Tech Transformers

Why we don’t need to copy Silicon Valley: Siemens

Siemens CEO on thinking like a start-up

Merely copying trends seen in Silicon Valley will not help big European businesses innovate, the chief executive of German industrial group Siemens told CNBC.

Last year, Joe Kaeser was accused by German newspaper Handelsblatt of sounding more like the founder of a "fast-paced start-up than the head of one of Germany's moist traditional companies".

Kaeser called the comments a "compliment" and described during an event hosted by CNBC at the World Economic Forum in Davos last week, how he had tried to push Siemens to think like a start-up.

"Innovating today is about creativity, it is about the freedom to act…if you look at the big conglomerate…it's highly regulated, it's a lot of talk about…internal controls and this and that…so there's a huge mindshift change to get the best of people," Kaeser said.

The German firm has set up a separate arm called "Innovation AG" and in 2014 launched its own venture capital arm. Kaeser said that regular employees are invited to come and pitch their business idea to Innovation AG and then are "treated like a start-up" if it's accepted.

"You also get equity so if you are successful you become a millionaire, you make much more money than I do," the CEO joked.

But Kaeser said that many companies are getting it wrong when it comes to trying to foster innovation.

"Some in Europe take a plane, fly to Silicon Valley, visit and look and come back and say we need to do the same thing. Well you can copy others…but if you always copy others, you never get ahead…so it's got a big downside," Kaeser said.

"So we said why don't we…understand Silicon Valley not only as a geography but also as a mindset…how do they do it, how do they innovate…what is it and why is that they get up on their feet again if they fail?"

But Innovation AG also has strategic importance for Siemens too. There are 10 to 15 employees who liaise with the start-ups to help them leverage Siemens' scale. And if an idea is attractive to Siemens, it will buy it.

"We have a valuation of their business…we pay you as we would pay an acquisition then we integrate the business into the organization of the company, and make it big and scale it up." Kaeser said.