Interview with Cedrik Nieke, CEO of Siemens Smart Infrastructure – Wirtschaftswoche

June 29, 2020
Enlighted

The following interview with Cedrik Nieke, CEO of Siemens Smart Infrastructure, and Andreas Macho appeared in Wirtschaftswoche. It is translated from German. View the original article here

Business in the area of energy grids and smart buildings is the new focal point for Siemens. Cedrik Neike, CEO of Siemens’ Smart Infrastructure business, discusses in which markets the pandemic has been overcome and the products which are in demand due to corona. 

Neike has been a member of the Managing Board of Siemens AG since April 2017 and is CEO of the company’s Smart Infrastructure business. He studied engineering and business finance, did an apprenticeship in industrial business management at Siemens and worked in various positions for the network equipment provider Cisco for over 15 years.

WirtschaftsWoche: Mr. Neike, which Siemens apps do you have on your phone? 

Cedrik Neike: It’s a colorful bunch. The newer apps include Comfy for example, an app developed by Building Robotics, a company headquartered in Silicon Valley, which we acquired 18 months ago. Since I’ve got special access rights for this app, I can control the temperature for my coworkers at our headquarters in Zug, Switzerland, for example – even if I’m not there [laughs]. But, in all seriousness, back when I was Siemens Chairman in China, we were developing all kinds of apps to control substations. I also like experimenting with apps that measure energy consumption, for example. I would consider myself a geek in this area.

WirtschaftsWoche: A year and a half ago, Siemens acquired the sensor technology provider Enlighted and the workplace app manufacturer Building Robotics, both headquartered in California. What are your expectations for these companies? 

Cedrik Neike: Let me take a step back to give some context. With the carve-out of Siemens Energy and beside our Mobility portfolio, the new Siemens AG will have two main technological focuses: industry and infrastructure. Infrastructure is further divided into energy management, which includes medium- and low-voltage systems, smart grids and buildings. And these areas – power generation and efficient energy consumption in buildings – are currently growing together. For this transition to be a success, however, smart systems are required. That’s why we intend to set up a network in which entire infrastructures can communicate with one another. In order to do this, we need sensor technology and software – and that’s exactly what the acquired companies in Silicon Valley offer. We can use the sensors from Enlighted to effectively see into the buildings and detect information. Comfy’s sole purpose is to provide users with a tool to be able to interact with buildings and “talk” to them. For example, the app tells users where they can find the nearest defibrillator or where a free desk is available. 

WirtschaftsWoche: Do these apps already account for a significant amount of revenue? 

 Cedrik Neike: Compared to the revenue of €15 billion that Smart Infrastructure makes in a year; the amount, software generates is still low. The software sector is very strong in the area of grids, for example. Where it comes to the distribution of energy. Our software solutions are also crucial in building automation.

WirtschaftsWoche: You also have many products in your portfolio which seem tailored for pandemics. For example, Siemens supplies thermographic cameras that measure employees’ body temperatures and can detect signs of fever early on. Apparently, Siemens is also working on a tracing app for office buildings. Is Siemens profiting from the crisis? 

Cedrik Neike: When the crisis started, our main thought at Siemens was that this was no time to abandon our customers. That’s why I picked up the phone and called all our major customers. The aim of these calls wasn’t for me to sell anything but to offer my help. After all, some of our customers are active in very sensitive areas of critical infrastructure, such as energy grids or hospitals, where there is simply no room for failure. But I also spoke to other customers at that time, such as shopping mall operators. As a result of the pandemic, their whole business model – bringing as many customers as possible together in a confined space – obviously had to be entirely rethought. The question was then: What technologies can Siemens provide to solve these problems? We developed our apps accordingly, so that they are able to measure the distance between people, for example, and subsequently trace contacts with people who are possibly infected. Our aim is to find solutions for our customers and not to profit from a crisis. 

WirtschaftsWoche: If companies use tracing apps or thermographic cameras, they’ll also obtain a whole host of personal information from their employees. The employer then not only finds out how often cigarette breaks are taken, but also, in some cases, if an employee is pregnant. If widely used, are such technologies at all compatible with data protection?

Cedrik Neike: It goes without saying that all statutory requirements must be met, and our Comfy app is 100% GDPR compliant. We have a very clear concept for this – we’ll store as little data as possible and only for specific purposes. For example, if the camera detects at an entrance that an employee has a high temperature, it does so with absolute anonymity and doesn’t associate a name to the employee. We clearly distinguish between what is technically feasible and what is ethically justifiable. Data is therefore only shared if the user agrees to it.

WirtschaftsWoche: But the customer for these products is the company and not the individual employee. Is it then the employer or the employee who decides to what extent they open their private lives to technology and data collection? 

Cedrik Neike: We recommend that every company ensures the greatest possible transparency and, for example, that it involves its works council in the implementation of our products at an early stage. We want to ensure that not only the company is satisfied with the apps, but also that end users feel comfortable with our technology. 

WirtschaftsWoche: Siemens’ President and CEO Joe Kaeser said that Smart Infrastructure was a speedboat in the Siemens AG fleet. In Q2, however, the business achieved a margin of five percent, clearly missing its margin range of 10 to 15 percent. The business also fell short of expectations in Q3 2019. Why is it that Smart Infrastructure is more like a rowing boat at the moment? 

Cedrik Neike: We have a very broad business that ranges from building technology to energy grids and industrial applications. You have to restructure and optimize in order to be successful with such a portfolio. And that’s what we’ve been doing over the last few months. These restructuring costs of €103 million were incurred in Q2. We also felt the impacts of the corona pandemic. If you subtracted these effects, we’d have largely been in the margin range. 

Nevertheless, we continue to work on our cost structure to prepare ourselves for new investments. This restructuring will be completed by the end of the year and then we’ll start again. 

WirtschaftsWoche: Alongside the short-cycle business, the long-cycle business, including buildings, is suffering. Due to the pandemic, April is likely to have meant a complete shutdown in this area. And the state will probably have less money for the construction of schools or airports in the future. What impact will this have on your business?

Cedrik Neike: The industry was already slowing down before the corona crisis, it just intensified the downturn. The crisis hits the short-cycle business first and only then the long-term business, such as the services business. However, our broad portfolio and our different markets enable us to mitigate the crisis quite well. Though our business in India is currently suffering very badly since the country is in complete lockdown at the moment, we’re generating more than half our revenue in the U.S., China and Germany. In these markets, we have been hit by the crisis in different waves. While business in China slowed down at the beginning of the year, it saw a steep increase in the U.S. In the last two months, however, business in China has picked up again sharply.

WirtschaftsWoche: Will the crisis impact Smart Infrastructure’s long-cycle business? 

Cedrik Neike: Critical infrastructures such as energy, data centers and hospitals are stable. However, activities connected with the buildings business are likely to slow down and a deceleration will also be seen in the industrial environment due to corona, while other businesses are growing. These businesses include pharmaceuticals, data centers and energy grids. Growth in these areas would also allow us to compensate if, for example, fewer airports are built.

WirtschaftsWoche: When will Smart Infrastructure reach its margin range of 10 to 14 percent again? 

Cedrik Neike: This margin range is still our goal. We’ll have to wait and see how long the corona pandemic will have an impact, and how significant this impact is. It’s too early to make a concrete statement. 

WirtschaftsWoche: Will there be other savings programs at Smart Infrastructure? 

Cedrik Neike: We think that many changes in the markets will be largely driven by technology. That’s why we’re saving in order to be able to invest. Of course, we don’t yet know the impacts that the pandemic will have, but we’ve got a clear savings program which we will see through first. We’ll deliver exactly what we said we would. 

WirtschaftsWoche: So, you don’t want to rule out an intensification of the savings program? 

Cedrik Neike: We’ll never do that. 

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