Innovating Innovation @tk

Abstract

This case shows how ThyssenKrupp (tk) has altered its innovation process in recent years. CEO Heinrich Hiesinger has brought in a former colleague from Siemens, Reinhold Achatz, to lead a transformation of the R&D function at the company. With tk’s roots over 200 years old and its highly divisionalized organization structure, Achatz had to be thoughtful and strategic about how to manage this change. At the same time, tk needed to boost its organic growth, which put pressure on the organization to move fast. The case follows projects through the new innovation process and invites students to place new projects into the proper place in the innovation process.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

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Resources

Appendix A: tk’s Partnership With Microsoft in IoT 1

“Lots of companies offered Internet of Things (IoT) services. And we had data from our first failed experience, and we decided to share that data with our prospective IoT partners to see what they would do with it. We worked with one company for 10 months, and they charged us to write the spec, and then concluded that the data was crap and there wasn’t anything that could be learned from it. That was a failed collaboration for us.

“Some years later, the CEO of our elevator business was in a separate meeting with Microsoft who was also talking about doing IoT. He told them that if they were serious, they should talk to me and put their money where their mouth is. He said this directly to Steve Ballmer. Two weeks later, the CTO of Microsoft contacted him back and he passed the CTO on to me. We had very low expectations by this time, after our earlier experiences. They wanted to meet face-to-face, and I told them that they must come to me in Germany. And three weeks later, they came. We joke about this meeting now, but at the time I really wasn’t very nice to them. They said that they didn’t have the full solution, and were willing to collaborate with us to develop the full solution. We followed up with a technical meeting in Chicago 2 months later, and we gave them our data again. They asked for 2–3 weeks to get back to us. In mid-April, they said ‘we have some things to show you,’ and this time we came to them in Seattle. When we saw their analysis, we realized that this is what we were looking for. This is our partner. We (Andreas Schierenbeck [CEO of thyssenkrupp Elevator AG] and I) met personally with Satya Nadella [CEO of Microsoft] to confirm this. We did a Proof of Concept deal, with open IP between us, on a handshake. We did not pay them any money, they just asked us to invest enough on our side to keep up with them.

“At this time, MS was working in agile and scrum methods for development, and we did need to learn that. 3 months later, we told them ‘we found a hole in your platform.’ This was on a Thursday. They quickly verified the problem, and put 5,000 engineers to work on it over the next 3 days. By Monday afternoon, they had a fix to give us. ‘Please see if you can break it in the next 48 hours,’ they told us. We publicly rolled this out in July of 2013. The whole process took less than a year from start to rollout. For a German, disciplined company, this was lightning speed. And it showed the scale at which MS can engage with their partners, it was really impressive. And we in turn have been one of their earliest adopters.

“We had a 20-person team on the IoT project with MS, plus a subcontractor, MS had 2 subcontractors and 50 of their own staff. They pushed us to complete our vision for the product, and they filled in all the missing pieces to create a complete solution. We were one of their first IoT solution application for their platform. This created some problems, since in all of the financial negotiations they had never been a solution provider before. Now this partnership has flourished. I get time and access to their top management and vice-versa. We are meeting with them quarterly.

“It was important for our collaboration to be clear on who owns the data. The raw data of the elevator is owned by the building owner, the owner of the elevator equipment. If they let us, we will use this data and give them more valuable data back. The data we derive from the elevators, such as algorithms for maintenance or improvement, needed to be owned by us. So we get improved productivity. The customer gets higher uptime for the equipment. Our original business model was highly protected, almost tribal. Useful data got passed from person to person in the field. If someone else has data we don’t have, they can blow up our business, so we needed to own the derived data. MS’s platform business model was based on consumption, and they told us they didn’t want our data. That was important for us to be able to work together.

“We have learned a lot about collaboration. It’s a mistake to think that Microsoft is the only way to go in the future. You have to remain true to the original model of looking for the best, most useful information out there, wherever it may be. Of course, we expect to work with Microsoft again in the future, but it will be because of their competences, their ability to perform, and their business model, not because they’ve become the inside favorite.”

Exhibit 1: tk Organization Chart

Figure

Exhibit 2: tk’s PLM Innovation Process

Figure

Exhibit 3: Expanded tk Innovation Process

Figure

Exhibit 4: New Innovation Project Options for tk

Carbon2Chem®

The aim of the Carbon2Chem® initiative is to use metallurgical gases from steel production as a starting material for chemical products, including the containing CO2. Surplus power from renewable energy sources will be used as a source of energy. Thus, an essential contribution to climate protection is accomplished and the success of the energy transition is supported by the merger of the key industries.

thyssenkrupp is both steel producer and manufacturer of chemical plants. This is why tk plays a leading role in developing the technology. Among other things, steel mill gas contains large quantities of carbon, hydrogen, and nitrogen. These elements form the basis for numerous chemical products, e.g. ammonia or methanol. Ammonia can be used to make mineral fertilizer—the prerequisite for feeding the majority of the world’s population. Methanol can be used to power cars and aircrafts or as raw material for synthetic fuels.

During discussions at the climate conference COP23 in Bonn in November 2017 the project was recognized as a tool to achieve greenhouse gas neutrality in the second half of the century as defined in the Paris agreement in 2015.

Big Data Analytics

Companies are still using only a fraction of their incoming data. The same is true for thyssenkrupp. However, this is now changing. With Big Data, they can develop new products, optimize processes, and improve services. thyssenkrupp is driving the use of this technology and wants to bundle the expertize spread over various units within the Group. tk’s experts in control technologies from the former activities in MagLev Technology “Transrapid” might be the nucleus for these central activities.

Additive Manufacturing

Freed from old, traditional ways of thinking, additive manufacturing (AM) technologies allow a new approach to design and production. With the entire development process from the initial draft to the finished product being digital, AM is a prime example of an Industry 4.0 value chain. Market researchers forecast the AM market to triple between 2016 and 2020 to a total of 20 billion US dollars. Thus, additive manufacturing is a future technology tk has to make use of. Having the experience, the research partners, the logistics, and access to the relevant customers, tk aims to create customized components with completely new geometries and functions. These will be: more stable, yet lighter and capable of being produced within a few hours.

Since 2015, tk already pooled their expertise and systematically started internal collaboration. Representatives from all BA’s work closely together in an interdisciplinary project group. Now it’s time to take the next step and approach the market.

Smart Components

Based on the initial #tkGarage idea ‘How Might We… Improve Road Conditions through Data’ the team around Steffen Rueck did tremendous progress: Via developing a hardware sensor, they depicted a new digital business model. Applying data analytics, their technology could be able to evaluate the actual condition of any car in real-time. This value proposition attracted the interest from rental car providers who pulled for further development and quick testing.

“Steel Only” Garage

To improve agility, approach startup communities and speed up especially digital innovation, the Steel business management decided to implement a fast innovation track in their BA. This track should keep a special “Steel Smell” to consider the strong heritage and culture of the Steel people. Thus, a full integration into the tk wide Garage initiative was excluded. Instead, only some principles and concepts should be adapted to the new format. Especially, besides some exceptions, the whole format should be limited to Steel employees.

Note

1. Source: interview with Patrick Bass, CEO of tk North America, Inc., August 17, 2017

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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