“Car Guys” vs. The Disruptors: Germany Week in Review

 

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CBS students at BMW Welt planning next “big idea”

Dr. Wolfgang Bernhard ‘88 is a proud man. He’s fit, maybe 5′ 11″ tall, his sharp chiseled facial features and touch of grey hair complement a finely tailored navy suit with a silver pocket square. When he speaks, he is assertive and charismatic, a commanding voice easily fills a room of 30 MBA students. Most importantly, Dr. Wolfgang Bernhard is a “car guy”.

Bernhard was the former Chief Executive Officer of Mercedes-AMG GmbH and would later hold various positions, including being a member of the board of management of Daimler AG, before retiring in 2017. Bernhard embodies the classic German ethos of discipline, hard work, first-one-in-last-one-out, and the “no bullshit, do-it-yourself” mentality. As an executive, he was not afraid to get his hands dirty by often taking monthly shifts on the Mercedes manufacturing line. “Know your business,” he tells us with a serious look, but slight smile. He continues to talk about German-engineering excellence and how hyper focus on attention to quality and improvement is unmatched. As he speaks to us, he is calm and composed…that is, until the topic of Tesla comes up.

“You need to be really good at manufacturing…they’re not. They’re just an IT company…that moved into auto…and they talk about the hell of manufacturing…that’s what it is! That’s what it takes to get the job done!  And for them it’s hell and for us it’s art! For hundreds of years we have been honing that art!” he states with just the slightest hint of red in his face. The subtext of his words are more powerful than the literal criticism. This wasn’t just about Tesla versus Mercedes, massive disruption in the auto industry, or even Elon Musk’s hubris…it was about something much deeper…the German identity.

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Dr. Wolfgang Bernhard – Photo by Daimler AG on Flickr

Bob Dylan famously writes, “Come gather ’round people wherever you roam and admit that the waters around you have grown…you better start swimmin’ or you’ll sink like a stone, for the times they are a-changin.” While not as profoundly German as Nena’s 99 Luftballoons, Dylan’s quote encapsulates the point of contention at the heart of the German cultural and business identity as we approach the end of a decade. Dr. Wolfgang Bernhard’s career represents what has made the German auto industry so successful in the past, a commitment to excellence through laser-focus on the singular objective of car quality. But in a rapidly changing automotive and technology landscape, does putting on blinders stifle unique opportunities for innovation?

This is, of course, the opinion of Dr. Volker Bilgram, of HYVE – The innovation company, and Dominik Böhler, of the Technical University of Munich. In both presentations, the term “car guys” was used to describe the old school German state-of-being defined by risk aversion, over-engineering, and bureaucracy. This mentality was in straight opposition to the new wave of German startups that espouse bold innovation, human centered design, and flat decentralized work culture.

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Paul Günther of Proglove

Founders of Proglove Paul Günther (product engineer) and Thomas Kirchner (CEO) embody this new wave of German startup culture. Kirchner is a former IDEO employee and with Günther, a former BMW employee, created a smart glove for industries. The glove was created through rapid prototyping and iterations incorporating continuous feedback from manufacturing workers. Contrary to the culture espoused by Wolfgang at Mercedes, the culture at Proglove empowers workers to choose when they start their days and provides access to unlimited vacation. But the auto industry isn’t the only sector German disruptors are attacking.

A short flight to Berlin, brought us to a fintech start up called Number 26 (N26). N26 is a mobile bank that offers millennial friendly features such as cash from any ATM without fees, instant account management and security, and real-time notifications. A week after CBS visited N26, the company closed a $160M round of funding  which is one of largest European fintech investments ever and clearly causally linked to our visit. N26’s success comes as a revelation as traditional European lenders, such as Deutsche Bank AG, continue to struggle posting its 3rd annual loss in a row.

*Quick meta note that Deutsche Bank decided to cancel our company visit on the day of, which is also causally linked to their string of failures.

I’m losing my train of thought trying to balance a clear theme of lessons learned in Germany while also trying to sum up the company visits for the week.  In the meanwhile…here are some more cool pictures to help illustrate the trip:img_3117

CBS visit to Factory Berlin – A community of startups

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BMW Welt – The building is made to look like 4 cylinders of a car engine
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CBS students (who received the red sweater navy pants memo) at Spotcap 
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CBS at the Berlin Wall

Ok, I’m back! So just to recap, we have this cultural shift in mentality from the big German business players represented by Wolfgang Bernhard, formerly of Mercedes, to the new wave of scrappy startups mostly based out of Berlin’s silicon allee. But a question remains in this risk averse German culture, where does the financial capital come from to fuel the German disruptors?

Our journey in Berlin, took us to Earlybird Venture Capital, a venture capital investor focused on European technology companies. The fund was established in 1997 and has over EUR 850 million under management. While the firm officially funds companies at all stages, they did emphasize that demonstrable traction, such as revenue, is significantly more important to them when compared to their Silicon Valley VC counterparts. We were especially pleased, however, to see that in a male dominated VC world, the two rising stars at Earlybird presenting to us were young women. It is VCs like Earlybird who are enabling the German startup scene to flourish.

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Milda Jasaite and Rebecca Hu of Earlybird Venture Capital

It is safe to conclude that the success of traditional and new German businesses will be integral to the countries’ global position moving forward. While we got our healthy dose of what is “new and sexy” in terms of German startups – it would be foolish to throw the baby out with the bath water in terms of the culture that has made Germany so successful in the past – the hyper-focus on perfection. The future of innovation has unlimited potential in Germany, whether it will be the “car guys” or the disruptors (or a combination of both) who lead this future, is still being determined.

-Chris Russell

Our 6 Favorite Examples of German Engineering

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1. The ICAROS by HYVE

Sticker Price – 8000 Euros
My WTP –
$250
R/E Ration – .4 (Reality/Expectations)
Innovation  Score –
77  (out of 100)
Practicality Rating – 1.2 (out of 5)
American Version –
Peloton

The ICAROS is a VR enabled flying workout machine developed by HYVE.  Featured in my previous post, the ICAROS creates a rush of adrenaline and high expectations upon first glance. The design looks as though a one-person-seesaw procreated with an iPhone to create a sexy monster of a workout machine. In reality, however, it’s a good workout that engages the core and stretches the lower back, but the VR is lackluster with low resolution video and simple game play (fly through rings) mechanics. I experienced a little of the VR spins/dizziness, but I think it is something I would get used to if I used everyday. Overall, the ICAROS is a bit of a hype beast that would likely collect dust in your home and best belongs in an equinox or other overpriced gym.

2. The Paradise Cleanseat Power by CWS-boco

Sticker Price – 1770.36 Euros
My WTP – $2,177.54
R/E Ratio – 1.8 (Reality/Expectations)
Innovation Score – 90  (out of 100)
Practicality Rating – 3.6 (out of 5)
American Version – Dirty Toilet Seat

There are some products in life that you never knew you needed, but after one taste of that sweet nectar, you now struggle to live life without it. Meet the Paradise Cleanseat Power by CWS-boco, a self cleaning toilet seat. CWS is a Swiss company, but boco began as a laundry service by Bernhard Burmeister in Hamburg, Germany in 1899. 109 years of cleaning craftsmanship has culminated into the eloquence of design and practicality that is the Paradise Cleanseat Power.

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3. The Mark by Proglove

Sticker Price – 850 Euros (scanner) + 8.50 Euros (gloves)
My WTP – $10
R/E Ratio – 1.3 (Reality/Expectations)
Innovation Score – 55  (out of 100)
Practicality Rating – 4.5 (out of 5)
American Version – Wait…there’s manufacturing in the U.S.?

Imagine the glove that Spiderman uses to shoot web, but instead of using web to fight crime, it uses a bar code scanner to shave 3 seconds off installing a part into a BMW! The Mark by Proglove and all of Proglove’s products are named after ex boyfriends and girlfriends of the team as a way to remind everyone that sometimes you have to let a good thing go to get to something better (this is 100% true). While not the most exciting of innovations, the Mark gets the job done as manufacturers see the return on investment within 3 months of having workers switch to its part scanning solution over traditional bar code scanners.

4. Tilt Turn by Veka

Sticker Price – Call for price a.k.a. Super Expensive
My WTP – $1200 (for 3 windows)
R/E Ratio – 2.1 (Reality/Expectations)
Innovation Score – 82  (out of 100)
Practicality Rating – 4.9 (out of 5)
American Version – That window that barely opens in NYC

The simple and blissful experience of using the Tilt Turn window by Zeka is unmatched by anything found in the states. The sensation one feels as your hand grasps the handle and gracefully tilts…and dare I say…turns the window, is just glorious nirvana. Well actually its more of a turn then tilt, but we’ll let that slide because it is such a great example of German engineering. I’m not the only weirdo who loves this window – check out an entire Tilt & Turn podcast by 99% Invisible. Nothing more can be said about this amazing product, well done Veka…well done!

5. Speed S +Plus Self Service Podium by Zumex

Sticker Price – 7290 Euros
My WTP – It is worth mortgaging your house or selling 2 Hamilton tickets
R/E Ratio – 10.0 (Reality/Expectations)
Innovation Score – 100  (out of 100)
Practicality Rating – 5 (out of 5)
American Version – Sunny Delight (As in everything else tastes like sunny d in comparison after you try this)

Ok so we are cheating a little with this one, but that is just how much the entire Innovation Aus Deutschland class loved this thing. The Speed S +Plus Self Service Podium by Zumex is a Spanish made orange juicing machine…there I said it. But alas, we found a loophole! Siemens (As German a company as possible) makes the PLM Software Solid Edge that enables Zumex to create better products through 3D design, simulation, manufacturing, data management and more! And lets face it, there’s nothing more German than creating the thing inside the thing that builds the thing. Please watch the above video to see why we love this juicer so much!

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6. Narrow Band Iot Device by IoT Venture

Sticker Price – It’s a Protype so free?
My WTP – The price of a fitbit
R/E Ratio – 1.0 (Reality/Expectations)
Innovation Score – 77  (out of 100)
Practicality Rating – 3.2 (out of 5)
American Version – Find my iPhone

Did you know that 30% of all bikes in Berlin are stolen and only 5% are found? To be honest, I didn’t fact check this, but that is the claim of IoT Venture, a Berlin startup that is a member of the startup community Factory. IoT Venture uses new narrow band technology to build tracking devices that have longer battery life, better security, and deeper indoor penetration for more accurate tracking than the current solutions. The company is currently in a prototype phase, but hopes to help solve Berlins bike crisis when it launches. Although many were tempted to take the prototype as a souvenir, we were quickly informed that they would be able to track us down (which I thought would be the greatest product demo ever).

-Chris Russell ’18

Innovation Aus Deutschland: The Case Against Thiel’s Europe

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3D printed mesh created at the Technical University of Munich

I’m willing to wager that the majority of American entrepreneurs, VCs, and startup enthusiasts have come into contact with Peter Thiel’s Zero to One: Notes on Startups, or How to Build the Future, at some point in their careers.  It is required reading in Owen Davis’ Launch your Startup class and for founders, such as myself, the book is somewhat of holy text that must be close to arms reach at all time.  Underlying Thiel’s lessons on building monopolies, selling products, and nihilistic consultant haterade*, however, is a deeply American ideal to innovation.

*haterade – excessive negativity in the form of a beverage

He writes, “Even the Great Depression failed to impede relentless progress in the United States, which has always been home to the world’s far-seeing definite optimists.”Thiel Quote Thiel argues that it is bold planners (definite optimists) who truly innovate: “A startup is the largest endeavor over which you can have definite mastery…it begins by rejecting the unjust tyranny of chance.  You are not a lottery ticket.”

Now I’m not one to drape myself in red, white, and blue, shouting “Amuurricaa!” at a Toby Keith concert, but something about Thiel’s words evokes a strong sense of American pride (along with a montage of Michael Bay explosions, Top Gun theme music, and Steve Jobs).  Particularly, this the case when Thiel juxtaposes this depiction of American innovation with what he calls European “Indefinite pessimism.”

He writes, “Europeans just react to events as they happen, and hope things don’t get worse.  The indefinite pessimist can’t know whether the inevitable decline will be fast or slow, catastrophic or gradual.  All he can do is wait for it to happen, so he might as well eat, drink, and be merry in the meantime: hence Europe’s famous vacation mania.”  Thiel’s depiction serves to inform the foundation of the stereotype that Europe does not innovate like its American counterpart.

With all due respect to Mr. Thiel, I believe it is time for him to take a trip back to Germany (ironically, the country where he was born).

Let’s start by highlighting our trip to the Technical University of Munich (TUM), whose MakerSpace rivals any found in the United States.  TUM is the epitome of the German effort to innovate through agile practices, supplying entrepreneurs with the resources to rapidly prototype ideas and build “Minimum Viable Products.”  3D printers, laser/water jet cutters, textile and electrical facilities, and machine and woodworking shops are at fingertips of TUM students.  At this point, you may be thinking tuition must be out of control at this University (especially those of you who paid 200k+ for those English BAs) and you are right…the number is astounding.  A German citizen pays 0.00 Euros to attend the Technical University of Munich.  Moreover, there is no application process, and all are accepted!

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At this point, you may have just dropped your iPhone, so take a second to collect yourself.  Let’s reiterate, “GERMANS PAY $0 TO ATTEND TUM AND HAVE ACCESS TO MILLIONS OF DOLLARS WORTH OF EQUIPMENT!!!”  As our TUM guide Dominik Böhler stated, “We believe people should be able to kickstart their ideas…and we have a 100 million EUR fund to invest in entrepreneurs.” TUM students are working on a variety of innovations including creating a prototype of Elon Musk’s famous hyperloop.

Taking a bus ride from TUM to closer to the heart of Munich, we arrived at HYVE – the innovation company. HYVE is an innovation consultancy firm in the same vein as IDEO and Frog in the U.S., a.k.a. innovation as a service (IaaS?).  Many are familiar with design workshop magic, but something unique about HYVE is their emphasis on crowd sourcing innovation. Dr. Volker Bilgram walked us through how HYVE used posts on forums and blogs to design an IoT package locker known as PaketButler.  PaketButler is basically a virtual “doorman,” (doorperson…it’s 2018 folks), that allows a package provider to deliver goods, informs the user of the delivery via smart phone application, and securely locks the package until the user is back at home.  The iterative prototyping process was continuously informed by feedback from customers online.

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A short trip downstairs led us to the pinnacle of German engineering.  The ICAROS.  The ICAROS is a VR enabled work out machine, or as I like to call it, the Peloton for flying.  Priced at an extremely reasonable 8,000 EUR (yeah, it’s primarily B2B), the ICAROS combines your fantasy of flying with your nightmare of dying in a horrible plane crash into the side of a mountain.  I personally was pretty terrible at the game, but definitely felt it in my core afterwards (which was good considering all the Paulaner Salvators I have consumed).

The most fascinating aspect of the ICAROS is that it was developed internally by HYVE for HYVE.  This may seem weird that a consultancy firm would use its profits to develop its own innovations (that have a high chance to go bust), but this speaks to the German sense of the pride that one has no right to advise if one cannot do it on his or her own.  The ICAROS has gone on to win multiple awards and has been included in the German Accelerator – a program by the Federal Ministry of Economic Affairs and Energy (BMWi) that helps German start-ups to get to know the US market.

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With our trip to Munich wrapping up, I think it’s safe to say that Germany has a lot to offer in terms of entrepreneurship and innovation.  I recommend that Mr. Thiel update Zero to One to reflect this (but please don’t Gawker me!  You are still right about most things…unfortunately).

Next stop is Berlin, the home of a booming startup scene!  Until then, stay classy, CBS.

-Chris Russell

Cuba: a Socialist Country in Transition

Since the revolution in 1960, Cuba has been a democratic socialist country. To most Americans, the concept is extremely foreign. Many of the questions we have had during our meetings in the country thus far question if privatization is possible, and what it is like living day to day in a socialist country. A few highlights on this topic from the trip so far…

2013 marked a new era for the country, with the passing of legislation allowing private (mainly touristic) businesses to operate. Small business owners now have to pay taxes on their businesses, a concept that had been foreign to Cubans until this time.

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A chat with a paladar (restaurant) owner at Atelier restaurant

Cubans receive free healthcare, education, some rationed food, and social services but are otherwise paid state sanctioned wages of the equivalent of $20-30 USD a month. There is opportunity to make more than the state wage in the private sector through tips and contact with foreign tourists.

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The artful ceiling of a paladar in Old Havana

The US Cuban Embargo means that businesses who need supplies need contacts in the US to buy supplies for them, and bring them back in their luggage. Anything that cannot fit in luggage is sent through other countries – for example, Julio who restores cars has large parts shipped through three different countries before it can come to Cuba. 

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Owner of vintage car restoration company, Nostalgic Cars, and his staff

Foreign investment has begun to bloom in Cuba – much to the benefit of the government. Swiss hotel company Manzana Kempinski operates a hotel in Havana. They earn 17% of revenues and 1% of profits, and the Cuban government takes the rest.

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The journalists, lawyers, educators and urban planners all agree that public healthcare and education has worked well for Cuba, but changes have and will continue to occur in the market, as Cuba’s GDP has been contracting and private businesses have afforded Cuba new avenues of growth.

-Jill Wang ’18