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Innovation to fight economic crises: Best practice example of German machine tool manufacturer Trumpf
Ulrich Lichtenthaler • 20. April 2020
How to fight the economic Coronavirus crisis by means of innovation – A best practice example from the German machine tool manufacturer Trumpf in the financial crisis in 2008/09.
Executives should focus on innovation not only despite the recession due to the Coronavirus, but precisely because of it. In a recent blog post, I have explained a number of arguments in favor of innovation in these challenging times. While I received very positive feedback on that post, several persons also asked me for an example that such a strategic focus on innovation may actually pay off in the time after the Coronavirus crisis – what I call the post-pandemic period. There are many examples, but I really think that the German machine tool manufacturer Trumpf with its headquarters in Ditzingen near Stuttgart offers a suitable best practice example.
The example of machine tool manufacturer Trumpf
The company Trumpf was founded in 1923 and is by now among the leading firms for machine tools, laser technology, and related applications worldwide. In the 2018/19 fiscal year, it achieved revenues of EUR 3.784 billion with 14,490 employees. According to the Trumpf website, the company’s mission “is to further develop and digitally connect production technology, to make it even more efficient, precise, and future-proof. In doing so, we want to make manufacturing and its upstream and downstream processes more efficient. This is how we build the industrial world of tomorrow.”
In the current economic downturn due to the Coronavirus, the company has announced to leverage the flexibility of its employees’ working time accounts and potentially rely on short-time work in order to preserve as many jobs as possible. Thus, the company’s reaction to this year’s economic crisis is similar to its initial strategic moves in the financial crisis in 2008/09. Even if it is still too early to judge the suitability of any strategic initiatives, it appears to be an appropriate reaction because Trumpf’s management of the financial crisis some ten years ago may serve as a best practice example for many companies in the manufacturing sector and beyond.
Emphasizing innovation during the financial crisis 2008/09
In the financial crisis, the executives at Trumpf expected a major economic downturn relatively early – already in mid 2008. On this basis, they reacted quite early and massively. They immediately stopped hiring any new employees. At the same time, they tried to keep as many jobs as possible based on short-time work regulations that exist in Germany. Thus, the number of employees was nearly constant during the financial crisis. These decisions were strongly facilitated by the fact that Trumpf is a family business, and family members are and were in key executive positions with Nicola Leibinger-Kammüller as CEO, her brother Peter Leibinger as CTO, and her husband Mathias Kammüller as CDO.
Because of its rapid and clear managerial response, Trumpf managed to reduce its costs by EUR 60 million within one year. Besides cutting costs, the management strongly pushed for winning new orders. Nonetheless, the company experienced a dramatically decreasing demand, leading to a reduction of its revenues by 38% from fiscal year 2007/08 to fiscal year 2009/10 (please see the figure below for details). However, the company made a loss only in a single fiscal year during this period, i.e. 2009/10. Despite this challenging context, Trumpf started an innovation initiative at the height of the financial crisis. This innovation initiative complemented a variety of short-term measures, and it turned out to be essential for successfully mastering the crisis and enhancing the firm’s competitive position in the aftermath of the crisis.
The example of machine tool manufacturer Trumpf
The company Trumpf was founded in 1923 and is by now among the leading firms for machine tools, laser technology, and related applications worldwide. In the 2018/19 fiscal year, it achieved revenues of EUR 3.784 billion with 14,490 employees. According to the Trumpf website, the company’s mission “is to further develop and digitally connect production technology, to make it even more efficient, precise, and future-proof. In doing so, we want to make manufacturing and its upstream and downstream processes more efficient. This is how we build the industrial world of tomorrow.”
In the current economic downturn due to the Coronavirus, the company has announced to leverage the flexibility of its employees’ working time accounts and potentially rely on short-time work in order to preserve as many jobs as possible. Thus, the company’s reaction to this year’s economic crisis is similar to its initial strategic moves in the financial crisis in 2008/09. Even if it is still too early to judge the suitability of any strategic initiatives, it appears to be an appropriate reaction because Trumpf’s management of the financial crisis some ten years ago may serve as a best practice example for many companies in the manufacturing sector and beyond.
Emphasizing innovation during the financial crisis 2008/09
In the financial crisis, the executives at Trumpf expected a major economic downturn relatively early – already in mid 2008. On this basis, they reacted quite early and massively. They immediately stopped hiring any new employees. At the same time, they tried to keep as many jobs as possible based on short-time work regulations that exist in Germany. Thus, the number of employees was nearly constant during the financial crisis. These decisions were strongly facilitated by the fact that Trumpf is a family business, and family members are and were in key executive positions with Nicola Leibinger-Kammüller as CEO, her brother Peter Leibinger as CTO, and her husband Mathias Kammüller as CDO.
Because of its rapid and clear managerial response, Trumpf managed to reduce its costs by EUR 60 million within one year. Besides cutting costs, the management strongly pushed for winning new orders. Nonetheless, the company experienced a dramatically decreasing demand, leading to a reduction of its revenues by 38% from fiscal year 2007/08 to fiscal year 2009/10 (please see the figure below for details). However, the company made a loss only in a single fiscal year during this period, i.e. 2009/10. Despite this challenging context, Trumpf started an innovation initiative at the height of the financial crisis. This innovation initiative complemented a variety of short-term measures, and it turned out to be essential for successfully mastering the crisis and enhancing the firm’s competitive position in the aftermath of the crisis.
Due to the innovation initiative, the number of R&D employees even slowly increased in those years during and after the financial crisis. In fiscal year 2009/10, the volume of R&D expenditures in absolute terms was slightly reduced, but in relative terms it remained at a high level of 9.3% of revenues. On this basis, the company managed to nearly compensate for the loss of revenues between 2007/08 and 2009/10 in the following year. There was an impressive increase in revenues by 51% from fiscal year 2009/10 to 2010/11. This extraordinary growth was strongly, but not exclusively driven by the innovation initiative. In the following years, Trumpf continued to maintain a substantial growth up to revenues of EUR 3.784 billion in fiscal year 2018/19. This is an increase by 182% (not inflation-adjusted) relative to the revenues of 1.340 billion in 2009/10, which was Trumpf’s worst fiscal year during the financial crisis.
Profiting from innovation after the financial crisis
In the years after the crisis, Trumpf could substantially profit from its continued strategic focus on innovation. Since that time, the company has also strengthened its activities in different fields of 3D printing. It had already been active as a pioneer in additive manufacturing since the 1990s and launched its first machine in that field, TrumaForm, in 2003 – still ahead of its time. After partly deemphasizing these activities for some years, the company successfully reentered the market in 2015 with its TruPrint machine. Beyond machinery, the company has strongly invested in smart factory software to enable and benefit from connectivity and intelligent manufacturing solutions in the future.
Whether Trumpf will be similarly successful in managing the current economic crisis is still an open question, of course. In conclusion, however, there seem to be some ‘lessons learned’ from Trumpf’s success story in the years after the 2008/2009 financial crisis, and they may well be successfully applied by executives in different sectors in response to the present Coronavirus crisis. Many of the managerial implications focus on balancing diverging interests. While unsystematic actionism is the wrong approach, quick strategic moves are needed. Managers have to substantially reduce expenditures, but they should try everything to avoid laying off people if their companies can somehow afford it from a financial perspective. In fact, committed and experienced employees may be an important basis for competitive advantage after the crisis.
In this regard, innovation is key for turning the current crisis into an opportunity. If companies can afford to start or to maintain an innovation initiative, it is the perfect moment to do so. Balancing the innovation portfolio with efficiency-driven projects and growth-oriented projects will help to ensure the top executives’ commitment to innovation. As the current crisis partly accelerates digital transformation, the topics of data analytics and artificial intelligence will continue to be on top of the strategic agenda during economic recovery. Focusing on digital innovation and Integrated Intelligence now will therefore be a key driver of firms’ growth and profitability in the post-pandemic period.
Please note: This blog post is not a scientific article, and it is not based on direct interaction with Trumpf GmbH + Co. KG. Relevant information has been collected from publicly available sources, such as articles in newspapers and magazines. The financial information has been taken from the annual reports that are available at www.unternehmensregister.de and www.trumpf.com.
Profiting from innovation after the financial crisis
In the years after the crisis, Trumpf could substantially profit from its continued strategic focus on innovation. Since that time, the company has also strengthened its activities in different fields of 3D printing. It had already been active as a pioneer in additive manufacturing since the 1990s and launched its first machine in that field, TrumaForm, in 2003 – still ahead of its time. After partly deemphasizing these activities for some years, the company successfully reentered the market in 2015 with its TruPrint machine. Beyond machinery, the company has strongly invested in smart factory software to enable and benefit from connectivity and intelligent manufacturing solutions in the future.
Whether Trumpf will be similarly successful in managing the current economic crisis is still an open question, of course. In conclusion, however, there seem to be some ‘lessons learned’ from Trumpf’s success story in the years after the 2008/2009 financial crisis, and they may well be successfully applied by executives in different sectors in response to the present Coronavirus crisis. Many of the managerial implications focus on balancing diverging interests. While unsystematic actionism is the wrong approach, quick strategic moves are needed. Managers have to substantially reduce expenditures, but they should try everything to avoid laying off people if their companies can somehow afford it from a financial perspective. In fact, committed and experienced employees may be an important basis for competitive advantage after the crisis.
In this regard, innovation is key for turning the current crisis into an opportunity. If companies can afford to start or to maintain an innovation initiative, it is the perfect moment to do so. Balancing the innovation portfolio with efficiency-driven projects and growth-oriented projects will help to ensure the top executives’ commitment to innovation. As the current crisis partly accelerates digital transformation, the topics of data analytics and artificial intelligence will continue to be on top of the strategic agenda during economic recovery. Focusing on digital innovation and Integrated Intelligence now will therefore be a key driver of firms’ growth and profitability in the post-pandemic period.
Please note: This blog post is not a scientific article, and it is not based on direct interaction with Trumpf GmbH + Co. KG. Relevant information has been collected from publicly available sources, such as articles in newspapers and magazines. The financial information has been taken from the annual reports that are available at www.unternehmensregister.de and www.trumpf.com.
As sustainability and ESG are on top of many firms’ strategic agendas, there is a growing need for specialized trainings, workshops, and keynotes.
Nachhaltigkeit und ESG stehen bei vielen Unternehmen ganz oben auf der Tagesordnung, daher wächst der Bedarf an spezialisierten Schulungen, Workshops und Vorträgen.
ChatGPT und generative KI werden uns nicht überflüssig machen – auch wenn die aktuelle Berichterstattung genau diesen Eindruck erweckt. ChatGPT hat uns allen verdeutlicht, wie schnell sich manche Felder künstlicher Intelligenz (KI) aktuell weiterentwickeln. Auch wenn einige dieser Entwicklungen schon seit Jahren erwartet wurden, ist die Geschwindigkeit vieler Verbesserungen selbst für manche ExpertInnen erstaunlich. Der aktuelle offene Brief des Future of Life Institute, der von über 1.000 Personen unterzeichnet wurde, ist daher grundsätzlich nachvollziehbar. Darin wird insbesondere auf die Risiken von KI hingewiesen und eine sechsmonatige Pause für das Trainieren leistungsfähiger KI-Lösungen gefordert. Eine ausreichende Beachtung der Risiken von KI ist unbedingt erforderlich, auch wenn die aktuelle Berichterstattung dazu oft zu kurz greift. Noch erstaunlicher ist aus betriebswirtschaftlicher Sicht jedoch das Medienecho der letzten Wochen und Monate zu den Auswirkungen von KI auf die Arbeitswelt, das sowohl in klassischen Medien als auch bei Social Media zu beobachten war. Dort wird häufig gefragt, ob wir als Menschen noch schlau genug sind im Vergleich zur KI. Auch wird diskutiert, ob KI künftig die meisten Führungskräfte ersetzen wird. Besonders oft steht also wieder einmal die Frage im Mittelpunkt, wie viele Personen durch KI ihren Job verlieren werden. Diese Frage ist auf den auf den ersten Blick vielleicht nachvollziehbar, weil durch KI-basierte Automatisierung in den nächsten Jahren tatsächlich in nennenswertem Umfang Jobs verloren gehen werden. Insbesondere werden auch solche Büro-Jobs betroffen sein, die bisher noch nicht automatisiert werden konnten. Dadurch sind mit offensiven Schlagzeilen sicherlich hohe Klickzahlen zu erreichen. Außerdem werden auch Arbeitsplätze in der Medienbranche automatisiert werden, wodurch sich die Berichterstattung zusätzlich erklären lässt. Integrierte Intelligenz strategisch oft wichtiger als eigenständige KI Dennoch wird viel zu oft ein einseitiger Schwerpunkt gelegt und damit auch ein falscher Eindruck vermittelt. Der wirklich entscheidende Teil der Entwicklung für die meisten Unternehmen und ebenso für die meisten Arbeitskräfte liegt in der Kombination von KI mit menschlicher Arbeit – und eben gerade nicht in der vollständigen Automatisierung von Jobs durch KI. In den letzten Jahren kamen verschiedenen Studien immer wieder zu ähnlichen Ergebnissen. Der Grundtenor ist dahingehend identisch, dass sich deutlich mehr Jobs verändern werden als komplett wegzufallen (vor allem, wenn die Zahl der Arbeitsplätze berücksichtigt wird, die durch KI zusätzlich entstehen). Diese Kombination von menschlicher mit künstlicher Intelligenz wird auch als integrierte Intelligenz bezeichnet.
Despite the massive attention to sustainability and ESG, many firms still underestimate the opportunities for innovation beyond reducing CO2 emissions.
The GREEN GRASS STRATEGY goes beyond traditional sustainability, and it refers to developing innovative solutions for a ‘net positive impact’. What is the GREEN GRASS STRATEGY? The GREEN GRASS STRATEGY is a sustainability strategy that focuses on innovation and new business opportunities rather than limiting sustainability programs to resource efficiency and the optimization of established processes. As such, the GREEN GRASS STRATEGY goes beyond traditional sustainability concepts that often focus on avoiding harm (no net loss) to consider positive sustainability and to embrace doing good (net positive impact). The GREEN GRASS STRATEGY enables you to leverage sustainability for innovation and value generation, and it can be systematically developed with the SUSTAINABILITY INNOVATION MAP , which helps firms to achieve a competitive advantage by systematically pursuing sustainability innovations in all ESG dimensions – environment, social, and governance.
Generation Z – and what is next? Many of today’s students are ‘sustainable natives’ and expect companies to make a positive contribution to solving ecological and social problems. In an international survey of more than 27,000 people, GlobeScan found in 2020 that for 60% of younger participants, climate change and social inequality are top priorities, combined with the expectation that companies should contribute to solving these challenges. Very importantly, the young generation expects positainability , i.e. making a positive contribution and not just reducing negative effects of doing business, for example by reducing CO2 emissions. To implement this positive sustainability approach, companies would need to pursue a GREEN GRASS STRATEGY . So far, however, many companies are hardly prepared for the future changes due to the ideas of those persons that will be starting their careers in the next few years. In fact, this new generation of ‘sustainable natives’ presents new challenges and opportunities for companies (as I have explained in more detail in a recent article in the Haufe Personalmagazin ). In particular, the following typical perspectives of this ‘Generation PI’ – Positive Impact – have to be considered. 1. Sustainable natives Many current students are ‘sustainable natives’ because they perceive sustainability as a core topic since their early youth. In contrast to the extensive public discussions about ‘digital natives’, the role of ‘sustainable natives’ has been mostly ignored so far. 2. Doubtful prospects Typical for ‘Generation PI’ are doubts whether their future standard of living will remain as good as their current situation and as the life of their parents, especially due to climate change. 3. Expected limitations Many current students expect restrictions on possible behaviors to enable a more sustainable economy and society in the future, for instance bans or massively increasing prices for air travel or the consumption of less sustainable food. 4. Positive contribution Beyond the goal of no-net-loss, ‘Generation PI’ is ready to make a positive contribution in terms of a net-positive-impact. Here, companies need to focus on major innovations rather than limiting themselves to reducing CO2 emissions in established processes.
Positainability – or positive sustainability – refers to the combination of doing good and avoiding bad to arrive at innovative solutions.
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