13th Starnberg Management Days
Innovation and growth in increasingly digitized B2B markets
- bringing the hype on the ground -
After a very inspiring "away game" in Leipzig, the 13th Starnberg Management Days came back "home". The 2015 event had been in the light of the Sales revolution: How to renew oneself with “digital inside” out of the markets.
This year, it was about how businesses can continue to grow – and how the digitization of product development and production environments can drive growth. Because: The growth pressure has risen significantly for many companies and executives - and thus the pressure to innovate digitally. Everyone is currently speaking of "Industrie 4.0" and the "Internet of Things". It has become a real hype. But who shows how you can bring these buzz words on the ground and actually generate ne and profitable revenue?
The Starnberg Management Days. Not only that the hype was grounded, but the entire event was again a highlight. That became visible in a quote of one of the participants: "The Starnberg Management Days are outstanding. This year was second to none in my opinion. But they will then do it better again ... as they do every time. "(Richard Gruenhagen, Supervisory Board Member of Agta Record AG from Switzerland)
Werner Seidenschwarz, managing director of the event organizer, Seidenschwarz & Comp. GmbH, opened to a full house and in an excellent atmosphere in Starnberg. He broke down the hype into building blocks and showed successful examples for successful growth with digitization – or simply driven by innovative players which make bold moves and enter new areas: Bayer’s container-sized chemical plant, the industrial robot project of Google or potentially trains in vacuum pipes developed by Hyperloop, a project of TESLA founder Elon Musk. His company, Seidenschwarz & Comp., has developed a concept of agile strategy implementation, enabling companies to achieve faster success, quickly produce a wider acceptance of changes such as the digitization of companies and thereby to be able to achieve measurable competitive advantages. This includes a strategy on 1 page which can be communicated within 5 minutes, and continued work in implementation sprints. "By this, one can quickly develop new business models out of the market and include them in the company patterns." The Professor and his team then discussed one of the biggest challenges with the participants in Starnberg: "Culture eats strategy for breakfast. An agile strategy process, however, will not be devoured by the corporate culture, but enriches and helps the company to evolve fundamentally." Werner Seidenschwarz sketched out the new customer benefit concept his company developed for smart products, processes and networks as well as the Internet of Things. Because: "An innovation, even if it is revolutionary, will only transform into revenue when customers are willing to pay for it. And for that it needs to create a real leap in customer benefit. Otherwise, you would only invest in start-up costs that will never be compensated throughout the life cycle. "
The first contribution came from Anton S. Huber, CEO of Siemens’ Digital Factory division. For more than 10 years, has pursued the vision of a Digital Enterprise in which "data from product development can be loaded directly into production and to suppliers" – without having to use physical prototypes. The advantage: up to 40% reduction in time to market for new products. And an unprecedented transparency of performance in the indirect areas – and thus of more than 90% of personnel costs. To simply automate manufacturing or just integrate a few sensors into products is not sufficient in times of "Industry 4.0": "You have to digitize the entire chain." In order to build this comprehensive expertise, the most crucial step for Siemens itself was the acquisition of the US software company UGS in 2007, an acquisition of which Anton Huber is one of the forefathers. Today, Siemens has a tool chain and engineering systems that enable plant operators to write their specific codes. "A BMW will never want to take over 1: 1 the operations of KIA and neither vice versa. The competitiveness lies in the process. Standardization out of the box would be a mistake“, Anton Huber emphasized. This was approved by the whole audience. Werner Seidenschwarz underlined that from the perspective of the agile strategy approach: "Tailored processes that express the unique strengths of a company provide the competitive edge."
Companies should typically start to digitize their product development landscape with a multi-site system, e.g. like Siemens’ Teamcenter. In the first step, product designs, documents, bills of materials and data are managed and made available throughout the company network. "The necessary preparation of a common data base and a clean-up of the process landscape can however be a gargantuan task." Not all companies are developed as far as the world's largest supplier of white goods, Haier – well-known Chinese company!
The resulting message was well-received by the participants: "Digitization is yet to come; we are just at the very beginning."
This message was underlined by Michael Süß, Chairman of the Swiss technology group Oerlikon. He predicted that Additive Manufacturing will have a similarly fundamental influence on the world of manufacturing as the internet had over the last 20 years. The fact that, being one of the most technically gifted top managers in German-speaking countries, he was able to provide his examples in a simple and firm manner, gives him a certain uniqueness.
”The flexibility of Additive Manufacturing processes is a better fit for volatile demand and a greater individualization than the classic chipping mass production." The business models around the technology are just starting to materialize in a wide range from the production of spare parts, "nomadic production" to the sale of manufacturing hours on demand. Again, you offer everything and you cannot do everything yourself, which is why Oerlikon is focusing on production of powder and post-processing such as coatings.
Michael Süß' enthusiasm for the technical possibilities transferred directly to the participants – but also the thoughtfulness of what a higher proportion of Additive Manufacturing would mean, especially for the German core competence in automotive and mechanical engineering and the related industrial jobs: "In comparison to this situation, the phase-out of coal was a sandpit playground". And yet: It is less about the question whether Additive Manufacturing will come, but more about how, and how you position yourself. Asian companies have recognized the great potential and are benefitting from nonchalance and an open error culture: "If it is wrong, then we will start over and do it differently." A marathon has begun in which the "field of runners slowly starts: those at the front are already running, and the ones in the back are still standing and waiting to finally start their run".
For Ralf Lenninger, Head of System Business Development, Strategy and Innovation at Continental Interior, digitization is today already the backbone of the company with currently 12,000 software developers - nearly as many as Google and Apple!
After upgrading mechanical systems by "electronic backpacks" in the first wave of digitization (e.g. by the 1983 introduced ABS) and a second wave of "integration of more than 90 electronics" in the car, Continental is now in the third wave: Networking with the Internet. The basic principle can be understood when compared to the oil industry: resulting data (= crude oil) goes through a Big Data analytics process (= refining) and is then monetized via services (= gas station).
With the system eHorizon, Continental already offers an electronic passenger which can predictively prepare the car to critical situations. But the company has vision of the "Better Car" which is far more ambitious: "zero emissions and zero accidents".
Ralf Lenninger emphasized the importance of three specific core competences for the third wave: "Listening. Understanding. And the flexibility to operate in different business models with different partners.” Especially with the Silicon Valley players such as Google, Tesla or Apple, a new innovation philosophy is entering the automotive industry: "Done is better than perfect." Create a fast prototype and then learn from it. But does that philosophy equally apply to safety-relevant systems which traditionally a governed by the motto "Perfect is better than done", and in which 99 out of 100 cases is simply not enough? The ideal situation would be a symbiosis of the agility of digital players and the soundness and safety of traditional industry players.
Oliver Konz, CEO of Würth Elektronik eiSos, confessed to be a big fan of the Starnberg Management Days - "Over the years I have learned a lot and also this time I already made many notes".
The gripping story of how he led his company from 6 to 6,100 employees today repeatedly made the participants feel that "this is not really possible": Focus on a mass of small customers rather than on the large and seemingly profitable ones, free product development assistance, 70% of the orders smaller than a packaging unit, significant stock levels. The growth story began with the entry into the business with electronic components which was back then dominated by Japanese companies; new entrants were not considered to have a realistic likelihood to succeed.
Nevertheless, a consistent and unparalleled business model emerged: "Today, there are almost no electronic components from Europe where we are not in." But the start was rather dry: Oliver Konz was asked by his former boss: "Look whether you can make something out of this business." There were a few small products, some competence and six employees. And there was no investment support. "So it was from the beginning the most important part of the strategy to decide which customers you want to have, and then align the model to it." As a trained physicist, he learned quickly to play the strengths of the Würth sales set-up.
The further growth path is clearly marked today – and backed by a vision and a strategy: Another doubling of business and a transformation from being a service leader to becoming a leading innovator in the market - with perfect and all-round high-performance processes.
Considering that it initially seemed that all this really could not work, the current annual growth rate of 20% is not bad ... Congratulations!
Of course, all the participants were very excited about listening to Marijn Dekkers, the former CEO of Bayer AG and since 01.05.2016 the Chairman of Unilever in London, and to learn how make companies grow and increase a company's value substantially: "From a company in crisis to Germany's most valuable company."
"Innovation is a top management issue. Top management cannot make strategic decisions and at the same time delegate innovation. Therefore, the innovation strategy must be part of the overall corporate strategy. This is why we have increased our R&D group budget from originally € 3 billion to € 4.5 billion." Another part of this is a culture in which small experiments can take place even outside the R&D area and in which "listening" and "being close to markets" are part of the corporate DNA up to the top of the company. After all, you do not want to fall behind competitors which have inferior products but are much earlier in the market.
German companies are today still amongst the most innovative, but the air becomes thinner. Many of the "Hidden Champions" are over 50 years old and new champions are added barely. "There is a lack of venture capital." And the excessive bureaucracy slowing things down, too: "Before you can even start a joint project with a university in Germany, a company in Asia has already applied for a patent." In total, Europe is missing a great cultural initiative for innovation. "With that, you could make much better use of digitization opportunities than today."
The final contribution enriched the discussion with an additional facet. In his concept of agile strategy implementation, Werner Seidenschwarz had initially identified the most notorious "killer" for digitization, innovation and growth: the budget.
When “lawnmower methods” and "December fever" are rampant in typical planning processes, and when at the same time the pressure on growth and profits is rising, innovation projects are often the first victims of cost saving measures. Roman Stoi, Professor of Controlling, Management Accounting and Corporate Governance at DHBW in Stuttgart and at the Steinbeis University Berlin, presented real-life examples of Robert Bosch GmbH and B. Braun Melsungen and showed how to significantly reduce planning efforts and simultaneously enable the company to make more agile decisions. Because: As in the preparation for a triathlon, which the passionate sportsman Roman Stoi described based on his own first-hand experience, "reality almost always deviates from the plan". With the introduction of the "Smart Business Plan", Bosch has reduced the planning cycle of almost 12 months down to 8 weeks. One planning year was completely abolished. Even more radical was the approach of medical device manufacturer B. Braun. Here, the traditional budget was replaced by a rolling forecast system that takes place 2 – 3 times a year. One characteristic is common in both systems: Personal incentives are not linked to the fulfillment with plans or forecasts.
The conclusion of Roman Stoi was: Given increasingly volatile market environments, agility and responsiveness of such modern planning processes are far superior to traditional systems (which produced spurious accuracy) and perfectly fit to the agile strategy implementation of Seidenschwarz & Comp. The long-standing association of Roman Stoi to the Starnberg Management Days and the organizers now also forms an excellent basis for a closer integration in joint projects and management trainings around the agile enterprise.
Just as with the agile strategy projects all threads come together at Dominik Veit, Managing Director of Seidenschwarz & Comp., he also opened the evening round by introducing another partner of the from idea to value® network: Ferdinand Prinz zur Lippe of Munich-based law firm SLB Kloepper, one of Europe's leading experts on the question "who does actually own customer data?" The legal frame conditions in Europe are quite comparable, but in Germany there is a far greater reluctance, if not skepticism, towards the provision of personal data for the use of services. Udo Lindemann, Chairman of the Senate of the elite Technical University of Munich (TUM) and Professor for Product Development, stressed - in addition to the entrepreneurial character of TUM - the international network with universities in the USA and Asia. As a result, his faculty has been a sought-after partner of students and companies over the past 50 years.
Kira Weidle, the junior speed queen in Germany’s downhill racing team, told the participants how she overcame her initial respect for "rushing into the depth", namely with a simple advice of her coach: ”Try it, then you’ll feel it!" With great charm, she discussed with Werner Seidenschwarz her first competitions with Lindsey Vonn, the co-operation with much valued Vicky Rebensburg as well as the subject of athlete data and doping controls. Participants now know that "steep" in a downhill run means "very steep" and that the training for the first race on one of her 35 pairs of skis is already running at full speed now in June. And one thing is certain: She now also has a lot of new fans among the present owners of companies and executives who were part of the evening round of the Starnberg Management Days!
One last question remains that Anton Huber raised to the participants: In a presentation to his Board sometime after the UGS acquisition, he was asked: "Are we done now?" The question was referring to investments and acquisitions. And he answered: "No, now is just the beginning of digitization and its implementation." What followed were many small innovations, acquisitions and integration steps.
That is why none of the participants had asked at the end of the 13th Starnberg Management Days: "Are we done?" Because everyone knew after the excellent contributions "It's just the beginning. And then step by step."
As in the beginning, when Werner Seidenschwarz presented the concept of agile strategy implementation to grow with digital inside ...
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