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

 

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.

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.

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:

CBS visit to Factory Berlin – A community of startups

BMW Welt – The building is made to look like 4 cylinders of a car engine

CBS students (who received the red sweater navy pants memo) at Spotcap 

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.

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

Innovation Aus Deutschland: The Case Against Thiel’s Europe

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 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!

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.

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.

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

Preparing for Chazen India

I’m Krista Sande-Kerback ’14, and I’m pleased to have the opportunity to blog for this year’s Chazen Global Immersion class to India!  I arrived in Mumbai late last night after close to 24 hours of travel, and after months of anticipating this trip, I am grateful to be here.

Columbia’s business school curriculum offers a significant number of case studies on companies’ strategies in India, and I’ve personally done some business with Indian companies and volunteer organizations over the years (consulting for outsourcing/offshoring projects and running the regional chapters for a global professional women’s network).  This is my first time visiting the country itself, however, as is the case for most of the students in the group.  I know that we are all looking forward to taking everything in, from sightseeing and experiencing the local culture in Mumbai and Bangalore, to participating in a dozen company visits, to sampling the cuisine, and more.

Our 30-person class has done extensive preparation in advance of our trip: applying for visas, obtaining shots and malaria pills, and participating in classes and group research leading up to our week-long in-country immersion.  We’ve been on semester break for the last month and some students arrived in India early to travel to other regions, so it will be great to exchange stories tonight over dinner.  The topic guiding the course itself is “reverse innovation.” The concept is that innovations can and may increasingly be adopted first in a cash-constrained, entrepreneurial environment in the developing world and then migrate to wealthier countries, as opposed to the “traditional” trajectory which works the other way around.   In our first three sessions, we heard from practitioners implementing these solutions in industries such as healthcare, and participated in a design simulation.  A major takeaway was that although it’s often believed that free, open, unconstrained solutions produce the most creativity, research shows that sometimes constraints lead to the most creative and success results.

Through group research projects, we’re exploring successful Indian innovations that could be adapted for the US market.  Our work expands on what we learned in the Marketing core curriculum, in that we need to dig deep to understand what drives success in the Indian market, determine what segment(s) of the US could be profitably targeted, and then figure out how to market to these consumers.

Our first group activity, a tour of the massive Dharavi slum (which features prominently in a number of films such as “Slumdog Millionaire”), will start in about an hour.  I’ve just spent the past week on campus immersed in another block week course on the “marketing of luxury products,” which featured meetings with executives from some of the most exclusive global brands.  I’m sure that experience will provide a fascinating juxtaposition to what we’re about to encounter in this country known for its huge contrasts.

More to come very soon!

Krista Sande-Kerback ‘14

Innovation in Scandinavia: Nordic Eats

Late on Day 3 (well, early on Day 4), it’s becoming clear how intense Chazen trips can be. We’re packing it all in: culture, adventure, tours, food, fellowship. It’s been nonstop. We arrived on Saturday in Copenhagen – considered one of the world’s most livable cities, capital of what may be the world’s happiest country – checked into the Scandic Palace (as nice as it sounds, featuring both modern amenities and the weight of its own history), and began our quest for aesthetic indulgence.

Our first event was a group lunch at Radio, which served us locally sourced, creative combinations that can be called “innovative” without any sense of irony. The five-course meal included salsify root, scallops, veal tenderloin and licorice cake with white-chocolate foam and apple ice cream. It set the bar ambitiously high, to say the least. The restaurant is owned by Claus Meyer, the man behind Noma, which San Pelligrino named the best restaurant in the world for the second year running, and it was the perfect place to start the trip. (NB: Three of our group arrived a day early and were able to score last-minute reservations at Noma, as well. Think a few dozen courses, beginning with fried moss. All report that if you have an opportunity to get in, don’t pass it up.)

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By the time we’d left Radio, Copenhagen had transformed itself from gray and rainy to crisp (enough) and (relatively) sunny, and we took the opportunity to acquaint ourselves with the city. The group splintered off in various directions. Josh and I began our unsuccessful hunt for bikes to ride, a goal that still truly eludes us (more on that later). Some went shopping, or headed to the market for duck sandwiches (apparently delectable), or moseyed around the city’s web of streets.

But in keeping with the day’s culinary theme, a group of us reconvened to cap the evening at Geist, another highly recommended panacea for hungry gourmands. Like Radio, Geist is grist for the argument that Nordic food is in the midst of a revival. It’s bigger than Radio and a bit shinier, but it too focuses on local ingredients and satisfying the adventurous. The plates are small, and seven of us passed around a host of offerings: lamb’s heart, raw ox and roe, suckling pig, turbot, cod roe, potato mash and crab, and black lobster and endives. We were too full to eat dessert, but we ordered it anyway, after our waiter, without a tinge of a smile, told us the “air in air in air tiramisu” was unlike anything we’d ever had before. He was right.

Tomorrow (Day Four) we visit the BIG offices and Designit, a strategic design consultancy. We visited some of BIG’s key buildings on Day Two, which I’ll write about tomorrow. With an early morning ahead of us, it’s key to get some R&R – we want to have enough energy to tick a few last things off our to-do list before heading north to Sweden. ~Brandon Wall

Innovation in Scandinavia: Norwegian Wood

In his seminal “Towards a New Architecture,” the inimitable architect Le Corbusier delivered what is probably his most famous quote: “A house is a machine for living in.” What’s most striking about that idea is how often most of us forget it – we rarely think “machine” when we think of the buildings we inhabit. Such is the curse of architecture. When it works, it risks going unnoticed.

I imagine we’ll be reminded of Le Corbusier’s sentiment often over the next week as we, participants in the Chazen Innovation Tour of Scandinavia, march around Copenhagen and Stockholm in search of what drives design in what is decidedly one of the world’s most stylish and forward-thinking regions. More than that, we’ll be encouraged to expand that sentiment, to include not just houses but all buildings, to think not just about architecture but about design in general.

On tap for the Copenhagen leg of our journey are visits to BIG (one of the most exciting architects working today), Novo Nordisk, the Copenhagen Innovation Lab, and Designit; in Stockholm, we’ll visit Spotify, Ericsson and Skanska (and maybe one other). But we’ll also tour the cities, eat at their finest restaurants and get to experience the Scandinavian culture firsthand. We’ll all leave with a better understanding of how good design works, what it looks like and where it comes from. That is, we all leave, I hope, with a notion of how good design can make life more worth living.

With that quest in mind, and as a second-year unshackled by the burden of mid-semester exams, I decided to tack on a pre-Chazen excursion to Oslo, Norway. (I recommend that future Chazen-trippers, if they can, take advantage of the “extended” spring break, as well. It’s a luxury that shouldn’t be ignored.) Norway is not part of our official itinerary – Copenhagen and Stockholm are both better known as design centers. But if innovation is the charge, I didn’t want to skip the work of the Norwegian architecture firm Snohetta – especially its relatively new opera house.

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The building – or, rather, the machine – opened in 2008, built on formerly flat industrial land that juts out into the fjord. It rises out of the water, a mound of glass and white-marble and oak. It foretells the area’s future – it was the first building to open as part of a rejuvenation of the area, and spillover is already in effect – as much as it recalls its history. Step inside and you’ll be delightfully overwhelmed by Norway’s favorite building material: wood. Wood is, simply, everywhere in this country. Sloping wooden beams hold up the Oslo airport, and it lines the walls and floors of even my budget-friendly hotel room. It’s warm and sturdy and striking to look at.

I bought tickets to the opera – Wagner’s Tristan og Isolde – and sauntered into Snohetta’s opera house – commissioned, of course, by the state – with a few hours to spare. I gawked at the oak “wave wall,” which wrapped the concert hall itself, and at the way the glass box framed views at the city and the surrounding hills. I investigated the pedestrian-friendly (though treacherous, slippery as it was from the day’s new snow) roof. I shot photographs of the Olafur Eliasson-designed interior cladding. And, of course, I studied the ubiquitous oak.

As the rest of the patrons trickled in, they were jubilant and talkative and fancy – this was, it was clear, an event. But most everyone focused less on the building’s details. To them, it was just a platform on which to place their cultural and social experience, a place to take in an opera. Surely, few of them would claim not to have noticed it, or say that their experience wasn’t impacted and enhanced by it. But the building in some ways seemed to disappear. Ah, to behold the power of a well-designed machine. ~Brandon Wall