Lesson
Number 50
 

Werner von Siemens (1816 – 1892): Insights of a Great Entrepreneur

By Manfred Hoefle

In 1693, Hans Siemens, a merchant, brewer and civic leader, engraved the phrase ORA ET LABORA (pray and work) above the entrance to his new house in Goslar, Germany. Many years later this tenet was to become the guiding principle in the life and work of his descendant, Werner von Siemens, whose life was characterized by invention, hard work and achievement. As Werner revealed in a letter to his brother Carl, his aim in life was to create something of permanence: "… to establish an enduring business, which perhaps under the leadership of our boys, could later become a worldwide enterprise like Rothschild and bring credit to our name across the world!"

Werner von Siemens was a versatile inventor and relentless developer of the technology of his time. Above all else, he was a manufacturer, who swiftly applied his inventions to commercial use. Speculative business practices, which he observed in the actions of his competitors and which he gravely distrusted, was alien to Werner von Siemens. He was skeptical of financial capitalism and stock markets, even when others expanded faster, at least temporarily, e.g. by merging their firms. He also insisted on avoiding all dependency on banks.

To mark the recent 200th birthday of that pioneering entrepreneur, this essay will recall his thoughts and actions using quotations taken from letters to his brothers and from his memoirs written shortly before his death. This selection of statements gives a well rounded and faithful impression of Werner von Siemens' maxims and morals. They need no further comment.

Business Ethics and Entrepreneurship as Guiding Principles

"To organize well is better than to double the share of the profit! We must always have only the far future in our sights; that is what matters above all else."
"I will not sell the future for short-term profit!"

"We would […] of course never get into an enterprise that might jeopardize our entire financial existence, no matter how improbably, even if it promised the riches of Croesus."

"I would rather shoot myself than tolerate not being able to fulfill my obligations, and I would not assume the slightest risk to survival for all the treasure in the world."

"You must have a real, not purely mercenary interest in a business if it is to give you satisfaction."

Technology and Quality as the Foundations

"A main reason of the rapid growth of our factories is, in my opinion, that the products of our manufacture were in large part results of our own inventions."

"It is true poison for an invention to be taken to the open market too soon and too quickly. There will unfailingly be a setback that will also destroy the healthy core, which needs time as well as tranquility if it is to grow."

Performance and Customer Satisfaction as the Rule

"He who performs best will always take first place, and I always prefer advertising by performance to advertising by words."
"We have always operated our businesses in a generous way and taken the justified claims of others into account more than our own."

Employee Engagement and Profit Sharing as an Obligation
"It became clear to me early on that satisfactory development of the constantly growing firm could be brought about only if it was possible to develop cheerful, spontaneous cooperation of all employees in promotion of their own interests."

"Money that has been earned would burn me like a red-hot poker in my hand if I didn't offer the expected share to my loyal assistants."

"I've still always found that it's the greatest waste not to give those involved in managing businesses a share of the results."

Decisive and Empathic Action as a Maxim

"Decisive, powerful action is almost always best in critical situations. Larger dogs will avoid even a small cur if it is determined and enraged."

"But we're still human, and we also want to remain people who feel things and are not always egotistically calculating, and we don't want to become nothing more than moneybags and money makers!"

"I myself can attest that it was not an urge to profit that led me to devote my labor and my interest so extensively to technical undertakings. Generally speaking, it was initially a scientific and engineering interest that led me to a task."

LESSONS FOR TODAY AND THE FUTURE

A synopsis of these quotations reads like a guide for responsible business leadership. Despite libraries of management books, armies of strategy consultants and an increasingly academic management "science", the relevance of Werner von Siemens’ 19th century insights — or indeed their timelessness — is remarkable. Moreover, they encourage us to study the biographies of other great entrepreneurs as a guide for management behavior instead of simply accepting limited and overhyped analyses by self-proclaimed experts with no practical experience of entrepreneurship. Siemens itself would be well-advised to rediscover its own spiritual heritage of business principles and to embed that ethos in its present-day management.
So what (in keywords) are the essential insights of Werner von Siemens?

Long-term thinking, forward-looking focus, dependability, prudent risk-taking, continuous innovation, value creation, product quality from the outset, real (not nominal) performance. These are Werner von Siemens’s principles of entrepreneurial behavior. They contrast with the behavior of what he called "the money-making institutes" ("short-lived with ever-changing boards") which he intensely disliked.

Publicly traded corporations in his view should be more than entities devoted to the accumulation of capital. Predominantly, corporations are in his words "a depository of knowledge and experience". Werner von Siemens believed that to be satisfied customers should feel that they are treated well, and are therefore one of the indispensible assets to a business. Employees who are capable and find pleasure in their work deserve recognition and a share in the rewards. Loyalty must be mutual if it is to be long-lasting, an insight that managers have increasingly neglected under the pressure of capital markets.

The Siemens company adhered to these guiding principles for an uncommonly long time — they became the essence of its "company spirit" — and it successfully applied and evolved them over time. In recent years, however, impressed by American business practices, specifically at General Electric, and under constant pressure from analysts, strategy consultants and the business media, Siemens managers began to adopt those practices. These US developments included an asymmetrical business strategy that favored shareholder value. These mistaken developments all had two things in common: they contradicted the business principles of Werner von Siemens and encouraged a trend among management professionals to follow the fads and fashions of management theory.
A long series of failed firms — among them formerly formidable competitors of Siemens, such as AEG, Westinghouse and GEC U.K. — shows that these had increasingly viewed themselves as pure capital holdings. It seems that corporations, that undergo constant restructuring and reorganization, also reduce their life expectancy.

Perhaps the most promising strategy for Siemens — and other businesses — is to closely and consistently follow the maxims of Werner von Siemens.

Business managers and others might also take inspiration from the final words of Werner von Siemens' memoirs: "My life was wonderful, mainly because it consisted of successful efforts and productive work."

Manfred Hoefle, September 2017

 

LITERATURE

  • Bähr, Johannes: Werner von Siemens (1816 - 1892) – Eine Biografie, C.H. Beck, 2016, Munich, Germany.
  • Feldenkirchen, Wilfried: Siemens, Von der Werkstatt zum Weltunternehmen, 1997, Munich, Germany.
  • Siemens, Werner von: Lebenserinnerungen, 19th edition, published by Wilfried Feldenkirchen, 2004, Munich, (first edition 1892, Berlin).
  • Siemens Archives Berlin: Letters