The development of the economy is currently stalling: years of growth, and now a crisis. In an interview, our Co-Founder and Managing Partner Robert Jacobi explains how companies can best deal with the crisis – and why difficult times can also be used as opportunities.
Mr. Jacobi, the long, steady economic upswing has recently been interrupted. Managers – and not only those in Germany – are faced with the challenge of dealing with this period of interruption. But how?
ROBERT JACOBI: I like to compare the current situation with a kayak trip. Let’s imagine that we’re paddling together in a kayak on a river in the wilderness. We’ve covered many kilometers on calm water, successfully navigated narrows through the right maneuvers, and picked up speed. But now we see a whirlpool in front of us, bigger than usual, the water frothing. What do we do? We take a deep breath or two, think about our technique – and paddle straight for it.
Of course the ride is challenging and difficult, and around every bend rapids can await us. The question arises: Who will best get through it? The ones who complain anxiously, or those who used the calm periods to get their kayaks afloat and optimize their paddling techniques?
Equipment and technique are crucial, because there are two forces at work here: The pressure to digitalize does not stop, just because the economic environment is becoming less secure. The combination of both these factors means that white-water journeys, to extend the metaphor, are becoming the norm in many sectors and industries – and courage, quick reactions and new knowledge are required for this development.
And how are German companies prepared for this journey?
Not all companies in Germany have done their homework. Not by a long shot! According to a survey by the industry association Bitkom, 60 percent of German companies place great importance on artificial intelligence for their future competitiveness. But only 12 percent are already using, planning or discussing possible applications of AI. The situation is similar with Big Data and the Internet of Things.
The economy is now making some people at the helms of companies think, “Save energy, concentrate on your core business, postpone innovation and change until later.” But that’s dangerous! Almost 50 percent of managers admit that competitors from their own industry who were early adopters of digital change are ahead. To slow down now for fear of getting a dent or two? That only increases the gap.
But what do you see as the alternative? How can managers keep their course in the current waters and even pick up speed?
I am of the opinion that the current crisis can be used as an opportunity. In any case, pausing or even discontinuing future projects is the wrong way to go. There is a smarter way to counter pressure to save money: by systematically reviewing your own innovation initiatives and projects. Which pay into the overall strategy – and which don’t? Are the projects meaningfully interconnected, and do they form a cohesive whole? Are successes transferred to the classic business? Isolated digital initiatives hardly help anyway if the entire added value needs to be optimized.
It even makes sense to continue investing and expanding. The valuations of younger companies and tech players, whether listed on the stock exchange or not, are no longer growing as strongly as in previous years. The opportunity to now complement start-ups that bring know-how, teams and markets should be seized. The decisive factor here is to take a closer look than usual: Acquisitions should not be made for the sake of managers’ egos or positive headlines, but very selectively – and with a detailed plan for what happens afterwards.
It is also important to avoid short-term returns. Not only the management, but also the shareholders should change their perspective: A company that continues to invest now – especially in research and development, and also consciously sacrificing short-term returns to do so – should increase in value in the long term instead of being punished. Those who only optimize the bottom-line figures will at best receive a boost in the short term, and will run aground in the medium term.
What relevance does the topic of data have?
A data strategy is absolutely essential. If you don’t have one, you finally have to implement one. Only those who know and understand their customers will win. This is no longer possible without a customized data strategy. Investing in suitable software, databases and specialized experts is a success factor that does not forgive delays. On the contrary: In no other area is it more challenging to stay ahead. Otherwise, the competition will pass you by.
What does this mean for the “war for talent”? Does less economic activity also mean fewer jobs?
In the second quarter of 2019, job offers for digital professions and MINT professions in Germany declined for the first time in years. This is not a good sign. Anyone who is convinced of their business model should act against the trend and invest in talent –especially when salary levels drop slightly. Companies waiting for calmer waters will be surprised, because in the whirlpool between new competitors from outside the industry and higher customer demands, it is impossible to find a balance.
It is always important to stay composed. Even if times are difficult – communication should be clear in difficult economic times. Massive job cuts should not be justified by digitalization, as has happened several times recently. Anyone who argues this way will need years to clean up the mess such a negative connotation makes. In the process, the important topic goes up in smoke.
Yes, all these things sound difficult. But the alternative of changing the current and putting an end to the pressure to change does not exist in economic life, any more than it does in nature. And there’s even a reward: navigating rapids no longer scares the trained kayaker – it’s even fun. All the more so when the kayaker comes out of the rapids with a head start.