From Trend to Strategy - Follow-up on the 15th Annual Conference of Strategic Management by Horváth & Partners

Wednesday, 13. May 2015

Exciting best practice presentations, lively discussions, and plenty of networking among strategy professionals - this is what the Annual Conference of Strategic Management by Horváth & Partners stands for more than any other such event in the German-speaking region. Last Thursday, the Annual Conference was held in Stuttgart for the 15th time already. As in previous years, SOLYP was happy to serve yet again as one of the event partners. The motto of the conference was: "From trend to strategy – Seeing further, acting sooner." Among the distinguished speakers were representatives of Tesla Motors, DekaBank, and RECARO Holding as well as the energy provider EnBW, one of our SOLYP3 customers.

Digitization Most Important Trend Across Industries

Digitization as driver for the development of new business models, processes, products, and services was the top issue that ran like a red thread through the event. Terms like the Internet of Things, Industry 4.0, “mobile only,” “always on,” “online first,” “smart,” or “hyper connectivity” were mentioned time and again. Just like Sylvie Römer of Horváth & Partners put it in her talk: it is only a matter of time until all industries will be “digitally revolutionized.” At the same time, digitization will not only change competition within industries, but also reshape traditional industry boundaries.

An industry which is already “massively” affected by the digitization and its consequences is the banking sector, as Ralph Martens of DekaBank told the audience. Sixty percent of the German banks are already online and are planning major investments into the further expansion of the online and mobile business, he said. The main challenge is to keep and foster close relations with the customer during the entire “customer journey” – from awareness to purchase –, as the “points of customer contact are increasingly occupied by others,” Martens explained. More and more FinTech companies that provide various financial services with superior customer value are entering the market putting traditional banks under high pressure.

The ever-increasing competition combined with the increasing market transparency and growing customer demands ultimately leads to a considerable decline in bank customer loyalty. Switching from one service provider to another is easier than ever. The old hurdle of the “laziness of customers” which banks have been benefiting from for ages is quickly diminishing, Martens pointed out. And even the trust factor seems to loose importance. “Credibility is much faster to obtain than we ever thought!,” was the somewhat surprising message of Martens.

Nevertheless, he is convinced that digitization is also a great opportunity for banks and other businesses as products and services are “finally being developed in a customer-oriented fashion.” Most of the other speakers also viewed a stronger customer focus as the main key to success. Susan Hennersdorf of EnBW captured this in a nut shell when she remarked: "Whoever listens to the customer and speaks on his behalf will be successful in the end!"

An excellent example of a company that has incorporated both digitization and a strong customer focus into its "corporate DNA" from the very beginning is Tesla Motors. For the Silicon Valley company, digitization and customer focus form the indispensable basis for the development and shaping of business processes, products, and services. For instance, thanks to the Internet, Tesla sells its electric cars directly to the customer bypassing the classical car dealerships; a process which can be described as revolutionary for the conventional automobile market and that wasn’t considered possible before even by industry experts. The cars themselves are more or less completely controlled by software and hooked up to the web. And it pretty much goes without saying that there is an app available for all kinds of functions.

Other major trends which are giving strategists reason for concern these days include the increasing regulation at the national and European level which is a significant risk factor and cost driver, consumer trends like sustainable consumption, the sharing economy, and prosumerism, as well as the economic, social, demographic, and geographic gap of the society.

How to Respond to Trends Strategically?

When it comes to trends, companies can fall into two basic categories: trend setters and trend followers. Tesla Motors is certainly one of the former. Philip Schröder, Country Director Germany & Austria of Tesla Motors GmbH, had all the attention of the conference participants when he summed up the philosophy of the company with the catchy words: “We don’t wait! We do it ourselves!” Tesla systematically follows a “vertical integration” approach in order to protect customers’ interests as best as possible throughout the entire value chain. The company does not wait for regulators, suppliers, or other stakeholders to act someday in its favor; rather it takes things into its own hands whenever possible.

For instance, to reach its goal of releasing a mass market electric car by 2018, Tesla stamped the so-called Gigafactory out of the ground last year seeking “to reduce cell costs much faster than the status quo and, by 2020, produce more lithium ion batteries annually than were produced worldwide in 2013.” No half measures here! Like Schröder said, it is this decisive decision-making and acting which made Tesla into a “synonym for electric mobility.” Granted, the necessary “petty cash,” as Tim Wolf of Horváth & Partners put it, probably also helped along the way.

A great way also for established companies to experiment with new business models and product ideas are so-called ”incubators” –  another term that was frequently mentioned during the event. Developing start-up subsidiaries in cooperation with joint venture capitalists provides a wonderful opportunity to break out of the familiar environment, go into a new direction, and even set new innovative trends. In order for this to succeed, however, companies should make ensure to hire talents from other industries that bring in totally new perspectives and don’t hold on to traditional practices and views.

To spot emerging trends early on and take them into account in strategy development, companies relied on a broad mix of methods and tools. Tesla, for instance, swears on a “rapid customer feedback loop” in order to be able to respond quickly to changing customer needs and behaviors. Other companies use scenario software or the 7-C-Model developed by Horváth. Speakers also stressed the importance of visualizing trends for employees in a clear and engaging way.

Trends are “the great classics of strategy work,” like Oliver Greiner of Horváth & Partners put it in his brief welcoming speech at the beginning of the conference. Marcus Getta of the Thüga Aktiengesellschaft underscored this importance when he remarked that: “innovation and trend management plays an increasingly crucial role – particularly for providing orientation in times of technological and economic upheaval in an industry.” Having said that, make sure to keep an eye on the trends in your and other industries, or better yet: set some yourself!