Jun 27, 2019

The days of the conglomerate are dead

Photo: Hulton-Deutsch/Corbis/Getty

Hundreds of thousands or even millions of jobs will vanish as conglomerates are forced to kill their traditional business model for the new technological age and chaotic geopolitics, says the CEO of Europe's largest industrial company.

What's happening: Joe Kaeser, CEO of Siemens, the German industrial giant, tells Axios that a revolution in manufacturing ups the challenge to the world's biggest companies, forcing them to focus only on products or services in which they truly excel.

  • "Traditional conglomerates have no future. On average, they are average. And today, average means mediocracy, and that's the target of the 4th industrial revolution," Kaeser said.
  • Technologies such as 3D printing "mean you can deliver any item at the cost of mass production."

The big picture: The new geopolitics of nationalism and protectionism — the "I'm first" movement most loudly voiced by President Trump — are part of what's making conglomerates obsolete. Multi-nationals can no longer casually operate across dozens of countries under the assumption that everyone will accept such cosmopolitanism.

Instead, Siemens, for instance, has divided itself into three distinct divisions based on its perception of its strengths — industrial, health care and power and energy arms. And now it must localize production everywhere it sells, and establish political connections as well, Kaeser said.

  • It won't be possible to build complete facilities everywhere. Instead, today's multinationals will have to persuade as many countries as possible that it's okay to establish a digital "brain" in the U.S., for instance, that will digitally instruct advanced plants in individual countries what to manufacture and how.
  • "Yes you are everywhere. You are part of the local society regardless," Kaeser said. "It's the opposite to what we are used to — a global value chain, where different countries get specialized with different parts."
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