The systemic competition between China and the United States puts Germany’s top companies in a precarious situation. On one side there is a state-controlled economy that increasingly invests in digital platforms. On the other, there is a start-up industry—financed by vast amounts of private capital—that is reshaping competition on the world stage. And right in the middle, there’s Germany. Leading German companies are at risk of dramatically falling behind: They might relinquish their roles as innovation pacesetters and, instead, become component suppliers for the new global market leaders. What steps do the Top500 have to take now to avoid that scenario? Accenture has identified four actions that will enable Germany’s current global market leaders to maintain their positions in the years to come.

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4 building blocks: How Germany’s leading industries can secure their global market leadership

  1. A vision for the platform economy
    In the future, value potential will increasingly lie in the services that make conventional products “smart“. These services provide the data that companies can use to continually optimize customer value and manufacturing processes. To take full advantage of the opportunities that lie ahead, leading German companies must collaborate via digital platforms. These platforms become the central customer interface and the “orchestrator” of the value chain. Leaders of German companies are open to participating in the platform economy. And their prospects for success are excellent, given the treasure trove of valuable data at their disposal—especially in the automotive, machinery and plant engineering, and medical engineering sectors. But they have to make their moves today. Their willingness to embrace the platform economy must now turn into action.

One-third of companies in Germany plans to increase their platform investments in 2020
How is your company's investment in digital platforms developing?

In terms of financing, companies are heavily dependent on the increasingly weakened banking sector. During the scaling phase, high-growth companies often need capital from abroad.
  1. A path from innovation to scalable business models
    To be global market leaders, German industrial companies have to remain innovation leaders, too. In terms of innovation, Germany has traditionally had much to offer, thanks to its numerous high-performance scientific institutes. What is difficult today, however, is transferring inventions from the world of science to industry and subsequently designing products that are marketable with business models that are scalable. For the time being, the ability to scale new digital technologies is still in its infancy. High investment costs present one of the main obstacles. For investment financing, companies are heavily dependent on the German banking sector. But that sector is losing relevance on the global stage. Therefore, high-growth companies have to rely on foreign capital to scale their innovations.

High investment costs and concerns about data protection are the biggest obstacles to using Industry 4.0
What obstacles do you see in the use of Industry 4.0 applications in your company? (in percent)

Although German companies are willing to invest in digital platforms, the amount they will invest in 2020 will likely be less than they invested in 2019. Intelligent products, smart services and new value propositions represent the greatest opportunities for differentiation.
  1. A public sector that is digital by default
    If the German public sector, with its five million civil servants, diligently pushes forward with digital transformation, it can become the pacesetter for the whole of society. That would be great news for German industry. Because the goods and services that public authorities in Germany procure are valued around 350 billion Euros, public services could set an example for massive digital scaling. At present, there is no lack of capital for ambitious infrastructure projects. Yet widespread investments have failed to deliver expected results. A functioning digital infrastructure, however, is the basic prerequisite for the successful digitization of German companies and, by extension, their future global competitiveness.

Germany far behind in e-government 2019

The German government’s digitization potential is enormous. However, its implementation speed is slower than in other EU countries.
  1. European digital sovereignty
    To an increasing degree, only those companies that can offer their products through digital platforms will maintain their position in the value chain. Particularly important are cloud infrastructures, extensive and fast data networks, data markets and a secure identity infrastructure. US and Chinese companies have a huge head start in these areas because they invested billions in their cloud solutions early on. It will not be easy for European infrastructure providers to catch up. It is impossible to develop a globally relevant, market-leading platform without a competitive cloud infrastructure. Therefore, it will be necessary to understand how sovereignty can be guaranteed even when non-European infrastructures are used.

At the end of the 2010s, the track record of digital transformation in Germany is hardly encouraging. To date, a lot of plans have been announced, but few have been implemented. Accenture believes six building blocks can be used to jumpstart Germany’s stalled digitization initiatives and keep German companies on course for global market leadership.

Entrepreneurship

Germany’s Top500 need more digital skills at C-level and more courage to pursue ambitious plans.

Ambition

Companies need ambition to develop and scale bold digital projects. Hundreds of isolated projects won’t work.

Strategy

Companies need to optimize their core business to open up more investments in innovation. Collaboration with other companies is key.

Digital infrastructure

Cloud solutions, identity systems, digital marketplaces, and fast data networks are critical competitive factors in platform economics.

Ecosystems

Scaling innovative business models requires ecosystems based on digital infrastructures.

Platforms

Market-leading platforms that Google, Facebook and other leaders established in B2C markets provide a roadmap for Germany’s Top500 companies.

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Germany’s Top500 need the courage to completely rethink their business models and find their rightful place in the platform economy.


Frank Riemensperger

Senior Managing Director, Accenture Germany

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