I have just spent a week in Germany, a day in Berlin then five days in Hamburg. I attended the opening of the Berggruen Museum, a spectacular collection of Picassos and Braques in Berlin. This was followed by the Edelman Leadership Meeting in Hamburg. In the course of the week, I met former Chancellor Gerhard Schröder, Fresenius (client) CEO Mark Schneider, ARD anchorman Ingo Zamperoni, Dr. Klaus Schüler, the National Secretary of the Christian Democrats and Philipp Missfelder, Christian Democratic Union Defense spokesperson. Here are a few observations from these discussions:
- The German election on September 22 will likely be a very tight race. Should the incumbent Merkel and her party win, they may achieve a plurality but not a majority as her coalition partner, the Free Democrats, have faded in the polls. Although, it is possible to see a combination with the Green Party or a classic grand coalition with the Socialist Party.
- Merkel is very popular personally and professionally. She has allowed her personal side to emerge, particularly in her visits to towns affected by the floods in recent weeks. She is seen as especially capable on European issues, holding the purse strings tightly on funds for beleaguered EU states such as Greece.
- German mid-sized companies have emerged as global leaders in their narrow manufacturing niches. According to Schüler, there are 1,500 German companies in market leadership positions, 70 percent of which are in manufacturing and 70 percent family owned.
- The Hartz Reforms of labor a decade ago have been the critical factor in the reestablishment of German competitiveness. The country has benefitted from productivity gains, as wage increases have lagged. The view is that German companies now face rivals on the global stage, not in Europe. R&D has also been vital in this gain in status, with research spending now at 3 percent of GNP.
- German MNCs are the second most-trusted national headquartered companies in the world, according to the Edelman Trust Barometer, perhaps in part by a localization strategy. Fresenius has moved from being a Mittelstand or mid-sized player to a global leader by “trying to be a local player in emerging markets,” said its CEO Schneider. The company starts local manufacturing early on to give local clients assured supply at the right price. Fresenius also maintains the brand names of companies it has acquired (Kabi is the brand for China). One anecdote; our guide at the Hermitage Palace in St. Petersburg said that Siemens began to supply the light bulbs over 100 years ago.
- On running a MNC, Schneider said that there are three non-negotiable aspects: Product Quality; Integrity of Financial Reporting; Ethical Behavior Linked to Corporate Compliance. He and his senior team travel regularly to the markets where he sees his people and customers. In fact, he spends time out in the field with his sales force or nursing teams to know the product “from the sharp end.” Schneider acknowledged that there are centrifugal forces that come with growth of a company. “You have to be prepared to let go while retaining the core principles.”
- German media is going through the same transformation as in the U.S. FT Deutschland was closed earlier in the year, while print media struggles to attract advertising. ARD is an independent TV enterprise created after WWII on the model of the BBC, funded by a Euro 17 per month charge on every TV home. ARD like many broadcasters is losing audience for evening news; down 10 percent in its 8 P.M. news hour in the past two years. But the 10 P.M. news has its highest numbers in 20 years because “we are doing more reporting and adding value to the audience beyond the facts,” Zamperoni said.
- The broadcasters are changing their view of the business. “We now have an app for mobile phones that takes you directly to our news product, which we have tailored to 100-second bites. We do not hold the news; we put it up right away. We are doing more print content on line (in fact the print media is suing ARD for exceeding its mandate). We have expanded the role of the anchorperson, interacting live with the audience via Twitter, coordinating live feeds from breaking news events such as the terror bombing in Boston,” said Zamperoni.
A decade ago, The Economist had a cover story on Germany, describing it as the sick man of Europe. Today it is able to pay down its federal debt while still funding bail-outs of less competitive EU members. All parts of society seem to have bought into the notion of a Germany that works. Now, the question is whether the shadows of the past will inhibit the country from taking its rightful position as one of the most important players in global governance. Germany needs the EU but should not be inhibited by fellow members in achieving its destiny of leadership.
Richard Edelman is president and CEO.
Image by Andrew Mason.