Stefan Heidbreder, Stiftung Familienunternehmen
Release Date: 2009-09-09
Germany is home to one of the largest and most successful family business communities; which characteristics of the German environment have enabled these companies to be so successful?First, there has been no alternative but to be very innovative and develop products for the world market. Germany does not have a lot of resources, and we were not a colonial country, so we have always had to focus on innovative products and services. For example, in the automotive industry 65% of the cars are made by suppliers which often have to be small and flexible; here in Germany many of these manufacturers are family businesses which are also developing other technologies. Harting is a good example of this strategy; the company produces wires for the automotive industry and has shifted into environmental systems. The second factor is the technology cluster approach that is common through Germany; you can find clusters for pharmaceuticals, furniture, machinery tools, solar power, and almost any other industry. These clusters are very successful because research, science, and practical application as well as a skilled labor force are all centrally located which allows for big steps in innovation.
The ‘Made in Germany’ reputation reflects the strength of German industry throughout the world; what would you say is the contribution that family owned businesses have made to this image?
‘Made in Germany’ is often connected with quality, reliability and innovation. Besides the automotive industry, the german textile-, furniture- and machinery- industry are perfect examples of ‘Made in Germany’. These industries are often dominated by family business, because of the strong intention of the owner not to be the biggest supplier, but to be the best in his field of business. This often comes along with an technology- and quality-driven strategy of the founder of the company.
Do you think it is a blessing that these companies are hidden champions, or do you believe that these companies could benefit from raising their profile?
I think these companies know there are industries in which they cannot compete as a family business such as aviation, automotives, and shipping. Yet, they know if they occupy the second tier and play a good role they can grow with the success of the first tier.
Does this mean that most family businesses are fully dependent on first tier companies?
To a certain extend yes. Especially in the automotive industry where many German family suppliers have lost 30% of turnover from last year throughout the industry as a result of the crisis. On the other hand, many suppliers are worldwide leaders in their field so a decrease in demand from the US can potentially be compensated by an increase in China. These companies have found out that it is often better to be a world leader in a small niche and supply the entire globe. Granted, while the current crisis is not typical, over the past 50 years the success of these businesses has been based on this business model.
The fact that most family businesses have been around for a few generations inevitably results in their focus on traditional industries; what do you think is the role they can play in green technology and renewable energy where every entrepreneur is a first generation business?
I think the green industry is made for family businesses because a big green industry will need time and family businesses can wait; some companies take ten years to develop products while they wait for the market to grow. Moreover, they do not require a market of €1 or €2 billion from the start: this patience and time, combined with an excellence in innovation and knowledge of the customer needs is what is needed to develop the green market.
This is a new business with a lot of high-tech components which require a lot of R&D; how can family businesses compete with publicly listed or government sponsored companies in their R&D capacity?
It presents a problem, for example if you look to develop a battery you need a large amount of R&D money which no family business has. This is a technology market for very big players such as Bosch, Siemens and Asian companies, yet within this market Heitkamp & Thumann is a family leader in manufacturing components for batteries and they grow with the industry based on R&D expenditure of 10-20% of turnover. There are technologies that are not for family businesses and those that are; in between is an opportunity for growth.
What do you expect from the companies that are starting in green industries at present? Do you expect entrepreneurs running companies in the solar and wind industry to become second generation family businesses or will they be more successful if they become part of larger groups or go public?
I do not think you can tell in advance; so far in solar there have been different stories. Goldbeck Bau is a good example of how a family business is changing all the time. The senior owner was a smith 40 years ago and today the company has a €1.2 billion turnover and is the biggest supplier of modular building components in Europe. He recognized that large industrial buildings normally have large rooftops, so he had the idea to install solar panels on top during the fabrication process which has become very successful even in the crisis as companies look to cut their expenses.
It is more common for familiy owned companies to evolve from time to time as to sell to larger groups or to the public. The owners of family firms are above all united by two key goals: namely to be independent and to pass on a good business to the next generation.
Xinhua recently released a report noting 17% of Germany’s medium sized companies are doing business in China and another 12% have the intention to enter China meaning overall one third of the companies in the study have an interest in the Chinese market. Is this becoming a bigger topic among your members, and what is your perspective on the match between the German and Chinese business cultures?
It is good to have a long horizon because this is definitely necessary in China, but some of our members have not been that successful in China. Several have closed their joint ventures there and relocated back to Germany. Some people say that the previous period was a trial period and that today the time is right to enter China as the market is truly bigger and functional. Compared to Russia, where are now 6000 German companies running their own plants, the potential has to be much bigger in China.
Doesn’t this mean that one of the studies that Stiftung Familienunternehmen conducts every year should be investigating this? Do you have plans?
Not yet, we focus on Germany and have first projects with the Arabian and Russian world. But we should have projects with China in the future since this is one of the most interesting areas in the world for the next decade.
What are the main issues that your Chinese counterparts should understand about German family owned businesses?
German family business owners often invest in new activities and markets by relying on people; they do not endlessly analyze facts and figures but instead use their gut and rely on their partners. When a partner is not reliable they will quit completely and there will not be a second chance, which can be a problem when entering a new business, new culture and new technology. Sometimes there need to be a second chance. However, it is possible they have underestimated the complexity of the political system and other requirements for doing business there.
As a last question, if in 2010 there would be a Sino-German Business Summit dedicated to family businesses and you were invited to speak what would be the message you would send?
It is a very big step forward for both cultures to come together to invest many hours of time in creating a relationship and out of it there can only be winners. You learn and you meet people who create new business opportunities. Most things have yet to be done: perfect future.
| Company: | Stiftung Familienunternehmen |
| Position: | Managing Director |
| Country: | Germany |