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Focus: The future of industry

Real values

New orientation: Industry is enjoying a worldwide boom, thanks to ultramodern software and IT.

Private production

3D printers are capturing the mass market. Industry also relies on these printers to make products in small quantities.

Abundant energy

Russia is one of the world’s largest suppliers of natural gas – and one of the most attractive export markets on earth.

Industry Journal Topics, trends, and technologies for decision makers in manufacturing

01 | 2013 | siemens.com/industry

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People all over the world are returning to the values of industry.«

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02 Industry Journal | 01 | 2013 | Editor‘s note

Siegfried Russwurm, CEO Siemens Industry

Editor’s note

Industry Journal | 01 | 2013 | Editor‘s note

Dear readers,

Industry is experiencing a global boom as politicians and the media discuss the comeback of traditional manufacturing and express great appreciation for it. Industrial companies in the United States, Great Britain, Germany, India, and China are finding that there’s a great deal of interest in them and support for their concerns.

The current friendliness toward manufacturing is closely linked to the economic tribulations of the past decade. First the bubble of the »new economy« burst, and then the financial crisis shook the economy to its core. Countries with a strong industrial base coped much better than did economies that had wagered everything on the service sector.

That’s why people all over the world are returning to the values of manufacturing, which day after day makes real products, secures jobs, and serves as a driver for growth, prosperity, and social peace.

Western countries are bringing production capacities back home. And some formerly lowwage countries are increasing value creation by focusing on making valuable products instead of lowprice massproduced goods.

One important factor in this is a technological development that can link productivity and efficiency more than ever before, reducing costs, shortening times to market, and increasing flexibility. I’m referring to the connection of the real and the virtual world of production using ultramodern industrial software combined with increasingly powerful hardware.

This issue of Industry Journal sheds some light on this trend and the resulting opportunities for decision makers in manufacturing. We hope you will find it to be profitable reading.

Best regards,Siegfried Russwurm

03

10Real values

Industry is experiencing a worldwide comeback following the collapse of the new economy and the crash of the financial markets. Major technological progress in IT and software, accompanied by societal changes, has led to a new orientation. As a result, traditional industrialized countries are expanding their domestic production capacities again, and emerging countries are discovering that it’s more profitable to manufacture highquality products than to make and assemble simple massproduced goods. The image of the old economy is improving all over the world.

Markets

Focus: The future of industry20 »Bringing back manufacturing«

Interview with Anthony Foxx, Mayor of Charlotte, North Carolina, about modernization initiatives for manufacturing, the image of this business sector, and competition among cities.

24 Production for the people 3D printers are capturing the mass market.

Customers use them to print spare parts and specialty parts. But companies are also counting on additive production. This is the beginning of a major trend.

30 The manufacturing imperative Countries put their own competitiveness and

economic stability at risk when they neglect their manufacturing industries. An essay by Harvard economist Dani Rodrik.

33 Production comes home Products are increasingly being manufactured

where they are sold. An essay about the reregionalization of the economy by David Bosshart, CEO of Gottlieb Duttweiler Institute of Switzerland.

36 Absolutely camera-ready The new Cars Land at Disney California Adventure

Park south of Los Angeles offers plenty of outdoor fun. It might seem like child’s play, but it requires ultramodern technology.

40 Rising to the top with service Manufacturing companies need reliable service –

a lucrative growth market for the companies that equip industry.

44 Full of energy Russia is one of the world’s largest suppliers of

energy. Its 140 million consumers and its major need for investment in industrial companies and infrastructure offer opportunities for investors. A report on the partner country at the 2013 Hannover Messe.

Industry Journal | 01 | 2013 | Contents04

Management

Themes

Innovation

56 66

06 Big picture Kalex uses PLM software

by Siemens to build worldcham pion racing motorcycles.

08 Spotlights Efficient steam turbines, eleva

tor controls, maintenance for copper mines, Inventors of the Year, TIA Portal, and Simatic S71500.

42 What is the job of a maintenance manager? Integral Plant Maintenance increases the productivity of industrial plants.

50 People to watch: Esther Duflo

The MIT professor uses unconventional methods to solve the problems of the world’s poorest people.

76 Bookshop Books worth reading: Makers,

Jugaad Innovation, Just Start, Extreme Trust.

78 Imprint

56 The most dedicated employees in the world

Two international consulting firms have measured employee engagement. This survey will help companies use engagement management to increase productivity.

62 Knowledge as a business model Nathan Myhrvold is a physicist, economist, and former executive at Microsoft who advocates the privatization of knowledge. His U.S. company Intellectual Ventures markets more than 40,000 patents and ranks among the world’s major patent brokers.

66 The charm of the swarm It’s not the highestranking member of the

swarm that determines its direction, it’s the one with the best information – a model for future decentralized production and logis tical systems.

72 The place for really big questions Scientists at CERN, the European Organiza tion for Nuclear Research in Geneva, Switzerland, are hunting for the smallest elements. The Large Hadron Collider, which cost €3 billion, is one of the most complex machines in the world.

Industry Journal | 01 | 2013 | Contents 05

Big PictureTechnology for world champions

Kalex motorcycles are always at the head of the pack. Stefan Bradl of Germany became world champion in the Moto2 class on a Kalex in 2011, Pol Espargaró of Spain (pictured here) took a Kalex to second place in 2012, and Sandro Cortese of Germany – the current world champion in the Moto3 class – will ride a Kalex in the Moto2 for the first time in 2013. Kalex is a German company specializing in the development, design, and production of custom motorcycles and parts. Located in Bobingen, a town in Bavaria, Germany, Kalex uses the NX CAD/CAM/CAE solution from Siemens PLM Software. Cortese will be competing in 2013 for the new Dynavolt Intact GP team, which is based in Memmingen, Germany, and which was created specifically for him. The team’s main sponsor is the Chinese battery manufacturer Dynavolt.

Industry Journal | 01 | 2013 | Big Picture06

07Industry Journal | 01 | 2013 | Big Picture

Spotlights

The new version of the Totally Integrated Automation (TIA) Portal, the integrated engineer ing framework from Siemens, makes the imple mentation of automation solutions even more efficient. Version V12 of the TIA Portal now enables the seam less integration and planning of drive technology. Safety features were also enhanced, including those for the new Simatic S71500 controller. Security measures were impro ved to safeguard business

secrets, protect against copying, and control access.

The new generation of Simatic S71500 controllers also ushers in major improvements in engineering. The medium and highend controllers integrate many standard motioncontrol, security, and safety features, including the new con figurable diagnostic feature for the system status and integration into the TIA Portal for easier engineering and reduced planning costs.

More enhancements to TIA Portal and Simatic S7-1500

Efficient steam turbine

Siemens has developed an industrial steam turbine that boasts much greater efficiency and starts up nearly twice as fast as previous mod els. The result: Biogas facilities, com binedcycle power plants, and smaller coalfired power plants can produce more energy than ever before. Facilities like solar thermal plants that do not produce energy continuously also benefit.

An optimized turbine blade design and better insulation of the turbine stages make these gains possible. The new turbines also feature a symmetrical outer casing that warms up more evenly than before. The use of new materials and the materialsaving design improve the warmup stage while also extending the turbine’s useful life.

Every year, millions of tourists visit one of America’s bestknown icons: the Statue of Liberty in New York. Thanks to a comprehensive overhaul in 2012, Lady Liberty now complies with the latest safety standards. The project included replacing the 30yearold emer gency elevator, which ensures that safety personnel like paramedics and firefighters can quickly reach

New heights for Lady Liberty

the observation platform located in the crown.

Siemens developed the control and monitoring software for the elevator system. Project partner Tower Elevator Systems used the Siemens TIA Portal to program the software, which saved costs by accelerating the engineering, testing, and troubleshooting phases.

The new SST111 multistage industrial steam turbine

126 years old but equipped with the latest technology: the Statue of Liberty in New York

Industry Journal | 01 | 2013 | Spotlights08

Siemens has expanded its portfolio of complex product testing and simulation software through the acqui sition of LMS International in Belgium. LMS, with its 1,200 employees, is a software partner and key supplier to leading global enterprises in the automotive and aerospace sectors.

The company develops software platforms that simulate and test mechatronic systems in automobiles and airplanes. They makes it pos sible to virtually test and optimize

Software for complex simulations

the vibrational patterns, acoustic properties, and fatigue strength of all components – with no need for expensive prototypes or com plex physical test environments.

LMS is the ideal addition to the Siemens PLM portfolio, allowing Siemens to expand its dominant position in the market for simulation and analysis software. Shared customers include big names like Daimler, General Motors, Nissan, Volkswagen, Boeing, Mercury Marine, Ericsson, and even NASA.

Service in the Andes Siemens has taken over plant and equipment maintenance in the Andina mine operated by Chilean mining company Codelco, the world’s largest producer of copper. The job begins with the crushers that break down the copper ore and includes the conveyors, mills, flotation basins, and filtration equipment. The fiveyear contract includes the molybdenum equipment, the shafthoisting installation, and the piping system. The Andean mine supplies some 248,000 metric tons of copper annually.

The maintenance services are billed by agreedupon metrics such as production volume, system availability, safety, and environmental impact. Siemens also follows Codelco’s riskbased maintenance concept. The Andina mine is now the third Codelco mine in Chile, after Radomiro Tomic and Minera Gaby, for which Siemens manages technical maintenance.

Copper mine owned by Chilean mining giant Codelco.

Scrap is to be minimized at all costs in the stainless steel production process. One area where scrap is generated is in the rolling mill when wornout rolls are replaced. Siemens employee HansJoachim Felkl developed a new process for replacing rolls that can increase the output by at least seven percent for coldrolling mills. The 58yearold was honored as Inventor of the Year for his developments to increase throughput in tandem lines.

Since 1995, Siemens has yearly awarded the distinction Inventor

of the Year to excellent researchers and developers in its workforce. The twelve recip ients honored in 2012 account for 734 indivi dually issued patents. Overall, Siemens applied for 4,600 patents in 2012.

The other honoree in the Industry Sector is Manuela Lüftl, an engineer who played a key role in developing an improved generation of contactors – special devices that are essential for switching motors in automation technology.

HansJoachim Felkl developed a new process for replacing rolls

Manuela Lüftl improved a device for switching motors in industry

Inventors of the Year

09Industry Journal | 01 | 2013 | Spotlights

Comeback of manufacturing

Huge drive components for cement plants, ships, and tube mills, such as extremely robust gear couplings and gearbox housings weighing up to 80 tons, are made at the Siemens factory in the town of Voerde near Duisburg, Germany. In view of machining times of up to 100 hours, process reliability and quality control play a vital role.

Industry Journal | 01 | 2013 | Markets10

Berlin, the capital of Germany, is full of industrial buildings. As the result of a precipitous decline in Berlin’s industry, they often stand empty or offer homes to architects and artists. In 1920, nearly 600,000 people poured through the plant gates at companies like Borsig, Schering, AEG, and SiemensSchuckert every morning. But most companies either left or were dismantled after the Second World War. The number of industrial workers fell to 100,000 – and Berlin sought its salvation in sectors like the media, tourism, and software.

The city is now planning a comeback as a location for industry. The Berlin Senate, the executive body that governs the city, has been working with associations, trade unions, and companies to develop the »Industrial City Berlin 2010–2020« master plan, and now hopes to double the number of industrial jobs in just

a few years. »Creative cities with service economies need an industrial base,« says Governing Mayor Klaus Wowereit.

Berlin is in good company as it falls back in love with the manufacturing sector again. Governments all over the world are developing programs to promote industry. U.S. President Barack Obama recently announced a proposal to create a National Network for Manufacturing Innovation, with 15 research institutions located all over the country that will encourage innovation in industry.

Wellknown American industry organizations have also joined the National Manufacturing Renaissance Campaign to promote highquality industrial manufacturing. And companies all over the country are starting to bring back manufacturing that they once outsourced to lowwage countries.

Industry is experiencing a worldwide renaissance following the collapse of the

new economy and the crash of the financial markets. Technological progress in

manu facturing, accompanied by societal changes, has led to a new orientation.

Traditional industrialized countries are expanding their domestic production

capacities again, and emerging countries are discovering that it’s more profitable

to manufacture high-quality products than to make cheap, simple, mass-produced

goods. The image of the »old economy« is improving all over the world. Industry

is suddenly sexy again.

»

»Industry is a guarantor of growth and social stability.«Thomas Menze, Senior consultant, ARC Advisory Group

11Industry Journal | 01 | 2013 | Markets

Even upandcoming India, the service provider, has a new economic policy that calls for increas ing industry’s current share of GDP by more than fifty percent before 2025.

Unusual esteem

From Michigan to Manchester, Delhi to Detroit, Beijing to Berlin – industry is in vogue all over the world. It is being courted and is enjoying unusual esteem in the eyes of political leaders and society at large. This follows years of pro cla mations – at least in the Western world – that the next stage would be a service society that would create intellectual property instead of cumbersome machinery.

The new economy arose during this phase of euphoria in the service sector. Internet business models mushroomed, with enormous expectations for returns. There was a goldrush mentality. Dotcom companies were unreservedly viewed as cool and, above all, as the new economy – the future.

In contrast, industry meant the old economy – the past. It apparently did only what it had always done: make machines and drives, auto bodies and motors, fuel and chemicals, drugs and flour. With no perks like a soccer table in the office, no bosses wearing hoodies, and no rosecolored glasses. To young people, a job in industry was about as attractive as a glass of iced tea on Grandma’s porch.

Factories were seen as relics of another time. The United States and Great Britain sold their industrial base or shifted it to lowwage countries. In the United Kingdom today, only about one employed person in ten works in industry. Industrial manufacturing’s share of gross value creation declined from 19 percent in 1998 to 11 percent in 2010. American states with previously strong sectors like steel, consumer electronics, and machine manufacturing saw their industrial value creation fall from 17 to 13 percent during the same period. Almost six million industrial jobs disappeared during the first decade of this century.

The same thing is happening in Europe. EU Industry Commissioner Antonio Tajani has submitted a strategy paper calling for industry’s share of gross domestic product (GDP) to increase from 16 to 20 percent by 2020. He is pressing for »a third industrial revolution.« And EU Energy Commissioner Günther Oettinger is urging a »reindustrialization of Europe.«

The emerging countries with their strong economies have also recognized this global trend. China, according to its current fiveyear plan, will no longer emphasize cheap assembly or the manufac turing of simple, massproduced goods. Instead, the country will increasingly emphasize sophisticated manufacturing of highquality products by select hightech industrial sectors.

One reason for this is to compensate for the increasing loss of China’s position as the »world’s workshop.« China also knows that this kind of manufacturing promises greater value creation, growth, and prosperity in the future.

Spain

GermanyGreat Britain

U.S.

Industry, value added (% of GDP)

Source: World Bank*2002, **2009

1998|2010

17|13 23|2318|11

19|13**Mexico 21|18

Russia

17*|15

Brazil

16|15Australia

15|9

India15|15

South Africa

19|15

Sweden22|16

Japan

22|19

Indonesia25|25

China32|30

Vietnam17|20


»The reputation of what are known as ‘bluecollar jobs’ has suffered a great deal compared with ‘whitecollar jobs’ in the U.S.,« confirms Martin H. Richenhagen. He is a German and the CEO of AGCO, an agricultural equip ment company with annual revenue of US$8 billion headquartered in the small town of Duluth, Georgia. But the trend is shifting, he says.

Global rethinking

That’s because global rethinking began after the collapse of the new economy and then the financial markets. Entire national economies are again looking to industry – the second sector – with its unspecta cular but steady growth and its creation of real value and secure jobs.

Gene Sperling, Director of the National Economic Council and Assistant to the President for Economic Policy, has described the decline of industrial employment in the U.S. as a national problem of the first order. But they are already well on their way to solving that problem: American industry has grown by more than ten percent annually and has created 500,000 jobs since early 2010.

Germany doesn’t need such a fundamental rethinking. It has always believed in its industry and in a strong »Mittelstand,« its small and mediumsized companies. Germany was still being mocked as a stodgy European problem case in the 1990s, but today the rest of the world envies Germany’s large share of the world’s industry. »Germany has always made sure that key industries stayed in the country – even as costs rose,« AGCO chief Richenhagen says approvingly.

India has high hopes for manufacturing

Things look different in India, which has not experienced much industrialization since it became independent. That’s no surprise, because the country originally hoped to develop

China International Marine Container (CIMC), an industrial company with 63,000 employees on six continents, manufactures tank containers, tank trucks, and pressure vessels for production plants at its Nantong location on the east coast of China. Quality is more important than quantity for CIMC, which complies with the strictest international standards. The Chinese government increasingly sees manufacturing highquality products as the way to keep pace with international competition. The previous Chinese formula for success – manufacturing simple products on a large scale, or merely assembling products – is now considered outdated.

»


and manufacturing has caused all process steps to merge into one unit, instead of being performed sequentially. This ranges from design to production planning, engineering, and manufacturing to services. The result is greater efficiency, shorter times to market, and increased flexibility.

Wage costs less important

This technological convergence is increasing productivity so much that factors like wage or transport costs become less important in comparison. This also makes production in Western economies competitive again. And new technologies are offering emerging markets the opportunity to manufacture effi ciently and flexibly from the outset, putting them on an equal footing with their global competi tion. However, economic opportunities also involve some risk: Companies that don’t join this

ing domestic demand and the effort of multinational companies to find alternatives to China as a place to do business could help India achieve its objective.

This paradigm shift knows no national boundaries. Severe, radical changes to industry are a key issue in almost every country. »It doesn’t matter whether a national economy wants to keep its industry competitive or bring it back into the coun try – this turnaround offers an opportunity for all companies,« says Siegfried Russwurm, CEO of the Industry Sector at Siemens.

In the final analysis, companies like his first unleashed the current rediscovery of industry with their technological developments. A clear trend toward connecting powerful industrial software and ultramodern hardware has taken shape in industry over a period of just a few years. Digitization of product development

There is more expertise embedded in a ton of computers than in a ton of metal ore.«

»

Ricardo Hausmann, Professor of the Practice of Economic Development at Harvard University

directly from an agrarian society into a service economy.

But the Indian government has now understood that the service sector alone cannot help the country make broad economic progress and it won’t offer enough wellpaid jobs. That led to the development of the National Manufacturing Policy (NMP), a plan for industrial growth.

National Investment and Manufacturing Zones will be created all over India. They will have modern infrastructure and be subject to less stringent regulations while being required to meet strict environmental standards. The goal is for automation to increase productivity and improve quality, in small and mediumsized companies as well as large enterprises. NMP is projected to increase the manufacturing industry’s share of GDP from its current level of 16 percent to 25 percent by 2025. That’s an ambitious goal, but grow

»


The governments of emerging countries are also pinning their hopes on producing highquality products. That’s the right thing to do, says Ricardo Hausmann, Director of the Center for International Development and Professor of the Practice of Economic Development at Harvard University. He says that this increases value creation and allows greater scope for differentiation by national economies.

What is the advantage for emerging countries of producing high-quality products compared with inexpensive mass produc-tion?

As products become more complex, the possibilities of variation grow exponentially. There are many more varieties of chairs than of cocoa beans, and there are many more possible varieties of airplanes than of chairs. As your products involve

more knowledge, there is more scope for differentiation.

What should emerging countries pay special attention to in indus-try’s new orientation?

When we observe how countries develop, we tend to see that the new industries that succeed tend to be relatively close to the previously existing ones. It is easier to move from small jet aircraft to larger planes than it is to get there if you start with soybeans.

Does value creation grow as products get more complex?

We have determined that this correlation does in fact exist. More complex products are more valuable and more complex economies create more value. There is more expertise embedded in a ton of computers than in a ton of metal ore, and the

price per ton reflects that. There are no rich countries that export primarily coffee, and no poor countries that export primarily medical imaging equipment.

How does a strong industry that produces increasingly complex products affect a country’s service sector?

Among other things, manufacturing requires accounting and auditing services, design, marketing, legal advice, investment banking, advertising, wholesale and retail distribution, and postsale services. It is all part of the same value network – it is not a different economy. A country with a strong manufacturing sector will have a complex service sector that an economy without manufacturing will not have. The distinction between services and manufacturing is collapsing as the value network is divided and globalized.

The »virtual machine« at INDEX, a lathe manufacturer in Southern Germany, is a digital twin of the real machine. Using it can reduce runup times by more than 80 percent and increase production by almost ten percent during ongoing operation. This is one reason why INDEX is a successful manufacturer in highwage Germany.


When developing and manufacturing vehicles, glass, paper, machines, or pharmaceuticals, using industrial IT and industry software and ultramodern hardware to digitize and interlink all production steps can increase productivity so much that factors like wage and transportation costs become less important.

hightech revolution in time could soon miss out.

VDMA, the German Engineering Federation, estimates that IT and automation currently account for 30 percent of the manufacturing costs involved in machine building. The market for industrial software in the strict sense will grow by some 70 percent to €28 billion from 2012 to 2018, according to experts. That doesn’t count the world market for industrial software in areas such as logistics, security, and energy management, which total another €100 billion or more.

New forms of manufacturing are also changing job descriptions – and pay levels. Industry is increasingly seeking qualified employees who also know how to use software to control complex processes. Industrial workers no longer wear overalls while manufacturing highquality products, and the tools of their trade are now tablet computers.

Crisis-resistant sector

National economies and companies that successfully adjust to this transformation will gain an obvious international competitive edge. For example, the manufacturing industry is far more resistant to economic bubbles than the service sector. »The barrier to entry is higher than for Internet companies,« explains Thomas Menze, senior consultant at the ARC Advisory Group, a technology research firm. He says that someone who wants to create a Web startup doesn’t need much more than a desk, a computer, a phone, and an idea. »But someone who wants to build an industrial enterprise will have to buy machines and ensure that the location is connected to global logistics flows,« says Menze. That costs a lot of money and protects against investing in business models that can’t be rationally justified.

Industry also creates a large number of wellpaid jobs. One industrial job


chains and a good environment for innovation.

»German industrial companies took the crisis of the mid1990s as an incentive to focus strictly on innovative technologies with comprehensive investments in research and development,« says Lichtblau. There was no question of dismantling the industrial base on a large scale, he said, adding that the country could look back on almost two hundred years of industrial history. The result of such deep roots: Between onequarter and onefifth of the German GDP – the values vary according to the source and the calculation method – is earned by the manufacturing industry. That is far above the international average.

U.S. profits from natural gas

The United States is currently in a particularly comfortable situation where reindustrialization is concerned. Huge deposits of domestic shale gas are soon likely to make the country mostly independent of the world market (see box on page 19). Abundant supplies have already affected the price of natural gas. It is about twothirds lower in the U.S. than in Germany, for example – which has massive effects on production costs.

Boston Consulting Group assumes that by 2015 manufacturing by U.S. industry could be 15 percent less expensive than in Germany or France and as much as 21 percent less expensive than in Japan. China would be only about seven percent less expensive by then, which hardly tips the balance compared with the other costs that are relevant to manufacturing. Factors influencing those costs – which in turn influence the reshoring plans of U.S. companies – include shorter transport distances, fewer customs formalities, greater protection against counterfeiting, and better quality assurance.

almost always has multiple jobs at suppliers’ or service providers’ businesses depending on it. The manufacturing industry is closely linked with other economic sectors, making it an engine for the entire economy. This also distributes prosperity more evenly. And wages and salaries in industry also ultimately prime the pumps of the domestic market. »This makes industry a guarantor of growth and stability,« says ARC consultant Menze.

»The manufacturing industry is the germ cell in a long value chain with enormous potential for employment,« confirms Gordon Riske, an American who is CEO of Kion Group, headquartered in Wiesbaden, Germany. Kion has 20,000 employees and operates internationally, manufacturing forklifts, warehouse technology, and industrial trucks.

The value chain starts with supplier companies, which are now closely involved in research and development, says Riske. »And it extends to the services related to our products that we provide to our customers.« He adds that modern IT connects these flows of products and data.

A good image in Germany

Riske praises the fact that manufacturing companies are highly esteemed in Germany. Karl Lichtblau, managing director of IW Consult, a subsidiary of the Cologne Institute for Economic Research, agrees: »Germany has a strong industry, which in turn profits from unusually advantageous background conditions in the country.«

Lichtblau and his colleagues studied the quality of 45 countries as business locations from the viewpoint of industry (see table on page 19). Germany was rated No. 5, scoring for wellestablished infrastructure, legal security, a high level of education, and stable supplies of energy and raw materials. Other factors were functional labor relations and value

»

Three questions for …

… Helmuth Ludwig, CEO North America at Siemens Industry

How important is the industrial renaissance for the United States?

Potentially very important. There is a broad based conversation going on in the U.S. about the future of manufacturing. Structural economic shifts have made manufacturing investment in the U.S. more attrac tive for companies in traditional manufacturing geographies and in emerging U.S. manufacturing »hubs.« An important example is the oil and gas industry and its investments in unconventional gas recovery.

What does this mean for manufacturers?

This is a moment of choice for many manufacturers. They are holding unprecedented levels of cash while looking at aging manufacturing infrastructure. While the catalyst for investment may be lower energy costs in the U.S. and growing manufacturing costs overseas, companies want to be cer tain that their investments will position them for longterm leadership. This is where we can help.

How can Siemens Industry help in this context?

As a technological pioneer, our vision is rooted in our customers’ future success. An example is our ongoing investment in the integration of industrial software with our product portfolio. As such, our products, solutions, and services help companies take better products to market and get them there faster.


facturing one series of its computers in the U.S. again. Harold Sirkin of Boston Consulting expects the U.S. economy to grow by some US$20 billion to US$55 billion per year based solely on homecomings like this.

Countries like China will lose jobs as a result. China currently earns more than onethird of its GDP from manufacturing, primarily making relatively simple goods or assembling products that were developed in other countries.

China will have to find a way to cope with rising wages at home and reindustrialization in the West. »Think of the textile industry. It moved from Europe to China because wages were lower there – and now most of it has left that country again because production was no longer profitable,« says Thomas Döbler, a partner at Deloitte and coauthor of The Future of Manufacturing, a report for the World Economic Forum.

But China foresaw this trend and has taken precautions. Back in 2011, the Chinese government announced in its fiveyear plan that it would focus on manufacturing highquality products using ultramodern automation technology at a worldclass level. For example, Foxconn, a computer maker, recently announced that it would be using more robots for production.

The experts at Deloitte say that the Chinese economy is currently very interested in developing higher quality, more complex manufac turing and products to stimulate value creation. »Simple reproductions like those they previously made won’t get them any farther,« says Döbler.

Some American states, especially in the South and Southwest, could soon become some of the least expensive production sites in any industrialized country for that reason. Another reason: After years of seeing industry dismantled, American trade unions are ready to compromise and are calling for only modest wage growth.

As many as three million new jobs could be created in the United States in the coming years. Tapping the new sources of energy would directly and indirectly increase economic growth by two to three percent.

Costs rising in China

Falling costs at home isn’t the only reason U.S. companies are finding that it pays to bring production for the domestic market back from lowwage countries like China. Manufacturing is also getting more expensive there – in particular, due to rising pay levels. »Since 2001, wages and salaries in China have risen 15 to 20 percent – per year,« reports Harold L. Sirkin, a senior partner at Boston Consulting. The firm also assumes wage costs will continue to increase by about 18 percent annually in the coming years.

The list of American companies that are returning from other countries is already getting longer. For example, the sports equipment maker WhamO has shifted parts of its Frisbee manufacturing operation back to the U.S. Watts Water Technologies, a manufacturer of pipes and valves, is moving out of Asia and expanding in the state of New Hampshire.

Even the computer giant Apple has announced that in 2013 it plans to invest US$100 million in manu

Reindustrialization could create as many as three million jobs in the United States over the next few years. U.S. industry has added 500,000 jobs since early 2010.


Promoting innovation

The Chinese government has pinpointed seven key industries ranging from biotechnology to machine and plant building for industries like aviation and telecommunications. Companies in those sectors will receive tax breaks for investments in research and technology and for using environmentally friendly manufacturing methods.

The densely populated regions along China’s coasts will be upgraded from »workshops« to hightech production centers. China plans to move more of its simple assembly work further inland to the western provinces – simultaneously developing more lowwage locations and promoting the economic development of remote areas. Many production facilities have already moved from more expensive locations like the Pearl River Delta to provinces where costs are lower.

In other words, lowwage manufacturing is on the move in China. And wages are already rising in smaller emerging countries. »The traveling circus must come to an end at some point. The last regions with low wages and acceptable background conditions have already been developed,« says Döbler.

The race for new lowwage locations can be a matter of indifference to companies that focus on highquality manufacturing and products. »A company that now invests in modern, efficient production technology can profitably manufacture products in industrialized countries and conserve resources over the next few decades,« says Siemens Industry CEO Russwurm. Now is the time to prepare for this trend.

Energy for the U.S. The United States has large deposits of shale gas in clay. Extracting it is more expensive and technically challenging than extracting conventional natural gas. The process, known as fracking (hydraulic fracturing), injects a mixture of water, chemicals, and sand into rock to release the gas.

The largest shale gas field in the U.S. is located directly south of the traditional industrial center in the Northeast. At least 30

petrochemical plants will be built there and in other economically underdeveloped regions over the next five years. Shell plans to spend US$2 billion to build a cracker in the old steelmaking region of Pennsylvania. The plant will break down natural gas into ethylene, which can then be used to make plastic products.

There are shale gas deposits in other countries, too. Gas companies are exploring for potential deposits in Poland and Scandinavia. But environmental concerns are thwarting plans to tap deposits in densely populated parts of Europe. Past experience indicates that yields are too low while the risks and costs are too great.

The best industrial locations in the world

Country 2010 rank 1995 rank Index value 2010*

U.S. 1 1 136

Sweden 2 4 132

Denmark 3 5 131

Switzerland 4 7 129

Germany 5 14 128

Australia 6 10 128

The Netherlands 7 2 127

Canada 8 3 127

Norway 9 8 126

Japan 10 12 126

Finland 11 13 122

Austria 12 15 122

Great Britain 13 6 121

Italy 14 9 120

New Zealand 15 11 118

* Average of all countries studied = 100Source: Cologne Institute for Economic Research, IW Consult

The Cologne Institute for Economic Research measured the quality of 45 countries as business locations from the viewpoint of industry. Analysts collected and weighted 58 indicators for their quality of labor relations, human capital, infrastructure, and inno vative strength and combined them in an index.


Strengthening domestic industry is being pushed on many levels in the U.S. Industry

Journal spoke to Anthony Foxx, Mayor of Charlotte and head of the Task Force on

Advanced Manufacturing of the U.S. Conference of Mayors, about modernization

initiatives, the weak image of the industrial sector, and the competition among cities

and regions.

Manufacturing should come back to the U.S.«

»

Mayor Anthony Foxx as a guest speaker at Power2Charlotte, a municipal education initiative for more aware and more responsible energy consumption.


Mayor Foxx, the United States is still the world‘s biggest industrial nation. However, about five mil-lion jobs were lost during the last decade. What has happened?

The United States has had several challenges with manufacturing, not the least of which is the relative lowcost manufacturing off United States shores. During the past 20 or 25 years, there was an exodus of U.S. companies that went overseas, having a huge impact on the American jobs front. But today there‘s an opportunity for us to reemerge as a manufacturing nation.

Because labor costs in Asia are rising?

Yes, in part. But also because locally we do everything to qualify workers for advanced manufacturing jobs. We try to improve their vocational skills so that they can take up positions beyond traditional areas of work. Education and vocational training are two main points in our endeavor to incentivize companies to come back to the U.S.

You are chairman of the new Task Force on Advanced Manu facturing of the U.S. Conference of Mayors. This team is supposed to promote modern industrial production. What are your plans?

We want to develop a bestpractice model – a kind of toolbox local politicians can use to mobilize resources that support their industries; activities such as partnerships of colleges and universities with the private sector, or infrastructure improvements from air and rail traffic all the way to the mechanics of moving goods around. Even though the latter are national tasks, we mayors want to press ahead with them.

How can a best practice model work? Mayors compete with each other, don’t they? So they’re prob-ably not really interested in having

their neighbor successfully foster investments.

That’s true. In a way, we’re competitors, the mayors, the cities, the Federal states. But it’s obvious that in certain regions particular industries grow faster than elsewhere. Concentration on highquality products is no uniform model, of course. Different regions have different strengths. For instance?

The Southeast, we here in Charlotte, is a growing location for energy companies. That’s why Siemens is based here. The company has considerably extended its plants and more than doubled the number of jobs. This could serve as a model for publicprivate cooperation with the aim of further developing this kind of industrial production. Other regions, on the other hand, are strong in car manufacturing or in information technology. North Carolina probably won’t pay as much attention to the automobile industry as Michigan. It comes down to each locality having a sense of where its strengths are.

How can such a division of labor work?

One of the big messages that is likely to come out of this is that we really have to move in clusters. There will be clusters in the Southeast, in the Midwest, and in the Northeast. Within these clusters there will be collaboration, among them competition. But with our work we’ll all contribute to pushing the sector as a whole. I see great opportunities in advanced manufacturing. What else is on your agenda when the task force will start work this year?

The basis is to number one orient our membership in what advanced manufacturing is because people will be coming into the room with

Anthony Foxx Since December 2009, the lawyer Anthony Foxx has been the mayor of Charlotte. Elected at the age of 38, the Democrat is the youngest mayor in the history of the metropolis. Earlier in his political career he held a council seat and specialized on traffic planning and business development. One of his main objectives is the reduction of unemployment. Since the beginning of his tenure it has gone down from eleven to nine percent.

»


A solemn moment – under the white cover (left) there is the first gas turbine made at the Siemens gas turbine plant in Charlotte in 2011. It was subsequently delivered to Mexico.

Charlotte‘s Skyline with the prominent Bank of America Corporate Center. With a height of 265 meters, it is North Carolina’s highest building.

different levels of knowledge about that. Then we will agree on the tasks we want to tackle. One opportu nity for us mayors is lobbying in Washington and at the state government level to improve the general conditions for the industry sector. At the same time, we must be local communicators. We are on the ground every day, we are in front of citizens, and our microphone collectively is pretty big. We have an opportunity to help the larger public understand that we are not down and out in manufacturing, that there are oppor tunities for us to continue growing that sector, and that we are going to fight hard to do it.

Will industry representatives be involved in your activities?

Of course. We are bringing industry to the table. And we’re going to intensify this dialog in the course of the year. Our whole goal is to be moving in concert with industry and advocating to Congress and to various states agendas that are probusiness.

Democrats and Republicans are at loggerheads. However, your ini-tiative is a cross-party approach, isn’t it?

Yes, it is indeed. The mayors are members of both parties. But we share a common interest in this issue.

The Obama administration has also launched an advanced manu-facturing program. How is that being coordinated?

CharlotteWith its 750,000 inhabitants, Charlotte is North Carolina‘s biggest city. Altogether, nearly two million people live in the metropolitan area in the eastern U.S. The finance sector is traditionally strong in this region, but it has also attracted a number of renowned industrial enterprises, such as the steel producer Nucor, the aerospace company Goodrich, and the SPX conglomerate. Moreover, about 250 energy companies are based in the region, among them the utility company Duke, the plant manufacturer Babcock & Wilcox, and – since 1999 – also Siemens. More than 65,000 people in the region are employed in the industrial production sector.


We have had some initial discussions with the administration about how to partner and help each other to advance this issue. Government representatives join our Task Force meetings. The American nation is making a big effort to develop industry further. We know this will take a lot of hard work and a lot of focus and a lot of talking to each other but we are ready to get going.

Many school graduates don’t even consider a career in manufacturing. Is the public image of the sector really that bad?

The image is even worse than the actual situation. You see thousands and thousands who may or may not have completed high school but who are working on jobs that are lowskill jobs but pay decent wages and allow that person to buy a house and take care of his or her family. Those folks haven’t gone away. And in advanced manufacturing, job requirements as well as wages are higher. And I do think it’s changing. Nothing focuses the mind like a doubledigit unemployment rate.

Do companies, small and medium-sized enterprises in particular, have to cooperate closer with high schools and colleges in order to find suitable graduates?

Absolutely. We have absolutely got to connect our young people to these promising career paths. This is going to require a different approach. When I came into the mayor’s office in 2009 we had the legal basis to create a Youth Work

force Development Board, but we hadn’t done it. I made sure we did it. And one of the most important tasks of the new board was a suitable conveyance of industry job opportunities. Once they see the opportunity, they can aspire to it, but if they never see it they won’t.

Which industrial sectors do you expect to benefit in particular from the regional and national initiatives?

Probably the carmaking and computer sectors. It’s not without reason that Apple has announced to return part of the Mac production back to the U.S. Another sector that is often not taken into account is the healthcare business, which is usually regarded as a service business. But many medical products are produced on an industrial scale. These are only a few examples. In Charlotte, I will consult my business community and we will see which sectors employ most people. And the question will be: how we can grow those sectors.

Why should globally active in-dustry giants be interested in strengthening the position of the U.S. as an industrial location at all?

Competition is the biggest source of savings for companies in many situations. The stronger and more competitive the U.S. manufacturing sector is, the better global companies will do. The U.S. will not win every future competition for employment, but a major world player is back in the game.

Nationalalliance for industryThe United States Conference of Mayors, founded in 1932, is a powerful crossparty advocacy body based in Washington, D.C. It represents cities with more than 30,000 inhabitants and currently has some 1,300 members.

In September 2012, the U.S. Conference of Mayors established a task force to support socalled advanced manufacturing from 2013 on – modern, capital intensive industrial production. Shortly after the reelection of the Obama administration, the chairman of the Task Force on Advanced Manufacturing, Anthony Foxx, met Secretary of Labor, Hilda Solis, and Trade Secretary in office, Rebecca Blank, to develop a mutual industrial policy strategy.


Production for the people

Smaller than a milk crate: Bre Pettis, founder of MakerBot in the U.S., can easily lift the Replicator 2, one of the company’s 3D printers.


The future is already here. At a small store with white walls and a cracked stone floor in New York’s trendy SoHo neighborhood, they’re busily at work – black devices about the size of scanners whose print heads whiz back and forth. These are replicators, and they print toy cars. Or apples. Or wrist bands. Not on paper, though: These are real threedimensional plastic objects.

The man some have dubbed the new Steve Jobs stands behind the counter. He’s wearing hipster glasses with black rims and a dark gray shirt over jeans. »Welcome to the revolution,« says Bre Pettis, founder of the MakerBot company and a new star on the horizon. He and one of his replicators were recently featured on the cover of Wired, a technology magazine. »This machine will change the world,« says the headline. Pettis explains why. In a few years every home will have a 3D printer, and we will be able to make objects just as easily as we print out text today.

What may have seemed like a crazy vision of the future just a few years ago is now becoming a reality. Tens of thousands of 3D printers are at work in homes and engineering firms, hobbyists’ workshops, and research laboratories. And that’s just the beginning. Terry Wohlers, an

industry expert from Fort Collins (Colorado, USA), predicts annual growth of about 30 percent and estimates that sales of additive manufacturing equipment will reach US$3.7 billion by 2015. Exciting times are ahead, according to Digital Trends, a tech nology magazine. That’s what’s known as hype.

Print your own spare parts

In technical terms, 3D printing is relatively simple. A material, usually plastic, is liquefied and successively laid down in very thin layers according to a digital model. That model can be downloaded – or you can design your own. This idea is captivating to consumers. If the temple of your glasses breaks, you can find the design on the Internet and print out your own replacement. Kids can make the toys they want. If you lose a button, just replicate a new one.

Can life really be that simple? »From the beginning we’ve faced the problem that people think of this as science fiction,« says Pettis. »That’s why we opened the store.« He opens the sliding door of a stall that looks like a photo booth. But instead of your picture, there is a 3D scan, and the result is printed out on a 3D printer. Your own personal minibust, which can be infinitely replicated.

The use of three-dimensional printers to manufacture

products was once limited to industry. As prices fall,

3D printers are now capturing the mass market. This

is the beginning of a major trend. It is also benefiting

manufacturing plants, which are increasingly using 3D,

also known as additive manufacturing.

»


A huge number of printers are already available. Most manufacturers are small, owneroperated companies. Steve Wygant heads SeeMeCNC, a fiveperson company in Goshen (Indiana, USA). He made the move from routers to 3D printers in the fall of 2011 and sold more than 500 units within a year. Wygant found this to be »phenomenal.« He took a new model to the World Maker Faire in 2012 and had soon pocketed orders worth almost US$80,000.

Models from the Internet

The market leader MakerBot is in another league. Pettis’s company has sold more than 15,000 printers since it was founded in 2009. It received US$10 million in venture capital in August 2011, including from Amazon founder Jeff Bezos. That makes it possible to run the expensive store in SoHo as well as the »Thingiverse« Web site. The site offers thousands of digital designs for 3D printing – free of charge. The aim is to increase customer loyalty before the big boys like HP or Brother discover this area for themselves. »MakerBot is at the point where Apple was 30 years ago, when desktop publishing got popular,« says industry insider Chris Anderson, for many years the editorinchief of Wired (see interview on page 28).

The technology still leaves something to be desired, however. The printers are still very slow – it takes hours to finish a saucer. They can print only relatively small plastic parts in one color. If the resolution is too low, the surface of an object will be rough. That will change. But it’s still doubtful whether the application will ever offer quality as high as that of indus trial production, and it probably won’t be as convenient or inexpensive, either. The Gartner research firm predicts that 3D printing will not be ready for the mass market for more than five years.

»The public can access this manufacturing process here for the first time,« says Pettis.

The public can also thank Neil Gershenfeld, a professor at MIT, the Massachusetts Institute of Technology in the United States. He is a physicist who in 2001 began 3D production for scientific purposes at the Center for Bits and Atoms. But there was overwhelming demand from students, who simply wanted to make something, anything. Gershenfeld came up with the idea of the smallscale workshops known as FabLabs. Today there are some 100 FabLabs all over the world, from Takoradi, Ghana, to Jalalabad, Afghanistan.

Those early efforts have long since become the global phenomenon known as the maker movement, which is committed to the principles of open source. Instructions, designs, plans for 3D printers and all are distributed free of charge. An entire cosmos has been created in this way, including doityourselfers and professionals, the avantgarde and their imitators, and special online marketplaces. The industry also holds special gettogethers, the Maker Faires.

High-tech for all

The World Maker Faire in New York clearly shows how rapidly this trend is developing. Only two companies with 3D printers attended in 2010, and there was little interest. Almost 30 companies attended in 2012, and parents and children pushed their way into the 3D Printer Pavilion. Kids who grow up with smartphones and tablets think hightech crafts are cool. And they’re also increasingly affordable. If you want to put together your own printer, you can get a kit for less than US$600. A readymade Replicator 2 by MakerBot costs about US$2,200.

15,0003D printers since 2009.

Market leader MakerBot

has sold more than


Super-flexible manufacturing

What seems revolutionary for consumers is old hat to industry, which has been experimenting with additive manufacturing for 30 years now. It takes longer than conventional casting or stamping methods and is expensive for large batch sizes, but it allows extreme flexibility and customization.

The technology has already made its breakthrough in the area of prototype construction. Now, carried along by hype, it’s attempting to conquer the production floors. »This is a paradigm shift for manufacturing technology,« says Adrian Keppler, CEO of EOS GmbH in Krailling (Germany), a world leader in integrated emanufacturing solutions for industrial applications. Keppler is a specialist in laser sintering who since 1989 has been preaching the need for engineers to move away from conventional thinking, with design and construction still focused on established production methods. »We are casting off those bonds and in the future will be able to make innovative, functionally integrated parts,« Keppler promises.

More efficient structures are possible once CAD design joins the process. Those structures offer weight reductions of as much as 70 percent in lightweight construction. Professional applications are also able to handle materials that can’t be cast. In contrast to 3D printers for home use, industrial printers can work with weldable alloys like titanium and cobalt. Emanufacturing is everyday fare in aircraft manufacturing, medical technology, and mechanical engineering. MTU, EADS, Daimler, and BMW are all customers of EOS.

Funded by Obama

But Keppler says this is just the beginning: »At least half the major

»

The Replicator 2 by MakerBot (top) will fit on any desk. Highresolution 3D printers can make model cars or functional gearboxes (center left) or desk lamps with hinged bases (center right). The 3D Photobox by MakerBot (bottom) makes a threedimensional scan of the torso. Customers can then use the data to create busts of themselves.


Companies don’t have to do every-thing themselves.«Interview with Chris Anderson, for many years the editor-in-chief of Wired magazine and a mover and shaker in the maker movement.

How revolutionary is production for the people?

3D printing and cloud manufacturing – access to factories over the Internet – is nothing new for the industrial world, but it is for individuals. It’s like with computers, which were at first used only professionally. It wasn’t technology that changed the world, but rather the democratization of technology.

Will this threaten the business model of industry?

Not on a large scale. However, many small manufacturers will be created that will produce things that large companies don’t want to or can’t make. The Internet wasn’t a threat to companies, either, but businesses and individuals profited from it equally, and the result was new business areas. The development of industrial production will advance the same way.

For example, for procuring spare parts?

That’s not a major business. How many spare parts do you actually buy? What’s much more interesting for established companies is the open innovation model – the idea of sharing inventions and continuing to develop them in communities.

How can companies profit from that?

Take a product and make the digital design available to your community. Let me mix it, improve its functions, and invent new accessories. You don’t have to do everything yourself if you allow your customers to contribute to value creation.

A car from a printerDrivAer offers a good example of how prototyping can be used by industry. The name may be a neologism, but this is a realistic model of a car. It was developed by Audi and BMW in collaboration with the Technical University of Munich (Germany), with the goal of performing accurate flow testing in wind tunnels.

The model, made of plaster and epoxy resin and just 1.20 meters long, was meticulously developed in the 3D laboratory based on real vehicles. More than 60 sensors measure air resistance. The simulation offers considerable advantages over the conventional Ahmed body. It is too far removed from reality, for example, because it doesn’t have a mirror or a fastback.

»

A feel for technology trends: Chris Anderson

Plaster is faster: The digital prototype is first generated at different levels of detail (top) and then printed as a real model made of plaster and epoxy resin for testing in wind tunnels (bottom).


Perhaps the fears are as exaggerated as the hopes. »Glowing articles about 3D printers read like the stories in the 1950s that proclaimed that microwave ovens were the future of cooking,« says FabLab creator Neil Gershenfeld. Of course, today we know that »microwaves are convenient, but they don’t replace the rest of the kitchen.«

The future has begun

Whether they are critics or fans, experts agree that everything that has happened so far is just the beginning. Biotechnology companies are already testing whether it will someday be possible to print organs, using stem cells as the raw mate rial. At the University of Glasgow, chemistry professor Leroy Cronin is experimenting with a 3D printer that can mix different medications from a single set of active ingredients. And Gershenfeld is developing a 3D assembler for atom clusters that can be used to integrate sensors and circuits into a 3D product. The future has just begun.

industrial companies have additive manufacturing on their radar.« And EOS is not alone. Internationally listed companies, including the American printer manufacturers Stratasys and 3D Systems, are heavy hitters on the market. And U.S. President Barack Obama considers the technology to be so promising that his administration has invested US$30 million in a National Additive Manufacturing Innovation Institute.

The consumer and B2B sectors can inspire each other when developing additive manufacturing technologies. It’s likely they will also have to work together to solve a major problem: piracy. The open source community is willing to share free of charge. But companies can’t allow their designs to be copied for free over the long term. Many design plans are on the Internet, and 3D scanning can be used to copy almost every shape. Strategies for controlling digital rights, such as copy protection, are considered impracticable because the market is so fragmented.

At least half the major industrial companies have additive manufacturing on their radar.«

»

Adrian Keppler, CEO of EOS GmbH

Glossary

Additive manufacturing

A process in which products are produced by laying down materials in thin layers. Its opposite, subtractive manufacturing, involves first stamping out or casting products and then finishing them.

FabLab

Fabrication laboratory, or »fabulous laboratory.« A workshop for individuals and small companies equipped with 3D printers, laser cutters, and milling machines.

Rapid manufacturing

CADbased manufacturing of products using 3D printers; usually highquality, custom products suh as injection molds or prostheses.

Rapid prototyping

CADbased manufacturing of models using 3D printers, including models for conventional series production.


The manufacturing imperativeAn essay by Dani Rodrik

Countries jeopardize their competitive edge as well as jobs and their political stabil-

ity when they neglect the importance of domestic production, says Harvard econo-

mist Dani Rodrik. He takes up the cudgels for manufacturing industries and warns

against an overestimation of the service sector.


We may live in a postindustrial age, in which information technologies, biotech, and highvalue services have become drivers of economic growth. But countries ignore the health of their manufacturing industries at their peril.

Hightech services demand specialized skills and create few jobs, so their contribution to aggregate employment is bound to remain limited. Manufacturing, on the other hand, can absorb large numbers of workers with moderate skills, providing them with stable jobs and good benefits. For most countries, therefore, it remains a potent source of highwage employment.

Indeed, the manufacturing sector is also where the world’s middle classes take shape and grow. Without a vibrant manufacturing base, socie ties tend to divide between rich and poor – those who have access to steady, wellpaying jobs, and those whose jobs are less secure and whose lives are more precarious. Manufacturing may ultimately be central to the vigor of a nation’s democracy.

The United States has experienced steady deindustrialization in recent decades, partly due to global competition and partly due to technological changes. Since 1990, manufacturing’s share of employment has fallen by nearly five percentage points. This would not necessarily have been a bad thing if labor productivity (and earnings) were not substantially higher in manufacturing than in the rest of the economy – 75 percent higher, in fact.

The service industries that have ab sorbed the labor released from manu facturing are a mixed bag. At the high end, finance, insurance, and business services, taken together, have productivity levels that are similar to manufacturing. These industries have created some new jobs, but not many – and that was before the financial crisis erupted in 2008.

The bulk of new employment has come in personal and social services, which is where the economy’s least productive jobs are found.

This migrat ion of jobs down the productivity ladder has shaved 0.3 per centage points off U.S. produc tivity growth every year since 1990 – roughly onesixth of the actual gain over this period. The growing proportion of lowproductivity labor has also contributed to rising inequality in American society.

The loss of U.S. manufacturing jobs accelerated after 2000, with global competition the likely culprit. As Maggie McMillan of the Interna tional Food Policy Research Institute has shown, there is an uncanny negative correlation across individual manufacturing industries between employ ment changes in China and the U.S. Where China has expanded the most, the U.S. has lost the greatest number of jobs. In the few industries that contracted in China, the U.S. has gained employment.

In Britain, where the decline of manufacturing seems to have been pursued almost gleefully by Conservatives from Margaret Thatcher until David Cameron came to power, the numbers are even more sobering. Between 1990 and 2005, the sector’s share in total employment fell by more than seven percentage points. The reallocation of workers to less

productive service jobs has cost the British economy 0.5 points of productivity growth every year, a quarter of the total productivity gain over the period.

For developing countries, the manufacturing imperative is nothing less than vital. Typically, the productivity gap with the rest of the economy is much wider. When manufacturing takes off, it can generate millions of jobs for unskilled workers, often women, who previously were employed in traditional agriculture or petty services. Industrialization

The manufacturing sector is where the world’s middle classes take shape and grow.«

Dani Rodrik The 55yearold Professor of International Political Economy at Harvard University’s Kennedy School of Government is a leading scholar of globalization and economic development.

was the driving force of rapid growth in Southern Europe during the 1950s and 1960s, and in East and Southeast Asia since the 1960s.

India, which has recently experienced Chinese rates of growth, has bucked the trend by relying on software, call centers, and other business services. This has led some to think that India (and perhaps others) can take a different, serviceled path to growth.

But the weakness of manufacturing is a drag on India’s overall economic performance and threatens the sustainability of its growth. India’s highproductivity service industries employ workers who are at the very top end of the education distribution. Ultimately, the Indian economy will have to generate productive jobs for the lowskilled workers with which it is abundantly endowed. Much of that employment will need to come from manufacturing.

»

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For developing countries, expanding manufacturing industries enables not only improved resource allocation, but also dynamic gains over time. This is because most manufacturing industries are what might be called »escalator activities«: once an economy gets a toehold in an industry, productivity tends to rise rapidly towards that industry’s technology frontier.

I have found in my research that individual manufacturing industries, such as auto parts or machinery, exhibit what economists call »unconditional convergence« – an automatic tendency to close the gap with productivity levels in advanced countries. This is very different from the »conditional convergence« that characterizes the rest of the economy, in which productivity growth is not assured and depends on policies and external circumstances.

A typical mistake in evaluating manufacturing performance is to look solely at output or productivity without examining job creation. In Latin America, for example, manufacturing productivity has grown by leaps and bounds since the region liberalized and opened itself to international trade. But these gains have come at the expense of – and to some extent because of – industry rationalization and employment reductions. Redundant workers have ended up in worseperforming activities, such as informal services, causing economywide productivity to stagnate, despite impressive manufacturing performance.

Asian economies have opened up, too, but policymakers there have taken greater care to support manufacturing industries. Most importantly, they have maintained competitive currencies, which is the best way to ensure high profits for manufacturers. Employment in the manufacturing sector has tended to increase (as a share of total employment), even in India, with its servicesdriven growth.

As economies develop and become richer, manufacturing – »making things« – inevitably becomes less important. But if this happens more rapidly than workers can acquire advanced skills, the result can be a dangerous imbalance between an economy’s productive structure and its workforce. We can see the consequences all over the world, in the form of economic underperformance, widening inequality, and divisive politics.

According to Rodrik, productivity – and, hence, income – in the manufacturing sector is higher than in most service industries. If too many jobs are forfeited in this sector, overall economic productivity will drop and social imbalances will increase.

For developing countries, expanding manufacturing indus-tries enables dynamic gains over time.«

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Production comes homeAn essay by David Bosshart

Goods are increasingly being produced where they are purchased, says futurist

David Bosshart, CEO of the renowned Gottlieb Duttweiler Institute. He describes

the many signs of the trend toward re-regionalization in an exclusive essay

for Industry Journal.

The Western world sometimes feels like it’s running on a hamster wheel. Technical progress is moving faster than ever before, but it never gets ahead. Economic output, still the most important measure of a society’s prosperity, is growing – if at all – rather anemically. All of the money spent on research, development, and restructuring ends up making it just barely possible to stay in business.

But the feeling of running in place immediately shifts if you look at something other than pure economic data. Numerical growth may have

come to an end, and measuring affluence in terms of monetary units may have reached its zenith: peak wealth. But that doesn’t apply to people’s feeling of wellbeing or to the state of society. New technologies will succeed on the market if they promise additional benefits, thereby promoting structural change.

One characteristic of the coming structural change that is currently taking shape is the reregionalization of production. For thousands of years, goods were produced where the consumers of those goods lived.

Now, after two centuries of migration of production sites, they are moving closer to the people who use what they make.

In the 19th century, production was attracted to places where raw materials were available (such as the Ruhr region in Germany), and in the 20th century it moved where it could find the right workers – who were either particularly inexpensive, as in China, or particularly qualified, as in California, Germany, or Switzerland. Now the circle is closing: »Production is coming home.«

»


Several current trends are behind this reregionalization:

• Narrowing of the global cost gap: Differences in labor costs all over the world are decreasing. In China, still the world’s factory, labor costs are increasing massively and will continue to do so due both to higher wages and improved working conditions. The caravans of laborintensive industries like textiles – which have moved from southern Europe to southeast Asia to China – will no longer be able to find such attractive destinations. And the narrower the worldwide cost gap, the less incentive there is to move production to places where labor costs are lowest.

• Higher logistical costs and risks: Globalization in the 1990s benefited from a decade of cheap oil, but that won’t be coming back anytime soon. The switch to renewable energy sources may one day lead to an era of cheap electricity, but it will be less favorable for ship ping than for manufacturing. And the disastrous tsunami in Japan in 2011 has reminded us that upheaval and turmoil in one part of the world can immobilize process chains all over the globe.

• Lower barriers to market entry: Digitization and the communication revolution have drastically reduced the competitive edge of experts, specialists, and veterans in many industries. Anyone who can sell muesli, lights, or custom computers online is avoiding the barriers to entering traditional markets. Capital requirements for new entrants are plummeting, which simultaneously increases opportunities for peer production, the trend that favors production among equals – and also among those who are located physically nearby.

Gottlieb Duttweiler Institute (GDI) in Rüschlikon, Switzerland, is named after the founder of the Migros retail chain, who created it in 1962.

Re-regionalization of products is a characteristic of structural change.«

»


• Longing for originality: Studies by Gottlieb Duttweiler Institute on the values of consumers in Germany and Switzerland have for some years shown an increased longing for originality that cannot be satisfied by industrial mass production. This marks a return to craftsmanship and local value creation. Even if this longing is often not reflected in a corresponding shift in consumer behavior, it does point to a trend for production. If slow living becomes the new luxury, there will soon be slow living for all. Luxury has always invited imitation from below: today’s luxury is tomorrow’s bulk commodity.

• Bursting of the abstraction bubble: The American economist Robert Reich coined the term »supercapitalism« in the 1990s, meaning that companies tend to act more like analysts of symbols than producers and to outsource everything related to physical production. A decade later, the financial markets became a symbol of such abstraction when they dealt in derivatives of derivatives of derivatives – until investors lost first their grip on reality and then their money. Since that time, value has increasingly been physically created instead of abstractly destroyed.

• More individual products and shorter production cycles: The era when the fashion houses launched their collections only twice a year has long passed. Many clothing chains offer new items every month, or even every day. The same applies to other industries. Large producers are also relying less on trade shows to set trends, which are instead being multiplied on the street and in social networks. This can make demand harder to predict, so the supply side has to be able to respond faster. Shorter delivery times and logistical paths will increasingly offer a competitive edge.

• Technical capabilities for individual production: »The Internet democratized publishing, broadcasting, and communications,« wrote Chris Anderson when he was still the editorinchief of Wired, »and the consequence was a massive increase in the range of both participation and participants in everything digital – the long tail of bits. Now the same is happening to manufacturing – the long tail of things.« The term »prosumer« coined by Alvin Toffler more than 30 years ago is again making the rounds. Prosumers are producers who are also consumers, and they will minimize the role of the market because they increasingly make their own goods.

There is still a long row to hoe, especially for the last item on the list. True, a 3D printer for home use can be had for less than a thousand euros. But those machines are really still toys. However, Neil Gershenfeld of MIT, the Massachusetts Institute of Technology, warns manufacturing companies against underestimating these devices – as happened decades ago for another innovation. He says the computer industry initially saw personal computers as nothing more than toys, until the PC almost destroyed the industry’s business model (see page 24).

However, reregionalization does not mean that most production will return to backyards and garages. Even if hyperlocal production sites of this kind become more important, they don’t make sense – and aren’t worth pursuing – for many products and processes. One reason is the strict requirements for product quality. If artificial joints are someday produced as exact copies of natural joints, this will still be done in highly specialized production facilities. Another reason is the productivity of energy and resources. The streamlined methods

used in mass production continue to optimize input, waste, and emissions over decades. It takes far fewer raw materials and requires far less energy to produce 20 million cookies in a factory than it does to bake 20 cookies in a million home ovens.

Traditional industrial operations can therefore use mass customization – the mass production of individualized products – to remain competitive over the long term. And the closer they are to their end customers, the better.

David Bosshart David Bosshart, 53, is CEO of Gottlieb Duttweiler Institute (GDI), based in Rüschlikon near Zurich, an internationally renowned independent think tank that focuses on research in the areas of consumption, lifestyle, megatrends, and social change. He has a PhD in philosophy and political theory.


It’s a bizarre desert landscape, something out of a painting, here in the western USA. The lightblue convertible is chockfull of passengers – six of them. And they all seem to be having loads of fun on their desert joyride. Suddenly, a rusty tow truck pulls into their path, blinks its eyes, and welcomes the riders: »Hey, everyone in a good mood?« A few minutes later, a blue Hudson Hornet race car, challenges the convertible and its pas sen gers to a race. And suddenly they are off: The cars zoom on two lanes through the hilly landscape, as though on a slot car racecourse, hugging hairpin curves and slipping down narrow canyons. »Great race, folks!« the travelers hear as they reach their destination.

Sounds like a scene from a Disney movie? Well, it should. The Cars Land

theme area, with its Radiator Springs Racers racecourse and two more rides, is the latest attraction at the Disney California Adventure Park in Anaheim, near Los Angeles. In electronically controlled convertibles, visitors to Radiator Springs Racers zoom through the set, meeting up with the talking autos from Cars. In that boxoffice hit from Disney subsidiary Pixar, a cool race car gets stranded in the fictitious small town of Radiator Springs, where it finds true friendship.

Most visitors to the amusement park know the highly colorful kids’ movie. But what very few of them know is that it was ultramodern Siemens technology that made their actionpacked, computercontrolled joyride possible. It took five years from the

Talking animals, cars in love, jealous toys – Disney animated

films make children’s fantasies a reality. And at the Disney

theme parks, visitors of every age can find themselves set

down in the midst of movies like Cars and Toy Story. It looks

easy and playful, but behind the scenes it calls for the very

latest technology.

Absolutely camera-ready

conception to the opening of Cars Land. Disney invested a total of US$1.1 billion in the park, almost a fifth of it in the racecourse built with Siemens equipment. Money well invested – since Cars Land opened in June 2012, visitor figures have skyrocketed by 25 percent. And hotels in the neighborhood report significantly higher numbers of overnight stays.

Infrastructure by Siemens

Siemens provides a safe experience in more than just the race cars. The company is responsible for the entire electronic infrastructure on the nearly five hectares that Cars Land covers – in a wide range of functions, including energy distribution solutions, automation, and control systems. »This is the biggest success in our

In Cars Land at the Disney California Adventure Park, visitors have lots of fun racing cars. To make sure the races run automatically and completely safely, each vehicle continuously sends data wirelessly to the control center.


We need our partners’ collaboration to tell our stories.«

partnership with Disney to date,« says Tim Black, head of sales at Siemens Industry in Southern California. There’s been a strategic partnership, a winwin situation, between Siemens and Disney since 2005. The basic idea: Disney benefits from the latest industrial technology, and Siemens positions itself as a nationwide, involved corporation in the important U.S. market. For example, the technology company has long sponsored worldfamous Disney shows and attractions, including Spaceship Earth at the Epcot Center in Florida. Siemens is also prominently represented in New York’s Times Square, as the sponsor of a giant screen for TV network ABC. Technologically, a variety of platforms are expected to expand further as part of the

»

Russell Oja, Director Corporate Alliances, Walt Disney Company

»

© Disney


partnership – not only automation at amusement parks, but also things like technology on cruise ships and at holiday resorts.

For its part, Disney takes advantage of Siemens expertise to produce the perfect illusion. »We at the Walt Disney Company are a group of storytellers. We need our partners’ collaboration to tell our stories with the aid of their technological expertise,« says Russell Oja, who coordinated the Walt Disney Company’s collaboration with Siemens for Cars Land. It was only the joint involvement of creatives, park employees, and technology firms that made the attractions so perfect, he reports.

Disney creates new attractions in a nearritualized process. »Imagineers« is its name for the creative employees who start out by dreaming up anything they please. »Bluesky ideas« is the inhouse term for their inspirations. The second step is a review of which of these ideas are technically feasible. And that’s the point where Siemens in California came on board. The electronics are nothing spectacular for outsiders, but they’re indispensable for a fun ride.

Simatic S7 319F Failsafe Controller

Sinamics G120 Variable Frequency Drives

Like a slot car racecourse for giants, the race cars in Cars Land speed around on tracks through the mountainous landscape of the fictional town of Radiator Springs.

Attendance figures have risen 25 percent at Disney California Adventure Park since the opening of Cars Land. And surrounding hotels report significantly higher numbers of overnight stays.

Safety has the highest priority at the theme park, and a computerized control program directs communications between the cars. The traffic lights in Cars Land don’t actually control traffic, but rather help give the fully automated ride a realistic feel.

© Disney

© Disney

© Disney


Siemens got to apply its full range of capabilities in automation for the Radiator Springs Racers.

In amusement park rides, safety is the top priority. A computercontrolled monitoring program governs the car’s speed, speaker volume, and other variables. Seamless coverage is an essential as far as Disney is concerned. »We need a continuous datastream that can reliably show us if a car is stuck behind a mountain or on a curve,« says Oja.

Cableless Ethernet

The solution: the car’s speed on the track is controlled by way of a cableless Ethernet connection. There’s no physically connected control. Instead, each of the 32 cars is equipped with a receiver. The whole track is equipped with a cable known as a »leaky coax.« Data »leaks« out of slits in the cable, so that the cars are continuously exchanging data with the control room.

As the car runs down the course, the receiver switches seamlessly from one segment of the track to another. Which means that in contrast to conventional antenna solutions, there is

no risk of dead zones. The technicians in the control room always have a view of all the vehicles, similar to air traffic controllers at an airport. Monitors indicate where on the track the various cars are located.

Siemens used a »leaky coax« cable for the first time for Disney about four years ago, in the interactive Midway Mania attraction based on the Toy Story film, at Disney World in Florida. Here, the special cable ensures continuous data transmission from a vehicle to a 3D screen, on which the visitor must master video games during the ride. But the car race in California posed a special technical challenge because two cars are driving next to each other in real time. »That’s why we had to lay two leaky coax cables and keep them from interfering with one another,« explains Siemens manager Black.

More theme parks on the way

Over the past two years, Disney has invested heavily in the USA. Now the entertainment giant is turning its attention to its theme parks in other countries, opening up oppor

tunities for more joint projects with Siemens. At present, Siemens is bidding on technology projects for building the Disney resort in Shanghai, planned to open at the end of 2015. There’s also discussion of renovations at the sevenyearold Disneyland Hong Kong that could also involve Siemens. Meanwhile, at Disneyland Paris, specific plans are under way for a thematic roller coaster based on Ratatouille – likewise a project that calls for the latest electronics. »The incredible bandwidth of products Siemens offers is very attractive to us,« says Disney’s Oja.

While Disney particularly prizes Siemens’ solutionsoriented engineering perspective, for Siemens the cooperation offers a valuable emotional marketing component. After all, automation solutions in the industrial sector are a pretty abstract affair.

At Cars Land, by contrast, everybody understands what’s involved. »My son saw Cars more than a dozen times,« says Black. »He used to fantasize a lot about what it would be like if he could step into the movie. It’s fantastic that I could contribute to that.«

The Radiator Springs Racers ride that opened in 2012 at the Disney California Adventure Park uses a large number of products from the Siemens portfolio – including the Simatic S7 319F failsafe controller. It monitors all circuits and the Scalence W wireless access points on the special leaky coax cable. The cars’ data is transmitted to the control room in real time.

The cars have Sinamics G120 Variable Frequency Drives (VFD) installed under the hood. The VFDs have programmable logic controllers (PLCs) that control the drive and provide power. The PLCs communicate with the control room by way of a universal series interface (USS) protocol, and send analog signals to the VFDs.

The cables from the drive to the control unit are hardened to keep down vibrations that might interfere with the electronics. What Disney especially liked about this modular solution was that if needed, the control unit is easy to swap out, without having to dismantle the entire drive and pull all the power cables.

Helpers behind the scenes


Rising to the top with serviceThe demand for technical maintenance services in the

capital goods industry is on the verge of a boom. That’s

because effective service concepts for plant and equip-

ment, machinery, or IT systems secure the operating pro-

cesses and allow companies to focus on their core busi-

ness. Manufacturers that offer service programs for their

products benefit from a steady stream of additional profit.

When you step into an elevator and press the button, you expect to be taken to the desired floor – safely and without a problem. If the elevator does not move or if it takes you to the wrong floor, or, even worse, if it gets stuck between floors, you are going to be very aggravated. Whether in hotels or shopping centers, office towers or hospitals, operators expect the highest technical reliability from their elevators. This is both a challenge and an opportunity for providers of maintenance services.

For international companies like Otis, Schindler, Kone, and ThyssenKrupp, service is not a cumbersome obligation, but rather a lucrative supplementary business. When it comes to service, Europe’s leading elevator manufacturers pressed the strategic »up« button at the right time; today, they are viewed as the benchmark for successfully integrated, profitable industrial service management.

And they have produced measurable results. Whereas the capital goods sector in general, in which most companies focus primarily on selling new machines and equipment, suffered a profit drop of 37 percent in the economically weak years of 2008 and 2009, the four elevator manufacturers increased their profits by an average of 56 percent over the same period. That finding was revealed in the recent study Service Now! released by the international consulting firm Bain & Company. Service revenues, which are largely crisisproof, were a big part of this impressive performance.

Trend toward outsourcing

The Service Now! study is based on the extensive experience that Bain & Company has accumulated from numerous international consulting projects related to technical service. According to the study, elevator manufacturers are not the only companies that can earn solid profits on tailored service and support programs. Given the still generally weak state of the economy, more and more industries are looking to outsource the servicing

Elevators in the office tower of the Aurora Group in Taipei (Taiwan): manufactured and serviced by Schindler.


of their equipment. Industrial customers want to streamline their internal processes and structures, lower their personnel and working capital costs, and focus on their core business. That is driving the demand for services from external providers.

Unused market opportunities

Customers generally want more than just standard services. Instead, industrial enterprises are demanding tailored service concepts that will help them optimize their processes and boost the efficiency of their plant and equipment. To that end, they are looking for serviceoriented partners with specific industry expertise and a good understanding of their business.

Therefore, the consultants of Bain & Company see attractive – and often untapped – service opportunities for companies in the capital goods industry. The sales margins for technical service activities are two to three times higher than those that can be earned on traditional activi ties in the capital goods industry. Furthermore, the service business, which is growing at five percent per year, is much less prone to businesscycle ups and downs.

Strong revenue potential

On average, European capital equipment manufacturers generate about 25 percent of their total revenues from services. Depending on the sector, however, this percentage can be much higher. According to Bain & Company, particularly manufacturers of industrial equipment, such as power units, elevators, gas turbines, and steam turbines, that is subject to high levels of wear and tear during operation and to strict safety requirements – all of which lead to the need for more service – could generate more than half their total revenues from effective industrial service programs.

The conclusions reached in the study Service Now! are also supported by a recent survey conducted by the con sultants of large capital equip

ment manufacturers. According to the results, 80 percent of surveyed companies consider the international service business to be a highly promising growth market, and 85 percent plan to expand their service activities over the long term, giving them an additional revenue stream. And the majority of CEOs interviewed by Bain consider the future expansion and optimization of their service business to be a strategic priority.

Service expert Alexander Schmitz, partner with Bain & Company in Munich (Germany), believes there is good reason for this interest in service activities: »Given the current economic environment, service offers tremendous growth potential for manufacturers of industrial equipment in particular. And they can realize this potential for a relatively small investment cost.«

Defining service targets

The study’s authors recommend that companies pursue a concerted service growth initiative that encompasses all areas of the company. In the first step, the potential of the service business should be analyzed in detail. Manufacturers must compile a precise list of the plants and equipment they have sold to customers, including where they are installed, as well as the services to be used by different customer groups and the future trend of customer needs. Based on this analysis, they should adopt an overarching goal for their service activities, including revenue and profit targets, the future role of service activities within the company, and the promises to customers.

Among such goals, the company may seek to reinforce longterm customer loyalty or generate higher profits. The focus is always on the customer’s preferences: lower costs over the lifecycle of capital equipment, an extended lifecycle, and less complex production processes. However, companies can not afford to spend a lot of time developing and implementing such service strategies. »Anyone who doesn’t seize these opportunities now,« Alexander Schmitz warns, »will miss the boat.«

Three questions for …

… Dirk Hoke, CEO Customer Services, Siemens Industry

What can be accomplished through effective industrial service?

Service creates the basis for minimal downtimes, the optimal use of staff, and the best possible utilization of all resources throughout the entire lifecycle of machinery and plants. Through innovative service concepts, we increase reliability, productivity, and efficiency – right from the earliest stages of planning and development, all the way to operation and modernization.

What is the reason behind the grow-ing demand for service and support?

As a result of intense cost pressure, rising energy prices, and increasingly strict laws and environmental regulations, industrial customers need economical solutions to extend the useful lives of their machinery and plants and lower their operating costs. Integrated service concepts are increasingly being recognized as a success factor in international competition.

What criteria should companies use to choose a service partner?

The service partner should possess extensive industry and technology expertise and a deep understanding of the given industry, and it should offer tailored services. Therefore, the ideal service provider is often the manufacturer, because the knowledge that goes into developing and manufacturing industrial equipment can also be put to good use in the corresponding service concepts. That improves both the quality and the reliability of the service provided.


Production never stands still in the Czech town of Kvasiny: ŠKODA AUTO produces for the world market five days a week in a threeshift operation. Top priorities are ensuring a high degree of uptime and the utmost in quality. No downtime. No manufacturing defects. More than 60 Siemens staff have shared the responsibility for smooth production as professional maintenance service providers since 2001. The Integral Plant Maintenance (IPM) experts’ job is preventive maintenance for the entire paint line and parts of the assembly line, including spare parts storage management.

The processes behind integral plant maintenance are aimed at increasing the productivity and competitiveness of the business. That is why ŠKODA AUTO has commissioned the Siemens IPM

experts with the task. The cooperation is based on a comprehensive range of services that prevents plant downtimes and, even worse, production losses. Moreover, the service program reduces maintenance costs in a sustainable manner, makes better use of the machinery’s operating times, reduces lifecycle costs, improves the overall performance of the plant, and finally contributes to the conservation of the value of the plant. All-rounders wanted

Maintenance professionals have longstanding maintenance experience in various industries, comprehensive technical knowledge, and industryspecific plant knowhow as well as special expertise in automation and drive technology. The tasks of mainte

nance managers are accordingly complex: As analysts and consultants, they identify the potential for improvement and draw up customized, demand and goaloriented maintenance plans together with their customers. As coaches, they support the implementation of measures. As executives, they head technical staff in the maintenance, servicing, and inspection of systems, plant units, and even entire plants and factories.

The basis for all measures is always a maintenance concept that has been developed and geared toward the customers’ demands and manufacturing conditions. For this purpose, the maintenance manager analyzes strengths and weaknesses of a company’s asset management and determines the level of maturity of

What is the job of a …

… maintenance manager?Comprehensive maintenance concepts ensure robust and efficient production – and hence

the productivity and competitiveness of manufacturing companies. With Integral Plant Main-

tenance (IPM), the Siemens experts keep industrial plants up and running. The job of the

maintenance professionals is as complex and analytic as that of a management consultant.


processes in comparison to industry standards. The results are the basis for specific measures that are included in a detailed implementation plan. This plan also includes fields such as production, procurement, and finance. Moreover, payback periods of investments are calculated, and implementation concepts are developed, including a risk management plan.

Maintenance is a matter of trust

During their work, maintenance managers gain deep, often confidential insight into their customers’ production processes. After all, they need to concentrate on all processes and workflows, as well as a company’s special characteristics in order to make proposals that pay off. That is why maintenance projects require a high degree of mutual trust and a common understanding of the goals, plus sound industry and product knowledge as well as personal commitment.

Clear contract provisions are also important: In the case of the service partnership of ŠKODA AUTO and Siemens, for example, a performance based contract is in place. This gives the customer access to Siemens’ specialist automation and drive technology knowhow as well as ensuring optimal plant availability.

The maintenance manager is the interface – to some extent also the moderator and coordinator – between the contract partners, ensuring that all agreed services are implemented in the production plants and target values are reached. The latter are usually related to agreed key performance indicators (KPIs), such as safety, quality, availability, and costs. The efficiency of the maintenance process, and, hence, the performance of a maintenance manager, is measured on the basis of these KPIs.

Interview with Petr Peška, Siemens main-tenance manager at the ŠKODA AUTO paint line in the Czech town of Kvasiny.

What is your job at ŠKODA AUTO?

As a maintenance manager, I am in charge of the maintenance of the whole paint shop and parts of the assembly department. This includes maintenance and operation in the fields of conveyor technology, process engineering, application technology, building technology, and spares management.

What does that mean for the production process?

The production concept at Kvasiny meets the highest demands in terms of quality and financially. Our IPM services ensure process quality by means of preventive and proactive maintenance measures. However, our job isn’t limited to the elimination of acute faults. We constantly ensure a high plant availability rate of 98 percent, increase transparency through optimization of budgeting and forecasting, and reduce maintenance costs. A tool we rely on is our Computerized Maintenance Management System (CMMS), which enables us to assess key plant performance indicators.

What are the advantages for ŠKODA AUTO?

Siemens had already been significantly involved in the construction of an allnew paint line with new technology for the production of the ŠKODA Superb, an executive car model. It was only logical, then, to put the responsibility for maintenance into the hands of Siemens as well: No one knows the industrial plant better and has a deeper technical knowhow than our experts do. Knowing that our IPM team is in the background taking care of efficient maintenance and servicing, and ensuring maximal plant availability, ŠKODA can fully concentrate on the production of highquality cars for the world market.

We ensure process quality.«

»

Petr Peška, IPM manager with Siemens Industry


Full of energy


Hanover 2013: White, blue, and red are the omnipresent colors at the world’s largest industrial trade fair. That’s no surprise, as these are the national colors of the Russian Federation. Russia is this year’s partner country for the fair – with good reason: »After the 2008 crisis, the interest of many European companies in the Russian market rose markedly,« says Jochen Köckler, a member of the board of Deutsche Messe AG. »One reason is the relative proximity of the market, but it’s also the attractiveness of Russia as a longterm customer for capital goods to modernize the domestic economy.«

Indeed, Russia is Europe’s most important supplier of natural gas and plays a central role in the continent’s energy policy. About a quarter of European demand is covered by Russia. Govern ment programs in the fields of infrastructure development, housing, and agriculture have also created attractive business opportunities for foreign companies. The state railway RZD alone plans to invest about €10 billion annually through 2014. Russia’s acces sion to the World Trade Organization also improved the situation for European exporters of products that are

very popular in Russia, such as vehicles, machinery, and electrical engineering solutions.

Focus on energy efficiency

Technologies in the area of energy efficiency have great potential, for instance. Russia is among the world’s economic regions with the highest energy consumption. According to dena, the German Energy Agency, the country’s energy consumption as a percentage of gross domestic product is nearly three times that of Western Europe.

Even though Russia is rich in natural resources, the situation is expected to change. Until 2020, the government wants to reduce consumption by at least 40 percent from 2007 levels thanks to a government program and regional budgets. The lion’s share of investments will be made by the private sector, though. This also calls for foreign knowhow.

Energy has a major influence on the Russian economy because of consumption but also because it is exported. Five percent of global oil deposits and 21 percent of natural

gas reserves are located in Russia. This leads to a high degree of economic dependency on global oil price levels. High oil prices mean high gas prices, which benefit Russia. If prices are low, the country will have problems.

Dependent on economic trends

The oil price nearly quintupled in the global market place from 2000 to 2008, and the Russian economy grew by an average of seven percent per year. But exports of natural gas and oil, steel, and coal are extremely sensitive to a weaker world economy.

An aggravation of the euro crisis would have serious consequences for Russia as a supplier of energy. This situation is exacerbated by the fact that relatively crisisproof export products and services are in short supply. Trying to fend off a recession, the Russian government has increased the share of government expenditure as a percent of gross domestic product (GDP) through social benefits and government spending. Government expenditure in 2012 amounted to more than

Russia is one of the world’s most important energy sup-

pliers. Natural gas and oil ensure growth as well as a

high level of dependency on global energy prices. Some

140 million consumers and a need for investment in indus-

try and infrastructure offer opportunities for investors.

»


20 percent of GDP, and all in all the Russian public sector is responsible for about half of the Russian economy.

Public spending is primarily financed through oil and gas exports. As the price of oil dwindled during the global financial crisis in 2008, Russia’s economy had to face severe after effects. It contracted by eight percent in 2009. Things improved again afterwards – due to rising oil prices – but the problem of dependence on commodities remains. This became clear in the summer of 2012, when growth declined and it was obvious that national economic forecasts predicting growth of more than four percent could not be achieved.

In fact, gross national product rose by only 3.8 percent yearonyear in 2012, according to estimates by the International Monetary Fund – a respectable result based on international comparisons. State programs accounted for a major portion of

that, ensuring further stable growth will remain a considerable challenge in the coming years, since the government has set the objective for itself of growing five percent annually.

Moscow isn’t Russia

Russia isn’t simply Moscow, a large city with a very wealth upper class and a middle class that is increasingly prosperous and which loves to shop. There are many sides to this picture, starting with the economic center Moscow and moving to upandcoming cities like St. Petersburg, Ekaterinenburg, Voronezh, and Perm, and then all the way to impoverished rural regions or the 300 »monocities« of Russia, which were oriented toward a single branch of industry during the Soviet era and in many cases still are.

Foreigners assess the country’s situation in different ways, in many cases positively. In summer 2012, James

21 %of the world’s natural gas

reserves and about 5 %

of global oil deposits are

located in Russia. As an

energy exporter, the coun-

try is highly dependent

on oil price trends.


O’Neill, head of Goldman Sachs Asset Management and creator of the term »BRIC countries,« wrote in a guest article for the German business news paper Handelsblatt, »Provided the oil price doesn’t collapse completely, Russia could be in a better situation this year than last year.«

So what’s behind all these voices of critics who already see Russia on the decline? »They simply don’t want Russia to be successful,« says O’Neill. But he doesn’t mean to say that in Russia »everything runs according to plan. It is still true that Moscow needs to rid itself of its dependence on oil and gas exports and that the Russian economy needs to diversify.« Feverish efforts are currently underway in Russia to analyze where savings can be found.

A high level of imports

While domestic industry – particularly the processing industry – is

weakening, foreign countries keep exporting large quantities to Russia or setting up shop there. The automotive industry is considered promising, because the country is quickly becoming the largest market for cars in Europe. In 2011, German companies alone delivered products worth a recordbreaking €35 billion. German manufacturers supplied metal presses, punching machines, and computercontrolled CNC milling machines worth a total of €7 billion in 2011. There’s not much moving in the other direction, however, aside from commodities. Russian industry still has to learn to face the challenges of joining the WTO and offering competitive products to world markets.

Russia is becoming more important for foreign companies. Despite problems with infrastructure and red tape, as well as the need to catch up in terms of investment and background conditions, this giant country offers an attractive market.

Russian industry – here a steel mill (left) – is not considered particularly energy efficient. That’s why the government wants to reduce its high level of energy consumption by 2020. When it comes to energy saving, foreign knowhow is in great demand. A consortium led by Siemens is currently building the biggest Russian pelletizing plant for highgrade iron ore pellets (r.), which are used in blast furnaces, in the southern Russian city of Stary Oskol.

»


earnings had risen considerably during the first half of 2012. Half of the companies had made investments in 2012, and nearly twothirds had hired additional employees. 20 percent had intensified their operations in Russia as a consequence of the sales crisis within the eurozone.

»We consider Russia a partner that has proven reliable for years and enables the establishment of strategic partnerships in many fields as well as a sustainable market,« says Rainer Seele, president of the

During the first half of 2012, foreign investments grew by 6.2 percent as compared to the previous year. A cumulative investment volume of US$25 billion and direct investments of nearly US$11 billion came from Germany.

The sales and earnings of the German companies that operate in Russia have also increased. In a survey by the GermanRussian Chamber of Commerce in November 2012, more than 50 percent of the surveyed companies stated that their sales and

Russia in figuresNational territory: 17.1 million square kilometers Population: 142 millionEmployment rate: 62.7 %Unemployment rate in 2012: 6.0 % (estimate)GDP in 2012: US$1.95 trillion (estimate)Share of global GDP in 2012: 3.0 % (adjusted to purchasing power parity)Industry’s share of GDP in 2011: 37 %Services’ share of GNP in 2011: 59 %Agriculture’s share of GDP in 2011: 4 %Total goods imports in 2011: US$285 trillionTotal goods exports in 2011: US$478 billion

Source: German Federal Statistics Office, Rosstat (Russian Federal Statistics Service), International Monetary Fund. Data for 2010 unless otherwise indicated.

Moscow State University has produced 11 Nobel laureates. Foreign investors in regions such as St. Petersburg, Voronezh, Tomsk, Novosibirsk, and Ekaterinenburg also profit from welltrained specialists and university research and development.


GermanRussian Chamber of Foreign Trade in Moscow. Investments worth billions

This is true in the commodity sector and also for major projects and national funding programs. Several hundred billion euros will be needed for private and national programs in the years to come. »This can’t be done without durable technology that is highly efficient and reliable and requires little maintenance,« says Seele. This offers a great opportunity

for technology companies from all over the world.

That’s why Siemens also sees great potential in Russia, where the company has operated for 160 years and made major contributions to modernizing important parts of the eco nomy. »Even though economic growth has stabilized at a lower level than in the past, Russia remains a highly attractive market for Siemens,« says Fred Rettlinger, Sector Cluster Controller Industry at Siemens Russia and Central Asia.

Siemens in Russia Siemens will celebrate the 160th anniversary of its presence in Russia in 2013. Headed by Dietrich Möller, CEO Siemens Russia, the company employs some 3,000 people, is present in more than 40 cities, and has become a leading supplier of products, services, and complex solutions for modernization of the most important economic and industrial sectors.

Siemens’ volume of orders in Russia, Belarus, and Central Asia totaled almost €2.2 billion in fiscal 2012, with sales of €1.6 billion. Siemens offers its customers in various industries a broad range of products, services, and endtoend solutions.

The current focus is on the strategic issues of regionalization, localization, and energy efficiency. Major projects include the following:

•Modernizationofblock6intheKirishkayapowerplantbelonging to Russian energy supplier OGK2, one of the largest repowering projects in power generation

•ProductionincreasesattheSiemenstransformerplantin Woronesch, the compressor plant in Perm, and the railway vehicle plant in Verchnaya Pyshma near Yekaterinburg

•FittingoutRussianmedicalcenterswiththemost modern medical technology, for example in Smolensk, Barnaul, and Novosibirsk

•FittingoutthenewVolkswagenplantinKaluga•Localproductionofelectricmotorsaspartofthe

Siemens Elektroprivod joint venture•EquipmentfortheTransneftcompanyandtheEastern

SiberiaPacific Ocean pipelines ESPO 1 and 2•Deliveryof1,200locallyproducedDesirotrainscars

and 221 locally manufactured 2ES10 freight locomotives as well as eight additional Velaro RUS (Sapsan) highspeed trains for the Russian railway company RZD

•Complexprojectsintheareasofbuildingautomationand dispatching control systems throughout the country

•Constructionofanewplanttomanufacturespongeiron briquettes for the mine operator Lebedinsky

Siemens’ market presence in Russia also includes the international leasing company Siemens Finance, which has 17 branches throughout the country. As an active member on the Foreign Investment Advisory Council, Siemens supports the Russian government in improving the investment climate, particularly in the area of energy efficiency.

Dietrich Möller, CEO Siemens Russia


People to watch: Esther Duflo

Field studies against poverty

Esther Duflo is everything but a typical U.S. elite scientist: Feminine,

small, with a strong French accent, unpretentious, and a specialist

for poverty reduction, the professor at the Massachusetts Institute of

Technology does not feed common career clichés. A niche expert one

might think. But the whole world is interested in her research.

Industry Journal | 01 | 2013 | People to watch50

We usually take it for granted – water, clean water. We daily open the tap in order to wash ourselves, brush our teeth, to cook, to drink it. At the same time, about one million babies regularly die of diarrhea from contaminated drinking water. An estimated 1.1 billion people worldwide have no access to clean drinking water. They usually live in the poorest countries of the world. Humanitarian aid organizations tried to sell bottled water cleaned with chlorine at low prices. But that was still too expensive for the poor.

Even if they regret it, politicians, entrepreneurs, and scientists do not seem to be able to solve the problem. Not so Esther Duflo. The French economist with a doctoral degree holds the chair of Poverty Alleviation and Development Economics at the renowned American university Massachusetts Institute of Technology (MIT). Together with her coprofessors Abhijit Banerjee and Sendhil

Mullainathan, she founded the Poverty Action Lab (PAL) at MIT, which has more than 70 scientists from 50 countries working for it. The scientists intend to figure out what really helps in the fight against hunger, poverty, and underdevelopment. In which way can education systems, healthcare, labor markets, agriculture, energy supply, and financial systems be changed, so that the world’s poorest experience a significant improvement of their living conditions?

Field studies in Kenya

For almost ten years, for example, scientists have been conducting largescale field studies in Haiti and Kenya with 440,000 people to find possibilities for a safe drinking water supply. The most successful model so far advocates the establishment of free chlorine dispensers at the village wells, enabling the villagers to disinfect their water with only a

»

Esther Duflo The now 40yearold studied history and economics at the École Normale Supérieure in Paris, one of the most respected French educational institutions. At the age of 26, she had already become assistant professor at the elite U.S university Massachusetts Institute of Technology (MIT). Today, she holds the chair of Poverty Alleviation and Development Economics there. In 2010, Esther Duflo received the John Bates Clark Medal, the most prestigious award in economics after the Nobel Prize for Economics.

There are 1.1 billion people around the world who

currently lack access to clean drinking water.

51Industry Journal | 01 | 2013 | People to watch

few simple steps. In addition to that, the MIT experts involved the village elders in the project. For a small fee they promote the aseptic water supply to their fellow citizens.

The results of the largescale study are highly presentable: More than half of the villagers are using the chlorine dispensers today. Depending

on the price, as little as two to ten per cent of the control groups used the bottled water offered. The scientists estimate that more than 60,000 severe cases of diarrheal disease in the last four years could have been avoided with the use of chlorine containers. During the next five years, a total of five million people in Kenya are to be connected to the chlorine distribution system.

Duflo sees these achievements as a confirmation of her strategy to consider economy and development aid in an integrated manner and to uncompromisingly question existing concepts for poverty reduction. While being unpretentious and modestly

concealing her personality behind the scenes she is vehemently dedicated to the matter. »I am small, I am French, I speak English with a strong accent,« the star economist says about herself. The 40yearold appears with jeans and pullover, wearing very little makeup – even on official occasions.

There is no reason for her to hide her light under a bushel, however. The economist has received numerous rewards and honors for her research. In the last three years alone, Duflo received about 20 academic awards. The British economics magazine The Economist named her one of the most important young economists worldwide in 2008. For the U.S. magazine Foreign Policy, Duflo belongs the Top 100 Global Thinkers. In 2011, Time Magazine ranked her among the hundred most influential people in the world. And more than once, the MIT professor was a potential candidate for the Nobel Prize for Economics.

It’s simply wrong to say that there is one solution or one program to help people.«

»


It might be one reason for her excellent international reputation that she does not believe in a miracle cure. »There is no silver bullet against poverty,« the economist says. There are too many different reasons for people being poor – and remaining poor. »It’s simply wrong to say that there is one solution or one program to help people,« Duflo insists. Even in medicine there is no universal cure but – depending on the disease – different promising medicinal products. Learning from experiments

The MIT economist and her colleagues from PAL mainly back field studies in developing countries for their diagnoses and approaches. In the pharmaceutical industry, experiments with random control groups are common practice. They are an exception in economic sciences, however. Still, it is a method to effectively reveal theoretical mistakes and measures derived from these mistakes, says Duflo.

With such experiments the MIT researchers traced the seemingly unsolvable problem of many aid organizations to reduce the high emissions in the huts.

The poor traditionally use open fireplaces made from clay, fired with wood, charcoal, or dried cow dung. The smoke can only moderately be cleared and is regarded as a cause of lung diseases, cancer, and heart disorders. The World Health Organization (WHO) estimates that each year around two million people die from the smoke of open fireplaces worldwide – especially small children and their mothers, who stay close to the fireplaces.

In order to fight this threat, the U.S. initiative Global Alliance for Clean Cookstoves, supported by the U.S. government, campaigned that until 2020 about 100 million households in the Third World will be equipped with clean stoves from metal and clay cartridges as well as a chimney. Duflo,

»

Many people in developing countries get their water from open wells. Free chlorine dispensers at the wells contribute significantly to combat serious diarrhea.


together with her colleagues Michael Greenstone from MIT and Rena Hanna from Harvard University, put to the test what sounds logical, good, and right. The researchers sold the stoves to more than 2,600 households in 44 Indian villages and monitored the use of the devices for three years.

Practice disproves theory

The results were disappointing. Most devices were defect; the owners hadn’t cleaned the chimneys and repaired the cracks. Besides that, the women often forgot to cover the second port when using only one pot. The huts were full of smoke just as with traditional fireplaces. The air quality had scarcely improved. Duflo’s finding: The stoves from America were obviously too complicated. »People in developing countries are permanently stressed. Their child is ill, their parents are dying, and they have no income. They have to look for occasional work every day,« Duflo says. They do not have the time to read manuals and maintenance

instructions – if they can read at all. The devices have to be easy to oper ate and more robust to be accepted by the target group. Otherwise not only will the wellintentioned initiatives fail, but so will the efforts of Western companies to open up a market in these regions. The Global Alliance for Clean Cookstoves is now carrying out further field studies in Ghana, Kenya, and Nepal in order to figure out how stoves can become better and cheaper. In many cases the price of up to US$150 proved to be too high as well.

The Poverty Action Lab has completed about 350 field studies so far. Duflo and her MIT fellow campaigner Banerjee report the results in their book Poor Economics. The British Financial Times nominated it the economics book of the year 2011. »Abhijit Banerjee and Esther Duflo react allergically to the generalization of the causes of economic underdevelopment. Instead, they use precise observations and field studies to explore how poor people in poor countries cope with poverty,« Robert Solow, U.S. economist and

two millionpeople die from the

smoke of open fireplaces –

mainly small children and

their mothers.

According to the World

Health Organization (WHO),

an estimated

Open fireplaces are bad for the lungs but easy to burn. Many poor prefer them not only because of the cost over modern devices. In fact, they lack time to read the manuals. Many of them cannot even read.


winner of the Nobel Prize in economics, praises them.

Pragmatic solutions

Indeed, Duflo and her team of scientists do not want to establish a new general theory for the development of emerging and developing countries. They prefer to find pragmatic solutions for individual problem areas. And these are often surprisingly simple and cheap. In nearly all developing countries, only very few mothers have their children vaccinated against common infectious diseases. The humanitarian consequence is disease, epidemics, death. The economical consequence is low labor productivity and weakened economies. Raising the vaccination rates could bring a strong impulse for the economic development of the countries in the long run.

In an extensive field study in India, Duflo and Banerjee sampled whether a small financial incentive could persuade families to do more for their

children’s health. For every vaccinated baby the mothers received one kilo of lentils – valuable staple food in many regions of India.

There was an enormous positive effect. In control groups without vaccination incentive, only six percent of the babies were vaccinated. In villages with the lentil remuneration, the rate was 38 percent – more than six times as much. »This shows that even the most reasonable programs only work if the people are pushed to join in,« Duflo says.

Even if the research results of the Poverty Action Labs are more than impressive, the fight against poverty remains arduous and long. The MIT researchers have only little hope that hunger, misery, and under development in the Third World can be resolved in the foreseeable future. »Poverty has accompanied mankind for thousands of years,« Duflo says. »If we have to wait another 50 or 100 years, then that’s the way it is.«

Poverty Action LabIn 2003, Esther Duflo founded the Poverty Action Lab (PAL) at the Massachusetts Institute of Technology (MIT),with two fellow professors, Abhijit Banerjee and Sendhil Mullainathan. On the one hand, the concept envisages carrying out field studies in the area of poverty research. On the other hand, PAL actively campaigns for random field experiments in research. This aims to increase research quality and, hence, the effectiveness of development efforts.

Together with her colleague

Abhijit Banerjee (left), Esther Duflo

evaluated more than 350 field studies for

poverty reduction. Banerjee, from India,

did his doctorate at Harvard and is the director of the Poverty

Action Lab at MIT.


The most dedicated employees in the worldIndians are more engaged than the French, the Chinese used to have more oomph, and

employees over age 61 are the most dedicated – these are some of the results of the

international Global Perspectives Survey. The survey does more than simply pique one’s

curiosity: It also helps companies improve their productivity by systematically managing

employees’ level of engagement.

Industry Journal | 01 | 2013 | Management56

India is a land of contrasts. It has more millionaires and billionaires than any other country in the world. At the same time, 70 percent of its population must survive on less than US$2 a day. Western countries envy India for its demographic potential: Almost twothirds of its 1.2 billion citizens are between 15 and 64 years of age. But only five percent of its workers have a professional qualification, and only seven percent of wage earners have an employment contract that includes social security benefits. Yet Indians are the most engaged employees in the world.

That is one of the conclusions of a study recently conducted by ORC International, a London market research company, along with the German firm Kienbaum Management Consultants – for the third time. As part of the Global Perspectives Survey, 9,000 employees from

19 advanced economies in Europe, North and South America, Asia, and Australia were asked about their satisfaction with various aspects of their jobs such as the tasks they do, their opportunities for advanced training and development, and recognition of their performance.

To measure that satisfaction objectively, analysts developed measurement values for motivation and dedication. Those values are used to calculate the Employee Engagement Index (EEI), an indicator of employee engagement in individual countries and worldwide (see page 61, bottom).

India at the top

The result: India is the undisputed champion again this year. India’s EEI is up an impressive four points from 2011 and now stands at 78 index points. Also at the top are

Satisfied employees are usually also the most engaged, and they are considered an important factor for success. Companies profit from more than just a low level of turnover and reduced absenteeism. Employee engagement has also been shown to influence customer satisfaction.

»

57Industry Journal | 01 | 2013 | Management

The satisfaction index will probably be an incentive to act in many cases, especially in knowledgebased industries and companies with a large percentage of highly educated employees. This is where employee engagement has a particularly strong effect on the bottom line. In an increasingly global competitive environment, CCI offers useful reference points for managing engagement in specific regions.

Early indicator

The EEI is an early indicator that reflects the mood of the grass roots in each country. The advantage: Understanding how employees feel at each location, how safe and secure they are in their jobs, and how motivated and engaged they are when they come to work helps determine the condition of and outlook for each country’s national economy. The index also offers a valuable

Supervisors should communicate trust, safety, and security: Employees who feel safe at work and who can freely express their own ideas or criticism are more satisfied and engaged. Team spirit and a good worklife balance are particularly important for the younger generation.

Brazil and Turkey, whose growth is strong compared with other countries.

»When companies operate in a prosperous economic environment, that has a positive effect on employee engagement,« explains Dirk Ruppel, a consultant at Kienbaum in Berlin. That’s because companies can invest more during economic booms, for example in workplace equip ment and advanced professional training.

Rapid growth also opens up attractive opportunities for employees, including career advancement and pay increases. Those factors are important drivers of engagement. Conversely, crisisriddled countries like France, Spain, and Japan found themselves at the bottom of the chart in 2012: Employee engagement in those countries is well below the global average of 56 index points.


control parameter for comparing individual companies with others.

For example, China rose by a good ten points in the EEI two years ago, putting it in second place for 2011. But the People’s Republic lost almost the same number of points the next year, so it is again ranked number 5.

That drop reflects uncertain ties about the future direction of the communist leadership and the underlying social conflict brewing among the population. »The example of China clearly shows that a continued high level of engagement among employees also requires the integration of societal needs,« says Ruppel.

In the United States, the lasting economic uncertainty is also influencing how things look. Respondents were somewhat restrained when rating the factors of pay, job safety

and security, and career advancement. The threepoint drop for the U.S. was less than China’s, but the two countries are almost neckandneck in terms of engagement in 2012.

Guidelines for companies

In addition to accurately taking the temperature behind the doors of production facilities, service companies, and public administrations, the Employee Engagement Index also offers companies important information for comparing their own success at motivating workers. That information must be interpreted in a national context. »Employees don’t compare their own situation with workers in other countries; they rank themselves in their own local socioeconomic environment,« explains Ruppel.

If companies systematically measure the engagement and motivation of

Measuring employee engagement The Employee Engagement Index is based on an online survey of employees all over the world by market researchers from ORC International working with Kienbaum Management Consultants. The index was calculated using the following criteria:

»

SayI would recommend my organization as a great place to work.

My organization is a good place to work compared to other companies I know about.

StayI feel committed to my organization’s goals.

I intend to still be working for my organization in 12 months‘ time.

StriveMy organization motivates me to contribute more than is normally required in my work.

Working at my organization makes me want to do the best work I can.


We still have to get used to Generation Y.«

»

Dirk Ruppel is a project manager at Kienbaum Management Consultants in Berlin, who focus on employer attractiveness and employee surveys. He spoke to Industry Journal about strategic engagement management, agreements on objectives, and status symbols.

How can companies systema t-ically increase their employees’ engagement? Strategic engagement management begins when I define what factors I want to measure so I can later derive improvement measures from them. The indicators »Say,« »Stay,« and »Strive« have proven themselves. Do employees speak positively about the company (Say)? Do they want to remain on board (Stay)? And are they ready to give 100 percent for the organization – to go the extra mile (Strive)? At the same time, employee surveys should be seen as a continuous process, not a onetime inventory. Links to other control processes,

such as agreements on objectives, can support company leaders in this.

What is the benefit of quantifying engagement? Many studies have shown the connection between employee engagement and a company’s bottom line. Engagement doesn’t just affect HR indicators like turnover or absenteeism: By influencing customer satisfaction, it also impacts influence indicators like sales and profit. For example, change processes within the company can be implemented more successfully when workers are highly engaged. What should a company do when its engagement rating shows that action is needed? They must analyze what tools they can use to influence employee engagement most effectively. There are no elixirs for this, because the potential areas of action can vary greatly depending upon the individual industry, company, or professional group. For example, many employees in research and development value both their freedom to make decisions and a sense of individual responsibility. In contrast, their fellow employees in the sales department often find good commission structures to be more important. Are there any across-the-board trends? Yes, all over the world we are seeing a greater focus on the personal work situation. This means more opportunities to use instruments like health

management systems and occupational safety measures to positively influence employee engagement. Companies should institutionalize those measures. For example, are there specific contact people, regular training sessions, and appropriate preventive measures in these areas? Does this mean that proven factors like responsibility, hierarchies, status symbols, and impressive job titles are no longer important? You shouldn’t ignore them, but you have to analyze all engagement factors by age group. The conventional factors are still important all over the world for employees between the ages of 30 and 40, who are in what is known as the »career decade.« They want more money and more responsibility and are looking for professional advancement. The loyalty of that age group is relatively low, with a high percentage of »career nomads.« Then you have the young Generation Y, with hopes and needs that many personnel managers still have to become accustomed to. What are those needs?

What counts for Generation Y are team spirit, variety, meaningful tasks, the ability to make a recognizable personal contribution to the success of the company – and a good worklife balance. But there is also a high level of engagement among older people. This means that companies must take steps that will allow those employees to keep demonstrating their commitment in spite of physical agerelated limitations.

Dirk Ruppel advises companies on strategic engagement management


their employees, they should compare their results with national reference values. For example, from a national viewpoint an EEI value of 56 (the global average) would be a relatively good score for companies in France, Japan, or Great Britain, and would be considered a success. In contrast, a 56 would sound a warning bell in India and Turkey.

How can companies promote their employees’ sense of engagement? The consultants from OCR and Kienbaum have observed a global trend – away from traditional drivers of engagement such as higher pay and more responsibility and in the direction of greater focus on individual work situations and personal satisfaction on the job.

Safety and security

Employees all over the world are according greater importance to a safe and healthy workplace. This includes confidence in being able to express an opinion without negative conse quences or question inhouse processes without fear. At a time of increasing fundamental economic change, successful managers are the ones who can credibly communicate trust, security, and safety.

The trend for Great Britain shows that companies with the right strategies can achieve a lot, even in an economically uncertain environment. Unemployment in Great Britain is 8.4 percent, a recent record level, and economic growth by no means appears stable. Nonetheless, Great Britain’s rating rose by seven index points in 2012, moving it from 17th to 13th place, the greatest increase in the survey.

Ruppel says that many companies in Great Britain have good organizational structures and are systematically working to increase employee engagement. That is reflected in positive survey results, especially around the aspects of communication and trust.

Increasing employee engagement

Worldwide employee engagement

These factors have an especially positive effect on employee engagement:

Workload, work environment, and job• Satisfactionwithphysicalworkingconditions• Feelingofpersonalaccomplishment• Sufficientlychallengedandmotivated

Work processes and policies • Policiesprovidesupportforthework• Organizationiscommittedtocustomersatisfaction• Employeesfeelsafetospeakupandchallengethewaythingsaredone

Pay and well-being• Feelingsecureonthejob• Healthandsafetyistakenseriously• Employerpromoteshealthandwell-being

Rank 2012 (2011) Country EEI 2012 EEI 2011 Trend

1 (1) India 78 74 +4

2 (3) Brazil 63 64 1

3 (–) Turkey 63 * *

4 (4) Switzerland 62 63 1

5 (2) China 60 67 7

6 (4) U.S. 60 63 3

7 (6) Canada 59 58 +1

8 (7) Germany 57 57 –

9 (9) Russia 57 56 +1

10 (12) Australia 57 54 +3

World average 56 57 1

11 (7) The Netherlands 56 57 1

12 (11) Italy 55 55 –

13 (16) Great Britain 55 48 +7

14 (13) Spain 52 53 1

15 (9) Singapore 51 56 5

16 (–) Sweden 50 * *

17 (13) France 49 53 4

18 (17) Japan 45 41 +4

19 (15) Hong Kong 43 50 7

*Surveyed for the first time in 2012 Source: Kienbaum Management Consultants / ORC International

A total of 9,000 people were surveyed online about job satisfaction for the Employee Engagement Index (EEI).


Anything that Nathan Myhrvold does somehow becomes extreme. He wrote a 2,438page book on avant garde cuisine – price US$625. His office in Seattle (Washington, U.S.) is decorated with the huge skull of a prehistoric fish, the Dunkleosteus. Most important, he founded his own very successful company, which may be one of the most unpopular in the technology sector. That’s because Nathan Myhrvold privatizes knowledge.

Nathan Myhrvold, former Chief Technology Officer at Microsoft, is unprecedented in his ability to stir up the world of intellectual property. Long before the topic became familiar as the media focused on the patent battles of Apple, Google, and Samsung, he went shopping on a huge scale. Today, his company Intellectual Ventures (IV) manages more than 40,000 patents and is a major player on the market for inventions.

He sees himself as an advocate for nerds and hobbyists. »Inventors should get rich,« says Myhrvold. »We should have more inventors. It’s good for everybody.« His critics respond that his vigorous efforts in favor of patent protection hinder progress instead of promoting it. Crank or visionary, destroyer or savior? With a beard, curly hair, and rimless glasses, the 53yearold Myhrvold looks more like an anarchist than a wellknown businessman. But that’s misleading. He’s a manager who wants to do no less than establish a veritable market for intellectual property. Just as venture capital has made it possible for decades now to participate in ambitious, innovative startups, he thinks it should also be possible in the future to have a financial stake thanks to »invention capital.« Investors who fear the risks of a single invention would be able to acquire »patentbacked securities.«

Knowledge as a business modelNathan Myhrvold is a physicist, economist, and for-

mer executive at Microsoft. He collects dinosaur skel-

etons, is the author of a molecular cookbook – and

advocates the privatization of knowledge as no one

has ever done before. His company, Intellectual

Ventures, markets more than 40,000 patents all over

the world, ranking among the major patent brokers.

»


Good. Its projects are primarily intended to serve people in the poorest regions of the world. Projects include laser devices to shoot mosquitoes, or insulated containers that can cool sensitive vaccines for 100 days without added energy. »Through my contact with Bill Gates over the years, I’ve certainly become aware of the many very challenging problems the developing world faces,« he says. But are these projects truly based on altruistic motives? »We’re not expecting to make money on these projects.« But on some, they will.

Myhrvold was always exceptionally talented. He was a gifted student who finished high school at 14, later studying at two elite universities, Princeton (New Jersey, U.S.) and the University of California, Los Angeles (UCLA). He has two master’s degrees, in mathematical economics and geophysics. He also completed a PhD in theoretical and mathematical physics. He later did research on cosmology and quantum field theory with the worldfamous physicist Stephen Hawking at Cambridge University.

Sale to Microsoft

Instead of sticking with science, he created the company Dynamical Systems. It was soon well on its way to revolutionizing the world of operating systems thanks to some software named Mondrian. But things never got that far: In 1986 Microsoft acquired the company – along with its founder. Myhrvold worked at the software giant for 13 years, among other things creating the corporate research department Microsoft Research. As eccentric as he was, he was always seen as someone who could work with a high level of professionalism in the corporate structure.

In his company, he works on a number of offbeat hobbies. For example, he finances and accompanies expeditions to look for dinosaur remains, and is proud to have discovered the most Tyrannosaurus rex skeletons ever. He donated a million US dollars to his friend Paul Allen, one of the founders of Microsoft, to help finance the largest telescope in the world.

Secret portfolioNo one really knows what inventions Intellectual Ventures owns. Anyone who signs a license agreement with this patent farm must enter into a confidentiality agreement. Myhrvold has spun off some of the patents to more than 1,200 shell companies, according to research by University of California scientists. The veil is rarely lifted, however. The economist Steven Levitt revealed in his book Superfreakanomics that IV owns the rights to climate manipulation technologies that could play an important role in the Earth’s survival.

IP Checkups, a California patent search company, recently hoped to collect systematic information on IV’s patents and upload it into a public database. It collected donations for the project in 2012, but only US$13,500 came in instead of the necessary US$80,000. For the moment, IV’s patent collection will remain under wraps.

Vision of a better world

Myhrvold’s vision is of a society that, fueled by the creativity of countless Gyro Gearlooses, takes a great leap forward to a better, more humane world. His critics accuse him of using this argument merely to cloak a hardcore business model in moral legitimacy.

His company IV, founded in 2000, is headquartered in Bellevue, a suburb of Seattle. Since that time, it has quietly acquired thousands of patents and granted the rights to use them. IV relentlessly charges royalties for them, if necessary with the assis

tance of lawyers and the courts. The company also represents the rights of more than 4,000 inventors, who are part of the International Inventor Network created for that purpose. IV’s customers include wellknown companies like Akzo Nobel, Samsung, Research in Motion (RIM), HTC, and SAP. And their numbers keep growing.

The Japanese technology group Olympus has just signed a license agreement with IV, ending a prolonged legal dispute. Lawsuits against Canon and Nikon are still in progress. Since it was founded, IV has collected more than US$2 billion in royalties and paid out some US$400 million to investors.

Market power for creatives

IV is the alpha dog of the murky patent trade. The many small companies known as trolls – considered nothing more than profiteers – operate in that market. Myhrvold differs from them primarily where his philosophy is concerned. He thinks that the free market for inventions just doesn’t work at present. Large firms often follow a policy of compartmentalizing knowledge by simply crosslicensing to each other. Those who don’t belong to the club will find that their ideas have been exploited. He says this applies primarily to garage tinkerers, who are still excluded from market access. Myhrvold hopes that will change once IV offers market power to creatives. For a fee, of course.

Still, IV does more than trade in patents; it also employs more than 120 scientists. They work on their own inventions, including a purportedly riskfree nuclear reactor. IV recently obtained a patent for technology intended to prevent piracy using 3D printers. Myhrvold was again ahead of his time in this. The patent application was filed in 2008, when physical production using 3D printers was still considered a pipedream (see page 24).

In addition to obviously commercial projects, Myhrvold has also created a humanitarian department, Global


discourage him: »I wasn’t a popular kid in school.« He is a polarizing figure on the Net simply because he’s a sworn enemy of the freeware and shareware culture. Myhrvold believes that the value of intellectual property has long been neglected.

By creating IV, Myhrvold anticipated a trend that has been taking shape for almost two years, primarily in the telecom industry. Myhrvold points out in his own defense that Apple, Google, and Microsoft are doing what he does, which is buying patent portfolios. He wonders why he shouldn’t do the same. And, of course, somehow do it in an extreme way.

His sixvolume cookbook Modernist Cuisine is highly praised by celebrity chefs. It is 40 centimeters thick, weighs 21 kilos, and is devoted to biochemically based cooking. Making a cheeseburger by his recipe can take ten hours. It seems Myhrvold, with his fanatical love of progress, is attracted by anything superlative. The main thing is to be bigger, better, and more innovative.

Myhrvold’s many talents also include selfpromotion. He is regularly attacked at technology conferences or in online forums. It doesn’t matter, according to him. Disputes and hostility seem to encourage rather than

Nathan Myhrvold has many unusual

interests. For example, he collects

dinosaur skeletons (top left), wrote a

huge cookbook on molecular cuisine (bottom left), and donated a million

dollars to Paul Allen, a founder of

Microsoft, for a telescope to

explore deep space (bottom right).

Nathan Myhrvold At the young age of 23, Nathan Myhrvold, now 53, earned a PhD in mathematical and theoretical physics at Princeton. Foreign Policy, an American political magazine, included him in its list of the top 100 global thinkers in 2010, and Time Magazine listed him as one of the 100 most influential people in the U.S. in 2011.


The charm of the swarm

Autonomous systems instead of centralized

control – a new paradigm is finding its way

into logistics and production. It is based

on nature, with scientists and engineers

orienting their systems toward the intelli-

gence of swarms.

Industry Journal | 01 | 2013 | Innovation66

As if guided by magic, the bright orange transporters roll with a barely audible hum through the 1,000 square meters of a hall in Dortmund (Germany). As many as 50 of the Multishuttle Moves simultaneously travel between the highbay storage warehouse with 600 cargo carriers for small parts on its shelves and eight commissioning stations built for experiments by researchers at IML, the Fraunhofer Institute for

Material Flow and Logistics. Their objective: flexible intralogistics, which means a better adjustment of the flow of goods and materials in commercial locations to cope, for example, with seasonal fluctuations.

To accomplish this, the IML experts have combined numerous innovations under one roof, in their research hall. The transporters, each measuring 114 centimeters long and

71 centimeters wide, can move freely among the shelves of the high bay storage warehouse and throughout the hall. Their movements would normally be limited to the shelves, and a circular rollerconveyor would typically be needed for further transport to the commissioning stations – and so the containers would need to travel farther than necessary. The IML hall differs from a conventional intralogistics system in

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67Industry Journal | 01 | 2013 | Innovation

another way: There is no centralized control of the process. Instead, the 50 little transporters are in constant communication with each other via WLAN, and they decide autonomously which of them will perform each task. The IML researchers call this new approach a »cellular transport system.«

The scientists base their work on the behavior of biological systems known as swarm intelligence. It comes into play when the members of a swarm must collectively perform a task that none of them could do on their own. This happens when bees find a place for a new hive or fish try to avoid an enemy. Swarming intelligence requires astonishingly complex behavior, but is based on just a few simple rules for interaction among members of the group. The American biologist Brian Partridge discovered back in the 1980s why salmon sometimes act like a superorganism. Every fish in the swarm obeys just two simple rules: follow the fish in front and keep pace with the fish next to you.

The logistics experts at IML in Dortmund are using a different species as their model. Ants live in complex groups and have perfected their ability to move material between their nests and their surroundings. »Even given their limited intelligence, ants are the greatest logistics experts in the world,« says Professor Michael ten Hompel, who heads IML and also holds the Chair of Materials Handling and Warehousing at the Technical University of Dortmund.

Based on the tiny insects’ behavior, the researchers figured out a way to minimize the distance between the highbay storage warehouse and the commission ing stations. When wandering about in nature, ants leave chemi cal markers (pheromones) in their environment to attract other ants, which in turn leave behind their own pheromones. As more ants follow a trail of this kind, once it has proven to be a good one, it gets easier for other ants to detect it. The result is that ant trails follow the shortest distance between two points, such as their nest and a source of food.

Ants as good models for logistics

Experts in information technology have implemented this system in computers, developing the »ant algorithm« in which a sort of digital pheromone marks the way. In this case, too, the optimal route seems to be determined out of the blue by the intelligence of the swarm. »Our Multishuttle Moves, which do not have centralized control, find the shortest path from the highbay storage warehouse to the commissioning stations and back,« explains ten Hompel. »They use a laser scanner to determine their position and keep the other vehicles constantly informed of it. This creates counterparts to ant trails, which quickly adjust to changing conditions in the environment.«


Based on their limited intelligence, ants are the greatest logistics experts in the world.«

»

Professor Michael ten Hompel, Fraunhofer Institute for Material Flow and Logistics (IML)

Scientists at the Bremen factory for selfcontrolling products have developed a workshop production system for taillight manufacturing in which machines and products organize themselves according to the principle of the swarm.

This is how the autonomous transporters in the test hall developed a pattern that optimizes the flow of materials. They take many different paths to the commissioning stations, but they all follow the same path back to the warehouse.

The autonomous IML transporters use other mechanisms besides the ant algorithm to independently organize their work, for example when picking orders. There is no centralized authority here either, to specify who should do what and when they should do it. Instead, the swarm independently agrees on how to proceed. If a new transport order comes in, an auction starts and the Multishuttle Moves »bid« for the job. »Each participant gets a number of points depending on its distance from the target and the available transport space, among other things,« says ten Hompel. »The one that collects the most points gets the job. This is completely decentralized, and only the list of orders is centrally administered.«

Goodbye to centralized control

The use of swarm intelligence is a logical result of the increasing demands being placed on logistics, says ten Hompel. »As logistics chains become more complex, we have to rely more on decentralization and autonomous systems. We have developed increasingly complex algorithms for centralized controls, but they’re now reaching their limits.« That is because even the smallest error in the sequence forces central control to recalculate its entire planning.

In contrast, the Multishuttle Moves can respond flexibly to new challenges: for example, by easily integrating new transporters into their system. »Very simple, basic algorithms will be important in future logistical systems so that they can quickly make a sensible decision on the spot. That makes much more sense than wanting the supposed best decision from a central system and then having it arrive too late,« says ten Hompel.

»


Professor Jens Krause studies the behavior of fish swarms and human groups at IGB, the Leibniz Institute for Freshwater Ecology and Inland Fisheries in Berlin. He is a behavioral biologist who is also interested in industry, especially automakers.

Swarm intelligence is generally associated with the behavior of fish swarms. How is this intelligence expressed?

It leads to solutions that individual fish can’t achieve alone. One study involved avoiding a predator that was difficult to locate. Individual fish made the right decision in only 56 percent of cases, while the swarm of 16 fish were right almost 90 percent

of the time. In that case, the decision wasn’t just better; it was made in only half the time. We had previously thought that better information processes in the swarm came at the expense of speed. We then found that the fish combined swarm intelligence with the distribution of labor.

What can companies learn from this?

We can apply the abstract principles of fish swarms to other situations. Fish use social selforganization, and from this we can draw parallels to economic processes or the organization of companies. For example, hierarchy isn’t important to the swarm – the direction it takes is primarily determined by individuals who have more information than others do.

A new form of bionics«

»

You also work with industry. What are their representatives interested in?

We have the most contact with the automotive industry. They are interested in the possibilities for collective management in which – as in a swarm – hierarchies are less important than the skills of employees. This is fundamentally a new form of bionics. Previous uses of bionics has involved companies copying materials or surfaces – from shark skin to lotus leaf. Today bionics primarily focus on the question of how natural systems process information and make robust decisions in quickly changing environments. We can record that behavior in mathematical models and apply it to industry.

Can you provide an example?

At Audi, we discussed how cartocar communication could be oriented to natural swarm models like those of bees or ants. For example, one question is how many cars would have to be connected to a network for it to accurately recognize traffic conditions. This has some parallels to insects looking for food. Ants send out only a few individuals and share with each other the infor mation those individuals bring back.

What are the limits to swarm intelligence?

We once submitted simple mathematical problems to test subjects. Swarm intelligence totally failed. The results actually got worse when we asked more participants. Unfortunately, the problems of human societies are so complex that we don’t have any clear criteria for when a swarm would make a better decision than an individual.

Professor Jens Krause, head of the Department of Biology and Ecology of Fishes at the Leibniz Institute in Berlin


Experts in production logistics have also fallen for the charm of the swarm in their efforts to optimize the flow of products between processing steps. »Instead of a centralized control system, the products and machines decide for themselves what process comes next,« explains Henning Blunck of the Global Production Logistics working group at Jacobs University in Bremen (Germany).

Speeding up the final installation of optional features on imported cars at the Port of Hamburg (Germany) is another subject for the scientists, who are working with colleagues from the University of Bremen and the operator of a terminal at the Port of Hamburg. A sunroof or an infotainment system can be added to Japanese vehicles after they are delivered to Germany, for example. The parking lot at the port holds up to 12,000 cars, and all of them must be customized and have features added as effectively as possible.

Cars decide for themselves

As part of a simulation, the scientists let the cars decide which one should be next in line. »The cars used an auction method to decide, for example, what parking spot should be filled next and which cars have been worked on, as well as when and where the work was done,« says Blunck. »What mattered was the time remaining until the car was delivered to the customer and its distance to the next step in the process.« The simulation showed that allowing the swarm of cars to organize themselves reduced throughput times by as

much as 20 percent and also enabled a more effective use of parking spaces in the terminal.

In another project, the researchers made changes to production of car taillights. The goal was for the initial product to be used to make variants with different bulbs and covers – not the best situation for conventional assembly line production. »Production on the line makes sense when large numbers of a uniform product are to be manufactured over a long period,« explains Blunck. »Other production layouts are better for a large number of alternatives and frequent changes – if they are intelligently controlled.«

To make the tail light, the scientists developed a workshop production line in which the individual machines (like drilling and stamping equipment) were grouped according to their function instead of along a directional process flow. The swarm of products and machines used priority rules to decide what tail light should be processed next and which machine it should be processed on. »This makes it possible to respond flexibly to disruptions, for example, when an order is changed or a machine breaks down,« reports Blunck. »That wouldn’t be possible with conventional hierarchical control.«

Decentralized intelligence will also play an important role in Germany’s future energy mix. Researchers at Siemens Corporate Technology (CT) have developed the SO EASY system (selforganizing energy automation system) in which

software agents meet in a virtual marketplace to ensure that supply and demand are always balanced in the power grid – in spite of fluctuations in generation from wind turbines and photovoltaic plants.

Smart software agents

Every generator and consumer of power is represented by a Personal Energy Agent (PEA). For example, the software calculates a minimum price at which power can be generated by a plant and makes an offer to the virtual power supplier, which makes a decision about allocating the PEA offers. This is known as Balance Master, and is also based on auctions: »The Balance Master attempts to maximize revenue, just like the trading system on the stock market,« says Michael Metzger of Siemens CT. »Other agents are responsible for grid stability, data collection, and monitoring of agreements. These are the Area Administrator, the Network Transport Agent, and the Energy Police.«

Researchers at CT are currently testing a system made up of 50 PEAs in Wilpoldsried, southern Germany, where many photovoltaic plants and bioreactors are located. »But SO EASY is also suitable for a national grid with millions of agents,« says Metzger. »It is also useful for industrial operations. Increasing numbers of companies are considering their own microgrids with windmills, photovoltaic systems, and diesel generator sets so they can become more independent of the public grids. They can also be automated using a swarm of agents.«

Fish swarms perform complex maneuvers at lightning speed by following simple rules: follow the fish in front and keep pace with the fish next to you.


What is matter made of? What holds it together? How did the universe look fractions of a second after the Big Bang? Scientists at the European nuclear research center CERN in Geneva (Switzerland) are dealing with nothing less than the fundamental questions of physics.

At the moment, they are mainly concerned with tracking down the Higgs boson – a particle that physicists have been trying to discover for decades. That is because the Higgs boson might provide the answer to one of the biggest riddles in physics: Why does matter have mass?

The place for really big questionsAt the European nuclear research center CERN in Geneva,

scientists are busy solving the ultimate riddles about the

structure of matter and the origins of the universe. Now

the researchers are on the threshold of a basic research

breakthrough in physics.

The permanent Universe of Particles exhibition at the CERN Visitor Center gives lay visitors a readily understandable look into the world of particle physics.


With a circumference of 27 kilometers, the Large Hadron Collider (LHC) under Lake Geneva and the Jura mountains (Switzerland) is the world’s largest particle accelerator. It belongs to the European nuclear research center, CERN.

Exhibitions are held in the Globe of Science and Innovation at the CERN Visitor Center (top). Technicians need bicycles to inspect the many kilometers of the particle accelerator (bottom).

»

Scientists have already found out a lot about what the world is made of. They now know what’s behind the fundamental forces of nature: force particles like the photon fly back and forth between the building blocks of matter and thus cause attraction or repulsion. But the physicists are still trying to answer two questions: Where do elementary particles get their mass? And why do their masses differ so much?

Prospects for the Nobel Prize

This is where the Higgs boson comes in. It interacts at different strengths with the elementary particles, and thus gives them their individual mass – similar to how water molecules interfere differently with the movement of different kinds of fish in the ocean. If that theory is confirmed, it would answer one of the last great questions in basic research. So it is no wonder that thousands of scientists worldwide have been hunting for the mysterious unknown quantity. Whoever is the first to find the Higgs boson is almost sure of a Nobel Prize – along with British physicist Peter Higgs (83), who was one of the first scientists to predict the particle’s existence back in 1964, and who has

been waiting for it to be discovered ever since.

The wait may soon be at an end. Engineers and scientists at CERN have built an immense machine that is thought to have found the Higgs boson in the summer of 2012. The Large Hadron Collider (LHC) is the largest particle accelerator in the world, and also one of the world’s most complex machines.

Three billion euros

The circular installation is almost 27 kilometers in circumference, cost three billion euros, and extends through an underground tunnel between Lake Geneva and the Jura mountains in France. Through the nearvacuum in the LHC’s two tubes, protons circulate at close to the speed of light in both directions, kept on a prescribed track by some 10,000 superconducting magnets. Here, Siemens control technology plays a central role (see box on page 74).

At four points deep underground, the scientists cause the flying protons to collide again and again. That creates whole showers of other particles, which are detected at


Siemens and CERNWhenever CERN researchers go hunting new particles, Siemens technology is along for the ride – for instance, to control the unique cooling system at the Large Hadron Collider (LHC). The roughly 10,000 magnets in the accelerator have to be kept chilled to an insanely low 271 degrees Celsius. That causes the cables inside to lose their electrical resistance, so they can carry massive currents without loss.

Not even outer space is that cold. To get the temperature that low, a complex system chills 100 metric tons of helium, liquefies the noble gas, and pumps it as a coolant through the LHC magnets. To monitor and control what amounts to the longest refrigerator in the world, the system uses 18 highpower Simatic S7416 controllers that communicate with 1,600 valves and some 20,000 sensors, among other equipment.

If the cooling system nevertheless encounters a problem, the magnet protection system intervenes

within milliseconds: 40 extremely fast Siemens Simatic S7319 controllers, distributed around the LHC, switch off the current to the magnets in emergencies and make sure that the stored magnetic energy is conducted away – otherwise the magnets would be destroyed, which in turn would not only paralyze the accelerator, but also be very expensive: The 1,232 dipole magnets, weighing 35 metric tons, that are distributed around the LHC cost about a million euros – apiece!

On top of that, many of the technical processes at CERN have been controlled since 2001 using the WinCC open architecture SCADA system (Supervisory Control and Data Acquisition) from the Simatic family, which monitors the data from more than ten million input and output channels. That information tells the scientists at CERN’s central control center such things as whether the cooling system is working properly.

Siemens delivers more to Geneva than just components to control the accelerators. The company is also working with CERN researchers to develop better products at what is known as the Open Lab. One emphasis here is on improving the IT security of control systems – all, of course, top secret.

On the trail of the particles named for him: British physicist Peter Higgs (right) visits CERN, where the world’s largest particle accelerator is thought to have found the Higgs boson in the summer of 2012.


lightning speed by gigantic detectors. One of these, the compact muon solenoid (CMS) – 15 meters in diameter, 21 meters long, and weighing 12,500 metric tons – is made up of a number of layers.

The fragments from the collisions fly through a kind of cylindrical digital camera with a resolution of 100 million pixels. »That lets us measure the tracks of the electrically charged particles,« explains Oliver Buchmüller, Professor of Physics at the Imperial College in London, in the CMS control room. »We measure the fragments’ energy farther out. When we combine the information from all the individual instruments, we can determine whether a Higgs boson was produced in a collision, and what characteristics it has.«

The problem is that the Higgs boson is an extremely rare guest at the CMS. Protons collide there 40 million times a second. But out of all these collisions, the superfast electronics and the detector’s 30,000 microprocessors can filter out at most 500 events that might be of interest in the hunt for the Higgs boson. Meantime, the scientists in the CMS control room monitor that their mighty yet sensitive instrument is still working correctly. Researchers from all over the world sit patiently during eighthour shifts before dozens of monitors, watching the system’s parameters. If the system

were to yield defective data, the more than 2,000 researchers from 37 countries involved at CMS would have a problem on their hands.

Every event categorized as interesting is first sent to the CERN computer cen ter, which initially stores the data from all LHC experiments on some 69,000 hard disks with a capacity of 30 million gigabytes. »Ten gigabits arrive here every second,« reports Stefan Lüders, head of Computer Security at CERN. »Each year that’s equivalent to a stack of DVDs one and a half times the height of Mont Blanc.«

But even though the computer center has more than 8,800 servers and 69,000 microprocessors, most of the data are not processed here. Instead, the scientists developed the LHC Computing Grid for the purpose, distributing the flood of measurements to eleven com puter centers in Europe, Asia and North America. Those in turn convey the data to some 150 scientific institutions around the world for analysis.

This kind of decentralized data processing, a forerunner of cloud computing, is not the first fundamental IT innovation to come out of CERN. In 1989, CERN was where Tim BernersLee invented the World Wide Web – partly to provide better access to documents about the LHC, which was then in planning.

Since that time, the gigantic accelerator has turned out to be a scientific gold mine. It has been doing good work in more areas than just the hunt for the Higgs boson. LHCb (Large Hadron Collider beauty) experiment detector searches for the fine differences between conventional matter and its mirror image, antimatter. Every conventional particle has a twin, with the same mass but the opposite electrical charge. In 1995, at great effort, CERN scientists produced the first antihydrogen atom from an antiproton and an antielectron (a positron). Detection and confirmation are so difficult because matter and antimatter destroy one another instantly when they meet. All that is left behind is a tiny cloud of energy.

Conditions like the Big Bang

It is thought that the Big Bang, nearly 14 billion years ago, produced just as much antimatter as matter, but they destroyed one another instantly – except for a small remainder of conventional matter: our universe. LHCb is dedicated to asking how and why that asymmetry occurred. Occasionally, instead of protons, the CERN scientists also cause the much heavier nuclei of lead atoms to collide in the LHC, producing states of matter as they were shortly after the Big Bang. The ALICE experiment (A Large Ion Collider Experiment) aims to find out in this way how the universe looked shortly after its birth.

During 2013 the LHC will be shut down for a while and modified, with the aim of making protons reach energies roughly twice as high as before. Another upgrade is planned for around 2018. And before the projected end of its service life in 2030, the scientists want to increase the accelerator’s power even further. But one thing is unlikely to change in spite of all the alterations: CERN will still be the place where people look for answers to the really big questions.

69,000hard disks with a capacity of 30 million gigabytes store

the data from all the LHC experiments. That’s equivalent

to a stack of DVDs one and a half times the height of

Mont Blanc every year.


With reduction to innovation Jugaad InnovationThink Frugal, Be Flexible, Generate Breakthrough Growth Navi Radjou*, Jaideep Prabhu, Simone Ahuja, 275 pages, US$27.95 (€21.10) Many Western engineers confuse complexity with progress, leadership and innovation strategist Navi Radjou and his coauthors Jaideep Prabhu and Simone Ahuja criticise in their book Jugaad Innovation. The engineers come to the office every morning with the intention to break through the boundaries of technology. But exactly this is the wrong way to create new successful innovations in the 21st century,

the authors say. They advocate keeping products and services as simple and as cheap as possible in order to also reach alleged marginal groups while still working profitably. The innovation experts propagandize the Jugaad principle. In India, the Hindi word stands for innovative, improvisational solutions. And these arise by modest means due to deficiency and shortage of money rather than by extensive research. To show these principles in action, the authors compiled numerous success

stories – starting with an entrepreneur who invented a fridge made entirely of clay and working without power to Tulsi Tanti. The founder of the international energy group Suzlon only intended to raise two wind turbines as an energy source for his cloth mill. Today, Suzlon is one of the largest companies in the wind industry. The authors‘ conclusions from these success stories: Jugaad innovators are aiming high despite bad conditions. They have a sparing and modest mind and operate flexibly – virtues that are to be rediscovered by Western companies. On the one hand to enter new markets in emerging and developing countries, and on the other hand due to the increasing Western demand for simple and cheap solutions that save money and resources.

*Navi Radjou, a French citizen born in India, is innovation strategist in Silicon Valley (Silicon Valley, California, U.S.) and executive director of the Centre for India & Global Business at the English Judge Business School, University of Cambridge.

From do-it-yourselfers to businessmen MakersThe New Industrial Revolution Chris Anderson*257 pages, US$26.00 (€19.90) Jim McKelvey is a prime example of a maker. In spring 2009, the smallscale entrepreneur from San Francisco was annoyed that he was not able to accept a customer’s payment as he did not have a credit card reader. The large terminals like those used in supermarkets were too expensive for him. So McKelvey constructed a prototype of a mobile mini device with a 3D printer. Today his company Sqare produces millions of these devices.

Examples like this represent the power of Makers: The New Industrial Revolution. The author Chris Anderson visited a car company in Arizona which constructs cars developed in an open and collaborative manner by customers and prospective buyers, an online distribution for electronic

components for hobbyists in Colorado, and a stateoftheart hobbyist studio (FabLab) in Manchester, England. His investigations describe the philosophy and the dimensions of the young movement vividly.

At the same time it is a very personal book, starting with Anderson’s grandfather, who invented a lawn sprinkler in the 1940s. The grandson points out how easy it is for inventors nowadays in the age of Open Source, 3D printing technology, and crowdfunding. He also refers to his own experiences with his company DIY Drones,

which produces accessories for the construction of civil mini drones for private customers.

Indeed, Anderson is much too integrated in the scene to produce a distanced and systematic makermovement analysis. And when the physicist dabbles as an economic historian he often fails – for example when glorifying the exploited home workers in the 19th century as independent entrepreneurs. But for those who want to understand spirit, technology, and the ambitious social makermovement, the book is a mustread.

*Chris Anderson is longtime chief editor of the technology magazine Wired and one of the protagonists of the doityourself movement (see interview on page 28).

Industry Journal browsed the market of

management literature and presents books

worth reading.

Bookshop

Industry Journal | 01 | 201376

Managing uncertainty Just StartTake Action, Embrace Uncertainty, Create the Future Leonard A. Schlesinger, Charles F. Kiefer, Paul B. Brown* 200 pages, US$16.20 (€18.95) Presumably only Michael Dell could write a success story like that of Dell Inc. And only Howard Schultz the Starbucks story. The ways of such company founders are fundamentally different. And yet there

is one element that links them all, as Leonard Schlesinger, Charles Kiefer, and Paul Brown state in Just Start: Successful founders handle uncertainties in a way that is different from how most of us have learned to act.

The authors describe in an entertaining manner how we got conditioned. This includes, above all, predictive thinking. We try to make predictions on the basis of available information from the past and the present. In many cases, this method works very well, for example to

predict the future need of diapers by birth rate prognoses. However, such methods fail whenever there is a lack of experience.

The authors analyze what successful founders do in such cases. Their stories often start with a small but smart first step. The founders use available resources and never risk more than they can afford. Then they do – not much. They see what happens and adjust their next step accordingly. And they don’t cling to their idea but are always prepared to give up their plan (»I open a computer shop«) – but they never give up their target of developing a successful company. According to the authors, this approach does not ensure instant success, but: »We guarantee that if you fail, you will fail fast and cheap.« And that offers more scope for further, hopefully successful attempts.

*Leonhard Schlesinger is the president of the renowned Babson College (Wellesley, Massachusetts, U.S.) specialized in entrepreneurship.Charles Kiefer is the president of the management consultancy Innovation Associates that he founded together with Peter Senge.Paul Brown works as an author for international media such as New York Times or Businessweek.

Trust as commercial basis Extreme TrustHonesty as a Competitive Advantage Don Peppers and Martha Rogers*326 pages, US$17.25 (€21.00) In Extreme Trust, U.S. management consultants Don Peppers and Martha Rogers praise consumer goods companies. In most cases the management acts ethically and responsibly, legal departments keep an eye on laws and regulations, and essential principles and corporate guidelines are observed.

But the companies often make a severe mistake, the authors say. Many of their business models are based on their client’s nescience – but nescience decreases in times of social media. Card companies and banks prefer earning interest paid on overdrafts and arrears to warning customers. Telephone companies benefit from customers

losing track in the tariff jungle. And still most companies do not provide a possibility for product evaluation, praise, and criticism on their Web site.

Considering the triumph of social networks, this is a dangerous strategy. The users of Twitter or online review sites do not show mercy when they feel badly treated, Peppers and Rogers warn, and instead advocate uncompromising honesty. They conclude that companies that

build the utmost confidence among their customers have a strong competitive position. By means of practical examples, recommendations, and checklists they explain how that works.

However, there is one weak point in the book. The authors only sparingly leave the U.S. market with their explanations and examples. In addition to that, they limit themselves to the consumer goods industry and miss a transfer to the field of B2B.

*Don Peppers and Martha Rogers founded the international Peppers & Rogers Group. The company based in Stamford (Connecticut, U.S.) is among the world’s leading management consultancies for customeroriented business strategies.

77Industry Journal | 01 | 2013

Publication informationIndustry JournalTopics, trends, and technologies for decision makers in manufacturing

Published bySiemens AG Industry Sector Communications WernervonSiemensStr. 50 91052 Erlangen, Germany [email protected]

Responsible for the content Gerald Odoj (V.i.S.d.P.)

Editor-in-chief Bettina Schoene

Concept Stephen Rose

Editorial staffdas AMT GmbH & Co. KG Andreas Jung (CEO) Tiessenkai 10 24159 Kiel, Germany www.dasamt.net

Contributors to this issue Dr. David Bosshart, Christian Buck, Kirstin von Elm, Christiane Engelhardt, Günter Heismann, Nele Husmann, Christine Mattauch, Mirjam Müller, Prof. Dani Rodrik, Florian Sievers

Creationfeedback communication GmbH Hendrik Leyendecker (CEO) Hannah Egelseer (project management) Mario Kienel (art direction) Bartholomäusstraße 26 c 90489 Nuremberg, Germany www.feedbackcommunication.de

Print NovaConcept Schorsch GmbH An der Weinbrücke 11 95326 Kulmbach, Germany www.novaconcept.de

Copyright© Siemens AG 2013 All rights reserved. Reproduction of this publication and use of its content are subject to prior consent. Technical details are subject to change. All information provided in this document refers to general technical possibilities and characteristics that do not always apply as described in every individual case.

Photo credits Getty Images: Cover, p. 42 Thinkstock: p. 2, p. 8 bottom left, p. 22 center, p. 22 bottom p. 51, p. 52, p. 53, p. 54, p. 57, p. 65 top left, p. 65 bottom center, pp. 66/67, p. 68, pp. 70/71 top, pp. 76/77 top

© F. Glaenzel: p. 6/7 © Ricardo Hausmann: p. 14 © Index Maetse: p. 15 © Anthony Foxx: p. 20, p. 21© 2009–2013 MakerBot® Industries,

LLC | One MetroTech Center, 21st Floor, Brooklyn, NY, USA 11201: p. 24, p. 27 top, p. 27 center left, p. 27 center right, p. 27 bottom

© Wired.com © 2012 Condé Nast.: p. 28 bottom left

© Angelina Heft, Institute of Aerodynamics and Fluid Mechanics, Technical University of Munich: p. 28 top right, center right, bottom right

© Dani Rodrik: p. 31© GDI Gottlieb Duttweiler Institut: p. 33,

p. 34 top, p. 34 bottom, p. 35© Disney: pp. 36/37, p. 38 top left,

center left, bottom left© Schindler 2013: p. 68© Deutsche Messe Hannover: p. 45 © Patrick Imbert: p. 50 © L. Barry Hetherington: p. 55 © Dirk Ruppel: p. 60© 2012 Intellectual Ventures Management,

LLC (IV®): pp. 62/63, p. 65 bottom left, p. 65 bottom right

© BIBA: p. 69 © Jens Krause: p. 70 bottom © CERN: pp. 72–74

All other images: © Siemens AG

Comprehensive up-to-date informationIf you want to know more about Siemens Industry, our products, solutions, and services, please visit www.siemens.com/industry to discover our comprehensive portfolio, which helps make your enterprise more productive, more efficient, and more competitive.

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78 Industry Journal | 01 | 2013

siemens.com/answers

Space exploration begins on the factory floor.Making things right – connecting productivity and efficiency.

With each new generation of telescopes, researchers get a more accurate picture of planets and galaxies. Just how accurate is also being determined in the Bavarian

village of Teisnach. This is where high-precision mirrors are made to enable a brilliant view into the depths of space.

The machine tool with which these mirrors are ground and polished is a technical masterpiece in itself and, at 85 metric tonnes, the largest of its kind.

Industry software and automation from Siemens for the entire value chain accelerate the innovative and highly precise manufacturing process. In this way, the OptoTech Optikmaschinen GmbH was able to benefit from a short time to market – and gain a significant international com-petitive edge.

The answers for better manufacturing exist. And now is the time to make things right. Because the world of tomorrow needs answers that last today.

The combination of software and automation gives a head

start in global competition. And in space exploration, too.

Industry_OptoTech_210x280_Industry_magazine_E_39l.indd 1 20.03.13 17:52

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The information provided in this magazine contains merely general descriptions or characteristics of performance which in case of actual use may not always apply as described or which may change as a result of further development of the products. An obligation to provide the respective characteristics shall only exist if expressly agreed in the terms of contract.

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