Siemens shakeup: Corporate restructuring will see healthcare managed separately

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As part of its Vision 2020 initiative, Siemens announced May 7 that it plans a major restructuring of the company, including having its healthcare unit managed as a separate business under the Siemens umbrella.

At a press conference in Berlin, Siemens CEO Joe Kaeser outlined the plan, which will see the company’s four business sectors—industry, energy, healthcare and infrastructure—eliminated in favor of bundling businesses into nine divisions.

Additionally, Siemens’ hearing aid business will be spun off and publicly listed.

“Looking at the longer run, the market technologies of healthcare [are] going to see fundamental changes,” said Kaeser. “For example, cost reimbursement systems—these are increasingly value-based and require new business models.”

The company pointed to a number of paradigm shifts in medicine that helped drive the decision to restructure healthcare, including disruptive technological changes such as big data analytics, increasing utilization of molecular diagnostics and the growth of mobile healthcare.

“To be able to adequately respond to these profound changes and to keep a hand at the helm to be able to react properly, healthcare will be set up as a separate unit within Siemens in the future,” said Kaeser.

With healthcare managed separately, regional organization structure can be tailored to the requirements of the healthcare market and don’t have to conform to Siemens’ organizational matrix, according to the company.

Siemens anticipates that the bundling of divisions and elimination of the sector level will cut costs by reducing bureaucracy. Increases in productivity are expected to be around 1 billion euro per year, fully effective by the end of fiscal 2016.

Beginning fiscal 2015, the divisions will be assigned target profit margin ranges (excluding acquisition-related amortization of intangibles). The target ranges will be oriented based on the main competitors of each division, with the healthcare division’s target profit margin set at 15-19 percent.