Innovation is often a key driver to a company’s success. Take Siemens, for example, which has a reputation for being innovative – and successful.
But the correlation doesn’t stop there, according to Ursula Boehm, Vice President, Operations (International Business) at Siemens.
It’s one thing to be innovative, but product differentiation also goes a long way to maintaining market share.
Boehm says that where multinationals used to target top-tier cities in China, Siemens for one, is homing in on rural areas in the country.
“If you look at China, you’ll see there is a vast difference (in terms) of customers. Take the example of hospitals: we might see hospitals in Beijing and Shanghai, as we see in Munich, Frankfurt or New York … If you go to the rural areas, they expect basic equipment, very basic things. And you need very different equipment to serve this market than to serve the first-tier cities.”
The largely untapped Chinese countryside of some estimated 800 million people, is what Boehm calls a “huge, huge market”.
She says that one of the company’s key strategies is not just to make high-end products to serve the well-heeled, but also to make products at a different price point for the mid- to low-range markets.
But low-cost products do not automatically mean that they have to be inferior. “We decided a couple of years back that one of our key strategies would be developing products, innovative products and solutions to enter this low-end market in basically all of the areas we are working in.”
Siemens has taken this one step further by “localising” their products. Boehm says this goes beyond just doing “a little bit of local sourcing”, but that the process of localisation encompasses product design, R&D and manufacturing.
In doing so, Boehm believes Siemens can be as competitive as the made-in-China companies. “If we are doing it in China, we can design products, to manufacturing, to sourcing, and fitting exactly the local market.”
In addition to being able to meet and match local price levels as a multinational in China, Boehm adds that company has now the added advantage of being able to export the products that were made in China, to other low-end markets in other countries. “(It) gives us tremendous scale which our local competitors don’t have.”
Boehm expects Siemens to continue to set its sights on emerging markets, and underpinning this directive is still innovation.
“It will be a major revenue driver, because in the high-end market, we have a very good market position - you can still grow there. But the growth markets are the mid-range and low-end markets.”
“Siemens is an innovative company. We cannot just be good in local markets by being cheap. You want to have products that are innovative for the local markets.”