Wednesday, 17 February 2016

"2015 was bad - and 2016 will be worse" - 6 Take-Aways from the Munich Security Conference

The Munich Security Conference (MSC) has become the major global forum for the discussion of security policy and - according to the participants - Wolfgang Ischinger, the CEO of MSC, even topped last year's event.

This February, he brought together more than 600 senior decision-makers from around the world, including heads-of-state, ministers, leading personalities of international and non-governmental organizations, as well as high ranking representatives of industry, media, academia, and civil society, to engage in an intensive debate on current and future security challenges.

My take-aways from participating in this year's MSC:

1. On Russia. Russian Prime Minister Dmitry Medvedev said, "We are back in the Cold War." His country's bombing of Aleppo and other parts of Syria has gotten the Russians back on the global stage through brutality that has caused new waves of refugees to emerge, which have the effect of destabilizing Europe, particularly Germany. It is unlikely that sanctions will be loosened. Moreover, Russia was seen as another destructive force alongside the Islamic State. Russia was also denounced for actively supporting right wing movements in Europe, with Pegida and Front National getting financial support and training from Russian foundations. In addition, the Russians were allegedly behind a large number of cyber-attacks targeting EU governments, agencies and companies. (According to Timotheus Höttges, the CEO of Telekom, there were reportedly one million attacks in 2015.)
2. On the risk of war. Russia and the US are supporting the Syrian Kurds in the fight against IS, but the expectation was that Turkey would intervene in Syria to stop the Kurds from using their new powers to establish an autonomous region. This raises the possibility of Turkish troops directly facing Russian soldiers within 30 kilometers of the border – prompting NATO representatives to expect an "Article 5" or Collective Defense scenario.
3. On Europe. Europe's foreign and security policy is viewed as a total failure – and the disparity between Eastern and Western Europe is seen as a real threat to the European Union.
4. On the United States. The US was less prominent at this year's MSC than in recent years. US State Secretary John Kerry did not provide leadership on any of the topics. Senator John McCain confronted the Russians openly but appeared to lack ideas on the way forward himself. The entire American delegation boycotted the gala dinner hosted by Bavarian Minister-President Horst Seehofer to protest his recent meeting with Russian President Vladimir Putin, as did the overwhelming number of German parliamentarians. Business leaders were pleased by the announcement that the Obama government will definitely bring in a draft of the Transatlantic Trade and Investment Partnership by fall 2016, which would make it mandatory for the new American president to ratify the contract.
5. On the refugee crisis. The widely shared view seemed to be that the current wave of refugees is not the peak but rather only the start of a migration trend that will persist for decades. Interestingly, experts and politicians agreed that there would be no effective way of shutting the external borders of EU – neither on land nor at sea – and that the EU would need to intervene in those countries receiving an overwhelming number of refugees. At the same time, many appeared to believe that the EU will unable to meet these needs in the short- and medium-terms.
6. On potential health crises. A panel dealt with other security threats, highlighting health as an issue. Pandemics are expected to increase, with UN experts estimating new kinds of illnesses with the potential to kill between ten to 20 million people in a span of eight to ten weeks, thereby destabilizing entire regions and causing further waves of refugees, spreading the illnesses to Europe rapidly.

Follow Torsten Oltmanns on Twitter: @TorstenOltmanns.

Monday, 16 November 2015

Eine Frage der Wahrnehmung

Es hat sich etwas grundlegend verändert im Verhältnis zwischen Unternehmen und ihren Stakeholdern: Aus einem Gleichgewicht der Kräfte ist eine Situation geworden, in der einige wenige Akteure mit entschlossenem Handeln, unorthodoxen Methoden und breiter Mobilisierung der Öffentlichkeit den Lauf der Dinge nachhaltig verändern können – und Führungskräfte, die dieser neuen Dynamik nicht Herr werden, um ihren Job fürchten müssen. Wer auf asymmetrische Konfliktstrategien und Regenbogenkoalitionen kritischer Stakeholder keine Antwort findet, droht an „Social Power“ zu verlieren.

Die gerade erschienene THINK ACT-Publikation „Eine Frage der Wahrnehmung“ leitet nun auf Basis eines neuen konzeptionellen Ansatzes konkrete Handlungsempfehlungen ab, wie Unternehmen und ihre CEOs den neuen Herausforderungen der Netz- und Mediengesellschaft begegnen und ihre Wahrnehmung aktiv steuern können. ManagementRadio sprach mit Torsten Oltmanns, Partner & Chairman Global Marketing bei Roland Berger über die neue Practice Group „Executive Communications“ und deren “Perception Value Management“-Ansatz.

Um das Interview mit Prof. Dr. Oltmanns hören zu können, bitte diesem Link folgen.
Zum Download der THINK ACT -Publikation "Eine Frage der Wahrnehmung", hier klicken.

Wednesday, 1 July 2015

Perception matters – CEOs in the public eye

Some six months ago, I wrote about how CEOs can keep their jobs with five new rules of perception that were the result of a study conducted by Roland Berger Strategy Consultants. Since the turn of the millennium, company performance is not any longer the most important indicator of a CEO's success. Nowadays the CEOs public perception and its effective management decide the CEO's future and often the company's market value too.

The case of the CEOs Anshu Jain and Juergen Fitschen shows that good performance does not necessarily leads to a fair and positive perception too. Both have resigned, after losing the stakeholders' general trust and in the fallout of the financial crisis.

Nowadays the perception of a CEO is either a liability or an asset to the company. CEOs have to provide orientation and guide the company and its employees. Poor perception does not only leave an impact on the CEO's career but also on the company's reputation and image too. Moral compass and integrity are becoming more and more important for all stakeholders and the general public. Due to the increasing participation of stakeholders, executives must persuade not only the supervisory board and the administration but also the public and mass media in general.

Executives should be able to determine weak points in their perception and develop personal plans tailored to situational use to avoid the discrepancy between CEO's vision (strategy) on the one hand, and the reality on the other. Today CEOs not only have to persuade the stakeholders but also mass media and the public in general. That’s what makes CEOs perception so important and valuable for companies and executives.

Perception needs to be managed professionally

This example shows that companies and CEOs need to manage their perception effectively. Roland Berger Strategy Consultants developed an analysis tool that enables companies and its executives to identify a CEO's current perception and develop measures to be taken as well as strategies using three different media channels for the improvement of a CEO's perception. This tool enables executives and decision- makers to compile pre-emptive as well as ad-hoc strategies to steer the perception in the direction needed.

To learn more about Roland Berger's new business unit "Executive Communications", with experts in professional perception management, see this recent article in PR Magazin and watch this video.


Tuesday, 19 May 2015

Investing in the digital future

Third of a three-part series on policy recommendations for the digital agenda in Europe

To date, Europe has invested far too little in the digital future. In the USA, venture capital equivalent to about EUR 17.5 billion is channeled into this field every year – compared to a meager EUR 3.5 billion for the whole of Europe. Nor is this figure linked to a shortage of capital: Around the globe, EUR 170 trillion of free capital is in search of sound investment opportunities. To reinforce our digital future, we must therefore create necessary conditions that make private investment in infrastructure and start-ups worthwhile. Suitable levers could be to stagger the licensing of internet services based on performance and security or to grant tax breaks on venture capital.

Governments and industry also need to engage in a structured discussion about sharing the burden of investment within the framework of digital transformation. All relevant players should be involved in finding out how huge pent-up demand for investment can be spread across providers, consumers and governments.

The public sector itself must likewise take action to work off the existing investment backlog in Europe's economy. Funds from investment programs should be used primarily to promote the digital transformation and exploit the resulting opportunities. For instance, it is urgent for more funds from the Juncker plan to be channeled into investments in digitization. This money could be used to achieve progress in many important areas, including:

·         The production of technical infrastructure for the digital economy (Europe-wide expansion of broadband networks)

·         The promotion of digital start-ups

·         The development of new instruments to mobilize private investment in the digital economy

·         Research into and development of a European cloud with high security standards

·         Changes to the educational offerings available to schoolchildren and students and for employee development, with the aim of acquiring, improving and updating core capabilities for the digital future

·         The promotion of flagship projects within the framework of the putative European economic alliance

·         The promotion of big data applications by the scientific and corporate communities

Creating access
Big data, cloud computing and e-commerce: These and other digital technologies are influencing the whole of Europe's economy and society. Access to them must be advanced, while damage and abuse must be prevented. It might sound tempting to cultivate a harmonized digital industry in Europe with subsidies, as was once done in aircraft construction. The cost would, however, be astronomical – and many times more complex than the successful example of Airbus. On top of these considerations, too much state intervention could stifle innovative capabilities in this rapidly-changing technological environment. It follows that the EU should, first and foremost, adjust conditions such that a European digital industry can develop itself, and that businesses are also free to source critical ICT skills with transatlantic and Asian partners, without this putting them at a disadvantage. In particular, these conditions must include a single European market, a legal framework for partnerships with the USA and with Asian countries, and a strict procurement law.

There is much at stake. Digital transformation presents huge opportunities for European industry. That means that policy has to speed up – as companies have to do, too. As Daimler CEO Dieter Zetsche put it: "Basically, the political and business communities must give clear visibility to digital transformation as a key future topic in Germany and Europe. Closer cooperation is urgently needed. Only then can political goals and business planning be reconciled with each other; and only then can a divergence between political statements of intent and the reality on the markets be prevented." That's exactly what the US and Apple did.

To learn more about the digital transformation of industry, click here.

Monday, 4 May 2015

Aligning European response and regulations in the digital age

Second of a three-part series on policy recommendations for the digital agenda

Europe's strengths lie in the diversity of its players and solutions and its outstanding industrial skills. Standards that make too little provision for these strengths and that make it more difficult to apply production expertise in the form of embedded software, for example, would undermine the competitive strength of European industrial companies and threaten the future prospects of the entire economic area. The interests of European industry must therefore be spelled out clearly, and regulations that have a bearing on competition must be formulated in such a way that the opportunities arising from the digital transformation can be exploited.

Europe's political arena should support this process. The National Platform for Electromobility in Germany is one example of how umbrella organizations, research institutes, companies and unions could bundle their interests. It would thus be welcomed if the EU Commission for the Digital Economy and Society were to set up a European alliance for digital transformation. For example, companies and governments could define a coordinated, joint approach to dealing with the American Industrial Internet Consortium. European interests will only be protected in the long run if Europe presents a unified response to America's current dominance.

Implementing a balanced regulatory framework. Aside from general standards, the regulatory framework too must be aligned with the digital age throughout Europe.

First, a harmonized, balanced and genuinely pan-European single digital market is needed in order to overcome current fragmentation. Such a market could slash costs and realize synergies through improved access to information, lower transaction costs, dematerialized consumption, a smaller environmental footprint and superior business and administrative models. Huge gains in efficiency could, for example, be realized by consolidating the telecommunications market. By way of comparison, Europe has 55 separate mobile networks, while the US has just five.

Second, the EU's future legal framework must guarantee technology neutrality and support the use of the most efficient technologies. One aspect of this is to provide harmonized mobile broadband spectrums in line with European demand. To place investment on a secure footing, stable rules governing the use of frequencies must be established throughout Europe. It is also important to give due account to the peculiarities of internet companies in market analyses and competition procedures. The aim must be to give a greater weighting to dynamic competitive effects (innovation).

Third, data protection for the EU has to be harmonized. The current European Data Protection Directive dates back to 1995 and is in need of reform. It must be brought into line with conditions in the digital world, quite apart from the issue of considerable differences in national data protection laws. Any provider who sells cloud computing services throughout Europe, for example, has to know and comply with all these different regulations. Instead, a new EU-wide data protection law is needed that should also apply to global players that operate in the single European market. It is therefore important to ratify the General Data Protection Regulation as quickly as possible. This legal framework must then also ensure that law enforcement no longer runs aground in the way it does today due to the lack of clearly defined competencies. The protection afforded to sensitive data must be aligned with different risks, albeit without causing innovation to grind to a standstill. Otherwise, the opportunities afforded by big data will be wasted.

Fourth, laws that are of relevance to the digital transformation must be reviewed. The majority of all current laws and standards were drafted at a time when many digital technology applications were still inconceivable. That explains why highly automated driving, for example, is incompatible with prevailing laws. The legislator must keep up with technological progress and review all valid laws to determine whether they are suitable for the digital transformation.

Fifth, antitrust laws must have a global orientation. The market for IT and electronic communications is global, so network effects play a crucial role. Other regions of the world are much more given to ex-post regulation than Europe is. In those regions, global IT and internet firms emerge that are not regulated until such time as they have reached a critical mass. Yet it is virtually impossible to build this kind of dominant market position from a European base. Although native European companies play in the same global market, they are bound by national antitrust laws. Thus, it is very difficult to achieve genuine economies of scale if large platforms are prohibited ex ante, instead of being reined in ex post where appropriate. On this score, the EU is vulnerable to players from other regions – witness the example of US video-on-demand provider Netflix in its competitive battle with Germany's TV channels. The latter were recently banned from creating their own platforms – the most recent of which was Germany's Gold, a streaming portal planned by public broadcasters ARD and ZDF – due to antitrust concerns.

Sixth, setting up a strict procurement law is mandatory. When security-related public contracts are awarded, all providers should be obliged to declare in advance that they are not bound by law or contract to disclose confidential data to third parties (in a "no spy" clause). Just how important this criterion should be to public procurement processes is evident not only from the recent NSA affair, but from as far back as the Patriot Act in 2001.

Seventh, creating a secure space for data transmission is a must. Telephone and internet traffic within the Schengen area should not leave this area. A secure space for routing could curb the third-party surveillance of communications and strengthen Europe as a location for data. As things stand, it is almost impossible for telecommunications players in Europe to know what route their e-mails and data packets take as they circumnavigate the globe, nor whether transit countries mirror or store their communications.

Eighth, the service quality in networks has to be guaranteed. Industry 4.0, cloud services, innovations in the internet of things and in machine-to-machine (M2M) communications are not feasible without fast and secure data networks. Critical applications in plant and machinery need a guarantee of high-quality network connections at all times. Accordingly, it is vital to be able to continue offering a high quality of service. Net neutrality should be regulated at the European level and defined in such a way that network operators have adequate freedom and incentives, and that innovation is not hindered. The competitive opportunities for connected manufacturing and products in the future are huge. Europe must take advantage of them.

Stay tuned for one more post on policy recommendations for the digital agenda.

To learn more about the digital transformation of industry, click here.

Wednesday, 22 April 2015

Speed up! How German and European policy can foster the digitization of industry

 First of a three-part series on policy recommendations for the digital agenda

Who invented the iPad? Was it Steve Jobs, or was it George W. Bush? According to Bloomberg columnist Mark Buchanan, the question is perhaps not as easy to answer as you might think. As his critical appraisal of the innovations by US computer giant Apple concludes, "Every one of the most important technologies in Apple's smart products, including the iPhone and iPad, were developed elsewhere and largely thanks to state funding."

You don't need to belittle the accomplishments of Steve Jobs to be able to agree with Buchanan on one thing: From the internet through to satellite communications, some of the essential enabling technologies for digitization would never have come into being without government funding. But the direct subsidization of technological projects is not the only way for the state to seed innovation. The way governments set up a regulatory framework gives them a huge amount of influence on what future technologies will be developed where and how fast they will become established. Look no further than the energy transition for proof of that.

The same goes for the digital transformation: Governments and policymakers can be instrumental in pushing the development of enabling technologies and enhancing the innovation capacity of companies. Owing to the substantially more favorable financial, legal and institutional conditions in the US and also in China, Europe's firms are at risk of falling behind in the digital race of the regions, in spite of the strength of the continent's industrial base. For the moment, at least, not one European internet firm has made it into the global top 20.

To these ends, governments should help Europe to pool its strengths and resources, improve the digital maturity of its companies, prevent a form of standardization that undermines manufacturing skills, encourage investment in the digital economy, and create points of access and platforms that can be shared by companies, research institutions and other organizations.

Pooling strengths and resources. Germany and Europe have no lack of associations and platforms to discuss the digital transformation. The Federal Government of Germany, for example, has come up with several industry-wide strategies to promote digitization. A Smart Networking Strategy is currently being drawn up for the Digital Agenda, the focal point of these efforts. The aim is to integrate cross-industry activities in an overall concept, the cornerstones of which were unveiled at the CeBIT trade show in spring 2014. Further projects and initiatives encompass Die neue Hightech-Strategie (The New High-Tech Strategy), Zukunftsprojekt Industrie 4.0 (Future Project Industry 4.0) or IKT 2020 (ICT 2020).

At the EU level, a whole range of additional strategies and actions can be listed – first and foremost Horizon 2020, but also programs focused on specific areas. The latter include ITEA for software innovations and Artemis for cyber-physical systems.

Systematically bundling these initiatives and focusing them on a series of cross-industry objectives would appear necessary to make them more efficient and effective. Two important steps would be: 

- To define a shared vision, common objectives and the most important areas of action in a digital transformation charter for industry

- To coordinate all ongoing and planned initiatives via a single project office

The National IT Summit that the German government is currently developing and refocusing in line with the seven areas of action laid out in its Digital Agenda could play a pioneering role in bundling the country's digital activities. Current efforts by the Fraunhofer Society, industry and the German government to create an Industrial Data Consortium are an important and proper approach to bundling and coordinating efforts and resources at least at the national level. Further steps must nevertheless follow.

Stay tuned for two more posts on policy recommendations for the digital agenda.

To learn more about the digital transformation of industry, click here.

Wednesday, 25 March 2015

Digitization of Industry now in full force

The digital transformation of industry will cause fundamental structural changes for whole industrial branches. This process will take place in waves, which will hit the different branches in various ways and intensities and may change them from the ground up. Following the first wave, the automotive and logistics industries are already in a far-reaching shifting process. The second, marginally weaker wave will trigger upheavals in the medical technology, electrical engineering, mechanical and plant engineering and energy systems industries. The third wave of digitization will hit the chemicals and aerospace industries, albeit more gently. European companies therefore have to act fast and develop a more profound understanding of what the digital transformation means and come up with new and sustainable business models.

The study "The digital transformation of industry" produced by Roland Berger Strategy Consultants in collaboration with the Bundesverband der Deutschen Industrie (BDI), examines the changes to value chains caused by new data, interconnectedness, automation and digital customer interfaces based on the example of German market leaders. The study represents the first extensive examination of the causes of digitization and quantifies the overall effect.

Key findings of the study

Among the key findings, the study presents both positive and negative scenarios. In a positive scenario Europe has the potential to create an additional value of EUR 1.25 trillion until 2025. If digital transformation will not be turned to Europe's advantage, the continent stands to lose as much as EUR 605 billion in the same period. The European Commission's goals under the Europe 2020 strategy to raise the share of industry in Europe from 16% to 20% by 2020 would clearly not be achievable in the negative scenario.

These radical changes open up new opportunities for the existing market players as well as for non-industry players such as those in the information technology sector. Established firms and industry leaders could quickly fall behind as a result. Market players from outside the industry who possess a high level of digitization expertise could come in and replace them in lucrative parts of the value chain.      

Recommendations for Europe's future industry

Companies need a comprehensive understanding of the new value-added potential afforded by digitization and how it can be utilized. Not only efficiency and costs have to be improved; and optimized new business models will also have to be created.

Europe needs a counterweight to the industrial Internet Consortium dominated by the United States. Therefore businesses and European governments must commit themselves and define common standards that accommodate the strengths of the German and the European industries.

The success of digital transformation depends on the installation of no-gaps broadband networks. Simultaneously, regulatory steps must enable the high- quality of service for mission-critical applications. Europe needs an effective and powerful infrastructure as a backbone if the companies want to stay competitive in the long run.

If Europe wants to implement the digital transformation of industry, successful collaborative action is needed. It must rigorously focus its investment programs on digital transformation, re-establish its own information and communications technology competence and foster a virtual digital valley as a counterpart to existing digital centers in the US and in Asia. Initiatives such as Terra Numerata from Roland Berger Strategy Consultants can help to improve the way the digital transformation is coordinated in Europe.

To learn more about the digital transformation of industry, click here.