganese nodules are completely different. They
are, quite literally, the truffles of our oceans in
that they contain rare metals such as copper, nick-
el and cobalt. However, a lack of technology that is
suitable for extracting these metals at depths bet-
ween 3,000 and 6,000 meters still remains.

Gas hydrates and mineral raw material on the ocean bed (source: Future Ocean, Kiel Marine Science)
Gas hydrates, one of which is meth-
ane hydrate, could become a source
of energy within the next ten years.
Manganese nodules contain pre- Deposits of marine gas hydrates
cious metals.
The technology used to search for diamonds
below sea level is far advanced. The first drill
ships are already in operation along the coast of
Namibia. “Ultimately, harvesting raw materials
from our oceans will become more refined and
sophisticated in time. After all, when one thinks
of fish, salt, and water, oceans have been fun-
damental sources of food and raw materials for
humankind for thousands of years,” says Prof.
Herzig.
Oceans as natural climate control agents
Oceans are not just enormous deposits of valu-
able raw materials, they are also essential to
the regulation and stabilization of our climate.
These huge expanses of water absorb 50 times
more greenhouse gases than the atmosphere
and absorb approximately 30 percent of CO2
produced every year by humans. But continu-
ous global warming also leads to higher ocean
temperatures. Simply put, higher temperatures
pose detrimental consequences to our eco-
system. As ocean temperatures rise, they absorb
less CO2 thereby allowing climate change to gain
additional momentum. It is a vicious circle.
Industry Journal | 03 | 2010 | Environment 69
Indications of gas hydrate Manganese nodules
locations
And that’s not all. The TEEB study “The Economics
of Ecosystems and Biodiversity” by the Indian
economist and UN consultant Pavan Sukhdev
proved that the effects of climate change on our
oceans will also bring tremendous economic
consequences to bear. The endangered coral
reefs alone constitute the livelihood of more
than 500 million people. According to Mr. Sukh-
dev, the situation is similar for mangroves that
have been functioning as important carbon
sinks and coastal protection for many years.
And there is yet another danger. CO2 causes the
acidification of the oceans.
It is high time scientific efforts were intensified
in relation to our oceans, the “inheritance of
humanity” as expressed in the addendum to
the UN Law of the Sea Convention of 1994. Ad-
mittedly, there is no legendary underwater city
of Atlantis awaiting researchers (in contrast to
their colleague Professor Pierre Aronnax in the
novel by Jules Verne). However, the case for oce-
anic research is undeniable.
70 Industry Journal | 03 | 2010 | Environment

In the green zone

“Growth for the benefit of safety” – a phrase that sounds about

as credible coming from a chemical company as tales of a perpet-

ual motion machine. But Ineos Phenol, in Gladbeck, Germany, is

proving that modernized installations can improve even further

on already high safety standards, and at the same time increase

productivity. The company produces in the midst of a residential

area, where its top priority is just one thing – not to be noticed

at all.

Joachim Pieper, Managing Director
of Ineos Phenol, in Gladbeck, is re-
sponsible for a production volume of
650,000 metric tons of phenol and
400,000 metric tons of acetone a year.
The way to Ineos Phenol in Gladbeck leads along
picturesque, tree-lined streets, past luxuriantly
planted fields. Arriving visitors might well think
themselves in an urban recreational zone. The
area is too attractive, the landscape too green,
for anyone to guess that this is where the pro-
duction facility of the world’s largest producer
of phenol and acetone is located. Not until the
plant’s massive towers appear in the distance
will visitors take a deep sniff, expecting the typ-
ical acrid smell of a chemical operation. But it’s
a false alarm. Here the air smells no different
than if an insurance company were waiting just
past the tree-surrounded plant gate.
Phenol – sometimes better known as carbolic
acid – is a toxic chemical used as a raw material
for medications, as a weed killer and disinfec-
tant, and in synthesizing epoxy resins and
plastics. Phenol can damage the mucosa, burn
the skin and eyes, attack the kidneys, blood,
and central nervous system. In other words, not
really a product that fits with a verdant idyll of
carefully mowed lawns and freshly painted gar-
den fences. Yet Ineos Phenol, in Gladbeck, does
indeed sit peacefully in the midst of a quiet,
prosperously middle-class residential area of
neat single-family homes and lovingly tended
gardens and façades.
Industry Journal | 03 | 2010 | Environment 71
Joachim Pieper is familiar with the surprised re-
actions of guests who visit his plant for the first
time. The Managing Director at Ineos Phenol, in
Gladbeck, is a low-key gentleman with a clear eye
for what really counts. He knows what’s at stake
here each and every day: “We’re producing in
the midst of our neighbors’ front yards. But they
mustn’t smell us, hear us, taste us – they just
shouldn’t notice we’re here at all.” That’s not just
lip service from Pieper. His strategy ensures that
even minor accidents are avoided, so that major
ones remain practically inconceivable. It would
put people in danger and infuriate residents and
politicians. So Pieper’s error tolerance is zero.
And this has allowed his company to earn a rep-
utation in the region as a safe, environmentally
friendly, quality-conscious employer. “Safety, qual-
ity, and environmental protection are insepara-
ble, and are crucial corporate objectives,” he says.
Massive responsibility
All in all, Ineos produces more than a million
metric tons of phenol and acetone each year –
equivalent to the capacity of more than 40,000
large tank trucks. Pieper bears a massive re-
sponsibility on his shoulders. In meeting that
responsibility, he has just one goal: “Our prod-
ucts have to stay inside the pipes and apparatus.
Without exception.”
72 Industry Journal | 03 | 2010 | Environment
Safer with
Simatic PCS 7
The Simatic PCS process control system from
Siemens stands for the latest state of the art in
automation, no matter what the industry, world-
wide. It combines a scalable architecture with
powerful engineering tools and add-on functions
that can be seamlessly integrated, such as Alarm
Management, Process Safety, and Asset Manage-
ment. So Simatic PCS 7 offers everything that’s
needed to automate the entire production process
at processing and fabrication plants, safely, across
the board – from receiving to shipping.
Ineos Phenol decided to migrate to Simatic PCS 7
without interrupting production. The plant was
down for not a single minute, and there were no
revenue losses of any kind. By installing Simatic
PCS 7, Ineos Phenol also significantly expanded
its capacity.
Control centers combined
As part of the modernization process, the former-
ly separate control centers for two major process
units – distillation and oxidation – were combined
in a single new center. The migration to Simatic
PCS 7 included rerouting 8,000 process signals.
Siemens took on the complete engineering of the
system. Thanks to detailed planning and smooth
teamwork between Ineos and Siemens, the change-
over took only ten months, instead of the pro-
jected fourteen. Simatic PCS 7 was designed for
maximum process safety. Extensive safety func-
tions ensure that if an alarm occurs, employees
can transition all processes to a safe status within
a very short time.
To maintain the requisite level of safety and prod-
uct quality, Ineos Phenol, in Gladbeck, invests
continuously in modernizing its installations.
Its most demanding project so far was retrofit-
ting its control and instrumentation systems to
Simatic PCS 7 – without stopping production.
The open-heart surgery was a success. “Working
with Siemens, we set a milestone in migrating
from an old system to a new one,” Pieper says.
“Our goal was to retrofit on the fly – without giv-
ing up a single ton of production.” Two factors
were crucial to success: “The teams fitted togeth-
er perfectly, and the plans were really extremely
sound and detailed,” the executive recalls.
Ullrich Dallmeier, head of electrical and instru-
mentation technology at Ineos Phenol, in Glad-
beck, assisted the project right from the start.
He, too, is impressed with the new control center.
“Simatic PCS 7 has the critical advantage of offer-
ing not just a high level of automation and every
automation option, but absolutely seamless inte-
gration with safety equipment. That ensures the
performance and the safety standards we need.”
Alarm system ensures safety
A significant role in maintaining those safety
standards belongs to a sophisticated alarm sys-
tem that includes all areas of the plant that are
relevant to safety, and responds instantly to any
slight deviation from the norm. Like all other
information from logistics, production, and pro-
cesses, the alarm messages also converge at the
new control center.
“If something were actually to happen, we can be
anywhere in the plant within no more than two
and a half minutes,” says plant fire brigade chief
Holger Kaiser. But in the past few years his team
has only had to run drills. The safety systems have
earned the confidence of a professional like Kai-
ser. “I know every detail, I’ve been part of all the
planning, and what I see here lets me sleep sound
at night. I don’t know of any other plant where I’d
rather work, because I just feel safe here.”
Asset Management improves productivity
Maximum product quality and maximum safety,
especially in chemical production, call for pre-
cise, stable processes. Apart from the quality of
the raw materials, what’s needed is flawlessly
operating production facilities. In a plant like
the one at Ineos, which has been in existence for
more than 50 years, the maintenance expense is
substantial. But maintenance leads to costs. The
art of properly maximizing productivity lies in
allowing no compromises on safety and quality,
but, at the same time, allowing no excessive ex-
penses, either. A complicated balancing act.
 Industry Journal | 03 | 2010 | Environment 73

Ullrich Dallmeier (upper left), head of

electrical and instrumentation technology;
Holger Kaiser (upper right), head of the
plant fire brigade, and Andrzej Kurpik
(below), head of the technical department,
all master the balancing act between
productivity, safety, and environmental
protection at Ineos Phenol in Gladbeck.

Measurements signal that it’s

maintenance time
Andrzej Kurpik, Technical Unit Manager at Ineos
Phenol in Gladbeck, and his team are respon-
sible for Asset Management. For years, he has
successfully pursued a strategy of preventive
and predictive maintenance. “Ongoing mea-
surements of specific values show when a piece
of equipment needs to be replaced or repaired,”
Kurpik says. That must never be done too late –
but wherever possible it should also never be
done too early. “Our goal is to repair or replace
the equipment five minutes before a defect
crops up.”
In the past few years, Ineos Phenol, in Gladbeck,
has further expanded its position as the world’s
leading maker of phenol. But that growth hasn’t
been at the expense of safety. Quite the contrary.
Rather, today all processes at the Gladbeck plant
are coordinated more precisely than ever. The
new process control system plays an important
part here. But even more important are the em-
ployees who each day treat safety and environ-
mental protection as their paramount corporate
goals. Not least of all because most of them are
from the area. And after all, everyone likes liv-
ing in a recreational zone.
74 Industry Journal | 03 | 2010 | Environment

Brake and you’ll win

This article is based on an article featured in Siemens Pictures of the Future in the fall of 2010.

The engineering world is working tirelessly to improve environmentally friendly

mass transit in an effort to loosen the traffic’s stranglehold on modern-day cities.

Studies show that buses are more fuel-efficient when their diesel drive is supple-

mented by an electric motor that uses braking energy than their conventional coun-

terparts. The ELFA hybrid drive developed by Siemens has seen the company take a

leading role in commercially utilized hybrid vehicles, and today’s demand for them

far exceeds expectations.


How stop and go is detrimental to the environment
Respirable dust caused by conventional buses and
trucks is disproportionately high in congested traffic.
The use of low-emissions hybrid vehicles is a very effec-
tive means of protecting the environment.
Respirable dust
(in grams per kilometers driven)
4.0
3.5
Large buses
3.0
2.5
2.0
Trucks
1.5
1.0
0.5
Medium-sized buses
0.0
0 10 20 30 40 50 60 70
Speed in km/hours
Source: The World Bank 2004
The World Bank study “Reducing Air Pollution
from Urban Transport” does not mince words
when it claims that the “development of cost-
efficient hybrid drives is the best possible way to
leverage the benefits of emissions reduction by
switching to electric drives.” The study is alarm-
ing. Every year, one hundred thousand people die
of air pollution-associated diseases and continued
global economic growth greatly exacerbates this
problem.
Today, in many large cities, people prefer to take
the bus downtown than to go by car. This is not
only the case in threshold countries where car
ownership is a luxury. In many industrialized
countries, bus transport constitutes half of all
local transportation.
The more congested metropolitan cities are, the
more fervent the wish for quiet and clean vehi-
cles, and for less traffic in general. A number
of cities across Europe have taken measures to
reduce traffic congestion in recent years, and the
trend is set to continue. Since 2003, London has
been limiting access to its inner city. Both London
and Stockholm have decided to make their car
Industry Journal | 03 | 2010 | Environment 75
users pay tolls to enter the inner city, and “gas-
guzzlers” are charged an extra fee. Munich, too,
has taken steps in the same direction, by rerout-
ing trucks away from its inner city. Many metro-
politan areas are soon to follow suit, restricting
direct access to the inner city to fuel-efficient
vehicles and those with electric drives.
However, technical challenges remain. “A battery
that keeps a bus operating for an entire day
still weighs and costs too much,” says Manfred
Schmidt from Siemens Drive Technologies Divi-
sion in Nuremberg, the manufacturing site for
electric drives. For this reason, Siemens’ hybrid
buses are equipped with both an internal com-
bustion engine and an electric drive. Conveniently,
they don’t need to be connected to an outlet: as
soon as the driver steps on the brake, the energy
is fed into an electric storage unit. Typically, a
metropolitan bus spends between 25 and 40 per-
cent of its time waiting at bus stops or red lights.
When the bus starts up again, it uses the stored
braking energy to accelerate with zero emissions
and a very low noise level.
Currently, MVG, Munich’s public transportation
company, uses two hybrid buses for its routes.
One of them is the City Hybrid by MAN, equipped
with Siemens drive technology. “We want to test
and compare different hybrid buses and support
manufacturers in the further development of in-
novative automotive engineering,” says Herbert
Koenig, CEO of MVG.
Serial instead of parallel hybrid solutions
The serial hybrid solution by Siemens is based
on ELFA technology. Whereby a parallel hybrid,
drives the axle by both an internal combustion
engine and an electric motor drive, a serial hybrid
by contrast, uses only an electric motor to do this.
Here, a varied energy mix that allows just about
all combinations of energy production with ener-
gy storage, supplies the motor. Generators driven
by internal combustion motors or fuel cells gen-
erate power while batteries or ultracapacitors
(ultracaps) are used for energy storage. The ad-
vantages of an ultracap compared to batteries are
its far higher power density and power efficiency.
The ultracap is capable of storing a large amount
of energy in a small space. In addition, it is largely
maintenance-free and has a much longer service
life than a lithium-ion battery. When the ultracap
is discharged, the diesel motor starts up and sup-
plies a generator, which in turn generates current
for the energy storage.
“With serial hybrid technology, more brake power
can be injected than with parallel systems, because
the electric motor is larger,” explains Schmidt.
When brakes are applied in a bus, about 150 kilo-
76 Industry Journal | 03 | 2010 | Environment
The next generation
Traffic experts are convinced that hybrid buses
(see image below) are already an important step
forward in improving urban environments.
However, in the final analysis, they are only an
intermediate step to zero-emission buses. There
are two different ways to reach this goal: either
with battery-operated vehicles, where the energy
storage unit would be charged at the final desti-
nation or in the depot, or with a hybrid model
that uses fuel cells for the drive in addition to the
battery. The fuel cells could then charge the on-
board battery while the vehicle is in operation.
It is currently not possible to predict which tech-
nology will prevail. “Whether we are going to use
hydrogen or electrical current as fuel depends
how and where we produce electricity in the futu-
re,” says Manfred Schmidt of Siemens Drive
Technologies Division in Nuremberg.
watts of electricity is made available. In a parallel
hybrid drive, however, a smaller electric motor
can hold approximately 50 to 80 kilowatts. “This
means that you give up as much as two-thirds of
valuable braking energy and the savings poten-
tial is rather low,” says Schmidt.
30 percent fuel savings
A serial hybrid consumes one-third less fuel and
reduces climate-damaging carbon dioxide emissions
in the process. Depending on the number of
bus stops and inclines, a conventional bus requires
between 40 and 60 liters of fuel per 100 kilome-
ters. A bus that drives approximately 60,000 kilo-
meters per year consumes about 30,000 liters of
diesel. A hybrid consumes a mere 20,000 liters. In
sum, a hybrid bus saves about 26 tons of CO2 com-
pared to a conventional bus.
Siemens engineers have succeeded in reducing
diesel consumption by a further ten percent
thanks to an additional innovation. The drive
usually comprises two three-phase asynchronous
motors that are linked with a summation gear.
If they are replaced by self-excited synchronous
motors, the motor requires less electric power to
generate a magnetic field that turns the motor.
This working principle reduces losses, makes the
machine more efficient, and transfers more ener-
gy to the axle.
Extraordinary demand
The hybrid bus is gaining momentum at the
moment. If Beijing follows through on the an-
nouncement that it is going to change half of the
city’s bus fleet to hybrid buses, the demand for
these buses will skyrocket. “Worldwide interest
is already huge,” says Manfred Schmidt. Siemens
in Nuremberg works with many different bus
manufacturers worldwide. MAN is not the only
one among them who is placing orders for ELFA.
Mercedes, the Belgium manufacturer Van Hool,
and the Indian company, Tata Motors, have also
placed their orders for ELFA.
Wrightbus from Northern Ireland ordered drive
technology for double-decker buses from London.
When the mayor of London, Boris Johnson, in-
troduced plans for the new vehicles in May 2010,
he praised their “innovative green technology”
and predicted that the streets of London will
see hundreds of these hybrid buses in the near
future. To date, ELFA buses are to be found all
over the continent, in Spain, Belgium, the Nether-
lands, Italy, Turkey, the USA, and Brazil. In Ger-
many, Public Transportation Services in Hamburg
plans to introduce Mercedes hybrid buses that
combine a mixture of battery and fuel cells based
on ELFA. Beginning in 2020, every new bus in the
hanseatic city will be a hybrid model.
“It was a political decision for emission-free
inner cities,” says Schmidt. Also suitable for hy-
brid drives are garbage trucks and small trucks,
especially for longer trips with many stops.
Faun, a North German company, markets a gar-
bage truck with ELFA, a model that is already in
use in Leipzig.
 Industry Journal | 03 | 2010 | Environment 77

“Sustainability is primarily
not a question of ethics”

The sustainable production of goods and services is no longer a question of

ethics. In this interview, Alexander Holst, head of Sustainability Services at

Accenture, an international consulting firm, outlines how corporations are

able to profitably integrate the aspect of sustainability into their core busi-

ness, why infrastructure providers have a keen interest in this topic, and how

optically attractive LED lighting systems help cities save costs and at the same

time contribute to mitigating climate change.

78 Industry Journal | 03 | 2010 | Environment
Public discussions frequently do not reflect
the economic mood. What are your expe-
riences with customers when you address
the topic of sustainability?
Since the second half of 2009, this topic has
taken off again, for example under the aspect
of cost savings. The price of oil has gone up
again which increases the demand for energy-
efficient solutions at the same time. Previously,
the request for sustainability moved somewhat
into the background during the financial crisis
because many corporations viewed the whole
more or less as a philanthropic engagement.
Has something changed in the basic attitude?
Absolutely. For economic reasons alone, it is be-
coming more and more feasible for corporations
to integrate sustainability into business, be-
cause it is a proven value driver. Using a sustain-
able approach, costs can be reduced and trust
increased. Many top managers have recognized
this effect. Examinations have shown that more
than half of all CEOs are deeply involved in this
topic, considering it extremely important. Sus-
tainability is no longer primarily a question of
ethics.
How is it possible for corporations to success-
fully integrate sustainability in their core
business?
Four points are especially important:
Firstly: Implementation has to be holistic – that
is, integrated. This means that the three pillars,
namely economics, ecology, and social issues
have to be viewed for the company overall – for
its products, installations, processes, and busi-
ness models.
Secondly: Sustainability has to be a value-based
implementation. This is the only way to obtain
internal acceptance by those decision makers in
the company who show a strong financial orien-
tation. Each sustainability action has to contrib-
ute to increasing sales, reducing costs, and
minimizing risk, or to increasing the company’s
reputation – preferably all of them.
Thirdly: Sustainability requires practical inte-
gration. This is the area plagued with the great-
est backlog. What is extremely important is
the support of top management. Added to that
should be an internal structure that is respon-
sible for the team, something in the way of a
“sustainability board (council).” Also, it should
be possible to measure success with a charac-
teristic data system. A positive example from the
food industry is Danone: the corporation con-
siders carbon reduction extremely important.
As a result, Danone began to measure carbon
dioxide emissions for all its products. Upper
management has even attached part of the bo-
nus to it. Because the topic applies to so many
different areas of the corporation, satisfactory
project management is highly important. A
company has to have clearly defined sustain-
ability objectives and train its executives and
employees accordingly.
And as a fourth step: All steps taken have to
be oriented toward the customer or the stake-
holder. The question in this case is: What do my
customers and stakeholders really want? And
how can the products and processes change to
provide the customer with true benefits and de-
mand increases due to the steps taken?
Do you know of examples of how corpora-
tions successfully integrated sustainability
into their business?
Siemens itself is a good example for sustain-
ability. Recently the corporation introduced the
most efficient gas turbine in the world. Products
of this kind contribute to slowing down climate
change and present Siemens with an obvious
competitive advantage and therefore an increase
in value. Similar indications apply to energy
savings in the building sector where Siemens
offers many interesting products. And Osram
helps cities and communities to reduce costs
with LED technology. With a spectrum of such
innovative products, Siemens is able to help
reduce carbon emissions far more than with
internal measures.
Another good example is Otto Versand, a mail-
order company: the objective was to reduce
risks in the supply chain. Among textile corpo-
rations, the largest risk is the suppliers’ use of
child labor. For Otto, the statement of a supplier
is not enough. Instead the company has employ-
ees in Asia who check the companies on-site –
and even help them in case of problems. But
this is not just a matter of humanitarian motiva-
tion. In fact, Otto reduces the risk of being pub-
licly associated with child labor. The additional
costs for this “social management system” are
well spent because a scandal of this magnitude
would be much more expensive.
Which countries and regions are especially
interested in the approaches described?
In Europe, it is among others Great Britain and
France. The British public sector is far ahead

when it comes to sustainable acquisitions:
90 percent of all bids in the EU that mention
sustainability are provided by that island. The
background for this is that Great Britain sees an
opportunity to develop a new area of service in
addition to the financial sector. And in France a
great deal of thought is given to a new defini-
tion for “growth” that takes sustainability into
account. In Japan the topic is accelerating across
a broad front. Trends of this nature are extre-
mely important for infrastructure providers
such as Siemens.
What do things look like in the US?
The Obama Administration is set on sustain-
able energy and transport policies.
To date it is still up to individuals of a company
to drive this topic. The focus is far more on mor-
al considerations than on contributions to the
success of a company.
Are rapidly growing threshold countries in-
volved in sustainability?
It is difficult to provide a sweeping answer. How-
ever, when I was in India, I did not experience
strong demands from corporations. Usually
other things are more relevant there and closer
to the concerns of the people – for example,
medical care.
Do you consider sustainability a luxury
affordable by rich countries only?
The question is: What is sustainability? In indus-
trial countries, essentially the ecological aspect
is the primary focus. In India, however, the so-
cial pillar is currently far more important than
sustainability – in addition to health care, there
is also the question of food and education.
Furthermore, Aids plays a central role in Africa.
As a first step, money has to be invested in the
medical field. And in the final analysis, carbon
emissions per head are far higher with us than
in threshold countries, putting the onus of im-
proving ecology on industrial countries.
During sustainability discussions, it is fre-
quently implied that there is a primary de-
mand for sustainable products. Is that true or
is the demand artificially produced by using
appropriate marketing tools?
Many trends are generated on the level of end-
users and continue in the value-added chain to
the very beginning. For a number of years now,
we have a target group of the so-called LOHAS –
Lifestyle of Health and Sustainability. These are
Industry Journal | 03 | 2010 | Environment 79
people who want to contribute to sustainability
through their consumer behavior. In industrial
countries this involves between ten to 40 per-
cent of the population. And this group is asking
for specific offers. But LOHAS alone cannot save
the world – the idea of sustainability has to
enter the mainstream of society. And that will
also have to do with marketing.
We have a nice example from New Zealand for
that: A flyer for sustainably produced coffee –
bought by a mere two percent of customers –
was lying on the counter of a coffee shop. Ho-
wever, when the clerk talked about the coffee at
the check-out, 30 percent of customers bought
it. As soon as a certain social control was added,
the percentage rose further. For that purpose,
somebody behaved like a customer and positi-
oned himself as closely as possible behind the
shopper so that he could hear the answer. And
what happened next? Suddenly 70 percent of cu-
stomers bought the sustainable coffee. For cor-
porations this means that a change at the point
of sale motivates customers toward sustainable
behavior.
About the person
Alexander Holst is responsible for “sustainabil-
ity services” in Germany, Austria, and Switzer-
land at Accenture, an international consulting
firm. He is in charge of projects for developing
sustainability strategies, for measuring sustain-
ability, and for smart cities. Alexander Holst is
also the author of the first “Phoenix Reports,”
an analysis of success factors for corporations,
where the connection between sustainability,
innovation, and corporate success was exam-
ined. The executive majored in European
Business Studies at Osnabrück and received his
MBA at the IESE Business School in Barcelona.
80 Industry Journal | 03 | 2010 | Environment

Certificate for green solutions

What does green actually mean? Trying to increase their market success, more

and more companies claim supposed green products and solutions. Together with

the Danish Technical University and the Technical University of Berlin, Siemens

developed a method that puts this claim to an objective and transparent test.

Rising energy costs, awareness about the fi-
niteness of resources and the understanding
that global warming has to be stopped – these
factors are changing customer expectations:
“The development of green products and solu-
tions is gaining in importance due to climate
change and increasing lack of resources,” says
Jens Wegmann, CEO of Siemens Industry Solu-
tions (IS). What is required are innovations that
protect the environment and improve customer
competitiveness by leveraging energy efficiency.
“Sustainability and economic feasibility are not
contradictory terms,” explains Wegmann.
To provide proof for this premise, Siemens In-
dustry Solutions developed the Eco-Care Matrix
in cooperation with the Danish Technical Uni-
versity (DTU) and the Technical University of
Berlin (TU). Using this matrix, it is possible to
display both the environmental compatibility
as well as economic feasibility of products and
methods.
nomic criteria. Toward this end, known methods
of the eco-balance or Life Cycle Assessment were
combined with capital and operating costs.
During the development of the Eco-Care Ma-
trix, a comparison of different methods for
producing pig iron numbered among the pilot
projects. The conventional blast furnace routine
was compared with the Corex/Finex methods
developed by Siemens VAI Metals Technologies.
The Eco-Care Matrix identified this method as a
“green solution”: The conventional blast furnace
routine requires coke and ore sinter to produce
pig iron from iron ore. In comparison, the Corex
method produces hot metal directly from coal,
lump ore, or pellets, rendering coking plants
and sinter installations superfluous. It also
eliminates two energy and emissions-intensive
processing steps.
The winners are the ecology and the
economy

The starting point was the question: “What does
green mean?” Siemens wanted to develop a clean
and stringently scientific method that would eval-
uate whether solutions were representing value
added in accord with ecological as well as eco-
Because of these characteristics, Baosteel
Pudong Iron and Steel Co. Ltd. decided to
procure a Corex-C 3000 installation for their
planned smelting works at the western edge of
Shanghai. Pig iron production in a blast furnace
 Industry Journal | 03 | 2010 | Environment 81

Eco-Care Matrix
The y-axis displays the “Eco Care
Parameters” that acquire essential envi-
ronmental pollutants such as CO2 emis- Green solution,
Corex methods
sions, emissions of sulfur dioxides, nitro-
gen oxide, and dust, usage and contam-
ination of water as well as the need for
energy and other natural resources. The
x-axis shows customer value expressed by
the productivity indicator. The Eco-Care
Matrix is a relative methodology: The prod-
uct or method is evaluated by setting it Reference: Traditional blast
in relationship to another alternative sol- furnace routine

ution entered as a reference point in the

Positive effect on the environment

center matrix. Green solutions that score

economically as well as ecologically are
located to the right above the reference
point. The Eco-Care Matrix also shows the
comparison between Corex methods and
conventional blast furnaces.
Sustainable engineering
is required

Increase of productivity

would have failed in the face of strict environ- Wegmann. For Industry Solutions all innova-
mental requirements. tions in the Eco-Care Matrix would have to score
before they become part of the environmental
At the end of 2007, the Chinese iron and steel portfolio.
multi – the third-largest pig iron manufacturer
in the world – has put the largest Corex instal- The Eco-Care Matrix can be integrated in the
lation into operation with a yearly output of 1.5 already existing product lifecycle management –
million tons of hot metal. The operating costs driving sustainable engineering forward. This
have been reduced by approximately ten percent is why Dieter Wegener, Chief Technology Officer
as compared to those for conventional pig iron (CTO) of Industry Solutions, refers to the matrix
production. And compared to the use of a blast as an important instrument within the innova-
furnace, CO2 emissions are reduced by close on tion process: “It shows engineers which param-
one-third. Also the emissions of sulfur dioxide eters have to be changed to obtain truly green
dropped by 97 percent, and the emissions of solutions.”
nitrogen oxides and dust were reduced to approx-
imately one-tenth of the former amount. Also To nip any kind of Eco label fraud in the bud, he
the pollution of sewage with ammonium, phe- stresses transparency: The results of the Eco-Care
nols, and sulfide has been greatly reduced (see Matrix and the methodology are checked by the
page 37). Institute for Technical Environmental Protection
belonging to the TU Berlin and the Department of
Key role for environmental portfolio Management Engineering of the DTU. At the TU
Berlin, a special department known as “Sustain-
By 2015, Siemens Industry Solutions plans to able Engineering” is responsible for the certifica-
have increased the share of environmental so- tion; employees of the “Quantitative Sustainabili-
lutions in total sales. The Eco-Care matrix plays ty Assessment” section perform the certification
a key role in this undertaking: “New develop- as such. Both chairs are considered renowned
ments will be aligned with sustainability, costs, addresses for evaluating the sustainability of
and environmental protection,” emphasizes Jens products, services, and methods applied.
82 Industry Journal | 03 | 2010

How does ... The rising costs of raw materials, the balance between
economy and ecology, and globalization are just some of
the challenges that are increasingly facing the chemical

... safety work in the industry. First-line responses to these challenges are max-
imum system availability, process stability, innovation,

chemical industry? and flexibility.

In the chemical industry in particular, maximum plant and

process safety is considered a matter of course.

1 Raw materials

Raw materials are usually expensive, vary in terms of quality,

and are at times, difficult to procure. Product quality and pro-
cess safety can be seriously jeopardized by even minor devia-
tions from the quality specified, or by improper handling. To en-
sure optimal results, quality is checked and analyzed repeatedly, 6
from the raw material state to the end product being produced,
throughout the entire production process.

2 Logistics

From raw material to the end-product stage, progress is regulat-

ed by defined processes and continuous monitoring. Neverthe-
less, flexible production methods and efficient logistics must be
available to react to changes that arise. Secure RFID and identi-
fication systems ensure, for example, optimized material flows
and high delivery reliability for the customer. 5

3 Production

In short, the more exact the continuous processes, the more

efficient the operation of the chemical plant. Greater process
transparency means greater plant safety. Clearly-defined pro-
duction workflows form the basis of continuous product quality.
Sustainable results in the chemical industry rise and fall with
uninterrupted plant operations. Safety as such, includes process 1
development, integrated optimization, as well as intelligent
maintenance concepts. Process quality is defined by the careful
adherence to defined conditions such as humidity, temperature,
and pressure or gas concentration. Siemens reliably contributes
to process safety, with flexible measurement and analytical
systems. Just a hint of carelessness when using caustic sub-
stances can have serious consequences for safety and follow-up
costs. Siemens Automation and Drive Technology already has
the necessary safety functions in place, with Safety Integrated – 2
for the protection of people, machines, and the environment.

4 Process control system

All information from the laboratory, production, and logistics is

channeled into the process control system, i.e. the nerve center
of the plant. All processes are controlled around the clock and
protected by a sophisticated alarm system. This ensures that
severe problems caused, for example, by a stuck valve or an
overfull storage tank, are detected in time, and eliminated, even
during chemical production. With its Simatic PCS 7, Siemens
offers a process control system for handling demanding tasks.
State-of-the-art field bus technology, such as Profibus and
FF (Foundation Fieldbus), provides the ideal communication
medium between the control center and the periphery, as these
are the fastest and safest communication links in the industrial
sector.
 Industry Journal | 03 | 2010 83

People and the environment have to be protected more

than in other industries, while the profitability and
sustainability of business activities must be assured.
Siemens Safety Integrated portfolio provides functional
as well as specially tailored safety concepts to meet the
requirements of the process and manufacturing industry.
These safety concepts can be successfully integrated into
the complex production workflows of chemical plants.

5 Asset management

All production systems in a chemical plant have to be tested

continuously for satisfactory operating status and functiona-
lity. Simatic PCS 7 offers professional asset management, not
only for electrical assets, but also for mechanical assets, such
as pumps and heat exchangers. The objectives are to provide
smooth production workflows as well as extensive information
when system parts need to be replaced. For reasons of safety
and efficiency, parts should not be replaced too late or too
4 early.

6 Business processes

No system can guarantee full safety, regardless of how sophisti-

cated it is. Every chemical plant needs comprehensive business,
plant, asset, and process protection. This begins with access con-
trol and video monitoring, fire extinguishers, and control systems
that serve to protect against fire or chemical substances being
released into the air. However, it also means adequate safety tech-
3
nology for IT infrastructures and communications.

7 Uninterrupted services

Environmental protection and safety go hand in hand in the

chemical sector. They are intrinsically linked to one another.
There is also a large potential to optimize the responsible han-
dling of energy and water, which in turn means cost reductions
7
and an increase in overall plant efficiency. Siemens solutions
enable significant savings in energy and CO2 emissions as well
as ultra-pure and cooling water, water and industrial waste-
water treatment. Energy Optimization Service (EOS), Advanced
Process Control (APC), Continuous Emission Monitoring Systems
(CEMS), supply chain and waste management perfectly adapted
to the process, all serve to prevent environmental pollution and
ensure greater productivity across the lifecycle of the chemical
plant.
84 Industry Journal | 03 | 2010

Imprint
Industry Journal Editorial staff Photo credits
Creating sustainable value through technological das AMT Getty images: Cover, p.7. above., pp.10/11, p.27,
leadership Gesellschaft für p.29, p.30, p.34, pp.42/43, p.44 left, p.44 right,
individuelle Kommunikation mbH & Co. KG p.46, pp.64/65, p.66 left, p.80
Published by Andreas Jung (CEO) Fotolia: p.8 above.
Siemens AG Tiessenkai 10 © Bayer AG: p.12 left and right
Industry Sector D-24159 Kiel © OECD: p.21
Communications www.das-amt.net © David Rosenblum: p.26 above
Werner-von-Siemens-Str. 50 © Ken Hutt: p.26 below
91052 Erlangen, Germany Contributors to this issue © Facebook: p.36 left
journal.industry@siemens.com Christian Buck, Maximilian Geyer, © 2010 Yahoo! inc.: p.36 right
Detlef Gürtler, Meike Hebestreit, © Ian Thomas: p.47 above and below
Stefanie Heinrich, Ken Hutt, © Sierra Nevada College 2007–2009: p.60
Editor
Andreas Jung, Mathias Peer, © Uni Kiel: p.68 below left, Jürgen Haacks p.68
Gerald Odoj
Jochen v. Plüskow, David Rosenblum above left, Nicolai Mumm p.68 above right,
Siemens AG
Andrea Wiedemann, Martin Wiedemann W. Hagen p.68 below right
Industry Sector
All other images: Copyright Siemens AG
Communications
Erlangen, Germany Creation
feedback communication GmbH Copyright
Hendrik Leyendecker (CEO) © Siemens AG 2010
Concept
Hannah Egelseer (Project management) All rights reserved. Reproduction of this publication
Matias Ernst, Thomas Thiele (Siemens AG)
Mario Kienel (Art direction) and use of its content are subject to prior consent.
Andreas Jung (das AMT GmbH & Co. KG)
Geisseestrasse 63 Technical details are subject to change.
Hendrik Leyendecker
90439 Nuremberg, Germany All information provided in this document refers to
(feedback communication GmbH)
www.feedback-communication.de general technical possibilities and characteristics
that do not always apply as described in every
individual case.
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 Industry Journal Creating sustainable value through technological leadership 03 | 2010
Creating sustainable value through technological leadership

03 | 2010

The information provided in this magazine contains merely

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in case of actual use may not always apply as described
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