Abstract
This chapter is a descriptive and explicative case study about value creation at Siemens in an uncertain and in a certain environment. Siemens has implemented economic value-added-based management since 1998. The empirical data analysis highlights value creation at Siemens at the beginning of the innovation lifecycle, when the environment is uncertain, and at the end of the innovation lifecycle, when contracts are signed, and the environment becomes predictable. Innovation is first placed in open networks, in which start-ups are essential, to which venture capital is allocated using business models. This is the ideation stage of the product lifecycle, when competitive advantage, the essence of value creation in both theory and the Siemens example, is created. Innovation matures, and Siemens closes contracts with customers about existing customer offerings. These contracts are managed as projects and funded with equity and debt. This is the stage when sufficient data exists to plan economic value added, the focus of Siemens' corporate governance.
TopBackground
The Industrial Economy is transforming in the Knowledge Economy in several progressive stages. Digital technology has inflicted several waves of fast and high-scale change to the Industrial Economy (IBM Institute for Value Analysis, 2011; IDC, 2017a). These changes may be represented as the decades of the Knowledge Economy (IBM Institute for Business Value Analysis, 2011): in the 1990s, the emergence of the Knowledge Economy, with digital products and infrastructure; in the 2000s, digital distribution and web strategy; since 2010, digital transformation of business models.
Digital technology, created by digitization, may be defined as the IDC’s third platform. The third platform comprises cloud, big data analytics, social business, mobility and technology accelerators which consist of robotics, natural interfaces, 3D printing, Internet of Things, cognitive systems, next generation security (IDC, 2017b). Digital technology may bear different names and classifications. For exemple, digitalization technology in manufacturing is called Industrie 4.0 or the Industrial Internet and comprises big data and analytics, autonomous robots, simulation, vertical and horizontal integration, Industrial Internet of Things, cyber security, cloud, additive manufacturing, augmented reality (Boston Consulting Group, 2015). Digitalization technology transforms individual industries (World Economic Forum, 2019).
Digitalization is defined (CapGemeni, 2013; Gartner, 2019; The Global Center for Business Transformation, 2019; IBM Institute for Business Value Analysis, 2011; IDC, 2017a) as the use of digital technologies to change a business model and provide value-creating opportunities or improve performance quantifiably.
Key Terms in this Chapter
Value Driver: Key performance indicators directly or indirectly linked to shareholder value; in a broad sense, factors which impact value directly or indirectly.
Value Creation: The decisions which generate value thoughout the organization.
Value Indicator: The corporate governance indicator all decisions are aligned to in value-based management, the net present value of discounted cash flow or economic value added.
Customer Value Delivery: The organizational processes that assure the customer receives and acknowledges this value.
Digitalization: A series of technologies, mainly defined by IDC’s third platform, and their use in organizations and society with a purpose, for example value.
Customer Value Creation: The organizational processes which lead to benefits for the customers.
Customer Value: The sum total of benefits which a vendor promises a customer will receive in return for the customer's associated payment (or other value-transfer).