Germany: Courage to innovate

Germany is still a powerhouse: last year, goods and services worth 1.28 trillion euros were exported. The consequences are congested ports and the notorious shortage of skilled workers. Some countries would be scrambling to solve problems of this kind.

But if you look at the news and observe the changes in politics, you will find little of the enthusiasm just described. Why is that? And who is right? These issues are examined below.

Made in Germany

One of the triggers for this article was a Special Report on Germany in the Economist. This report, which is well worth reading, was not only about the industry, but also about many other topics. But here I am primarily concerned with the implications for the industry.

So what are the reasons for the impressive trade balance? I see three main reasons:

• History & training - Germany has always been a country of technicians and engineers. Even today, the country still draws on this reputation and the training system is still well suited to technical professions - despite all the reforms and prophecies of doom.
• Established products - This point goes hand in hand with the previous one: Many of the export hits from Germany have been around for a hundred years: Cars, chemicals, mechanical components, etc. This knowledge advantage will not be made up so easily.
• Reforms of the 2000s - Even if many people don't like to hear this: Schröder's reforms at the beginning of the 2000s were a great economic success. What this meant on the human side remains to be seen. But within 10 years, Germany has transformed itself from the "sick man of Europe" to a superstar. Whether this is really down to Hartz & Co is still being debated.

Disruption

The buzzword "disruption" calls into question whether this success story will end well. All three points are affected: We can no longer rely on history. Established products (such as cars) are being reinvented with new technologies and new business models. And as we have already indicated, there will be questioned the extent to which the success of the German economy can be attributed to the Harz reforms. is.

A good example is - once again - the automotive industry. The automotive industry is an excellent case study, as it accounts for one in seven jobs in Germany and 20% of exports.

The German automotive industry accounts for seven percent of all jobs and generates 20% exports [tweetthis]The German automotive industry accounts for seven percent of all jobs and generates 20% exports[/tweetthis]

The "threat" is also very visible in the automotive industry: Daimler's autonomous vehicles must every 3km, with Google every 9000km. Tessla showrooms have been popping up in many major cities since 2012, demonstrating that electric cars work. Other industries are not doing much better, but the whole thing is just very visible in the case of cars.

On the market

German industry is certainly innovative. Daimler, for example, developed an autonomous vehicle back in 1986. The buzzword "Industry 4.0" also comes from Germany. So don't we need to worry after all?

According to the Economist cited above, the problem is German perfectionism: how Moritz Mueller-Freitag German companies only launch products on the market when they are perfect according to their own quality standards. This is certainly in contrast to the US mentality of allowing products to mature on the customer's premises.

But I see a different, albeit perhaps related, problem: we Germans are good at developing technology, but bad at bringing products to market. And so, unfortunately, many innovations remain in research departments or become half-hearted products that inevitably fail.

We need a start-up culture

We are seeing a lot of movement in the market, so I am optimistic. Even large corporations are starting to become more agile and courageous.

However, I see a structural problem, the urgency of which has not yet been recognized in my opinion: Innovation today often comes from small start-ups. Many corporations are innovative through acquisition. However, there are far more acquisition targets in the USA than in Germany. The start-up landscape in Germany is very underdeveloped. Venture capital is allocated much more hesitantly here than in our Anglo-Saxon neighbors.

Incidentally, this applies not only to innovation, but also to many other aspects of a healthy economy. SMEs are the backbone of the German economy. But SMEs used to be start-ups. Without the corresponding supply, Germany is lost.

Photo by David Cohen on Unsplash