Siemens Medical Solutions, Germany: Business creation and entrepreneurship
Siemens Medical Solutions is one of the key partners in a local network encompassing medical technologies, healthcare and pharmaceuticals. This network has managed to establish the Bavarian city of Erlangen as one of the major centres of this industry worldwide. The presence of Siemens and a university with a strong medical faculty has made Erlangen an attractive place for start-up and spin-off companies in this field.
After the restructuring of Siemens in late 2007, Siemens Medical Solutions became one of the three major business areas of Siemens AG, which is one of the world’s largest electrical engineering and electronics companies. In 2007, Siemens employed approximately 386,000 workers in more than 190 countries and in some 600 plants, and reported a turnover of €72,448 billion from continuing operations. Siemens generates about 90% of its sales outside of Germany. Since the beginning of 2008, the company businesses – besides healthcare – are focused on two other key areas: industry and energy.
As a leading healthcare solutions provider, Siemens Medical Solutions brings together trendsetting medical technologies and healthcare information systems, as well as management consulting and support services. Siemens Medical Solutions, which has its headquarters in the Bavarian city of Erlangen in Germany, employs more than 40,000 people worldwide, with around 9,300 employees being located in Germany.
Siemens Medical Solutions is a research-intensive company with a majority of high-level university graduates among its staff. This results in a rather low trade union density rate of about 21% at its Erlangen plants. Industrial relations are described as being ‘traditionally very cooperative’ between the local management and the works council, which is dominated by the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall).
Description of the initiative
Siemens Medical Solutions is one of the central players within a regional initiative aimed at establishing Erlangen as one of the major cities within the growing medical industry in Germany. Originally, the idea to create a local network began in 1996, when the newly elected mayor of Erlangen declared that he wanted Erlangen to become the ‘federal capital for medical research, production and services’. In 1997, the local community established the ‘Medicine-Pharmaceutical-Health Proficiency Initiative’ to initiate and support processes of network building among local companies and other institutions in the relevant field, as well as attracting new businesses which fit into an expanding medical cluster. It was clear from the outset that the presence of Siemens Medical Solutions and the University of Erlangen-Nürnberg with its well-established medical faculty were the main factors contributing to making the region attractive for new start-ups in this sector. Both organisations were also responsible for most of the local spin-off activities in the field.
The state government of Bavaria joined local actors in supporting the idea of a cluster built around health and medicine. It initiated state-wide networks, such as a forum for medical technology and pharmaceuticals in Bavaria – Forum MedTech Pharma – and also invested money in the foundation and development of a business creation centre. The Innovation Centre for Medical Technology and Pharmaceuticals (Innovationszentrum Medizintechnik und Pharma, IZMP) was newly built in the early 2000s adjacent to Siemens Medical Solutions and is an active network centre for science, industry, regional and supra-regional support associations. It is open to start-up enterprises and spin-offs in the field of medical technology and pharmaceutical research, including biotechnology and genetic engineering. In addition, IZMP provides room and support for existing companies from innovative research areas as well as national and international research and development (R&D) groups working on projects with a limited timescale.
In 1998, local partners in Erlangen established a venture capital company as a public–private partnership to support young companies in the field of medical technology and pharmaceuticals. Independent of this initiative, Erlangen has proven to be an attractive place for start-ups and spin-offs. In the last decade, more than 60 new companies have started operations in Erlangen, some of which have already won distinguished awards, such as WaveLight and Human Optics. By 2006, about 25% of the local workforce were engaged in the health and medical technology industry. Some experts believe that no other place worldwide has a higher density in expertise and competence in the medical technology field than Erlangen.
Siemens Medical Solutions is an integral and central element in this vision of a successful local cluster. Some of the new companies are spin-offs from Siemens, many have close business relations with Siemens, while a few are more or less dependent on this big player in the region. Siemens Medical Solutions boosted the region when taking the decision in the late 1990s to build a new research and production site in Erlangen. As this decision was made after intensive competition among different locations worldwide, this underlines how attractive the region had already become.
Moreover, Siemens also bears institutional responsibilities within the region. When it was decided to establish a coordinating institution for all of the different initiatives in the medical technology, health and pharmaceuticals field in the area, Siemens became one of four organisations which were represented in the coordinating body, the other three being the city of Erlangen, the University of Erlangen-Nürnberg and the Chamber of Commerce and Industry in Nürnberg (Industrie- und Handelskammer Nürnberg für Mittelfranken, IHK Nürnberg). Thus, the ‘Medical Valley Bavaria’, as the new body would be called, is a rather unique institution by German standards, with its shared responsibility among public, semi-public and private organisations.
The social partners at Siemens were only indirectly integrated in this process, as business creation and entrepreneurship do not belong to the traditional fields of codetermination.
The initiative is certainly a success story. Erlangen is one of the leading regions in medical technology and health – at least in Germany – and perhaps even worldwide. The region became an attractive place for new investment, and it has successfully built new institutions around the established and leading partners, namely, Siemens Medical Solutions and the university.
All partners seem to agree on one crucial factor of success in this initiative, that is, the relatively non-bureaucratic, purposeful and fruitful cooperation between actors from completely different contexts. While Siemens Medical Solutions is the focal company within the regional network, developing start-ups and already established private companies are also operating in the area within and outside of the influence of Siemens.
In addition, the local government was interested in developing a medical technology sector in the region and the state government of Bavaria aims at fostering future technologies. Moreover, semi-public institutions, such as IHK Nürnberg or the Credit Institution of the Free State of Bavaria (LfA Förderbank Bayern, LfA), facilitate comprehensive business development in Bavaria. Furthermore, specialised network bodies were founded, such as Medical Valley. These various actors meet in different compositions in local committees, in advisory bodies, in regional working or expert groups and in responsible associations, thus creating a tight network with many strong ties.
Exemplary and contextual factors
The example of Siemens Medical Solutions shows how an established private company can become a major factor in the process of local business creation and entrepreneurship, when it is open to being integrated as a partner in a larger regional network. The result allows not only all of the other network partners to benefit from Siemens, but also enables Siemens itself to benefit from the existence of this network. An essential factor for the success of the network seems to be that it was supported by a coalition of different public, semi-public and private organisations.