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20 September 2019

Siemens’ Outcome-based approach faces tough uphill battle

The tide is changing among the public, with environmentalism now more popular than ever. However, Siemens has found that this ethos has been slow to move up the chain to business leadership, and in a political climate that is warming to taking measures against our worst polluters, Siemens has a lot of sales opportunities.

Head of Energy Efficiency and Environmental Care Stephen Barker made the point that businesses should care about reducing their carbon footprints, and that in thirty years in the business, he’s never seen such support as there is for environmental causes today. He said it would be good for business, for the environment, society, and employees – and good economic sense regardless. Nonetheless, getting businesses to this point was the hard part, and this is where the new ethos comes in.

Outcome-based thinking was explained by Barker using a couple of quotes. One from Professor Stephen Covey, “begin with the end in mind,” and another from Professor Theodore Levitt, “people don’t want to buy a quarter-inch drill, they want to buy a quarter-inch hole.”

From a business perspective, outcome-based thinking means considering the outcome you want rather than the tool or process that could lead you to the outcome. This should let the business use unconventional avenues to reach that same outcome, which in this case, would open the door to more environmentally friendly options. Siemens itself is an advocate, and is using the ethos in its drive to halve its carbon emissions by 2020, and be carbon neutral by 2030.

As for the pitch, Siemens uses a circular process, which takes the lessons learned at the end of the first iteration to improve the second implementation – Engage, Discover, Develope, Deliver, Review, Optimize, Continue. Barker warns that this is a rigorous approach and not easy, but it is necessary if you want to use the process to actually get what you want.

To this end, Barker says that you have to have solid top-level commitment from both the client and the provider (in his case, Siemens). If you don’t, he warns, you won’t have that circular process, and it will grind to a halt after the first delivery.

The actual assessment process that Siemens uses has two steps. The first is called a value-discovery exercise, which looks at an asset to find ways to optimize it. The second step is the due diligence process, which is much more involved. Taking many weeks or even months, Barker described needing to find all the technical, practical, and commercial details, so that you can you create a fixed and firm contract.

If you try and take shortcuts in that process, Barker says everyone will suffer for years. Once the system has been delivered, you have to work out if it has actually fulfilled the contract’s criteria, in a formal evaluation – using the IPMVP protocol. Barker said that most of Siemens’ new contracts include this step, and the lessons learned in that evaluation make their circular way back to the first step in the process – so that things can be improved upon.

Modelling the process in software is a useful too, and Barker says this helps remove a lot of the risk away from the project. Siemens is also bundling in the service and maintenance of the equipment too, shouldering that burden for the customer. This brought Barker to digitalization, a trend he said could be discussed for days, but one that is very useful.

Barker explained how the data collection and processing would let you spot patterns that might otherwise evade you, and walked the audience through a scatter diagram and regression analysis example to this end. Without digitalization, he said this would at best be very hard, but usually impossible. Notably, Barker said that digitalization was one of the big opportunities that will emerge in the next few years, implying that it is certainly not yet here – despite what you might here from marketers.

Another admission was that only around 5-10% of customers are actually receptive to outcome-based thinking, meaning that Siemens really has its work cut out persuading potential customers to alter their way of thinking. This is why the due diligence part is so important, said Barker. We also asked how Siemens charges for the upfront cost, based on the admission, and were told that the potential clients are the ones paying – although the cost can be bundled into final bills.