Cologne/Munich (ots) – Subsidized companies from China are conquering world markets. At the same time, the USA is sealing itself off from competition from overseas with extreme import tariffs of 25 to 100 percent on electric cars, solar cells, batteries, etc. Economic experts are sounding the alarm, warning Europe of an impending import glut. Technology experts Grigori Bokeria and Dr. Franz Ramsauer of the global strategy consultancy Simon-Kucher.
“When the wind comes, some build a wall, others build windmills.” The Chinese proverb makes it clear: In order to survive in a challenging market environment, you need innovative concepts, the courage to try new things and an entrepreneurial spirit. Regulations and tariffs are nothing more than walls that only offer short-term “protection.” The past has shown how easily these can be avoided. Anyone who wants to sustainably strengthen the competitive positions of local companies should rely on “windmills”: new products, new business models, new collaborations.
The aim must be to strengthen the competitive position of local companies through interfaces to local markets and customers – also through understanding the exact customer requirements. Five points in particular are essential here: focus on the core business, vertical integration, sales effectiveness, new technologies and the right pricing models.
Strategic positioning in the core business
First of all, it is important to understand: A broad product and service portfolio with a large number of variants, derivatives and applications can be the basis for tailor-made customer solutions – but in practice this is not always the case. In everyday business life, unstructured product and service portfolios often lead to excessive inventory levels (raw materials, semi-finished and finished products), additional costs in production and excessive demands on sales due to their complexity.
What is better here is a well-thought-out module and platform strategy with a clear positioning of the value of the respective product and service segments for a customer (“value proposition”). This increases internal transparency regarding “real” sales and growth areas and makes it possible to efficiently offer tailor-made solutions with clear customer added value and communicate them accordingly.
Vertical Integration
End customers are interested in solutions – in production, particularly in low waste, a low machine failure rate and quick repairs. For mechanical and plant manufacturers, this requires conscious, strategic decisions: Is positioning as a solution provider possible or desired? Or is a role as a component supplier envisaged?
Access to a sufficiently large end customer segment is essential for a solution provider. The availability of required resources (personnel, space, machines, capex, opex) and required skills (software, hardware, B2B / B2C sales) represent further decision criteria. Should missing resources and skills always be built up internally or can they also be acquired externally via inorganic growth ( M&A), joint ventures and collaborations?
New business areas and models
Technological change offers opportunities – today more than ever. Smart Fluid Hydraulics and Smart Factories offer holistic monitoring and control of systems – 24 hours, 7 days a week, 100 percent remotely. State-of-the-art measuring instruments transmit production data (cycle times, disruptions, temperatures, utilization, etc.) to the control center in real time. Failures appear immediately, critical patterns due to changed parameters (pressure, temperature, scrap rate, etc.) are recognized early on using software solutions such as “predictive maintenance”, and maintenance personnel act more purposefully.
In addition to expanded offerings in the areas of software, service, maintenance and repair, smart solutions also enable pay-on-demand models. Instead of purchasing a system, you can also rent it. Customers can therefore transfer high capex investments into opex expenses that reflect their consumption. At the same time, traditional mechanical and plant manufacturers can cushion economic fluctuations in demand somewhat with steady sales (“subscription models”).
Improved sales effectiveness
B2B sales teams devote only 36 percent of their resources to “real” sales activities such as sales, interactions with customers, and maintaining active customer relationships. An incredible 44 percent of resources are spent on non-customer activities such as the management of existing orders and the operational processing of inquiries. Another 20 percent require administrative tasks (such as deciphering travel expense forms). The result? Sales teams spend 64 percent of their time on activities that have no direct impact on growth. Companies absolutely need to use this “lost” sales time for active customer time and transform the cost factor into an efficiency lever.
Value pricing and new pricing models
The cheapest is not always the best. It is therefore important to understand the value of a solution for the customer, validate it with alternatives on the market and translate this into a suitable pricing model. Enercon (wind turbines), Michelin (tires) and other hidden champions have already shown the way – even in price-sensitive markets, a price model adjustment including a link to customer value drivers can be successful. More and more industries are moving to pricing models that monetize value across the entire lifecycle.
Conclusion: The “China shock” is here and can no longer be imagined without it
What matters now is how our technology champions respond to this in order to steer the competition in their favor and fight it on a level other than a pure price and discount battle. In any case, blind pessimism must have no place in current developments.
Grigori Bokeria is Partner and Global Head of Technology & Industrials in the global strategy consultancy Simon-Kucher. As an expert in better growth strategies for the industrial goods industry, he supports companies in the areas of mechanical, plant and component engineering as well as electronics/electrical engineering with individual pricing and sales solutions.
Dr. Franz Ramsauer is a partner in the Technology & Industrials Sector of the global strategy consultancy Simon-Kucher. As an expert in transformation, strategy and commercial excellence, he helps companies achieve long-term, profitable growth.
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