From book printing, light bulb, aspirin, telephone, automobile, X-ray to the world famous “Currywurst” – this country has produced epoch-making inventions that have changed the lives of people and mankind. Inventive talent, precision and perseverance, entrepreneurial virtues that are considered as typically German, made these and other innovations possible and gave us prosperity and a leading role in the world economy. In addition to a few major conglomerates, they produced countless so-called “hidden champions,” primarily family-owned companies of small and medium size.
As a matter of fact, the German mechanical and plant engineering sector, which is predominantly made up of small and medium-sized enterprises, has been regarded as a showcase industry for decades and is often rightly described as the backbone of the German economy. Today, it is the largest industrial employer as well as a training provider and the second most important export sector. Everything in perfect order, you might think – keep it up!
Hardly: In the 21st century, Google, Paypal, smartphones, WeChat, Bitcoin, TikTok, and most recently mRNA are revolutionizing the world, and none of these innovations come from German or European territory. Not really surprising, considering that 500 years ago Portugal was the leading seafaring nation, 100 years ago Great Britain was the leading shipbuilder, 50 years ago the Soviet Union (USSR) was the second largest world power; just over 30 years ago it crumbled with the Berlin Wall. Ten years ago, Germany relinquished the role it had held for more than half a century as the world’s leading exporter. What has long been familiar to economists worldwide, we poets and thinkers – and engineers! – have to learn painfully: Nothing lasts forever!
It’s obvious: Data is the most valuable raw material and source of wealth today, just as oil once was – and artificial intelligence (AI) will inexorably revolutionize the industrial economy, just as the steam engine and electricity once did. The sheer inexhaustible efficiency potentials were underestimated – then as now – here as well as elsewhere. But others have invested before us and created polyglot economic giants with minimal staff and maximum profit, whose financial power could “snuff away” “our” classic industries with one breath or enslave them to a “de-cliented” supplier museum.
It seems inevitable: Our children’s children will tell their grandchildren about the former heroic times of German and European inventiveness and will encounter incredulous listeners, while the nanny-robo, programmable only in perfect Mandarin, spices the food and sets the table by means of miniature drones, made in Mongolia, while hawking the NFTs from the Dodgecoin depot, which are doubled in value every 24 hours, via Alexa in crypto format.
This is probably how Monty Python or Quentin Tarantino would satirize the future, but – seriously asked – what path must the “old economy” take today in order to have a say in shaping the world of the next generation? Because one thing seems certain: as long as people live, consume, move and feed themselves, the most efficient machine technologies will still be needed.
Olaf J. Müller believes that four fundamental things need to be understood.
- GO GLOBAL OR GO EXTINCT
Just as the beloved corner stores once gave way to loveless giga-shopping malls, technologically leading machine builders who are content with a niche existence and a regional footprint will sooner or later be absorbed by the market. A selective presence in traditional markets is not an option; the unconditional basis for lasting success is to give top priority to all growth markets. - SERVICE IS KING
Today’s hidden champions may have achieved their past successes as the best machine builders. In tomorrow’s Champions League room is reserved only for the best service providers able to support customers in their value creation more reliably than anyone else. Globally available OEM service, 24/7, is the duty here; first-class machines are the add-on. Those who put the customer at the center of everything by committing to such performance promise will prevail against any competition. - DIGITAL = EFFICIENT and viceversa
Let’s demystify the buzz word of the decade: In the first step, digitalizing means nothing other than using the most efficient means and methods for all company processes. This is standard for development and manufacturing via CAD and CAM, as well as for invoicing and accounting via ERP systems. Digital service offerings such as condition monitoring, remote maintenance and VR-based training modules provide customers enormous efficiency potential. Nevertheless, they are the exception throughout the industry and differentiate today’s true PREMIUM providers from the mediocre. - DISRUPTION IS SEXY
You may like the idea or not; but it also applies to mechanical engineering: data-based business models and AI-based technologies will change our industry permanently – and by the way: they are changing our customers’ ecosystems at the same time. Whether owner, company board or investor – every responsible manager must decide for himself and for his business whether he will proactively shape this change himself, or whether others will do it for him. UBER yourself before you get KODAKed.
Executive Summary: Digitalization and globalization of the business model, are existential cornerstones of corporate strategy for every German and European SME in mechanical engineering that wants to continue to play a significant role in the near and distant future. Loosely following a global DIY furniture supplier of Swedish origin who launched a slogan become cult in the 90’s, Olaf J. Müller urges his customers to drive the digital transformation of their own business model with vigor and with the joy of innovating “without putting the screwdriver down”. He supports owners as well as executives in medium-sized mechanical engineering companies as an advisor or supervisory board member.