How does a company with $24 billion of revenue adapt, transform, and change? The CEO of Siemens USA shares her experience with the digital transformation of this very large organization.

Barbara Humpton is CEO of Siemens USA, where she guides the company’s strategy and engagement in serving the company’s largest market in the world, with more than 50,000 employees and over $23 billion in revenues and $5 billion in annual exports.

Most recently, Humpton served as president and CEO of Siemens Government Technologies, Inc. (SGT), a leading integrator of Siemens’ products and services for federal government agencies and departments. In this role, Humpton also served as an officer/director member of the board of directors of SGT.

Prior to joining Siemens in 2011, Humpton served as a vice president at Booz Allen Hamilton where she was responsible for program performance and new business development for technology consulting in the Department of Justice and Department of Homeland Security. Earlier, Humpton was a vice president at Lockheed Martin Corporation with responsibility for Biometrics Programs, Border and Transportation Security and Critical Infrastructure Protection, including such critical programs as the FBI’s Next Generation Identification and the TSA’s Transportation Workers’ Identification Credential.

Humpton is a graduate of Wake Forest University with a bachelor’s degree in mathematics. She serves on the board of directors of MorganFranklin, the American Heart Association Greater Washington Region, the Center for Strategic and Budgetary Assessments (CSBA), and The George Washington University Law School Government Contracts Advisory Board.

Transcript

Michael Krigsman: Digital transformation remains one of the most important topics in business today, and so we're speaking with Barbara Humpton, who is the CEO of Siemens USA. Hey, Barbara, how are you?

Barbara Humpton: Hey, Michael. I'm doing great. Thanks for having me on.

Michael Krigsman: Well, thanks for being here. Barbara, tell us about Siemens USA and tell us about your role.

Barbara Humpton: Siemens truly is a large and phenomenal force here in the U.S. Globally, Siemens has 385,000 people; 50,000 of them are here in the U.S. We've actually been a U.S. company for 160 years. You'll find Siemens employees in all 50 states. We're doing about $23 billion in revenue annually and, actually, what a lot of people don't know is we're a net exporter. For just about everything that Siemens does, from power generation to transmission and distribution to buildings, mobility, [and] healthcare, every aspect of the corporation is represented here in the U.S., Siemens' largest market.

Michael Krigsman: The breadth of your reach is actually pretty extraordinary. I attended a Siemens innovation day, two days, this past summer. I think everybody knows the Siemens brand name but give us a sense of the kinds of products and services you provide.

Barbara Humpton: A lot of people know about B2C (business to consumer), B2B (business to business). Siemens is a business-to-society company. Think of us as a large infrastructure company. We're working on the kinds of things in electrification, automation, and digitalization that are truly shaping the future of the world.

Siemens put together a business strategy based on global megatrends. If you think about urbanization, climate change, the aging demographics of the human population everywhere, the expanding reach of the global supply chain, and then the digitalization of everything, these are things that are happening inexorable forces moving world markets. Siemens' business strategy is built around that, making sure that we bring our know-how in energy, in infrastructure, in manufacturing, mobility, et cetera to meet the needs of society here in the U.S.

Adapting to Market Changes

Michael Krigsman: All of these different domains that you've described are undergoing a tremendous amount of change. There's a lot of dynamism in the market, and so as you see these changes as CEO, how does that affect your thinking and your business strategy?

Barbara Humpton: Well, the number one thing that's happening right now is this digital revolution that we're part of. Siemens has been building elements of technology since its inception. The whole company is over 170 years old. From the very beginning, the whole application of technology was to help achieve change, innovation, productivity, et cetera, influencing every one of the industrial revolutions.

Here we are in what we're calling the Fourth Industrial Revolution where we've moved from steam to electric to automation. Now we have the digitalization where, truly, the use of data becomes central to the business models and the capabilities being offered in every one of our market segments.

Take any market segment, and let's take one of them that typically has some really long lifecycles to it, the power markets. When you're standing up a powerplant, key questions in the past used to be from the utilities:

  • What sort of technology do we want to have in our plant?
  • What's going to be the lifecycle?
  • How can we get a long-term service agreement in place, et cetera?

Now, we're beginning to ask different questions:

  • What is the future of power?
  • How will power needs change in this new environment that we're dealing with today?
  • Then, how can we use the data that we can gather from all of this physical equipment to make our operations more efficient, to make maintenance more responsive, to increase the lifecycle of assets, et cetera?

The application of data to tell us how the physical world is performing is really fundamentally changing everything. Now, what we're doing in the U.S., as a leadership team, is taking a good hard look, getting out our binoculars, looking multiple years into the future, to the best of our ability, and then asking ourselves, what kinds of things do we need to be doing today to enable the future that we envision for ourselves and for this society we're part of?

None of us can see that future for real. Just think about the time since 2007 when we saw the convergence of the technologies that would ultimately lead to the iPhone. In computing, in communications, we've seen this confluence of technologies that have given us exponential growth and capability. Those same technologies are now being integrated into this physical infrastructure that Siemens has been creating these multiple centuries now, and we're right on the cusp of being able to see that kind of exponential growth and capability take hold and carry us further into the future.

Shift to Business Models Based on Data

Michael Krigsman: This shift in a business model based on data, how do you go about driving that kind of change inside a company with $23 billion of revenue and, I think you said, 50,000 employees in the U.S.? How do you do that? [Laughter]

Barbara Humpton: Well, hey, every corporation wrestles with this, right? How do I innovate while I'm making sure I attend to excellence in the core business that I already have?

Now, Siemens, globally, has established an innovation approach that is really full bodied. Let me just explain the framework here. We take a couple of different looks deep into the future. Siemens Corporate Technology, pure research and development that's going on around the globe, is looking way out into the future to determine what are the kinds of technologies and capabilities we need to be prepared for.

Here in the U.S., by the way, Princeton, New Jersey, and Berkley, California, are two locations where we host innovation teams and corporate technologies. Yes, they are focused on the U.S., they're located here, but they're also networked into global teams that are taking the same topics and applying them in different regions of the world. Likewise, we leverage work that's going on in other innovation centers around the world to bring those capabilities here to the U.S. That's the pure research. Here in the U.S., we're doing, call it, $1.3 billion worth of independent research and development every year.

Meanwhile, we also started a venture capital arm. It's called Next47. Its headquarters is in Palo Alto, California. The team there is constantly scanning the ecosystem looking for entrepreneurs who are really making groundbreaking advancements in technologies and capabilities that we think are going to be vital to our future. What we like to do is take enough of a stake in the company and be engaged enough in their operations to be able to be a meaningful player in that company's growth. In fact, I would say the easy rule of thumb is to say, you want to be the first phone call for the president or founder when they have a key question. "Hey, Siemens. I've got an idea. How can I…?"

On our side, what we're doing is we're opening up the portfolio of access to customers, access into the rest of our technologies to help those venture capital companies of ours really get off the ground and make headway. We expect those companies to disrupt us. It's what we want them to do.

One of the other things we've done is we've encouraged current Siemens employees to bring their ideas to Next47, and we'll invest in those ideas. I've had some cases where former Siemens U.S. employees now have started their own companies, with our help, and we're their number one partner. This whole idea of creating an innovation arm that can run in parallel with the organizations who are ensuring we're meeting our customer commitments every single day is really vital and it keeps us challenged.

Now, the key is getting those teams to work collaboratively across boundaries. There's this constant ebb and flow where there's the actual mergers and acquisitions that bring more capability into the core along with this idea of spinning out new future ideas to keep the innovation engine running. It's a pretty dynamic model, and I'm really pleased with the results we're seeing.

Digital Transformation

Michael Krigsman: Barbara, we were talking about digital transformation and the various types of innovation activities in which you're engaged. Is it fair to say that innovation is the heart of digital transformation, from your perspective?

Barbara Humpton: Oh, I believe so. I believe so. You can think about innovation as this lofty, hard to reach goal. No; innovation is all about curiosity and initiative. It's all about being curious about what's possible and then taking the initiative to make it happen.

Actually, as Siemens, one of the key things we're focusing in on is this whole question of whether or not people need to be afraid of the future. There's this fear that robots are going to take over the world, that automation is going to eliminate the need for humans. Our perspective is, nothing could be further from the truth.

The goal of innovation is to keep propelling us forward. Every time we take a step with technology, we're actually elevating the role of the human. We're actually advancing what's humanly possible.

Michael Krigsman: You see technology, whether it's robotics or AI, as an extension of human capability as opposed to a replacement.

Barbara Humpton: Oh, by all means. I like to say, from the first time a human picked up a rock and used it as a tool, the role of the human changed. What that human was capable of was different. All of the technologies that we're looking at right now are merely modern day rocks. These are things that are now at hand, capable of helping us do things we've never been able to before.

Michael Krigsman: The question, therefore, is how to adapt these tools in the service of whatever business, product, or services we're creating and delivering.

Barbara Humpton: That's right. In doing so, I think we have some great opportunities right now. There's been a lot of worry about what is this going to do for jobs. I want to share just a couple of thoughts here.

One is, I think we're aware that automation does change what work gets done; how that work gets done. But what we're discovering is, with each new introduction of technology -- and think back, really, even think back on the first industrial revolution -- the idea of bringing steam and having an assembly line actually created a whole new industry, multiple industries, that brought millions of jobs to the world.

The same effect is going to be happening now. We may be doing different tasks. The role of the human in the overall function may change, but it is human beings who guide and envision the future and who create.

Digital Transformation and Employee Talent

Michael Krigsman: What about the role of talent in all of this? We've spoken about innovation. We've spoken a little bit about business models. When you look at digital transformation, what happens to talent, employee retention, the impact on employees and so forth?

Barbara Humpton: [Laughter] Yeah. Yeah, this has been a big topic for us at Siemens because, while we've been this powerhouse in electrification [and] automation, as we enter digitalization, we've become one of the top ten software companies in the world. A journey that began ten years ago with the acquisition of some core capability that would be useful in the manufacturing process has become the backbone of the creation of the digital twin, the ability for businesses all around the globe to be able to model their products, the things they want to create, model their production processes, and then model their products in operation.

We work today with 140,000 companies around the globe. The question is, where are we going to find all the talent that it's going to take to fulfill the need? We're competing against the top tech companies right now for that talent.

I think there is a wonderful dialog going on, globally, about what's the best approach for drawing people into this. I'm pleased to say that I get an opportunity to dig deeply into this in the U.S., having just been appointed to the American Workforce Policy Advisory Board by Secretary Ross and Ivanka Trump. I'll be helping the Administration look at how do our U.S. workforce policies enable the creation of the opportunities that we need and enable the readiness of our workforce for the future.

Now, my own perspective is that the best way to learn is by doing. I obviously hold formal education in high esteem, but the longer I work in my career, the more convinced I am that businesses have a huge role to play in educating employees and helping them elevate their skills to meet the needs of the future.

In my own case, when I got started at IBM, they took me as a math major out of college and put me through a training program. It was funny because it was the first time I'd experienced anything out of academic training. I was actually in a classroom setting where the instructors wanted me to succeed. I wasn't competing against other classmates to get a better grade. They wanted everyone to earn an A because we all wanted to be able to be excellent in producing software for mission-critical needs in IBM's portfolio.

That same spirit today of saying, "We want the best on our frontlines doing the work. Whether it's in our manufacturing sites or whether it's sitting side-by-side with customers analyzing their business processes, whether it's providing services, maintenance, et cetera in the field, we want our folks to be topnotch." And so, we're spending $50 million in training annually here within the U.S., $500 million annually globally. It's an impressive investment to be making as a corporation and one that I'll say I'll be encouraging other businesses to make as well, as we carry the U.S. economy into the future.

Digital Transformation and Process Change

Michael Krigsman: Barbara, of that large investment, to what extent are you having to do things differently or amplify or change the nature of training given the changes that are taking place in the environment: the technology environment, the economic environment, and so forth? To what extent is it just sort of business as usual because we've always invested in training?

Barbara Humpton: This is such a great topic, Michael, because I think there's a lot of work being done right now in the field with the effectiveness of training and training in different forms. We've been talking a lot here recently about, you can measure someone's IQ. In recent years, we were all taught to think as well about the emotional quotient, EQ. Now, we've been teasing a lot about, well, now we have to measure employees' DQ, their digital quotient, their ability to work with the digital tools of the trade, their ability to understand how data is changing business models, et cetera.

As we're reaching out with our training to employees, what we're finding is people learn in different ways, of course. Having a catalog of formal offerings is important because there are people who learn best in those sort of formal settings. Having the ability to form up ad hoc teams and assign new members into more experienced digital teams where they can learn in a hands-on way, that's valuable too.

Something else we haven't touched on yet is apprenticeships. Siemens brought the German apprenticeship model into the U.S. out of necessity. We had a plant that was opening up in Charlotte, North Carolina. We needed about a thousand people. While we got 10,000 applicants, we didn't have enough qualified applicants to fill all the jobs.

What we opted to do was partner up with the local community college in Charlotte, North Carolina, and create a mechatronics course and an apprenticeship, which then allowed us to have people develop their skills and learn on the job. That combination of formal education with hands-on experience really is the magic equation for building a capability that endures.

Michael Krigsman: It sounds like employee development of all these various types is a very high priority for you. You seem intimately familiar with the various types of programs and activities that are going on.

Barbara Humpton: Yeah, we're spending a lot of time on this as a leadership team because, whether you're in building technologies, power and gas, or working in factory automation, this is the number one topic; making sure that we have the right people to serve our customers' needs.

Shifting Customer Expectations

Michael Krigsman: What's going on with your customers? We've been talking about the changes that Siemens is undertaking, the business model and all of these various things. But, of course, your customers are facing the same dynamism on the market, and so, what do you see among your customers? You have such a diverse and large customer base.

Barbara Humpton: Yeah, it is. Where to begin? The customers, obviously, are all on a digital journey and we're all in this together. Let me put it that way.

What I find is that we have some customers who are very much on the early adopter end of things. The folks who are opening up new avenues of business, starting new business models based on the use of data, I'll call them disruptors. Maybe they're disrupting themselves and they're embracing digitalization and moving their businesses forward. We're an easy partner for them because of the breadth and depth of our capabilities.

I actually think there's no other company like Siemens with the ability to fulfill the full breadth of a customer's digital journey. Think about aerospace and defense. Think about the automotive segment. You'll find Siemens working from early design all the way through to life-cycle maintenance of product lines for our customers there.

That's not everybody in the United States. There is a huge segment of the market where people know that change is happening and the key questions they have to answer are, when is the right time to invest? Remember two decades ago when people were starting to see how they could use enterprise resource planning tools? Well, making a shift into an enterprise resource planning tool, an SAP, an Oracle, or something like that was a monumental effort. It required an entire business process overhaul, et cetera.

The really cool thing about what's happening right now with digitalization is that the change can happen incrementally. In fact, we're doing this even within Siemens. We've got some places within Siemens where you could go to a factory and see it as a world-class example of the application of automation from end-to-end.

You can go to other places where you'll step into factories where a lot of what we're doing is very much fine craftsmanship, but what we're introducing is pilots and projects where the use of data is making even those shops more effective. That's where we're partnering up with customers and working side-by-side with them.

In fact, what you'll hear us talk about a lot these days is co-creation. There's nothing better than getting into the customer's environment. We've got the know-how in our operational technology and how our control systems work, et cetera, but they are experts in their products and what their overall goals are. Sitting side-by-side in that kind of multidisciplinary team environment is really what crystalizes and catalyzes some great concepts to really drive development towards the future for these customers of ours.

Digital Transformation and Culture Change

Michael Krigsman: Okay. We have a couple of questions from Twitter. Iram Shah and Arsalan Khan are both asking about the role of cultural transformation. When you talk about digital transformation, what's the role of culture change? Thank you both for asking that question. It's a really good question.

Barbara Humpton: That's a great question. Yeah, here's a big question; can the command and control hierarchies of the past be successful in our digital future? Well, maybe they can, but I think what's even more effective is the idea that the future is networked, that teams form around customer issues and use agile approaches in order to deliver capabilities.

That's exactly the process we're going through right now at Siemens. Actually, people have heard about Vision 2020+. It's how Siemens is reordering our strategy, as we step into the next decade, for ourselves.

One of the things we focus in on is being very operationally focused on pure play market segments, bringing together experts around power, around smart infrastructure, around digital industries. But then, giving those teams the flexibility to form up and norm and perform in the way that's right and appropriate in their marketplace. That culture of being more networked than hierarchical is going to be part of our secret for success in the future.

Michael Krigsman: The issue of culture seems to come up, in general, with digital transformation. Getting back to trying to home in on what is digital transformation, could we say that it's the combination, the intersection of business model innovation and the culture shift?

Barbara Humpton: Huh, that's interesting. Yeah, let me trying something else out on you. Typically, when I've been talking about this to people, I've been sharing that I see it as the intersection of the physical and the virtual world. We've got this physical world. We actually make things. We go places.

I loved -- in the movie Ready Player One, my favorite line in the whole movie is when they say, "Hey, I love the real world. That's where you can get a good meal." [Laughter] There are certain things that just can't be done in a digital world.

On the other hand, digital tools bring us the ability to know more, predict more, plan more, and it's that marriage of the virtual and the physical worlds and closing the loop between the two that is at the heart of the digital transformation. Why does culture change matter so much? Well, traditionally, our organizations that have addressed real-world needs have continued to operate in models that have been around for a century or more. Then our digital, our tech market has developed a very different style and even culture.

The conversation that we're having right now is, "Hey, don't we want more of that culture inside Siemens?" I'll share with you. We've done some acquisitions recently of digital companies. There's that question of, "Hey, how will our two cultures mesh?" The fact is, we're a perfect marriage.

What I've been finding is that our digital employees who are coming in from the tech industry are just champing at the bit to get into the kind of mission that we get to drive here. What we do for society really matters and they love the concept of working on projects that endure, making a change that truly will last for decades. Then, likewise, are folks who have been working in the physical world are really excited to see what can happen when we bring more of, as I say, the agile approaches of digitalization into the workforce.

Michael Krigsman: It's a very, very interesting way to look at it because I think, at least in the past, there was this kind of surface view of digital transformation that it's, "Well, we're going to build an e-commerce site." I think, looking at it as you're describing, the implications then have tentacles throughout all of your operations, through the technology, of course, but your operations and your processes, as well as the cultural mindsets; the dramatic change that you were just describing in terms of going from command and control to more networked approaches.

Barbara Humpton: Well, yeah, and the funny thing is, in most parts of the customer segments that we've been working with, we haven't even begun to tap the art of the possible. What are the first things we do? You're absolutely right; set up an e-commerce site, become visible, have an Internet presence.

The next thing we might do is to say, "Hey, how can we use data to help us maintain and be more efficient at what we already do?" You quickly get to the point where you start to ask, "But wait a minute. How could we actually just disrupt this model?"

I'll give you a good example. Think about the way power gets produced in this country. Someone out there extracts fuel from the ground. Someone else transports it. It goes yet to another spot where maybe it's refined and transformed in a way that it's made useful. It goes through the transportation segment to get to a place where that fuel is consumed in a powerplant and, low and behold, we get electricity. Even this is a simplification.

We've got an effort going on at Siemens called Gas to Power. If you look at how to use data all across that value chain, bringing together all of the players, you find you can totally look at the whole risk equation in a different way. You might be able to make it less expensive, totally, to be able to get those electrons onto wires.

I'm telling you; the digitalization can fundamentally change how business gets done. You'll hear people talk about the most fundamental kind of thing is how to think about Siemens as a service. What if our customers didn't want to own our assets anymore but wanted to have someone else who owned them and wanted to have Siemens in the loop just assuring high levels of performance to meet that customer's core business model? Well, I think these are all things that are possible and they're all things worthy of exploration and where that co-creation with customers gets really fun.

Managing Investments in Innovation

Michael Krigsman: We have some more questions from Twitter, and so let's jump to those and then go back to the co-creation with customers because I think that's a really crucial topic. Iram Shah, who is just on a role, is asking many questions, but a really good one is -- they're all really good, actually -- how do you measure the ROI of these digital transformations? How do you balance investment in light of that ROI? It seems like another very important question.

Barbara Humpton: Yeah, that's a great question. I will share with everyone one of the really key things is to think about the timescale that you want to look at. Do you need a short-term return; do you need a long-term return? What your own business situation demands can help you figure out how to sequence in activities in digital.

Almost think of it as a pay it forward idea. What if early work to improve productivity could yield the kind of financial performance improvements that would then allow you to invest more deeply in technologies that will shift your business model? There are others; some businesses find themselves at an existential moment saying, "If I don't automate, if I don't really take advantage of digital, I'm at risk of becoming irrelevant to the marketplace." Companies like that have to really begin to think and act quickly to be ready.

Now, I'm seeing data from some partners in our ecosystem. We do a lot of work with Deloitte, among others. Deloitte has some just eyewatering business cases that can show the amount of gains that can be made from digital transformation, everything from increased productivity on a shop floor, to reduced cycle times for products to market, to enhanced satisfaction of customers, the customer experience. There are many, many factors to be measured and managed, and the fun part of this is deciding, hey, which are those elements that we want to make factors in our decision-making process.

Michael Krigsman: Deloitte is doing interesting things. I just did recently, last week in San Francisco, a CXOTalk Forum with the Chief Strategy Officer of Deloitte, Steven Goldbach, who wrote an interesting book called Detonate.

Another question about balancing; how do you balance investment in existing operations, which generate your revenue, versus investment in disruption that may not have a return for some time in the future?

Barbara Humpton: This is the holy grail question, right? This is what makes corporate strategists earn their keep in large corporations, that ability to plan out a path that actually yields the resources that will support that future. This is what we're all working to as leaders in a corporation.

Let's think about this a minute back in that context of business to society. There have been a lot of people who have thought that our business to society message was all about philanthropy; what you're trying to do is create enough profit so that you can give to the community. In fact, I want everybody to think about this differently.

Think about Maslow's hierarchy of needs within a corporation at the very foundation. In Maslow's hierarchy, it's food, clothing, shelter. Does it take care of the basic human needs? For us, it's integrity, safety, business compliance. You don't even go into business if you're not prepared to do that.

Move up the hierarchy and what you'll find is that being able to operate profitability is well up there, but it's not the ultimate of the corporate hierarchy. The ultimate pinnacle of the corporate hierarchy is what we give to society, what we mean, what we're in business for.

Every single day, Siemens wakes up focused on how to bring our know-how in electrification, automation, and digitalization to these markets that we've chosen to serve. In order to do that, we must - we must first perform profitability. Then we can only use the resources that we have at hand in order to enhance our capabilities for the future. An innovation plan, funding for that innovation, that is all part and parcel of the business plan.

If you've been watching Siemens' evolution closely, you will have seen, several years ago, the decision to spin off healthcare as a separate company and to create a joint venture in the renewable energy space. You'd ask, "Why?" Well, in both of those cases, there just wasn't enough corporate resource on-hand to keep us investing at a rate that would have us number one or number two in all of the markets we're trying to serve. By spinning out, we raised market capital. We got additional investors into the boat, kept a majority share, so Siemens still gets to have the guiding thought and principle that keeps these technologies moving in the direction we're interested in, but we've attracted a lot more investment into the mix.

Day by day by day, we're asking these kinds of questions:

  • What investment is needed in order to realize our goals?
  • How does our business plan hold together with the performance of today's products and services?
  • What else do we need to do to strengthen that portfolio so we can continue to invent?

Michael Krigsman: We have another question from Twitter, and it's directly related to this topic you were just talking about. I'll just ask you, Barbara, to answer it relatively quickly because we're going to run out of time and there are other things that I want to discuss with you. I wish we had three or four hours or five hours. We could just sort of go on, [laughter] but we have about ten minutes.

Gus Bekdash asks, "On this issue of balancing innovation versus the stability of current operations, there's a lot of risk. Companies have gotten into big trouble by not getting that balance right. And so, how do you, as CEO, ensure that you manage that balance in the right way?

Barbara Humpton: Market insight and then biodiversity. [Laughter] It takes a lot; you plant a lot of seeds to have the strong ones thrive and survive; planting some seeds in a lot of small ways and looking to see which ones actually will thrive.

Information Technology (IT) vs. Operational Technology (OT)

Michael Krigsman: Okay, that was pretty short. Thank you for that. [Laughter] You know it's such an important question as well, and it goes right to the heart of your role as CEO. Next time, we'll have to explore that one in more depth.

Let's go on to the topic of IT versus OT because I know it's very important to you. Maybe, for the people who don't know, would you just give us a very brief primer on that subject and why is it so important for you and for Siemens?

Barbara Humpton: Yeah, IT, information technology, the technology we use every day in computers, telephones, et cetera that keeps us connected and provides us with applications that fulfill needs, fantastic IT. OT, operational technologies, that technology that we may think of as invisible, the systems that run buildings and transportation systems, energy systems, healthcare, et cetera. It's often embedded in equipment that we're using in applications.

What we've come to discover is that there's a convergence now of IT and OT. We're sitting on the same network. The Internet of Things is happening and, in our world, the Internet or Really Big Things is coming together. It's that convergence where people need to begin to think about their operational technology, these tools that they've been using for environments, transportation, and energy, that they need to begin to realize that data flows and applications perform every bit as effectively in those areas.

Michael Krigsman: From a data perspective, then, where does the difference or the distinction lie? Of course, IT is responsible for the setting up of the infrastructure to manage that data. Is it a matter of which side is generating the data?

Barbara Humpton: Yeah, you can think of it that way. Think about a big piece of machinery with sensors that produce data that can give us intel on how that machinery is performing. That can flow into an operating system like ours, MindSphere, which probably sits in an information technology enterprise of servers and communications gear, et cetera. What we are specifically focused on is that the data and the flow of controls and interaction with the operational technology that is going to bring about really dramatic change for our customers.

Michael Krigsman: You're talking about the transformation of factories, cities, all kinds of different physical environments.

Barbara Humpton: That's exactly right. Think about a future city where your transportation systems are actually connected in with the buildings that they connect are connected in with the city services, be they the public utilities, et cetera. Then think about the citizen experience could be like in an environment like that, a city actually performing better for its residents. Cities all across the nation right now are exploring just that, so the Internet of Really Big Things is maybe coming to a city near you.

Michael Krigsman: Before we go on to our next topic -- I'm sorry. We could spend an hour on each of these.

Barbara Humpton: Any one of these, yeah.

Women in Technology

Michael Krigsman: The last thing that I wanted to talk about and I'm glad we have a little bit of time for it is the role of women in technology. You're a really unusual example of a woman who is CEO of an engineering company; such a male-dominated field.

Barbara Humpton: Yes. Yes. [Laughter] It's an outstanding position to be in. From what I gather -- you know people have asked me a lot about, "Was it hard? Was it hard to be a woman in a technical field coming up?" I don't know that I ever felt it was hard.

I mean there were awkward moments. I'll never forget coming up through the ranks. In those IBM days, we were working in satellite command and control. I was at this fantastic customer site. We'd had a great meeting. I said, "Excuse me. Which way is the lady's room?" They said, "Uh, we're not sure we have a lady's room." [Laughter] Everybody has those kinds of stories from the early days of engineering.

Beyond that, the silly stuff, when it came right down to it, every time I was assigned to a team, it was a team focused in on a mission that mattered. Getting in the foxhole with smart people, using all of our know-how to go solve problems, for me it was just fun. For me, every job felt like the most important job in the company and maybe the last job I'd ever have. You know, boy, this is the pinnacle of my career.

With each successful role, whether it was managing a project team, whether it was managing a business portfolio of projects, I got to work on things like satellite command and control, border security with customs and border protection when it was just being formed, gosh, biometrics for law enforcement at the federal level, helping the FBI discover that rapid DNA identification was within reach from a technological perspective. All of those things were just fascinating topic after fascinating topic. The way my career progressed was simply by responding when the phone rang and my bosses said, "Hey, we need your help," you know, on project X.

In fact, it was really responding to calls all along the way that led me to Siemens. Since I've been in Siemens, as you could tell just from the conversation we've been having, the kinds of things we get involved in, the kind of difference we can make in the world, this is really compelling. It's a compelling opportunity and it's just been such a privilege to be offered the opportunity to play this role.

Michael Krigsman: Did you ever experience the proverbial glass ceiling?

Barbara Humpton: It's funny because IBM, in its federal business, got sold to Lockheed Martin. Lockheed Martin, being a government contractor, there was a lot of this feeling that "Oh, yeah, we're in this male-dominated world," and yet, Lockheed Martin was one of the first aerospace and defense companies to promote women into leadership positions. Today, Marillyn Hewson, who will also be serving on the Workforce Policy Advisory Board, is leading that corporation with strong leaders up and down the chain.

It's funny. I had plenty of experiences where people told me things and I accepted them. When my husband and I chose to have our family early in our marriage, people said, "Oh, having kids, that's going to sideline you from the executive track." I kind of said, "So be it. What I really want to do is raise a family. If that prevents us from being able to be part of leadership in the future, then I guess that's the way it is."

But it turns out, fate didn't really have that in store. It turns out that, today, people really value the fact that a grandmother who has the perspective of a lifetime of being part of a family actually has a perspective that matters too. I think we're living at a great time for men and women who want to lead balanced lives and who want to choose. If they want to advance, great. If they want to go deep in a subject matter and stay in a role and really get as broad as they possibly can in that role, all of those options are available to us. There's not a definition of success that is too limiting, I think.

Michael Krigsman: Barbara, we're really over time here. We're out of time, but can I just ask you one more question because I think this topic is so important? What advice do you have for women who are looking at you and they want to achieve in a male-dominated industry? What advice do you have for those folks?

Barbara Humpton: Well, be yourselves. Be yourselves; it's the best advice I can give to anyone. Each of us comes to work with our individual talents and abilities, and we ought to just be feeling the joy of contributing and making the most of what we are able to do to help our organizations advance.

Michael Krigsman: Okay. With that, I'm very sad to say that we're out of time. Thank you, Barbara, so much for taking the time with us today.

Barbara Humpton: It's been fun, Michael. Thank you.

Michael Krigsman: We've been speaking with Barbara Humpton, who is the CEO of Siemens USA. What an interesting conversation; so much insight and wisdom on a lot of different topics. Come back next week. We have another show. Be sure to subscribe on YouTube and don't forget to subscribe to our newsletter and you'll keep up to date with everything that's going on with CXOTalk.

Michael Krigsman: Digital transformation remains one of the most important topics in business today, and so we're speaking with Barbara Humpton, who is the CEO of Siemens USA. Hey, Barbara, how are you?

Barbara Humpton: Hey, Michael. I'm doing great. Thanks for having me on.

Michael Krigsman: Well, thanks for being here. Barbara, tell us about Siemens USA and tell us about your role.

Barbara Humpton: Siemens truly is a large and phenomenal force here in the U.S. Globally, Siemens has 385,000 people; 50,000 of them are here in the U.S. We've actually been a U.S. company for 160 years. You'll find Siemens employees in all 50 states. We're doing about $23 billion in revenue annually and, actually, what a lot of people don't know is we're a net exporter. For just about everything that Siemens does, from power generation to transmission and distribution to buildings, mobility, [and] healthcare, every aspect of the corporation is represented here in the U.S., Siemens' largest market.

Michael Krigsman: The breadth of your reach is actually pretty extraordinary. I attended a Siemens innovation day, two days, this past summer. I think everybody knows the Siemens brand name but give us a sense of the kinds of products and services you provide.

Barbara Humpton: A lot of people know about B2C (business to consumer), B2B (business to business). Siemens is a business-to-society company. Think of us as a large infrastructure company. We're working on the kinds of things in electrification, automation, and digitalization that are truly shaping the future of the world.

Siemens put together a business strategy based on global megatrends. If you think about urbanization, climate change, the aging demographics of the human population everywhere, the expanding reach of the global supply chain, and then the digitalization of everything, these are things that are happening inexorable forces moving world markets. Siemens' business strategy is built around that, making sure that we bring our know-how in energy, in infrastructure, in manufacturing, mobility, et cetera to meet the needs of society here in the U.S.

Adapting to Market Changes

Michael Krigsman: All of these different domains that you've described are undergoing a tremendous amount of change. There's a lot of dynamism in the market, and so as you see these changes as CEO, how does that affect your thinking and your business strategy?

Barbara Humpton: Well, the number one thing that's happening right now is this digital revolution that we're part of. Siemens has been building elements of technology since its inception. The whole company is over 170 years old. From the very beginning, the whole application of technology was to help achieve change, innovation, productivity, et cetera, influencing every one of the industrial revolutions.

Here we are in what we're calling the Fourth Industrial Revolution where we've moved from steam to electric to automation. Now we have the digitalization where, truly, the use of data becomes central to the business models and the capabilities being offered in every one of our market segments.

Take any market segment, and let's take one of them that typically has some really long lifecycles to it, the power markets. When you're standing up a powerplant, key questions in the past used to be from the utilities:

  • What sort of technology do we want to have in our plant?
  • What's going to be the lifecycle?
  • How can we get a long-term service agreement in place, et cetera?

Now, we're beginning to ask different questions:

  • What is the future of power?
  • How will power needs change in this new environment that we're dealing with today?
  • Then, how can we use the data that we can gather from all of this physical equipment to make our operations more efficient, to make maintenance more responsive, to increase the lifecycle of assets, et cetera?

The application of data to tell us how the physical world is performing is really fundamentally changing everything. Now, what we're doing in the U.S., as a leadership team, is taking a good hard look, getting out our binoculars, looking multiple years into the future, to the best of our ability, and then asking ourselves, what kinds of things do we need to be doing today to enable the future that we envision for ourselves and for this society we're part of?

None of us can see that future for real. Just think about the time since 2007 when we saw the convergence of the technologies that would ultimately lead to the iPhone. In computing, in communications, we've seen this confluence of technologies that have given us exponential growth and capability. Those same technologies are now being integrated into this physical infrastructure that Siemens has been creating these multiple centuries now, and we're right on the cusp of being able to see that kind of exponential growth and capability take hold and carry us further into the future.

Shift to Business Models Based on Data

Michael Krigsman: This shift in a business model based on data, how do you go about driving that kind of change inside a company with $23 billion of revenue and, I think you said, 50,000 employees in the U.S.? How do you do that? [Laughter]

Barbara Humpton: Well, hey, every corporation wrestles with this, right? How do I innovate while I'm making sure I attend to excellence in the core business that I already have?

Now, Siemens, globally, has established an innovation approach that is really full bodied. Let me just explain the framework here. We take a couple of different looks deep into the future. Siemens Corporate Technology, pure research and development that's going on around the globe, is looking way out into the future to determine what are the kinds of technologies and capabilities we need to be prepared for.

Here in the U.S., by the way, Princeton, New Jersey, and Berkley, California, are two locations where we host innovation teams and corporate technologies. Yes, they are focused on the U.S., they're located here, but they're also networked into global teams that are taking the same topics and applying them in different regions of the world. Likewise, we leverage work that's going on in other innovation centers around the world to bring those capabilities here to the U.S. That's the pure research. Here in the U.S., we're doing, call it, $1.3 billion worth of independent research and development every year.

Meanwhile, we also started a venture capital arm. It's called Next47. Its headquarters is in Palo Alto, California. The team there is constantly scanning the ecosystem looking for entrepreneurs who are really making groundbreaking advancements in technologies and capabilities that we think are going to be vital to our future. What we like to do is take enough of a stake in the company and be engaged enough in their operations to be able to be a meaningful player in that company's growth. In fact, I would say the easy rule of thumb is to say, you want to be the first phone call for the president or founder when they have a key question. "Hey, Siemens. I've got an idea. How can I…?"

On our side, what we're doing is we're opening up the portfolio of access to customers, access into the rest of our technologies to help those venture capital companies of ours really get off the ground and make headway. We expect those companies to disrupt us. It's what we want them to do.

One of the other things we've done is we've encouraged current Siemens employees to bring their ideas to Next47, and we'll invest in those ideas. I've had some cases where former Siemens U.S. employees now have started their own companies, with our help, and we're their number one partner. This whole idea of creating an innovation arm that can run in parallel with the organizations who are ensuring we're meeting our customer commitments every single day is really vital and it keeps us challenged.

Now, the key is getting those teams to work collaboratively across boundaries. There's this constant ebb and flow where there's the actual mergers and acquisitions that bring more capability into the core along with this idea of spinning out new future ideas to keep the innovation engine running. It's a pretty dynamic model, and I'm really pleased with the results we're seeing.

Digital Transformation

Michael Krigsman: Barbara, we were talking about digital transformation and the various types of innovation activities in which you're engaged. Is it fair to say that innovation is the heart of digital transformation, from your perspective?

Barbara Humpton: Oh, I believe so. I believe so. You can think about innovation as this lofty, hard to reach goal. No; innovation is all about curiosity and initiative. It's all about being curious about what's possible and then taking the initiative to make it happen.

Actually, as Siemens, one of the key things we're focusing in on is this whole question of whether or not people need to be afraid of the future. There's this fear that robots are going to take over the world, that automation is going to eliminate the need for humans. Our perspective is, nothing could be further from the truth.

The goal of innovation is to keep propelling us forward. Every time we take a step with technology, we're actually elevating the role of the human. We're actually advancing what's humanly possible.

Michael Krigsman: You see technology, whether it's robotics or AI, as an extension of human capability as opposed to a replacement.

Barbara Humpton: Oh, by all means. I like to say, from the first time a human picked up a rock and used it as a tool, the role of the human changed. What that human was capable of was different. All of the technologies that we're looking at right now are merely modern day rocks. These are things that are now at hand, capable of helping us do things we've never been able to before.

Michael Krigsman: The question, therefore, is how to adapt these tools in the service of whatever business, product, or services we're creating and delivering.

Barbara Humpton: That's right. In doing so, I think we have some great opportunities right now. There's been a lot of worry about what is this going to do for jobs. I want to share just a couple of thoughts here.

One is, I think we're aware that automation does change what work gets done; how that work gets done. But what we're discovering is, with each new introduction of technology -- and think back, really, even think back on the first industrial revolution -- the idea of bringing steam and having an assembly line actually created a whole new industry, multiple industries, that brought millions of jobs to the world.

The same effect is going to be happening now. We may be doing different tasks. The role of the human in the overall function may change, but it is human beings who guide and envision the future and who create.

Digital Transformation and Employee Talent

Michael Krigsman: What about the role of talent in all of this? We've spoken about innovation. We've spoken a little bit about business models. When you look at digital transformation, what happens to talent, employee retention, the impact on employees and so forth?

Barbara Humpton: [Laughter] Yeah. Yeah, this has been a big topic for us at Siemens because, while we've been this powerhouse in electrification [and] automation, as we enter digitalization, we've become one of the top ten software companies in the world. A journey that began ten years ago with the acquisition of some core capability that would be useful in the manufacturing process has become the backbone of the creation of the digital twin, the ability for businesses all around the globe to be able to model their products, the things they want to create, model their production processes, and then model their products in operation.

We work today with 140,000 companies around the globe. The question is, where are we going to find all the talent that it's going to take to fulfill the need? We're competing against the top tech companies right now for that talent.

I think there is a wonderful dialog going on, globally, about what's the best approach for drawing people into this. I'm pleased to say that I get an opportunity to dig deeply into this in the U.S., having just been appointed to the American Workforce Policy Advisory Board by Secretary Ross and Ivanka Trump. I'll be helping the Administration look at how do our U.S. workforce policies enable the creation of the opportunities that we need and enable the readiness of our workforce for the future.

Now, my own perspective is that the best way to learn is by doing. I obviously hold formal education in high esteem, but the longer I work in my career, the more convinced I am that businesses have a huge role to play in educating employees and helping them elevate their skills to meet the needs of the future.

In my own case, when I got started at IBM, they took me as a math major out of college and put me through a training program. It was funny because it was the first time I'd experienced anything out of academic training. I was actually in a classroom setting where the instructors wanted me to succeed. I wasn't competing against other classmates to get a better grade. They wanted everyone to earn an A because we all wanted to be able to be excellent in producing software for mission-critical needs in IBM's portfolio.

That same spirit today of saying, "We want the best on our frontlines doing the work. Whether it's in our manufacturing sites or whether it's sitting side-by-side with customers analyzing their business processes, whether it's providing services, maintenance, et cetera in the field, we want our folks to be topnotch." And so, we're spending $50 million in training annually here within the U.S., $500 million annually globally. It's an impressive investment to be making as a corporation and one that I'll say I'll be encouraging other businesses to make as well, as we carry the U.S. economy into the future.

Digital Transformation and Process Change

Michael Krigsman: Barbara, of that large investment, to what extent are you having to do things differently or amplify or change the nature of training given the changes that are taking place in the environment: the technology environment, the economic environment, and so forth? To what extent is it just sort of business as usual because we've always invested in training?

Barbara Humpton: This is such a great topic, Michael, because I think there's a lot of work being done right now in the field with the effectiveness of training and training in different forms. We've been talking a lot here recently about, you can measure someone's IQ. In recent years, we were all taught to think as well about the emotional quotient, EQ. Now, we've been teasing a lot about, well, now we have to measure employees' DQ, their digital quotient, their ability to work with the digital tools of the trade, their ability to understand how data is changing business models, et cetera.

As we're reaching out with our training to employees, what we're finding is people learn in different ways, of course. Having a catalog of formal offerings is important because there are people who learn best in those sort of formal settings. Having the ability to form up ad hoc teams and assign new members into more experienced digital teams where they can learn in a hands-on way, that's valuable too.

Something else we haven't touched on yet is apprenticeships. Siemens brought the German apprenticeship model into the U.S. out of necessity. We had a plant that was opening up in Charlotte, North Carolina. We needed about a thousand people. While we got 10,000 applicants, we didn't have enough qualified applicants to fill all the jobs.

What we opted to do was partner up with the local community college in Charlotte, North Carolina, and create a mechatronics course and an apprenticeship, which then allowed us to have people develop their skills and learn on the job. That combination of formal education with hands-on experience really is the magic equation for building a capability that endures.

Michael Krigsman: It sounds like employee development of all these various types is a very high priority for you. You seem intimately familiar with the various types of programs and activities that are going on.

Barbara Humpton: Yeah, we're spending a lot of time on this as a leadership team because, whether you're in building technologies, power and gas, or working in factory automation, this is the number one topic; making sure that we have the right people to serve our customers' needs.

Shifting Customer Expectations

Michael Krigsman: What's going on with your customers? We've been talking about the changes that Siemens is undertaking, the business model and all of these various things. But, of course, your customers are facing the same dynamism on the market, and so, what do you see among your customers? You have such a diverse and large customer base.

Barbara Humpton: Yeah, it is. Where to begin? The customers, obviously, are all on a digital journey and we're all in this together. Let me put it that way.

What I find is that we have some customers who are very much on the early adopter end of things. The folks who are opening up new avenues of business, starting new business models based on the use of data, I'll call them disruptors. Maybe they're disrupting themselves and they're embracing digitalization and moving their businesses forward. We're an easy partner for them because of the breadth and depth of our capabilities.

I actually think there's no other company like Siemens with the ability to fulfill the full breadth of a customer's digital journey. Think about aerospace and defense. Think about the automotive segment. You'll find Siemens working from early design all the way through to life-cycle maintenance of product lines for our customers there.

That's not everybody in the United States. There is a huge segment of the market where people know that change is happening and the key questions they have to answer are, when is the right time to invest? Remember two decades ago when people were starting to see how they could use enterprise resource planning tools? Well, making a shift into an enterprise resource planning tool, an SAP, an Oracle, or something like that was a monumental effort. It required an entire business process overhaul, et cetera.

The really cool thing about what's happening right now with digitalization is that the change can happen incrementally. In fact, we're doing this even within Siemens. We've got some places within Siemens where you could go to a factory and see it as a world-class example of the application of automation from end-to-end.

You can go to other places where you'll step into factories where a lot of what we're doing is very much fine craftsmanship, but what we're introducing is pilots and projects where the use of data is making even those shops more effective. That's where we're partnering up with customers and working side-by-side with them.

In fact, what you'll hear us talk about a lot these days is co-creation. There's nothing better than getting into the customer's environment. We've got the know-how in our operational technology and how our control systems work, et cetera, but they are experts in their products and what their overall goals are. Sitting side-by-side in that kind of multidisciplinary team environment is really what crystalizes and catalyzes some great concepts to really drive development towards the future for these customers of ours.

Digital Transformation and Culture Change

Michael Krigsman: Okay. We have a couple of questions from Twitter. Iram Shah and Arsalan Khan are both asking about the role of cultural transformation. When you talk about digital transformation, what's the role of culture change? Thank you both for asking that question. It's a really good question.

Barbara Humpton: That's a great question. Yeah, here's a big question; can the command and control hierarchies of the past be successful in our digital future? Well, maybe they can, but I think what's even more effective is the idea that the future is networked, that teams form around customer issues and use agile approaches in order to deliver capabilities.

That's exactly the process we're going through right now at Siemens. Actually, people have heard about Vision 2020+. It's how Siemens is reordering our strategy, as we step into the next decade, for ourselves.

One of the things we focus in on is being very operationally focused on pure play market segments, bringing together experts around power, around smart infrastructure, around digital industries. But then, giving those teams the flexibility to form up and norm and perform in the way that's right and appropriate in their marketplace. That culture of being more networked than hierarchical is going to be part of our secret for success in the future.

Michael Krigsman: The issue of culture seems to come up, in general, with digital transformation. Getting back to trying to home in on what is digital transformation, could we say that it's the combination, the intersection of business model innovation and the culture shift?

Barbara Humpton: Huh, that's interesting. Yeah, let me trying something else out on you. Typically, when I've been talking about this to people, I've been sharing that I see it as the intersection of the physical and the virtual world. We've got this physical world. We actually make things. We go places.

I loved -- in the movie Ready Player One, my favorite line in the whole movie is when they say, "Hey, I love the real world. That's where you can get a good meal." [Laughter] There are certain things that just can't be done in a digital world.

On the other hand, digital tools bring us the ability to know more, predict more, plan more, and it's that marriage of the virtual and the physical worlds and closing the loop between the two that is at the heart of the digital transformation. Why does culture change matter so much? Well, traditionally, our organizations that have addressed real-world needs have continued to operate in models that have been around for a century or more. Then our digital, our tech market has developed a very different style and even culture.

The conversation that we're having right now is, "Hey, don't we want more of that culture inside Siemens?" I'll share with you. We've done some acquisitions recently of digital companies. There's that question of, "Hey, how will our two cultures mesh?" The fact is, we're a perfect marriage.

What I've been finding is that our digital employees who are coming in from the tech industry are just champing at the bit to get into the kind of mission that we get to drive here. What we do for society really matters and they love the concept of working on projects that endure, making a change that truly will last for decades. Then, likewise, are folks who have been working in the physical world are really excited to see what can happen when we bring more of, as I say, the agile approaches of digitalization into the workforce.

Michael Krigsman: It's a very, very interesting way to look at it because I think, at least in the past, there was this kind of surface view of digital transformation that it's, "Well, we're going to build an e-commerce site." I think, looking at it as you're describing, the implications then have tentacles throughout all of your operations, through the technology, of course, but your operations and your processes, as well as the cultural mindsets; the dramatic change that you were just describing in terms of going from command and control to more networked approaches.

Barbara Humpton: Well, yeah, and the funny thing is, in most parts of the customer segments that we've been working with, we haven't even begun to tap the art of the possible. What are the first things we do? You're absolutely right; set up an e-commerce site, become visible, have an Internet presence.

The next thing we might do is to say, "Hey, how can we use data to help us maintain and be more efficient at what we already do?" You quickly get to the point where you start to ask, "But wait a minute. How could we actually just disrupt this model?"

I'll give you a good example. Think about the way power gets produced in this country. Someone out there extracts fuel from the ground. Someone else transports it. It goes yet to another spot where maybe it's refined and transformed in a way that it's made useful. It goes through the transportation segment to get to a place where that fuel is consumed in a powerplant and, low and behold, we get electricity. Even this is a simplification.

We've got an effort going on at Siemens called Gas to Power. If you look at how to use data all across that value chain, bringing together all of the players, you find you can totally look at the whole risk equation in a different way. You might be able to make it less expensive, totally, to be able to get those electrons onto wires.

I'm telling you; the digitalization can fundamentally change how business gets done. You'll hear people talk about the most fundamental kind of thing is how to think about Siemens as a service. What if our customers didn't want to own our assets anymore but wanted to have someone else who owned them and wanted to have Siemens in the loop just assuring high levels of performance to meet that customer's core business model? Well, I think these are all things that are possible and they're all things worthy of exploration and where that co-creation with customers gets really fun.

Managing Investments in Innovation

Michael Krigsman: We have some more questions from Twitter, and so let's jump to those and then go back to the co-creation with customers because I think that's a really crucial topic. Iram Shah, who is just on a role, is asking many questions, but a really good one is -- they're all really good, actually -- how do you measure the ROI of these digital transformations? How do you balance investment in light of that ROI? It seems like another very important question.

Barbara Humpton: Yeah, that's a great question. I will share with everyone one of the really key things is to think about the timescale that you want to look at. Do you need a short-term return; do you need a long-term return? What your own business situation demands can help you figure out how to sequence in activities in digital.

Almost think of it as a pay it forward idea. What if early work to improve productivity could yield the kind of financial performance improvements that would then allow you to invest more deeply in technologies that will shift your business model? There are others; some businesses find themselves at an existential moment saying, "If I don't automate, if I don't really take advantage of digital, I'm at risk of becoming irrelevant to the marketplace." Companies like that have to really begin to think and act quickly to be ready.

Now, I'm seeing data from some partners in our ecosystem. We do a lot of work with Deloitte, among others. Deloitte has some just eyewatering business cases that can show the amount of gains that can be made from digital transformation, everything from increased productivity on a shop floor, to reduced cycle times for products to market, to enhanced satisfaction of customers, the customer experience. There are many, many factors to be measured and managed, and the fun part of this is deciding, hey, which are those elements that we want to make factors in our decision-making process.

Michael Krigsman: Deloitte is doing interesting things. I just did recently, last week in San Francisco, a CXOTalk Forum with the Chief Strategy Officer of Deloitte, Steven Goldbach, who wrote an interesting book called Detonate.

Another question about balancing; how do you balance investment in existing operations, which generate your revenue, versus investment in disruption that may not have a return for some time in the future?

Barbara Humpton: This is the holy grail question, right? This is what makes corporate strategists earn their keep in large corporations, that ability to plan out a path that actually yields the resources that will support that future. This is what we're all working to as leaders in a corporation.

Let's think about this a minute back in that context of business to society. There have been a lot of people who have thought that our business to society message was all about philanthropy; what you're trying to do is create enough profit so that you can give to the community. In fact, I want everybody to think about this differently.

Think about Maslow's hierarchy of needs within a corporation at the very foundation. In Maslow's hierarchy, it's food, clothing, shelter. Does it take care of the basic human needs? For us, it's integrity, safety, business compliance. You don't even go into business if you're not prepared to do that.

Move up the hierarchy and what you'll find is that being able to operate profitability is well up there, but it's not the ultimate of the corporate hierarchy. The ultimate pinnacle of the corporate hierarchy is what we give to society, what we mean, what we're in business for.

Every single day, Siemens wakes up focused on how to bring our know-how in electrification, automation, and digitalization to these markets that we've chosen to serve. In order to do that, we must - we must first perform profitability. Then we can only use the resources that we have at hand in order to enhance our capabilities for the future. An innovation plan, funding for that innovation, that is all part and parcel of the business plan.

If you've been watching Siemens' evolution closely, you will have seen, several years ago, the decision to spin off healthcare as a separate company and to create a joint venture in the renewable energy space. You'd ask, "Why?" Well, in both of those cases, there just wasn't enough corporate resource on-hand to keep us investing at a rate that would have us number one or number two in all of the markets we're trying to serve. By spinning out, we raised market capital. We got additional investors into the boat, kept a majority share, so Siemens still gets to have the guiding thought and principle that keeps these technologies moving in the direction we're interested in, but we've attracted a lot more investment into the mix.

Day by day by day, we're asking these kinds of questions:

  • What investment is needed in order to realize our goals?
  • How does our business plan hold together with the performance of today's products and services?
  • What else do we need to do to strengthen that portfolio so we can continue to invent?

Michael Krigsman: We have another question from Twitter, and it's directly related to this topic you were just talking about. I'll just ask you, Barbara, to answer it relatively quickly because we're going to run out of time and there are other things that I want to discuss with you. I wish we had three or four hours or five hours. We could just sort of go on, [laughter] but we have about ten minutes.

Gus Bekdash asks, "On this issue of balancing innovation versus the stability of current operations, there's a lot of risk. Companies have gotten into big trouble by not getting that balance right. And so, how do you, as CEO, ensure that you manage that balance in the right way?

Barbara Humpton: Market insight and then biodiversity. [Laughter] It takes a lot; you plant a lot of seeds to have the strong ones thrive and survive; planting some seeds in a lot of small ways and looking to see which ones actually will thrive.

Information Technology (IT) vs. Operational Technology (OT)

Michael Krigsman: Okay, that was pretty short. Thank you for that. [Laughter] You know it's such an important question as well, and it goes right to the heart of your role as CEO. Next time, we'll have to explore that one in more depth.

Let's go on to the topic of IT versus OT because I know it's very important to you. Maybe, for the people who don't know, would you just give us a very brief primer on that subject and why is it so important for you and for Siemens?

Barbara Humpton: Yeah, IT, information technology, the technology we use every day in computers, telephones, et cetera that keeps us connected and provides us with applications that fulfill needs, fantastic IT. OT, operational technologies, that technology that we may think of as invisible, the systems that run buildings and transportation systems, energy systems, healthcare, et cetera. It's often embedded in equipment that we're using in applications.

What we've come to discover is that there's a convergence now of IT and OT. We're sitting on the same network. The Internet of Things is happening and, in our world, the Internet or Really Big Things is coming together. It's that convergence where people need to begin to think about their operational technology, these tools that they've been using for environments, transportation, and energy, that they need to begin to realize that data flows and applications perform every bit as effectively in those areas.

Michael Krigsman: From a data perspective, then, where does the difference or the distinction lie? Of course, IT is responsible for the setting up of the infrastructure to manage that data. Is it a matter of which side is generating the data?

Barbara Humpton: Yeah, you can think of it that way. Think about a big piece of machinery with sensors that produce data that can give us intel on how that machinery is performing. That can flow into an operating system like ours, MindSphere, which probably sits in an information technology enterprise of servers and communications gear, et cetera. What we are specifically focused on is that the data and the flow of controls and interaction with the operational technology that is going to bring about really dramatic change for our customers.

Michael Krigsman: You're talking about the transformation of factories, cities, all kinds of different physical environments.

Barbara Humpton: That's exactly right. Think about a future city where your transportation systems are actually connected in with the buildings that they connect are connected in with the city services, be they the public utilities, et cetera. Then think about the citizen experience could be like in an environment like that, a city actually performing better for its residents. Cities all across the nation right now are exploring just that, so the Internet of Really Big Things is maybe coming to a city near you.

Michael Krigsman: Before we go on to our next topic -- I'm sorry. We could spend an hour on each of these.

Barbara Humpton: Any one of these, yeah.

Women in Technology

Michael Krigsman: The last thing that I wanted to talk about and I'm glad we have a little bit of time for it is the role of women in technology. You're a really unusual example of a woman who is CEO of an engineering company; such a male-dominated field.

Barbara Humpton: Yes. Yes. [Laughter] It's an outstanding position to be in. From what I gather -- you know people have asked me a lot about, "Was it hard? Was it hard to be a woman in a technical field coming up?" I don't know that I ever felt it was hard.

I mean there were awkward moments. I'll never forget coming up through the ranks. In those IBM days, we were working in satellite command and control. I was at this fantastic customer site. We'd had a great meeting. I said, "Excuse me. Which way is the lady's room?" They said, "Uh, we're not sure we have a lady's room." [Laughter] Everybody has those kinds of stories from the early days of engineering.

Beyond that, the silly stuff, when it came right down to it, every time I was assigned to a team, it was a team focused in on a mission that mattered. Getting in the foxhole with smart people, using all of our know-how to go solve problems, for me it was just fun. For me, every job felt like the most important job in the company and maybe the last job I'd ever have. You know, boy, this is the pinnacle of my career.

With each successful role, whether it was managing a project team, whether it was managing a business portfolio of projects, I got to work on things like satellite command and control, border security with customs and border protection when it was just being formed, gosh, biometrics for law enforcement at the federal level, helping the FBI discover that rapid DNA identification was within reach from a technological perspective. All of those things were just fascinating topic after fascinating topic. The way my career progressed was simply by responding when the phone rang and my bosses said, "Hey, we need your help," you know, on project X.

In fact, it was really responding to calls all along the way that led me to Siemens. Since I've been in Siemens, as you could tell just from the conversation we've been having, the kinds of things we get involved in, the kind of difference we can make in the world, this is really compelling. It's a compelling opportunity and it's just been such a privilege to be offered the opportunity to play this role.

Michael Krigsman: Did you ever experience the proverbial glass ceiling?

Barbara Humpton: It's funny because IBM, in its federal business, got sold to Lockheed Martin. Lockheed Martin, being a government contractor, there was a lot of this feeling that "Oh, yeah, we're in this male-dominated world," and yet, Lockheed Martin was one of the first aerospace and defense companies to promote women into leadership positions. Today, Marillyn Hewson, who will also be serving on the Workforce Policy Advisory Board, is leading that corporation with strong leaders up and down the chain.

It's funny. I had plenty of experiences where people told me things and I accepted them. When my husband and I chose to have our family early in our marriage, people said, "Oh, having kids, that's going to sideline you from the executive track." I kind of said, "So be it. What I really want to do is raise a family. If that prevents us from being able to be part of leadership in the future, then I guess that's the way it is."

But it turns out, fate didn't really have that in store. It turns out that, today, people really value the fact that a grandmother who has the perspective of a lifetime of being part of a family actually has a perspective that matters too. I think we're living at a great time for men and women who want to lead balanced lives and who want to choose. If they want to advance, great. If they want to go deep in a subject matter and stay in a role and really get as broad as they possibly can in that role, all of those options are available to us. There's not a definition of success that is too limiting, I think.

Michael Krigsman: Barbara, we're really over time here. We're out of time, but can I just ask you one more question because I think this topic is so important? What advice do you have for women who are looking at you and they want to achieve in a male-dominated industry? What advice do you have for those folks?

Barbara Humpton: Well, be yourselves. Be yourselves; it's the best advice I can give to anyone. Each of us comes to work with our individual talents and abilities, and we ought to just be feeling the joy of contributing and making the most of what we are able to do to help our organizations advance.

Michael Krigsman: Okay. With that, I'm very sad to say that we're out of time. Thank you, Barbara, so much for taking the time with us today.

Barbara Humpton: It's been fun, Michael. Thank you.

Michael Krigsman: We've been speaking with Barbara Humpton, who is the CEO of Siemens USA. What an interesting conversation; so much insight and wisdom on a lot of different topics. Come back next week. We have another show. Be sure to subscribe on YouTube and don't forget to subscribe to our newsletter and you'll keep up to date with everything that's going on with CXOTalk.