Siemens 2008 Annual Report Download - page 192

96 Management’s discussion and analysis
Closely associated with developing People Excellence is giving them strategic and challenging businesses to
work in. Our Portfolio management is therefore based on two principles: we invest in sustainable growth mar-
kets associated with our megatrend strategy, and we aim for leading positions in all our businesses. The four
megatrends are demographic change, urbanization, climate change and globalization.
Overall we aim for a stringent capital allocation, so we have dened three portfolio priorities to focus our
investments:
 Our top priority is businesses with organic growth. In recent scal years we have made a number of major
acquisitions that fueled our growth. We now aim to achieve organic growth based on providing innovative
products and solutions in our existing businesses.
 Our second priority is to streamline our portfolio according to our new structure, which is explained in
“Strategic overview” earlier in this Report. From this perspective, we examine all our businesses with regard
to their strategic and nancial t for their respective Sectors and for Siemens.
 Thirdly we focus on selective investments that can enhance our competitiveness and augment our portfolio.
Each such investment must meet rigorous nancial criteria and support our overall strategy.
To achieve organic growth from a streamlined portfolio, we strive for Operational Excellence including world-
class innovation and supply chain management.
Open innovations is our program for intensifying our focus on trendsetting technologies; identifying technology
and application trends; and translating innovative ideas into marketable products and services. One measure of
our performance in innovation is our patent position in trendsetting technologies. Siemens holds approximately
55,000 patents, a number that ranks us among the world’s leaders. In scal 2008, our researchers submitted
approximately 8,200 invention reports and we led approximately 5,000 patent applications. The average num-
ber of employees engaged in R&D in scal 2008 was 32.2 thousand, compared to 30.9 thousand in scal 2007.
Global supply chain management is our program for further expanding our global market presence. Excellence
in supply chain management is particularly important in penetrating new markets, especially in fast-growing
regions such as Asia, because it enables us to effectively move production close to our customers. Supply chain
management is also a vital capability for increasing the efciency of our overall global value chain, which
includes R&D, product development, sourcing and production. A key initiative in all these regards is known
as SMART (Simple, Maintenance friendly, Affordable, Reliable, Timely to market). This initiative focuses on
strengthening local procurement, engineering, and manufacturing so that we can provide products in large vol-
umes with good quality and competitive prices. In particular, we aim to develop SMART products and solutions
to meet specic customer requirements, including at the low end of the market.
Corporate Responsibility expresses our commitment to society. This includes Corporate Governance, which
is the basis of all our decision-making and monitoring process, Compliance, Climate protection and Corporate
citizenship.
Compliance
In scal 2007, it was determined that in past years some of our managers and employees had violated statutory
rules as well as our internal rules. As a result we introduced a new Compliance program aimed to ensure that
our business practices are in full compliance with the law and our own internal rules, and to enable us to better
identify and penalize compliance violations. Our Compliance program is based on three pillars prevention,
detection and response.