Siemens CEO George Nolen: Steering Innovation

Can George Nolen, CEO of Siemens USA, continue to drive double-digit growth?

December 1 2006 by Chief Executive


Siemens Medical Solutions of Siemens AG with headquarters in Malvern, Pa., and Erlangen, Germany, is one of the largest suppliers to the health care industry in the world. The company is known for bringing together innovative medical technologies and health care information systems.

Patients at the Nebraska Heart Institute Heart Hospital are seeing the benefits of Siemens’ technology firsthand. When the nearly paperless hospital opened in May 2003, state of- the-art technology enabled vital signs charting to be done automatically at the patient’s bedside, and seamless data transfer gave physicians access to comprehensive electronic patient records whenever and wherever they needed them, enhancing work flow and improving care. The fiscal benefits for the facility are also impressive: a patient’s length of stay dropped by an average of two days and patient throughput nearly doubled, with more than 1,300 discharges logged at the end of 2003 versus 766 projected discharges-all with the same number of staff as originally projected.

But Siemens is about more than medical technology. The company’s technologies are also employed in a wide range of industries, including energy, transportation and communications. The following are excerpts from an interview with George Nolen, president and CEO of Siemens USA.

What do you see as your challenge in developing this business?

It’s been developing at a double-digit growth rate for the last 12 quarters so one of our greatest challenges is to manage that growth effectively. Two is to continue to innovate.

Where are you placing the bets currently?

In the medical field, we’ve gone after three areas of medicine with real strength. We are No. 1 or No. 2 in almost every aspect of the imaging technology business. We use that platform to really understand health care and what’s happening in the U.S., and we’ve now developed a very sophisticated cost-reducing paperless information technology platform for hospitals called Soarian. It is about evolving to the paperless hospital, which streamlines processes, reducing costs while increasing the accuracy of patient information and the quality of care.

In the area of diagnosis, we’re really getting into state-of-the-art medical imaging and diagnostic equipment technologies. The medical industry is a big market for us; it represents about 30 percent of our U.S. business.

But energy is another area that is key to us. We have been aggressive in coal. It’s the most abundant natural resource we have in China. So we’re putting resources into how to make it cleaner. We are looking at coal gasification and different areas of innovation in this market. We are building the largest wind farm in the U.S. in Texas, with the potential to supply more than 50,000 households with electricity.

Another area is in the devices we have that are sucking up so much of our natural resources and that are not efficient. We are working with automobile manufacturers to put diesel technology, which can be 20 percent more efficient than gas, into cars. That’s a solution that may just be sitting right in front of us waiting to be employed. We are also working on hybrid car technologies and on ethanol and the dual fuel possibilities that could be developed for the future.

You are up against some very tough competitors. To what do you attribute your rapid organic growth?

On the innovation side, if you look at our pipeline, our oldest products are between three and five years old. So we are constantly spinning our technology, thinking about the best thing to spend our innovation efforts on pushing through. And we spend about 7 percent on R&D, which is high. But we get returns.

Is that corporate-wide?

Yes. We spend more than $6 billion a year corporate-wide. Our R&D system is a network of research and development units in Bangalore, India; Munich, Germany; Moscow, Russia; and many other parts of the world. Each group has an expertise in one or more areas. For example, we have an R&D facility in the U.S. in Princeton, N.J., where one expertise we have is pattern recognition, which can be applied across businesses. So while [pattern recognition] technology can be used for security and for bags unaccounted for, it also is the same imaging technology used for your heart, your lung or your kidney. One of our strengths has been in figuring out how to take different innovations we’ve developed and apply them across our businesses.

What sort of new products might we expect from Siemens?

We just came out with a new dual source computed tomography (CT) scanner that is both the fastest and clearest in the industry. It can get a perfectly clear [cardiac image] in about 15 seconds.

We are also doing major work in New York City‘s subway system, much of which you may not really see. A lot of our technology is business to business, so sometimes we are inside the box, making life a lot better and you don’t necessarily see that. But we can now computerize safe distances between the trains with technology so that they can run about four minutes apart on the same infrastructure and track. New York is building new tunnels under the East River, and the question is how do you speed up service? We have a project to convert all the software so you can see the entire train system on a wall-where all the trains are-and then manage that process.

Another piece of that was working on a system that runs 24 hours a day, seven days a week. We can’t just shut down a New York City subway, so the planning process has to be impeccable.

                                  

Most hospitals are not efficient with information and a lot is still done manually, oddly enough, despite technology. How is your IT put to use in that vein?

On the front end, we have developed smart card technology that recognizes who you are and your medical record is right there with you. So when you go into a hospital and register with the card, all your medical records come up. If you don’t have the smart card, you can still register electronically with this technology and that begins the process so that you no longer have to register every time a procedure or drug is prescribed or a diagnostic test done as you typically do today.

With this platform, the doctors actually carry around a BlackBerry type of  device in which they can enter prescriptions that will also drop a red flag when, say, based on George Nolen’s record of penicillin and another medicine that you gave him will collide. So it’s also an information library. When you take that a little bit further and you have an entire family registered, you can find out what’s going on genetically that you might look for. This is where the medical industry is heading. The difference with our solutions is that each is a complete solution, not a point by- point solution. One set of software ties everything together.

Often there is a reluctance to embrace change-or the cost is prohibitive. Do hospitals welcome this?

Hospitals today know that it needs to be done. The [initial] cost is really the issue. But many have spent a lot of money trying to fix independent problems only to realize that you need an overall fix to the whole process, not just the addition of another IT system overlay.

In fact, I met with two CEOs today, one from New York and one from Pennsylvania, who are looking for technology that can improve care-that’s always the No. 1 concern-and also reduce costs.

Right now, we are spending between 15 and 16 percent of GDP on health care. How much could that be reduced through greater use of IT?

Well, there’s been a tremendous amount of money spent trying to fix an in-place system. But the [digital transition] is a tremendous undertaking. A hospital runs 24/7, and at the same time you have to examine your process of taking a patient from start to finish.

What is the doctor’s and the administrator’s input? How do you want the flow of your hospital to go? Do you want your heart unit here? The [answer] gets back to the results at Nebraska Heart where they can have 40 percent more people go through than they had planned for with comparative staff.

Of all of these areas, what would you say is your core competency?

Innovation. I just described three very different markets where we are bringing new innovation to a marketplace. We have 33,000 software engineers working on our software capabilities, our electrical engineering capabilities, and our ability to innovate and to manage those processes.

What are you least good at?

Building the brand. We haven’t been so successful in actually getting the brand up there. But I’ve come to the conclusion that that can’t be one of the top priorities. In business circles, everybody knows who we are; many of them aren’t sure what we do. They may know us from the medical business, or from the power business, or from our building technology. So from that perspective, could we do better? Absolutely.

But does it matter if in fact every time somebody in the world is thinking about building a wind plant, a coal fire plant, a nuclear fire plant or a hospital, you know that they’ll call you for consulting advice? If the people who actually spend the money are bringing you in, then I’m not sure it’s necessary to develop the brand further.

The priority has to be profit and marketing. When you’re No. 1 and No. 2 in every market, then the buyers know who you are.