Open Innovation at Siemens Custom Case Solution & Analysis

1. Evidence Brief: Open Innovation at Siemens

Financial Metrics

Annual Research and Development Budget: Approximately 3.9 billion Euro (Exhibit 1).
Total Siemens Employees: Over 400,000 globally during the case period.
SOI Platform Participation: 30,000 active users by the third year of operation.
Contest Rewards: Cash prizes ranging from 2,000 to 50,000 Euro per technical challenge.
Operational Costs: 500,000 Euro initial investment for the Siemens Open Innovation (SOI) platform infrastructure.

Operational Facts

Organizational Structure: Siemens operates through a decentralized model with autonomous Business Units (BUs) and a central Corporate Technology (CT) department.
Platform Scale: The SOI platform hosted over 2,000 submitted ideas within the first 24 months.
Process Flow: Ideas move from the SOI platform to the Idea2Business (I2B) process for commercial validation.
Geography: R&D centers located in Germany, USA, China, and India.
Technology Scope: Covers energy, healthcare, industry, and infrastructure sectors.

Stakeholder Positions

Peter Löscher (CEO): Advocates for increased external collaboration to drive efficiency.
Siegfried Russwurm (CTO): Supports the shift toward open models but emphasizes the need for internal alignment.
Helmut Krcmar (Academic Advisor): Provides the framework for the crowdsourcing methodology.
Business Unit Managers: Express skepticism regarding the quality of external ideas and cite the Not Invented Here syndrome as a barrier.
Internal Engineers: Fear that external crowdsourcing devalues their specialized expertise.

Information Gaps

Conversion Rate: The case does not provide the percentage of SOI ideas that reached final commercial production.
Net Present Value: Specific NPV calculations for projects sourced via OI versus traditional internal R&D are missing.
Legal Costs: The expense related to Intellectual Property (IP) vetting for external submissions is not quantified.

2. Strategic Analysis

Core Strategic Question

How can Siemens transition from a closed, siloed R&D culture to a scalable Open Innovation model that delivers measurable financial impact without alienating internal technical talent?

Structural Analysis

The Value Chain analysis reveals that the primary bottleneck exists in the Research and Development stage. While Siemens possesses vast internal resources, the speed of technological change in sectors like Healthcare and Energy outpaces internal capacity. The bargaining power of internal experts is high, creating a structural barrier to external knowledge integration. The Jobs-to-be-Done for the SOI platform is not just generating ideas, but rather solving specific, high-friction technical problems that internal teams have failed to resolve within budget or time constraints.

Strategic Options

Option 1: Centralized CT-Led Clearinghouse. Siemens establishes the Corporate Technology division as the mandatory gateway for all Open Innovation activities. CT funds the platform and vets all ideas before presenting them to BUs.

Rationale: Ensures consistency in IP management and quality control.
Trade-offs: Increases bureaucratic delay and reduces BU ownership of the final product.
Resource Requirements: Significant expansion of the CT legal and technical scouting teams.

Option 2: Internal Market for Innovation. BUs are given the autonomy to launch their own crowdsourcing contests on the SOI platform, using their own budgets, while CT provides only the infrastructure.

Rationale: Aligning innovation goals with specific BU market needs.
Trade-offs: Risks duplication of effort across different BUs and inconsistent IP standards.
Resource Requirements: Specialized training for BU managers on how to define contest parameters.

Preliminary Recommendation

Siemens should adopt Option 2. The decentralized nature of Siemens requires that BUs feel direct ownership of the innovation process. Forcing a centralized model will only deepen the Not Invented Here resistance. By making BUs the primary sponsors of contests, the output becomes a solution to a recognized business problem rather than an abstract suggestion from a central department.

3. Implementation Roadmap

Critical Path

Month 1-2: Establish a standardized IP Transfer Agreement that all external solvers must sign before participation to prevent legal friction.
Month 3: Launch three pilot contests sponsored by high-growth BUs (Healthcare and Smart Grid) to demonstrate immediate ROI.
Month 4-6: Integrate SOI platform data with the existing I2B stage-gate process to ensure external ideas follow the same rigorous path to market as internal ones.
Month 9: Conduct a global internal roadshow showcasing pilot successes to mitigate cultural resistance.

Key Constraints

IP Risk: The danger of unintentional disclosure of core Siemens trade secrets during contest definition.
Managerial Bandwidth: BU managers are already stretched; adding the responsibility of managing external crowdsourcing may lead to poor contest design.

Risk-Adjusted Implementation Strategy

The implementation will utilize a phased rollout. Instead of a global mandate, participation remains voluntary for BUs for the first 18 months. To incentivize adoption, the Corporate Technology division will provide a 50 percent matching fund for the prize money of the first two contests launched by any BU. This reduces the financial risk for the BU while encouraging platform utilization. Success will be measured not by the number of ideas, but by the reduction in time-to-market for projects that utilize external solvers.

4. Executive Review and BLUF

BLUF

Siemens must pivot from a closed R&D model to a decentralized Open Innovation architecture. The current SOI platform is a successful technical pilot but lacks organizational integration. To capture real value, Siemens must shift the cost and ownership of innovation contests to the Business Units. This move aligns external solving with commercial P and L responsibility. The goal is to reduce R&D cycle times by 20 percent over three years by accessing external expertise for non-core technical bottlenecks. Failure to institutionalize this will result in Siemens losing speed to more agile, digitally native competitors in the industrial space.

Dangerous Assumption

The analysis assumes that external solvers possess the requisite contextual knowledge to provide solutions that are compatible with the complex, highly regulated Siemens manufacturing environment. Most external ideas may be conceptually sound but operationally impossible to implement without massive internal redesign.

Unaddressed Risks

Internal Brain Drain: High-performing internal engineers may feel marginalized by the emphasis on external crowdsourcing, leading to the loss of core institutional knowledge. (Probability: Medium; Consequence: High)
IP Contamination: The risk that an external solver submits an idea that Siemens was already developing internally, leading to a decade of litigation over ownership. (Probability: Low; Consequence: Critical)

Unconsidered Alternative

The team did not consider an Acquisition-Led Innovation strategy. Instead of crowdsourcing small ideas, Siemens could allocate a portion of the 3.9 billion Euro R&D budget to acquire distressed or early-stage startups that have already solved the technical problems in question. This provides a clean IP transfer and a ready-made team, bypassing the cultural friction of the SOI platform entirely.