Reorientate and accelerate
Competition for the best starting positions after the economic slide
- What are the lessons learned from the crisis?
- How to differentiate in tense times?
- How to take advantage of the tension for a great leap forward after the crisis?
- How to navigate “beyond the models“?
The topic of the Starnberg Management Days in 2009 was reorientate and accelerate. Eight renowned speakers and 130 participants came together on the 27th and 28th of October 2009 in Starnberg, to discuss not only the lessons learned from the financial and economic crisis, but also how to get ready for the time after the slide. The presenting speakers were very honest about the solutions they elaborated and how challenging it was to deal with critical situations in the company. Some of the companies were directly affected by the crisis, others only indirectly, some not at all. This resulted in various angles from which many implementation ideas came up, that were further deepened in the plenary and in numerous private discussions.
How the financial crisis initially started and then spilled over into the real economy is from today's point of view already somewhat bizarre. Both Werner Seidenschwarz, the CEO of Seidenschwarz & Comp. GmbH, Starnberg/Shanghai and lecturer at numerous internationally renowned universities, as well as Juergen Fitschen, outstanding representative of a "solid rock”, pointed this out at the start of the event.
In a free lecture and with great independence, Juergen Fitschen, a member of the board of Deutsche Bank AG, was showing the financial and economic crisis from the perspective of the largest and most successful German bank. Despite initial signs of recovery, Mr Fitschen was, especially in view of the persisting credit bubble and the overcapacity in the industry, very clear: "We are in the midst of the crisis." In particular, the trust between enterprises of the real economy and banks has not yet normalized. To better equip the system against crises and to prevent future encroachment on the real economy, improvements by all market participants are needed. Transparent, easier banking products, less bonus driven pay systems, increase of capitalization and risk management are some of the measures currently being worked on at the banks. Moreover, it depends on "smarter rather than more regulation," which should also include, in particular in the U.S., the "shadow banks". Besides the importance of these measures, Mr. Fitschen pointed out the need for a return of professional investors and bankers, but also companies and private individuals, to a "common sense" in balancing risk and return, since it can not be replaced even with the most sophisticated risk management systems. Despite all the ongoing and planned improvements, Juergen Fitschen could not rule out that a financial crisis will happen in the future, "Financial memory is a short memory."
Werner Seidenschwarz gained wide approval in the plenary when he suggested challenging the use of the term crisis in certain situations. A slump in sales might be weighted differently than for example the situation described in the speech where a young woman needed to undergo a liver transplant during pregnancy. Woman and child are now doing well. When reflecting one's own situation with such examples, it may well happen that the extraordinary complexity of a crisis, the typically unusual collective emotionalization and the handling of "fear laden" decisions, that one has to address as a leader and captain, will come more sovereign and with a helicopter view instead of getting caught too much in the daily rollercoaster of emotions. To keep a sense of proportion in turbulent times is a trait not given to all managers. Especially in tense times there is a constant danger that, for reasons of prominent events, even recently developed strategies are quickly put into question or that you run into one of the many decision-pitfalls. In conclusion, particularly in times of crisis when it comes to an "orderly formation flying at high speed, perhaps even in a new territory," inconsistencies in corporate governance, which most likely smoldered for some time but were covered "during good weather“, are quickly discovered. With the intelligent restructuring approach, as introduced by Werner Seidenschwarz, there is - after the first inevitable cost cutting measures - an approach for companies, based on a quick yet sophisticated business analysis, to reposition, refocus and then continue competitively with strengthened structures. Prominent examples show: "It is an art to find the right balance between pure cost cutting and intelligent restructuring. We can avoid a lot of scorched earth. "
“Be a visible leader“– a manager has to show himself during crisis! Wolfgang Dehen, CEO of the energy sector of Siemens AG, illustrated fundamental differences of leadership during growth and crisis. Improving cost position and competitiveness determine the actions of management. Although Siemens is expecting a "V-curve", meaning that a serious economic setback after passing through the valley is not expected: Siemens Energy is facing a serious paradigm shift. "After the crisis, all markets will be different. The old times are also gone for the energy market“. The rules of mature markets (e.g. automotive) also need to be understood in the energy sector and addressed accordingly. The "training" starts with the calculation. Wolfgang Dehen emphasized: In a competitive market, a "cost plus" approach does no longer work. Prices that include a large cost structure, multiple risk premiums and a huge profit bonus can no longer be enforced. Rather, one begins with the world prices and derives the costs allowed by the market. Early and countercyclical one can then work on lean structures. Then there will be leeway for development: "Operational excellence creates room for investments."
"The pressure in the market comes from below", i.e. from the current providers of low-cost products, "The path from bottom to top is easier than from the top down." Wolfgang Dehen sees the future in renewable energies. However, he emphasized the necessary balance (energy, centralized + decentralized, “bi-directional energy flow ") and highlighted the “systemic optimization”. An energy mix will be required in the future simply because of the power demand peaks and the different availability of energy capacity. "Wind and sun do not care for the electricity demand of consumers." On the other hand however, one can save a lot of money by consuming electricity at the right times. SMART technology (grid, meters, buildings, etc.) will make its contribution in the future on this matter. According to Wolfgang Dehen, the future energy mix will include, in addition to renewable energies (solar, wind, hydro, biomass), also gas, nuclear and "clean coal". Modern coal-fired power plants will be especially beneficial to China. Breakthrough projects like "Desertec” will play an important role in the future. Solar installations in the Sahara are to generate electricity for Europe. For many it is a very visionary project - for Wolfgang Dehen it is not more visionary than the construction of the telegraph line from “London to Calcutta" in the 19th Century: compared to the relative investment needs. A "green economic miracle" is possible. The market for "green technologies" is growing annually by 6.5 percent and will probably even replace the automobile as a lead market by 2030.
In the evening, the first day was rounded off at the bar. Jutta Munz, head of the children's charity organization Sternstunden of the bavarian radio Bayrischer Rundfunk, described crises situations from everyday lives: For example, when families break apart because one of three children is seriously ill and the family is overstrained to meet the situation. During crisis, surprisingly, Sternstunden is getting more donations than usual to help in such tragedies. Christoph Wellendorff of the Pforzheim jewelry dynasty Wellendorff sketched from a different perspective on how to solve the crisis of a Japanese empress, and how men can be heroes ... The fact that one can operate successfully as a family business for generations is secured in his family with four principles: 1 Sense of family always comes before self-will. 2. We love what we do. 3. Altruistic advice you get only from the family. 4. Responsibilities are, because of the family alliance, more clearly defined. These are rules which can also be transferred to other companies! This time, the athlete in the evening round was a relaxed Ricco Gross who, until two years ago, was still active and for several years winner at Olympics and world championships, collecting a total of 13 medals. He mainly held his naivety responsible for the fact that he has so far managed to avoid deep crises. He also showed this at the shooting range. Where one or the other participants still aimed, Ricco Gross had already hit five times ... The golden rule that was lived for decades in his teams was very simple, but perhaps for that very reason so successful: Do not blame other team members if it did not work out! It could have been you!
Marc Girardot, Managing Director of Global Automotive Practice of the Cisco Internet Business Solutions Group, outlined in his speech the need for a paradigm shift for enterprises today, particularly in response to the impact of the crisis. In the spirit of Darwin's "survival of the fittest" it is now more than ever important to adapt quickly to a changing environment and avoid a "natural" selection process. A special role is played by unforeseen events that fundamentally change the perception of “the world as such": So-called "Black Swans", events such as the current crisis in the automotive sector. The IT industry has always been - in contrast to other industries - more exposed to change than other industries. Cisco is responding to these challenges in its own way: With special business architecture, an intensively cultivated corporate culture and the ability to produce periodic innovations. Although now a company with revenues of $ 39 billion, Cisco actually still acts like a small enterprise. This ensures fast decision-making. A board system ensures that the cooperation of the various sectors works across regions. Every employee knows the Cisco culture; he carries it each day as an integrated brochure at his badge (!) and therefore very close to his heart. The innovation process is strongly driven by intense business acquisitions, which are probably unmatched worldwide. The success proves Cisco right. Regardless of two major crises in its history, Cisco has achieved an average growth of 20% p.a. since 1995. Despite the current crisis, the company holds about 35 billion USD in cash. However, after being asked by the audience, Marc Girardot could not say which banks actually have the money…
Friedrich Nitschke, divisional director of MINI within the BMW Group, demonstrated how MINI continued its success story despite attacks of aggressive competitors. The question "is it love?" got some scratches due to the crisis, but also in rough times the love relationship is answered with a "yes". MINI has created its own community and represents the premium in the small car segment. The market confirms this: "MINI is the most exciting premium small car brand in the world." MINI is extrovert, chic and integrative. Thus MINI offers its customers a feeling of life, a desire and it is not a status symbol, but brings people together. Outlining how the MINI brand promise is consistently translated into products, Friedrich Nitschke explained how emotional design is created, how the "go-kart feeling" is guaranteed and how the creative interior is being designed. New Minis will be transferred in just 20 months from the initial idea to serial production. This is achieved through the latest simulation techniques which also help to reduce the prototyping to a minimum. Despite all growth targets, the ultimate goal remains profitability. And this is backed by innovation. In the coming years, Mini will become a pioneer in vehicle communication. A Mini will speak with the driver and communicate more with the environment than any other vehicle in the world. Customers will be won especially with the possibility for individualization that is unique in this class: "Of the last 100,000 MINIs delivered, no two were identical!"
About the design of innovations in tense times, Peter Terwiesch, head of research and development of the ABB Group, held an equally tense speech in which he took the participants on a journey into the future of energy. From the global perspective of a leading technology group, and with the vision of Chief Technology Officer, he highlighted the stress field of market, environment and energy security which will shape the upcoming upheaval in the energy industry. That still only about 20% of primary energy is reaching the end-user is showing the enormous potential for improvement, in regards to energy efficiency as "low-hanging fruit" or by the introduction of "smart grids". The traditional path of continuous improvement in technology alone is not sufficient to achieve a breakthrough for the needed technologies. Rather, it is important to align the innovation management consistently on the "development of acceptable solutions while meeting the costs allowed by the market." Innovations do not necessarily need to be technology driven; often enough, the use of existing technologies in new applications is sufficient. One example is the highly successful development of alternative engines for container vessels; e.g. for a ferry project in Japan, the annual CO2 emissions could be reduced by over 60 million kg. Peter Terwiesch was convinced that an R&D boss can defend his budget against – in tense times especially demanding - controllers. His current success factors are: transparency and active management of the “return on R&D". As a result, the acceptance of extensive R&D projects in enterprises can be ensured even in critical times. It works for ABB.
Reiner Schüle delivered a report from the "eye of the hurricane” about the change of course and the 'new' everyday life of the automotive supplier industry. "If the automobile manufacturers have a cold, then the automotive suppliers have pneumonia. But what happens if the car manufacturers have pneumonia?" In an exciting report, Reiner Schüle, Executive Board Member and Vice President of Interior at Dräxlmaier Group, took the participants into the real world of automotive suppliers. He talked about how it all began with the first cable harnesses for the Goggomobil in the 50s and in which system worlds Dräxlmaier Group is involved in today, for example the Porsche Panamera. The company has undergone tremendous development stages, both regarding the products (invention of the first custom cable set) and the company (growth from 4,000 to 35,000 employees) within a decade. Most was done correctly: a clear growth strategy with a focus on the premium segment and the development of excellent products. Innovations were created which dominated the market and the performance of the owner-managed medium-sized business was gradually improved. A sophisticated supply chain management system was created which enables "just in sequence" deliveries in a range of "one piece per week" to "3,000 pieces per day". The business was adapted to the tough cost requirements of the market via "wage surfing" from Romania to Moldova. Actually, the company was perfectly prepared for all storms of this world. Until the hurricane came!
"We found ourselves in a free fall starting in October 2008." A sharp decline in orders and many cancellations hit the company hard. In those days, "Cash is King". The first steps that have been taken were directed at securing liquidity: Cost-down from direct and indirect material costs to personnel costs. This had to be done quickly and it was only possible with the involvement of all employees. 90% of employees agreed voluntarily to the measures when the owner Fritz Dräxlmaier personally explained the difficult situation of the company to them. An efficiency improvement program was set up in parallel. Through 6 work packages everything from sales to development to the complete supply chain process was reviewed in regards to opportunities for improvement. But also the strategic direction was discussed again. Is the focus on the premium segment the right direction on the long run? In which areas do innovations need to be driven forward? At the end, a 5 step plan was developed which the Dräxlmaier Group is now using to come back to its former strength. The bottom of the crisis has now passed and we have survived it because of the long-term and stable financial health. Now "the future will be shaped determinedly,” said Reiner Schüle, combined with the art of translating the high quality image that is attributed to Dräxlmaier to the growing lower-performing segments where the company's success began. But one who does not talk around things, like Reiner Schüle of Dräxlmaier, will also conquer new target segments.
Finally, Wolfram Mannherz, owner and CEO of the revived sporting goods manufacturer ERIMA, reached the heart of the participants with his passion. He conveyed the “ups and downs“ of a brand with tradition that was almost insolvent but could be developed into a happy ending. In 1974 Germany became World Champion in ERIMA jerseys. Top teams in ERIMA jerseys like Bayern and Moenchengladbach coined whole generations of footballers. Although the brand was founded in 1900, it lost almost all its shine and “became unknown." After the acquisition by Adidas and the withdrawal of ERIMA sport contracts, a rapid and severe decline began which could also not be stopped by trying to go into new lines of business. That just another great German brand did not disappear was not necessarily to be expected. But Adidas was responsible, invested, installed with Wolfram Mannherz a new management and gave it time. The road did not lead to the large customers where all sport brands focussed on, but the team sports, to sport clubs, which have clear requirements for team sport equipment: Specific modifications of the products, the dealer as a business transformer, products on stock and fast delivery, supply capability of up to 4 years for the collections. In a tough reorganization, the product range of the brand was realigned “based on target pricing to the old strength team sport”, and consistent cost management “up to a ban to use the elevator.” “A clear vision, honest and open communication with the team - especially in a crisis” and long-term partnerships with suppliers created synergies and a sense of anticipation which was followed by the people. In those times, today's corporate slogan “Win Together” was filled with heart and soul and is until now standing for the products and the corporate culture. Today, ERIMA begins to emerge again with renowned partners such as the TSV Lemgo or with Florian Hambuechen. ERIMA works with passion, even with partners who also create "suffering" like the 1860 Munich (see Starnberg Management Days 2008), but which also is a resilient brand. Just as ERIMA with his savior and entrepreneur, Wolfram Mannherz.
The 7th Starnberg management days gave a whole series of answers. The implementation program of Seidenschwarz & Comp. is called intelligent restructuring from idea to value®. We look forward to seeing you again!