Christian A. Rast, BrainNet Supply Management Consultants
Release Date: 2009-11-26
Creating an international supply chain management consulting firm from scratch must have been very challenging. How did you manage the first steps?I remember those days very well. Starting a consulting company means having nothing behind you other than yourself; the only way you can convince people to get a project is to convince them that you are the right guy to put the right solution on the table. On the one hand, it is extremely hard: there’s no brand behind you, no high reputation, no references. However, on the other hand, I have never felt success as deeply as I did in those days, because nowadays, although I absolutely love winning a pitch against another consulting company, I never quite get that very deep intrinsic feeling of having won like I did in those first few years. The interesting chance for BrainNet, which we were not aware of at the time, was that taking procurement as a focus from the start, gave us the ability to convince people to do international business with us. Our first two clients were from the chemical industry: Messer Griesheim which was a division of Hoechst, and Bayer Chemicals. We had the intention from the outset to think internationally and to deliver concepts and solutions which would have the potential and the scalability to work internationally. From the supply chain management consultant point of view it made sense from the beginning to act internationally, so the decision to internationalise our business was not really a choice or a risk on our part, it was clear we had to do it because we simply had to follow our clients.
What was the substance behind the pitch which ultimately convinced your first clients to work with you?
I remember the best pitch I ever did very well. It was in 1996, we were invited by former client from my days as a consultant who wanted to globally restructure his procurement organisation. He told us that we were one of seven consulting companies giving presentations that day, the board and other executives would sit together from 8am to hear from all of the competing consulting companies, and that we would be the last ones to present at 6pm. We had never prepared a presentation so thoroughly as for the one that day. When I walked in, however, and saw the table covered in hundreds of copies of presentations from different consulting companies, I decided to say to them, “Ok, you have nothing to lose, I will give you an choice, you can either have an additional 20, 30, 40 or 50 slides, which I don’t think you really want, or I would like to suggest that you give me your five most important questions and we will discuss them together.” So we had a long, open discussion, with no slides, using only 20 or 25 flip chats. They then asked for 10 minutes to discuss it and we left the room, when we came back in they offered us the contract for the project. That has got to be one of the best feelings I have ever had.
Do you still have time to get actively involved in the most interesting projects that your company takes on yourself?
I love being a consultant; this is a problem on a personal level. On the one side I love being a consultant, and on the other my role at BrainNet is to manage the company. Together with the other partners, my role is to lead projects; so about 30% of our time is spent dealing with projects and managing clients, 30% of the time is then spent in sales, and the rest is dedicated to managing the company or managing a special function within the company.
How would you describe the reputation that you have established in the marketplace?
The study, “Hidden Champions of the Consulting Market” by the Scientific Society for Management and Consulting (WGMB) puts BrainNet as the number 1 purchasing consultant in our domestic market. Our ambition is to become the number one supply chain management consulting and training company globally within the next 10 years.
Has your success been based on the fact that many other consulting firms have ignored the supply chain management market?
During the 1990s and into the first few years of this century, you are right many others were ignoring this market. However, in the last three or four years, and especially over the last 18 months, we recognised that all consulting companies are extremely interested in capturing a market share in the supply chain and procurement arena, since it would give them the ability to grow in crisis times. We have grown in the last 12 months and do not have the same volatile growth curves as most other consulting companies; our growth has been very linear and very stable with two digit growth rates every year. This is clearly because the procurement and supply chain management markets have developed year on year, which is also likely to continue for the next 10 years.
Can we say that in good economic times, your business focuses on helping companies to expand and internationalise their supply chain, and in bad times your main offering is to help streamline and cut costs?
Yes, but cutting costs is too easy. The point is that we have clearly seen that the volatility of almost every market has increased in the past few years. There is a reason for that: most of the procurement markets are more or less financially driven. It is not a question of supply and demand. Making a good forecast for the price development in any raw material market like oil, gas, copper or iron has become much more complex because 80% or 90% of the price volatility depends upon whether the product is driven by the financial markets, which are inherently much more volatile. In short, the volatility from the financial markets has come into the physical markets. As a result, the real challenge for companies is not only to reduce costs, but also to make their supply chains flexible enough to be able to switch the global capacity that they have in the background on and off in order to provide their customers with quality products.
It sounds a bit like we are back in the 1980s with the Japanese just-in-time management systems; what is the difference 25 years later?
The difference is that we are not talking about a supply chain within the company; we are now talking about global supply chains involving a lot of companies around the globe. Globalisation simply means that you are able to utilise the strengths of each region, and integrate these into products which have the best fit for the target market.
BrainNet entered the Chinese market in 2005, did you have previous experience in China?
Yes, we worked there, but in a project-oriented way. When the time had come to do a project which demanded a solid infrastructure in the region in order to be successful, we looked for a joint venture partner. Our original thought was that it should be a Chinese company, so we started looking for a consulting company with experience in the supply chain field, but we could not find the suitable partner. In the meantime we had come across EAC (Euro-Asia Consulting) a German company based in Munich, which 15 years of experience working in China and India. We realised that they had a deep understanding of the expectations of European and US clients, as well as knowledge of how to implement projects in China and India. That combination, together with our sourcing understanding and procurement and supply chain knowledge, was a perfect fit for the market. Thus integration meant the combination of regional competence with functional competence.
What are the main lessons that you’ve learnt from entering this market and helping European customers in setting up supply chains in China?
The major difference is that Chinese companies not only have long-term goals but at the same time are also interested in short-term money; this is a really interesting combination. Americans on the other hand are only interested in the short-term money, and are sometimes a little too opportunistic. In Europe we are in between the two: becoming more and more focused on short-term actions and objectives, but not being crystal clear on whether we would prefer to have a long-term strategy or short-term money. It seems to be that China has found its own way of being successful in the short term, whilst at the same time realising long-term objectives.
China was the first country to report a return to strong economic growth since the beginning of the global economic crisis. Which role do you foresee China playing in the global economy in the coming years, especially given China’s Go-Global strategy and the growing confidence of Chinese companies that they can succeed, not only in their own country, but also outside their boarders?
The role of China in all global markets will significantly increase because they will be able to combine very cost-efficient production whilst gaining the ability to design and build more sophisticated products. China will be the factory of the world, with increasingly intelligent products. The reason for this is the fantastic combination of the ambition and inherent motivation of Chinese managers to be globally successful, and their ability for huge scalability, giving them the potential to become the largest market of the world. The only chance for us is to create value by delivering intelligent services. There is a very good chance that Europe can be the R&D centre of the world, but the challenge will be to find a way to combine that with Chinese strength and scalability, their cost position and their interest to adopt that knowledge, and ultimately to integrate that into your products.
Before we talk about the opportunities in China for you, you mentioned China’s great expertise and cost-competitive manufacturing; do you think there are opportunities for Chinese consulting firms which specialise in cost-competitive production strategies to play a leading international role in this field?
I don’t think that we shall see Chinese consulting companies in the international market within the next few years, because the first step for the consulting industry was to work on a project basis for European and US clients that see China as a sourcing of market. Now we are seeing the increasing interest of Chinese companies in working with international consultants and learning from the best how they can improve their business. They will then learn to build global supply chains, not only for their own benefit, but also in order to adopt some of the points of view of their European and US clients. China be the factory of the world, but there are no Chinese brands. If China really wants to focus on the end customer then it must develop a better understanding of how to convince this end customer that the Chinese alternative is better than other options.
Does the same apply to the B2B environment as well?
It is interesting to look at the energy or chemical industry for example. It would be very hard to convince the engineering or procurement departments in these industries to change from a European supplier base to Chinese suppliers, so this does not only apply to the B2C business but also the B2B business. International consulting companies are now needed in order to ensure this is understood and make such views a reality and integrate Chinese suppliers on a larger scale. Their learning curve will be very fast. Then perhaps the next wave would be of Chinese consulting companies bringing their know-how to traditional markets like Europe and the US.
What prove to be critical success factors in meeting the needs of your Chinese clients?
We are becoming increasingly successful at attracting Chinese companies for our consulting services, and we are surprised quarter on quarter of the success we are having. Regardless of whether you are doing a supply chain management project with a European, US or Chinese company, the content and methods will always be the same, however, the way you communicate, the didactic approach is completely different. That is why we do all our projects with local people; you cannot be successful in the US with German consultants, and the same is the case in China. What they do want is the German know-how, as long as it is communicated in the Chinese way.
Chinese companies can come to us if they are really interested in building global supply chains which will be able to meet the requirements of the European and US markets. That is our core strength; it is in this area that we can support them in a better way than other companies. However, if they are simply looking for a strategy through which to enter the European market, there are other consulting firms which would be better for that purpose.
Previously you spoke about your most memorable pitch in 1996, how different is it to sell your services to potential Chinese customers compared to the way you do it here in Germany?
First of all, I am not a good salesperson for china! I would try to sell in a German way. My role is to find the right people in China, who are able to find the right approach, to communicate in the right way with our Chinese clients. This approach is fundamental to the successful running of the company. My added value is not to be the number one salesperson in China, but to be able to develop a process and a system which allows BrainNet to find and attract the right people. Yes, it would be a disaster for me to try to sell projects in china.
You’ve said that BrainNet’s ambition is to be the world’s leading player in your field, what is the role that china will play in realising this ambition?
I am absolutely convinced that china will become one of the top three markets for BrainNet, after our home market, within the next three years. It will be even more important than the US.
So which country could be number two then?
Good question, ask me in a year! I think that we have a very strong base in the German market, so over the next few years, Germany, Switzerland and Austria together will be our most important market. The number two market right now is the US, although we have been successful in our growth in Scandinavia and the UK. So in my view China will become the our second or third most important market.
You were saying that China does not really have international brand names. One of the most interesting things that we are seeing here is a development in the green industry where China has the opportunity to develop international brand names and position itself as a world leader…
China of course has the money to buy brands, but buying a brand is only the first step. Whether or not these brands will be successful in the future will depend on how they manage the people. The Chinese need to learn how to manage US or European managers, and how to use the brand in a way that brings Chinese products under that brand name to the clients.
Next year is the 15th anniversary of BrainNet; how do the ambitions in the first year compare with your positioning today?
In those days, we enjoyed doing good projects; we enjoyed doing projects that the clients loved us for. We started to think strategically about five years after founding the company, at the beginning of 1999. We posed ourselves the questions on precisely the business we really wanted to focus on, what the key arenas we had to be in were, how to build competitive strengths, what our unique selling position was and how to attract the best people to our business. In my view building a business has five different stages. First there is the founding phase: let’s say six friends decide to found a business. Second phase is thinking about strategy needed to survive: having done two or three projects where the clients loved us, we needed to think about how we could build more scalable business. Then there is an interim phase between when you have a few disparate projects and when you are actually a real company. The third phase is therefore once you are recognised as a real company. The fourth phase, once you are successful in your domestic market, is to take your business internationally to see if you can achieve the same success. Then the fifth phase, is rethinking what the real objective is, precisely what we want to be dealing with, re-establishing strategies, and this is the phase we are at now. The next step is to achieve our goal of becoming the number one supply chain management consulting company globally.
As an aside, something we’ve been discussing more and more recently is a concept we’ve called the hamburger theory. If you imagine a hamburger, where the top side of bread is the clients, who have increasingly higher expectations in comparison to five years ago, the bottom half of the sandwich is then the HR/recruiting market, where we are seeing a new generation who defines their goals very differently from those of my generation. Twenty-five year olds now no longer want to simply be successful for one company, like those who fought the competition to earn money and success as my generation did, they want to find the right balance between work and friends and family, they want to see the world, their horizons have been broadened. So there is pressure from both halves of the sandwich, and thus consultants are that hamburger in between. The key for us is to figure out how we can bring these two together in a symbiotic system, how we can design a flexible solution to meet the pressures from both sides. We want to be able to have the best people in the world in the field. We want the top 10 people in the top 10 universities to be thinking that the first call they make should make upon graduation is a call to BrainNet.
As BrainNet has developed from a six friends’ start-up into a very successful company with the ambition to become the world leader in its field, one might ask whether the current management is still the right management for the company. Would you be the most suitable person to take this company to the next level and once you have reached that goal, will this be something you want to continue with over the next 10 years?
That is the most important question. I ask myself every month, firstly whether I am still the right guy for the company at this stage, and secondly whether there is someone who can do the job better than me. So as soon as I cannot answer these questions positively, and I know there are three people in the company who can execute the job better than me, then I will change it. Today, I am convinced that I am the right CEO for the company.
The important thing, in order to answer your question, is to constantly attract new, bright people, so that in five or ten year’s time, we do have people with the ambition and the ability to do my job better. I would, however, love to be still working at BrainNet when I’m 70, but for sure in a different role, maybe only for the dinner speeches to tell the stories of the good old days, or educating other consultants, or doing perhaps even by doing just one project a year, which I can chose, perhaps with old clients I’ve worked before, so that I can just enjoy consulting.
| Company: | BrainNet Supply Management Consultants |
| Position: | MD and Founder |
| Country: | Germany |