Speed trumps scale as giant conglomerates GE and Siemens slim down

During most of the Jack Welch era at GE, Siemens, the German conglomerate, looked up to and even mimicked GE in much of what it did. The two companies often competed with one other, whether in energy, health care or engineering. GE, with its manager of the century, usually won out. GE was the biggest, and the biggest was often the best.

But as GE finalized the spinoff of its energy business GE Vernova earlier this month (after it had already spun out GE Healthcare), it’s the American company that seems to be following the Siemens playbook. Siemens too had broken itself into three pieces a few years ago, with energy, health care, and industrial solutions as its separate parts.

Why are the two companies from either side of the Atlantic following the demerger approach? I asked Jim Snabe, the chairman of Siemens this week in a Fortune Connect session, and his answer was simple: in an era marked by digitization and green transition, speed once again trumps scale.

“We believe speed matters, and speed for me means innovation,” he said. “When Jack Welch was a leader size mattered more than anything, and therefore you lead a conglomerate with a result-oriented, tough business model, where you are either No. 1 or No. 2 in each business, or you get out.” 

“Now it’s about the speed in which you can reinvent yourself, and certainly the leadership model where you’re tough on results fails flat on its stomach because it’s not about making a budget and achieving your budget. It’s about exponentially innovating the future and overachieving even the wildest dreams that you have. It’s about leading with purpose. It’s completely different.” 

Snabe’s perspective on conglomerate competitiveness seems to work for Siemens as well as for GE. Since announcing its demerger, GE reversed years of declining stock market performance. Siemens, meanwhile, has reported three years of double-digit business growth.

On a related note, here’s what Sanofi CEO Paul Hudson told Alan about the role Fortune plays in making sense of the digital transformation. 

“In an increasingly complex world, Fortune’s role in driving important dialogue around global issues remains invaluable. As major political, economic, and social challenges continue to divide us, and amidst a digital and AI revolution, Fortune and the CEOI community help connect the dots across sectors in what unites us in business and as a society.”

More news below. 

Peter Vanham
peter.vanham@fortune.com
@petervanham

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This edition of CEO Daily was curated by Nicholas Gordon.