For 10 years now, Accenture has been extensively analyzing the development of Germany’s largest companies. This year, Accenture looks back at the decade 2007-2017. Which industries matured and expanded over that period? What strengths do companies at the top of the German economy demonstrate? Where are the weaknesses of the top companies compared to global competitors? Accenture’s most recent analysis of Germany’s top companies aimed to answer these and other questions.

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4 insights about the future of the German economy

  1. Top500 – Gain strength through digital innovation
    The German economy has to ensure that its automotive industry maintains its worldwide leadership position. However, the industry is facing an imminent change in technology, as well as value chain disruption. New services and value propositions for a forward-looking mobility must be developed now. One example is vehicles that drive autonomously without causing accidents. Related to this is the development of new business models based on intelligent products and smart services. The German automotive industry will only be able to defend its pole position if it develops new capabilities in digital technologies, including artificial intelligence.
German companies want to invest in innovation. The majority are focusing on the Internet of Things and smart sensors, as well as artificial intelligence. Other investments are being made in blockchain technologies and augmented or virtual reality
  1. Generate growth with new business models
    If the leading German industries want to maintain their international competitiveness, they have to develop new, future-oriented and easily scalable business models. In the United States and China, technology and platform companies already followed this strategy and succeeded in climbing to the top of the value chain. Things are different in Germany: SAP has been the only company over the past 10 years to establish a relevant digital platform model in terms of revenue generation. As of now, Germany’s top companies are lacking the vision and courage to design open and multilateral ecosystems.
Although German companies have already developed platforms, most are – unlike platforms of their international competitors – mainly closed, unilateral systems.
  1. Create strong banks that are internationally relevant
    Germany’s large companies need an innovative banking industry to enable their digital transformations and to stand their ground against new competitors. However, the reality is that German banks have clearly lost their relevance since the financial crisis of 2008/2009. Their market capitalization provides proof: Germany’s largest banks are lagging far behind the top international banks. Today, the German banking sector has lost the ability to build businesses – in part because it does not have the skills to support digital initiatives. There is also a lack of flexibility to develop new financing offers. This puts German companies’ ability to set up new business models at risk.
In terms of market capitalization, German banks are far behind. While the top- ranked bank, JPMorgan, records an impressive market cap. of €309 billion (US$354 billion), Deutsche Bank is valued at a mere €32.8 billion (US$37.5 billion).
  1. Focus on people – increase productivity with artificial intelligence
    The Top500 companies will only develop business models that are fit for the future if they invest in new technologies, while enhancing their staff’s abilities and using artificial intelligence to increase their productivity. This means that top management has to coordinate its technology investments with the capabilities of their workforces (upskilling). Automation is successful if it boosts productivity and provides new opportunities for workers to generate higher value in the workplace. Skills like leadership, critical thinking, creativity and emotional intelligence must be developed.
Board members in German companies think that only a third of their staff is ready to work with artificial intelligence. Almost half of them see a growing skills gap developing. The question is whether they will take the actions necessary to close this gap.

Conclusion

It is imperative that the leading industries in Germany – with the automotive industry leading the way – defend their top positions on a global level. That is especially true since new competitors from China and the United States are likely to go on the offensive with disruptive business models. However, the German industry’s odds are not bad. The Industrial Internet of Things is just now being developed. Data generated from it has a much higher value than data from social media or e-commerce platforms. The opportunity for German industry lies in scalable digital products and services that offer new, personalized experiences for their customers. If companies can achieve this, the famous quality statement “Made in Germany” will turn into the digital quality label “Operated by Germany.” The German economy needs an ambitious plan that specifies the milestones required for setting up a national infrastructure with global reach – similar to China’s roadmap, but with content that reflects Germany’s culture, value systems and economic basis. A “Digital Germany 2025” plan would mark a major step forward on this journey.

"We must devote all efforts to maintain the enormous strength of the automotive industry and also to strengthen the ITC and financial sectors."

–FRANK RIEMENSPERGER, Chairman – Accenture Germany

Frank Riemensperger

Chairman – Accenture Germany

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