As we approach a new century, we are witnessing a radical world transformation, driven by a number of factors that will forever change the way of life, society, and business.
First: the world’s population will continue to grow at the rate of 90 million people a year, mainly outside the developed countries. The demand for primary energy will jump by at least two-thirds by 2020 and triple in the developing world. There will be shortages of drinking water, food, medical care, education, transportation, communication systems and almost everything else.
Second: the basic structures of societies are changing as millions of people move from the countryside into mega cities, especially in Asia, Africa and South America. This redistribution of population is giving the development of infrastructures an urgent priority.
Third: our efforts to meet the needs of the growing population is putting enormous strains on our environment.
And fourth: the process of globalisation is revolutionising the world economy. Deregulation, liberalisation and falling trade barriers are making competition fiercer and more intense. National champions and comfortable monopolies are gone. A small circle of highly industrialised nations no longer dominates the global market.
This means taking a hard look at what will drive the 21st century and how we can best meet the needs of our customers and society in coming decades.
Innovation is a crucial success factor. In a globalised economy, product prices, quality, and technology are ever more similar. For virtually the same item, customers can turn to suppliers in countries which have much better cost positions. Innovation sets us apart.
But for a company to get by and prevail in this tough new global business world, it must be more than just innovative. Success depends on many other factors.
First, we must have a global value-added chain. To keep competitive, we have to have the right mix: a highly efficient, global procurement and logistics system and low production costs where possible. We have to distribute our centres of competence throughout the world to be close to key customers and markets. And we must have a strong local presence to prove we are a good corporate citizen.
The second success factor is learning. Nothing today is more important than knowledge. And nothing is changing faster. A knowledge-based company must have one iron rule: learn, relearn, and relearn again. Only a restless, exploring, experimenting, changing company can hope to keep a competitive edge.
The third vital factor is an international mindset. It is the key to understanding our customers’ needs in every country. It is necessary to coordinate a worldwide workforce. And it is plain good business, because it opens every door and lets people see us as a local and global partner.
The fourth factor is cross-institutional cooperation. Working across national and regional boundaries is not enough these days. A global player must intensify cross-institutional cooperation between companies, with universities and research institutions, and with governments.
European companies have not worked with universities as extensively as in the US. We have to change this attitude. That is why we are concerned about the declining popularity of engineering. This trend began in the UK and has now hit Germany hard. In just six years, the number of students on engineering courses has fallen by half.
We need to strengthen university cooperation, boost the support of students, and reform engineering curricula and degrees to meet international standards. We must make the profession popular again.
Fifth, social responsibility is essential for long-term success. Companies are citizens of the countries where they operate. They are integral parts of communities. They bear social responsibilities. These include striving to create a better world, protecting the environment and safeguarding our peoples’ future by ensuring their employability. It also means making sure integrity guides our conduct toward business partners, colleagues, shareholders, and the public. Ethical and moral considerations must ultimately govern all of our decisions. We must not have blind faith in progress.
The challenges facing us are staggering. Yet the converging trends that are shaping the 21st century growing world population, changing structures of societies, accelerating burdens on the environment, and globalisation are also handing us golden opportunities.
Solutions to all these problems must be found. We cannot afford to sit back, watch and wait.
I have no doubt that Europe and its industries will seize these opportunities and continue to be a driver of progress.
Heinrich von Pierer is president and chief executive of Siemens. This is an edited extract from the 1998 Hinton Lecture, delivered to the Royal Academy of Engineering on Monday.