ROLAND BERGER Strategy CONSULTANTS

BUSINESS

DECember 2011

COO INSIGHTS

"We are reinventing the

aircraft," says
Airbus manager
Gnter Butschek.
Megatrends and
customers'
newfound power
are turning
more than
just this
business model
on its head.

2030
1.

SEVEN MEGATRENDS
THAT ARE SHAPING THE DEVELOPMENT
OF OUR PLANET
Demographic change

2.
3.
4.
5.
6.
7.

The world's population will grow to over eight billion

Average age will be five years older
Urbanization is increasing

Globalization and the markets of the future

Global exports will expand by 5.3%, global GDP by just 4%
In tomorrow's markets, the middle class will increase by 150% to a total of two billion people
The GDP of what are known as the Next Eleven states is growing by nearly 6% per annum

Scarce resources
Worldwide consumption of primary energy will increase by 26%
Worldwide demand for water will increase by 53%
Daily food consumption will increase by 27%

Climate change
By 2030, carbon emissions will be up 16% to 35,053 megatons
Average global temperature will rise by 0.5-1.5C
Biodiversity will decline from 70% of its original base today to 65%

Technology and innovation

The number of people who access the Internet only from mobile devices will grow by 34%
60% of the world's population will be connected in this way by 2030
Demand for medical technology will surge by an astronomical USD 300 billion a year

The global knowledge society

Knowledge networks will continue to gain in importance
The proportion of women in the working world will rise sharply
The "war for talent" will intensify

Global responsibility
The influence of NGOs will remain significant even as their numerical increase levels off
Governments will step up cooperation and share responsibility
Donations to charity will remain strong, but their form and focus will change

http://www.rolandberger.com/gallery/trend-compendium/tc2030/

Why
A

lthough it was meant to be

just another aircraft, it will be so much more
than that. Originally conceived as an A330
upgrade to square up to Boeing's Dreamliner,
the Airbus A350 looks, sounds and smells like
an aircraft. Yet it is something completely new,
completely different. More than half of the
whole machine and 90% of the fuselage is
made not of metal, but of fiber composites.
In an interview with think: act Business, Airbus
board member Gnter Butschek reveals that
this development is nothing short of revolutionary: "We are redefining the subject of
aviation" (page 14). Gnter Butschek knows
what he is talking about, coming from an
automotive industry that, 125 years after
its history began, is likewise opening a new
chapter. Driving on electricity instead of gasoline? Entirely new players in the supply and
OEM game? Car-sharing fleets as a new line of
business? All this is only the beginning. The
ultimate aim is mobility, in whatever form
even on foot. A business model that has lasted
over a century is now fighting for its life. And
the last word has not been spoken ...
The destruction of the environment, scarcity

of resources, urbanization and demographic

trends affect the whole planet. In the process,
they are rapidly, often abruptly, changing the
business models of established industries.
Never before have companies experienced
such far-reaching upheavals. Nothing lasts for
ever. Nokia, once a maker of rubber boots and
then equipment provider to the modern information society, has had its day. Apple is the
new now. And tomorrow? Who knows? Is this
the hand of destiny? By no means. Change
can be planned. Change can be wrought. While
some lament the demise of the newspaper,
the New York Times is earning top dollar on
e-subscriptions. On the list of hot innovations,
coffee arouses about as much excitement as
matches. Can you even earn money with it?
You bet you can! Nespresso drinkers pay the
equivalent of EUR80 per kilogram of coffee
beans. Thanks in part to George Clooney,
perhaps. But certainly thanks to Nestl's innovative business model.
Ideas may be free, but they are rarely new. The
forces of creative destruction were eloquently elaborated by Joseph Alois Schumpeter,
who died in 1950. Yet they have never been
more topical than they are today. Innovative
business models are everywhere, in every
industry.
Enjoy your read!

Axel Schmidt
Global Head of Operations Strategy

think: act BUSINESS

Business Models

Why
Editorial
Thought Leadership
Customers: the new superpower
How customers are shaping today's
corporate strategy
How
Business practice
"We are reinventing the aircraft"
Airbus manager Gnter Butschek
talks to Roland Berger
Automotive industry
Intelligence on wheels
Ushering in a new culture of mobility
Media industry
Can print survive the Internet?
Cloud economy
A data revolution reshapes the
IT industry
Who
7 questions for
Cdric Ochsner, COO, Chocolat Frey AG
What
Mergers and acquisitions
Successful PMI management
Purchasing
Emerging stronger from the crisis
Energy efficiency
Rising electricity prices create opportunities
Automotive suppliers
On a high for the time being
Kiosk

3
4

12

20
24
28

32
36
37
37
38
39

think:act BUSINESS
COO Insights
Published by: Axel Schmidt
Responsible for content: Dr. Michael Zollenkop
Project management: Dr. Katherine Nlling
Layout: Roland Berger DesignTeam

You can also order this magazine as a PDF file in English or German at:

COO_Insights@rolandberger.com

Roland Berger team of experts:

Marcus Berret, Christian Bhler, Ralph Bchele,
Robert Grimm, Prof. Torsten Henzelmann,
Oliver Knapp, Dr. Christian Krys, Dr. Thomas
Kwasniok, Jrg Lederbauer, Switbert Miczka,
Felix Mogge, Robert Ohmayer, Thomas Rinn,
Axel Schmidt, Roland Schwientek, Christian
Steinbach, Dr. Michael Zollenkop

Why

ROLAND BERGER STRATEGY CONSULTANTS

The new way:

How industries are
reinventing themselves

BusinesS B u s i n e s s M o d e l s

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ROLAND BERGER STRATEGY CONSULTANTS

g Why

Customers:
the new
superpower
How customers are shaping today's corporate strategy
and will before you know it be dictating the business
models of entire industries

one are the days when products

were created by product development departments and passed on to
sales and marketing to be literally forced
onto the market; the days when a product's success appeared to depend primarily on the company's ability to woo,
flatter or sweet-talk the customer into
buying it.
Gone are the days when firms could
rely on market research to help them
understand customers, pass this data
on to their development departments and

have them transform

it into market-ready
products.
Gone, too, are the days
when it was enough for
firms to involve B2B or B2C
customers in their product
development processes, enlist their
help in product tests or use them as codevelopers. "Customer integration" was considered the ultimate in successful product
development, understanding customer needs

think: act BUSINESS

and how they evolve over time the key to

developing successful products. Companies
assured anyone who would listen that the
customer was king and trumpeted how much
more customer-oriented they were then their
competitors.
Times have changed. Customers enjoy more
transparency than ever before about the
range of products available worldwide, their
performance and their price. Today more
than ever, customers are looking for flexible
solutions to meet their needs rather than
physical products with fixed characteristics.
Transparency about companies' business
models, competencies, principles, production
networks and revenue models has reached an
all-time high. Customers are networked with
each other and exchange information via the
social media, customer communities or good
old-fashioned word of mouth. Negative
opinions spread at the speed of light
through online communities and
thence to the traditional media,
soon reaching even the most
Internet-unsavy customers.
Customer requirements are
also more specific than in
the past. Different niches
emerge reflecting what is
available on the market
and what customers
want as a result of the
new transparency.
Sustainability and
social responsibility, individually tailored packages,
the right mixture of function,
design and emotion the list
of what customers expect of
a product goes on and on. Welcome to the
new reality. Welcome to the new super-power:
customers.
What lies behind this development? A fundamental change in customer needs, patterns
of use, availability of information and financial
factors, driven by a series of global mega-

Business Models

... Welcome to the new superpower: customers.

What lies behind this development?
A fundamental change in customer needs,
patterns of use, availability of information and
financial factors.

trends long-term developments that have a

massive and often global impact on society,
the economy and the environment. Together,
these megatrends bear much of the responsibility for the shift in power toward customers,
both corporate and individual, B2B and B2C.

1
Megatrend number 1: GLOBALIZATION.
Globalization makes itself known in the
massive growth rates experienced by some
emerging countries and their rapidly expanding prosperous middle classes. In the BRIC
countries, for example, the middle class is set
to grow 150% to around two million people and
in the Next Eleven countries to 730 million
people by the year 2030.
The potential represented by these new customers creates enormous challenges for companies in both their B2B and B2C business.
In B2B business with emerging countries,
Western manufacturers traditionally enjoy
limited success with products developed specifically for industrialized nations their standard product portfolio is typically too expensive, over-specified and insufficiently geared
toward local needs, applications and habits.
Studies show that around 70% of customers
buying engineered products in industrialized

countries make use of 70% or more of its standard functions on a routine basis. In China, by
contrast, only one-third of customers make
use of 70% or more of the functions. Moreover,
customers in non-Western countries sometimes require very different functions from
their counterparts in the west. Thus, when
radiologists in emerging countries such as
India buy an X-ray machine, they look at its
resistance to dirt, damp and variation in the
power supply as well as its price. In terms
of its technical functions, it's enough if the
X-rays can be developed manually in a darkroom rather than inside the machine; for
indications such as fractures and tuberculosis,
which make up the majority of cases Indian
radiologists deal with, even such an X-ray
machine enables a quantum leap in their diagnostic work.
The situation is similar in B2C business, an
area Indian-American management guru
C. K. Prahalad describes as "the bottom of
the pyramid". Customers at the bottom of
the income pyramid expect modern products
from brand manufacturers, but those products
must still be within the customers' ability and
willingness to pay. Successful products also
take into account local usage patterns. And in
the case of unfamiliar products, they include
instructions on how to use them.
For Western manufacturers, these customer
requirements and expectations can be very
challenging. When globalization was still in its
infancy, the usual approach was to first export
products made in Europe to emerging countries and only later start making them locally
in non-triad countries. Nowadays, companies

ROLAND BERGER STRATEGY CONSULTANTS

g Why

need to develop and test their products for

emerging markets in the countries themselves. Only then can they ensure that regional product requirements and local cultural
factors are taken into account. Fail to do this,
and the products run the risk of missing their
target audience entirely.

2
Megatrend number 2: DEMOGRAPHIC
CHANGE. Urbanization and ageing societies are changing the face of entire
industries. For example, the quality of
life in big cities is deteriorating as the
number of vehicles on the roads increases. At the same time, cars are less
viewed as status symbols, especially
by young people. Consumer electronic
products, for example, have become
more important. Overall, the trend is toward using rather than owning vehicles.

This development has important consequences for the automotive industry:

for example, manufacturers are responding with large-scale car sharing
systems.
The over-60s are more active today than
ever before. Older people are far more
involved in society, they stay mobile longer
and want to remain living in their own
homes longer than in the past. They also
control a much bigger share of society's
spending power than before. By 2035,
one-third of the German population will be
over 60. Companies can no longer content
themselves with producing appliances
tailored for older people with easy controls,
bigger buttons and clearer writing. They
need to change their whole way of thinking
to reflect the lives of society's "young-old"
segment.
Ambient assisted living (AAL) is the buzzword, here. All involves the use of technology to support older people in their everyday life, allowing them to live as independently as possible even if they become
sick or frail. The technology is integrated
into the person's personal environment.
Thus, devices for monitoring health can

WHOSE IDEA WAS IT?

Where do business model innovations originate?
Employees

2.8

Customers

2.7

Commercial partners

2.5

Competitors

2.4

Own service staff or sales reps

2.0

Academics

1.9

Conferences

1.6

Trade fairs and exhibitions

1.5

Industry associations

1.4

Scale of 1 to 5 (1 = not important at all, 5 = very important); n = 24

be incorporated into clothing, safety components added to household appliances

and automatic alarm systems installed
for emergency situations. Companies
need to integrate "smart" functions and
network connections into their products,
from stoves to floor panels. That means
acquiring new skills and reshaping the value
chain where necessary often a major
undertaking. In a word, companies need
to offer lasting solutions rather than products that are purchased as one-offs.
Their employees need new skills. And they
need to rethink their revenue models,
looking at options such as flat rates and
differentiated billing.

3
A third megatrend is the PENETRATION OF
NEW TECHNOLOGY AND INNOVATIONS.
We are currently witnessing a speeding up,
convergence and ubiquity of technology, from
digitalization to innovations in the field of
sustainability. Technology disseminates quicker than ever. Innovation cycles are shortening and the relevance of new technology for
previously unaffected industries is growing by
the day. What is more, innovations and hence
technology is no longer spreading according
to the classic "waterfall model", trickling down
from one market to the next. Instead, it's
being taken up by different markets simultaneously, a so-called "sprinkler model". The
technological distance between developing
emerging countries and their industrialized
counterparts is shrinking. In the case of major
technology shifts, companies from different
industries or hemispheres are sometimes able
to break into markets previously cornered by
established players.

think: act BUSINESS

Learn from the pros

Successful business models are often
transferable to other industries
Some business models are custom-made for specific firms. Others
apply to entire industries. Still others apply to a number of different
industries. Whatever the type of model, customer needs and wishes
are what drive growth.

Business Models

Low-cost business models: Do your customers want

their needs met at an attractive price and are prepared to do without
extra frills? Low-cost business models work on the principle
that all types of customers can potentially
participate in the market. Food retailers
and airlines introduced the model first and it
has since been taken up by a number of
different industries, even cruise liners.

Fractionalization: Are your business or private customers

unwilling or unable to afford an entire airplane?
No problem. Airplane manufacturers such as
NetJets are happy to sell their jets to
groups of customers who then own the
product jointly. Companies producing
such capital goods need to develop a
whole new set of skills for dealing with
customers and operations, at the very
least in the area of administration
and scheduling.

Product as a service: Do your business customers want

"Freemium" ("free" and "premium"): Do your

Crowdsourcing: Do your customers want to contribute to

value creation and in return benefit from the contributions of others?
Companies from Wikipedia to YouTube profit from customer
communities and the corresponding shift in
value creation, financed by advertising,
donations or other sources of income

customers expect everything to be free on the Internet? Companies

can meet their expectations by providing basic services
free of charge and funding them with feeincurring premium services. In online
services from email and search engines
to contact platforms and media sites,
customers are the new superpower.

solutions or semi-finished goods rather than capital equipment?

Companies are now offering compressor services rather than compressors, tools for hire rather than purchase, on-demand software services
rather than software products ("Software as a Service" or SaaS).
In this model, customers face neither
investment nor credit risks and benefit from
cost flexibility, to the extent of having the
manufacturer operate the product throughout
its entire lifetime

Symbol folgt

ehind these trends lie significant

changes on the customer side be it
business or private customers, current or future, in developed or developing countries. In many cases, power has
already shifted from producers to customers.
The key for companies is to spot new customer needs or customer needs not currently
met, which have mass-market potential. It
involves creating a new or extra value proposition for customers. Manufacturers that can

read the signs correctly enjoy a major competitive advantage in an age where customers
are the new superpower.
Harvard professor and bestselling author
Clayton Christensen ("The Innovator's
Dilemma") describes this approach as "disruptive innovation": product development
departments should focus consciously on
customer needs that are currently not being
met adequately or at all. Potential customers

Behind these trends

lie significant changes
on the customer side
be it business or private
customers, current or
future, in developed or
developing countries.

ROLAND BERGER STRATEGY CONSULTANTS

g Why

who are not customers at the moment because there is no product that meets their needs
properly are particularly interesting in this
respect.
A key feature of disruptive innovations is that
they are initially considered inferior to the
existing standard products and hence seen
as uncompetitive; however, they soon take off
and subsequently meet customer needs much
better than the old products. Disruptive innovations are the opposite of "sustaining innovations" where the focus is on refining standard
uses and functions.

tomorrow's customers, too how they will

be living in three, five or even ten years'
time. The length of innovation cycles determines how far into the future the trend
prognoses must stretch. As early as the
1970s, economist and co-founder of the
field of strategic management Igor Ansoff
was saying that trends were visible as "weak
signals" long before they became relevant
for competition. Today, we understand this
to mean signals that are initially considered
irrelevant by most stakeholders but which
on closer inspection turn out to be uncertain
or highly relevant.

o, what must companies do to ensure they react quickly? Even better,

how can they become proactive rather
than reactive? They must take a
close look at the needs of both customers
and non-customers. They must understand
the typical hierarchy of needs in different
customer segments and how they translate
into customers' willingness to pay. They must

A good way for companies to spot

such changes quickly is by using "360
Stakeholder Feedback", a tool developed
by Roland Berger Strategy Consultants in
collaboration with the Leipzig Graduate
School of Management (HHL). Its aim is
to help companies develop their strategy
by identifying weak signals and blind
spots. Management guru Michael Porter

External and internal drivers of innovation

Innovation drivers
Technologic progress
Economic development
Globalization of competition
Environmental change

1.24
0.60
0.56
0.56

Internal
Corporate culture
Current state of
information/knowledge
Staff skills and competencies
Combining resources

0.52
0.44
0.40
0.36

1-5 bipolar scale [-2,+2] from strong barrier to strong driver; n = 24

learn what drives changes in customer wishes

and requirements.
What is more, they must do this not just for
today's customers their lives today and
how they use products. They must do it for

ften it can be helpful for companies

to look beyond the boundaries of their
own industry. Broadening your perspective can help you not only identify
future trends but also find possible solutions
for future customer needs.

WHAT'S DRIVING IT?

External

"360 Stakeholder Feedback"

is an online survey tool that
compares internal and external
perspectives

defines "blind spots" as factors that companies overlook due to their strong internal
focus weak signals that are considered more
important or uncertain by external observers
than by people within the company.

Airbus is doing exactly that. Gnter Butschek,

Chairman of the Board of Management of
Airbus [in Germany], says that the company
is modularizing its product structure, testing
alternative materials and fuels in collaboration with major clients, putting together predefined standard configurations for airplanes
and developing systematic partnership agreements with key suppliers. On both the supplier and customer side, in production,
supply chain management and sales, Airbus
is busy transferring key elements of the automotive industry's business model to
the aircraft industry. Its overall goal is to
industrialize procedures, overcome the
skyrocketing complexity and ensure that
the business model does its part in helping

think: act bUsiNEss

the company meet its impressive sales and

growth targets.

business models

11

draw up a detailed description of their

current business model and any possible
alternatives, such as those used by their
competitors, and then evaluate their robustness in light of future developments. 360
Stakeholder Feedback makes this process

partners. Such partnerships mean that

the company reduces its own engineering
input and develops new skills such as
remember our radiologists in emerging
working with external partners, monitoring
countries looking to buy X-ray machines?
their performance and integrating different
Companies who want to supply them must
modules. Changes on a similar scale occur
in functions such as purchasing, production
and supply chain management. this has
a knock-on effect on the company internally,
What do customers really want? What future trends will shape
from what skills are now relevant to the
the market? how can companies best prepare for change?
new requirements placed on risk management. Sales and after-sales functions can also
An early-warning system can help companies respond quickly
be affected. For example, the company may
to signals from the market.
find that it has to offer new financing arrangements, provide more customer training or
What warning signs and future customer trends may affect the current
even supply staff to operate the machinery
business model?
locally. gradually, a new business model
emerges for the company's business in deve How fast are these trends developing?
loping countries one
that differs fundamen What parts of the business model or its interfaces will be
tally from its model in
so much
affected by these trends? What are the consequences for
developed countries,
tomers held ustries.
s
cu
ve
a
h
its overall fit?
Never before iness models in all ind ns,
which may continue
tio
us
sway over b extends even to opera e with
to exist in parallel.
nce
ired in lin
u
q
What actors stand to benefit from establishing an
re
Their influe
Managing two different
re
a
s
s and
nt change
the product lue
in
alternative business model? How could they profit from a
where urge

business models
l
e
d
o
m
siness
of the va
more innovative model?
the new bu
simultaneously in the
nfiguration
co
e
th
,
o
li
fo
service port venue model.
area of operations
re
What dimensions of customer needs are currently
chain or the
inevitably creates
not fully met by the business model?
additional complexity
for the company.

ensure that their product development departments understand the general context of
the market they are selling to and know what
functions are desirable or essential. they
must acquire the necessary know-how
sometimes a major task in itself. Many of
their existing technological, process- and
product-related skills will be irrelevant for
the project in question. Specialists will need
to be retrained or in many cases replaced by
new, external experts.

dynamic. In fact, the difficult part is not finding the right answers but asking the right
questions.
the goal should be to create transparency
over how different business models work,
what market segments they are aimed at,
what customer needs they meet and a whole
host of other areas, always with an eye to
the competition. If the company discovers any
competitive disadvantages or new factors, it
should adjust its business model accordingly.

What should companies be doing to prepare

themselves for the future? they should

Very often, products can only be adapted

for emerging markets with the help of local

lowly but surely, customers have

begun to influence all areas of the
company. their influence is felt even
in operations, a realm where direct
customer contacts were previously few and
far between. the success or failure of business models today depends to a large extent
on how they are received by customers.
Welcome to the new reality. Welcome to the
new superpower: customers.

How

ROLAND BERGER STRATEGY CONSULTANTS

Once upon a time ...

think: act BUSINESS B u s i n e s s M o d e l s

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13

ROLAND BERGER STRATEGY CONSULTANTS

g How

"

We've got to
redefine the whole
subject of aviation

"

Gnter Butschek, Executive Vice President Operations at Airbus, on the

revolution in aircraft engineering, the new alliance between manufacturers
and suppliers, and commercial jets off the peg

Butschek: I think you underestimate the fascination of flying. And perhaps you are also
overlooking the transitional phase in which
the aircraft industry currently finds itself.
RB: Mr. Butschek, you have been Executive
Vice President Operations at Airbus for nearly
nine months. Before that, you spent more
than half a career lifespan at Mercedes and
Daimler. Do you miss the cars?
Butschek: No, not at all, although for a long
time I believed cars were my life. Especially
when you are fortunate enough to work for
a brand like Mercedes.
RB: Right now, your former CEO, Daimler
boss Dieter Zetsche, has a lot to say about
reinventing the automobile. Couldn't that
kindle a few wistful thoughts?

RB: Are aircraft changing more than cars?

Butschek: I wouldn't put it like that. But we
too are, if you like, reinventing the aircraft.
I've always said that if something comes
along that captures my imagination, I will do
it. And at Airbus, that is definitely the case.
It's not just products such as the A380 and
the A400M. It's also the people I meet here.
There is a huge amount of passion which, for
me, is essentially if you want to do a job well.
RB: Until it went into regular service, the A380
was a problem child for the longest time.
The A400M military transporter is at least

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business models

gnter Butschek,

(51) has been Executive Vice President

Operations at airbus, Chairman of the
Management Board for airbus in germany
and a member of the airbus Executive
Committee since March 2011. He is also
Chairman of the Supervisory Board of
Premium aerotec, a supplier that specializes in developing and manufacturing
metal and carbon fiber composite structures for aircraft. Born in southwestern
germany, he previously led the Daimler
factory in Beijing, a joint venture co-owned
by the german auto group and Beijing
automotive Industry Holding Co. Ltd.
(BaIC). Butschek began his career in 1984
as a project engineer in Central Material
Management at Mercedes-Benz. Several
positions with this organization were followed in 2000 by an appointment to the
Management Board of DaimlerChrysler
South africa, where Butschek shouldered
full operational responsibility. two years
later, he moved to Born, the Netherlands,
to head up the Nedcar plant operated
jointly by Daimler and Japanese auto
maker Mitsubishi Motors.

as far as financing is concerned a disaster.

and now the a350 is running into delays. that
sounds like a pretty tough job.

instead of USD 6 billion and will go down in the

annals of aviation history as the aircraft that
got to market after the longest ever delay.

Butschek: We are dealing with tremendous

complexity. Mastering and improving that
complexity is the kind of thing any production
chief can only dream of. If you recall, when
airbus began planning the a380 there were
not a few people who thought it was crazy.
Fewer still believed it was actually feasible.
too big. too expensive. and now we fly it as
though it were the most normal thing in the
world burning just three liters of fuel per
passenger per 100 kilometers and making a
fat profit for the airlines. Our customers
and their passengers are absolutely thrilled.
I'd like to see the auto makers match that
achievement.

Butschek: Speaking of "fate" sounds very

dramatic. Let's call it the "biggest challenge".

RB: at airbus, your fate will primarily be linked

to the development of the new a350 XWB.
the long-haul jet is intended to compete with
Boeing's Dreamliner, which cost USD 16 billion

RB: Why?
Butschek: We are moving into completely
uncharted territory, both with our material
concepts and with our production technology.
the a350 XWB is not just a new aircraft. to
some extent, it embodies the reinvention
of aircraft engineering at airbus.
RB: thomas Enders, the boss of airbus,
speaks of riding through the fires of hell.
For others, the a350 XWB constitutes a revolution in the existing business model.
What makes it so extraordinary?
Butschek: We are dealing here with a
completely different process relating to

"

We expect the
global volume of
passenger traffic to
double in the next
15 years.

"

15

rOLAND bErGEr StratEgy CONSULtaNtS

g how

"black metal". 53% of the aircraft is made

of carbon fiber composites. these are replacing conventional materials such as steel
and aluminum, because lighter aircraft save
more energy and are less harmful to the
environment. that will help the a350 XWB to
reduce per-passenger carbon emissions by
25% compared to existing aircraft in the same
category. the a350 XWB will be the first aircraft whose fuselage is made almost entirely
of this material. So using this material to produce the whole fuselage is new for us as are
the development processes and component
production, not to mention maintenance.
But that is only one side of the coin.

that we then pieced together. By contrast,

this new form of partnership demands
that both sides shoulder substantial responsibility.

RB: the other one being... ?

RB: airbus too has had to learn the hard way.

Butschek: We've learned our lessons from

the a380 program, meaning that we are
setting new standards in development
and large-scale production. We are using
fully integrated, transnational development platforms and harmonizing all development tools and production equipment.
On top of that, we are building an "extended
enterprise", adopting a new approach to
risk management and involving major risksharing partners for the first time. In the process, we are consciously delegating responsibility for aspects of development and, subsequently, production to selected suppliers.
We are involving them in the development
processes much earlier and much more systematically. that is confronting our partners too
with completely different challenges. In the
past, they were our extended workbench, building the parts and componets

Butschek: there is no question that such a

fundamental change in the supplier structure
is a difficult process for all concerned, and one
in which we bear particular responsibility.

RB: Sounds like the car industry.

Butschek: you are quite right. auto makers
began turning to system suppliers and
selectively farming out responsibility nearly
20 years ago. the learning curve has been
difficult in places. In the end, however, this
proved to be the right way to go. If that
weren't the case, the industry would not be
as well placed as it is today.

RB: the a350-1000 has been modified and

will therefore be delivered later than was initially announced. Is that a nice way of saying
this will be a rerun of the a380, which was
delayed by two years?
Butschek: In the case, the delays have
nothing to do with mistakes. the a350-1000
the biggest model and the one with the
longest range has been modified and now
features improved engines that are still under
development. that takes time. In return,
however, customers will get a better aircraft
that even more closely matches their requirements.

RB: another reason could be that you have

bet too much on suppliers and, in so doing,
handed over control of the processes.
Observers reckon that was the worst problem
for the Dreamliner. Boeing gave away its
knowledge and thus lost control.
Butschek: I don't want to pass judgment on
the problems experienced by our colleagues
in Seattle. But I think there are a couple of
very obvious differences between us.
We maintain close contact with our suppliers,
supporting them with our teams. that doesn't
mean everything already runs smoothly,
but we have learned the lesson that responsibility is something we share. Maybe we are
taking a rather more conservative approach
to carbon fiber materials too. For example, we
consciously elected not to make the fuselage
in one piece, but as panels.
RB: as if that didn't give you enough to do, you
are also faced with a mountain of purchase
orders and letters of intent. Barely six months
after the initial announcement, around 1,000
orders had already come in for the a320neo
alone, which was scheduled for completion
in 2015. all that currently exists, though, is a
set of computer simulations. Such a situation
has never existed before. you are being buried
under the success of your own aircraft.
Butschek: the bottom line is that capacity
has never been as valuable to us as it is now.
RB: Some would say that is a nice problem
to have.
Butschek: that is one way of looking at it.
But what is really behind all this is a pheno-

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business models

menal challenge. Managing this kind of growth

is a hard business and a highly complex one.
Especially when you are turning production
structures on their head at the same time?
RB: How hard?
Butschek: In response to brisk demand, we
will substantially increase the rate of production. that in itself is a mammoth task. What
we are doing now is effectively implementing
reverse integration by trying to harness progress made in production processes for the
a350 XWB and, to some extent, for the a380 in
order to safeguard volumes and improve
productivity in the a320 family.

the figure should be 42, and later maybe

44. that...

RB: How do you propose to do that?

Butschek: ... I know what you are trying to say.
Butschek: the real bottleneck is not us but,
in the main, our suppliers. then there is the
fact that quality commands absolutely top
priority in aircraft engineering. Negligence is
taboo. Passenger numbers are currently growing by about 5% per annum, although China,
for example, is experiencing significantly
faster growth. We expect the global volume
of passenger traffic to double in the next 15
years. Between now and 2030, airbus has to
service demand for a total of nearly 28,000
passenger and cargo aircraft worth USD 3.5 trillion. We will profit from this situation. But
exactly how depends above all on the extent to
which we succeed in getting our supply chain
into shape. It is not even the first-tier suppliers
with whom we deal directly that we worry
about. It is rather those suppliers' own supply
chains.
RB: right now, you are managing to produce
38 a320 aircraft a month. By the end of 2012,

RB: and that would be... ?

Butschek: ...that that doesn't really sound
a lot.
RB: Correct. given the volume of orders you
have in hand, nearly 100 more aircraft a year
sounds more like a drop in a bucket.
Butschek: Let me give you a simple formula
to understand the complexity that we and
our suppliers face. a long-haul a330 jet involves roughly four times as much work and
material as an aircraft in the a320 family.
Move up to the a380 and you are talking
about a factor of eight. If we now assume our
planned rate of increase from 38 to 42 for
the a320 family, from 8 to 10 for the a330
family and from 2.1 to 3.5 for the a380 we
are effectively saying that, given a comparable
scope of delivery, some suppliers are going to

"

It took
Airbus 40 years
to get from 0%
to a 50% market
share.

"

17

rOLAND bErGEr StratEgy CONSULtaNtS

g how

"

Ten years in this business is no time at all.

We build an aircraft for 25 years. Add on the servicing phase and you are talking about
four decades.

"

have to increase their capacity by 40% to 50%

in the next 36 months. that is no mean feat.
RB: So how do they do it?

Butschek: that is precisely the challenge.

Often, they can't do it without our help.

such as the moving line, synchronized

production and shorter production cycles.
that works for us, so we tell our suppliers:
Let's have a look together and see whether
it works for you too. the difficulty is that
we really need every engineer we send to
our suppliers here in house. that alone is
an issue.

selection in detail. as the markets have opened up in recent years, differentiation has
become a very important consideration for
our customers. With the a350 XWB, we are
now going about things differently.
For the first time, we are offering ready-made
solutions that customers can choose from
a catalog.

RB: One of the main reasons why aircraft

need long production times is that they
are extensively customized. to put it bluntly,
every airline gets its own model.

RB: you want to tell the airlines what they

should buy? Off-the-peg jets?

RB: and what kind of help do you provide?

Butschek: One of the main things is much
closer cooperation. People used to say,
send the program to the suppliers and they'll
sort it out. today we send cross-functional
audit teams to our partners. they look at
the processes, initiate improvements and
ensure that potential is exploited. at
airbus, we use new production methods

Butschek: think of the situation where you

buy a car. Everyone knows it's a pure gut
feeling. By contrast, we build capital goods;
and the airlines that buy them plan their

Butschek: that would be going too far.

the a350 XWB is ushering in a new generation of aircraft. Having learned from our
experience with the a380, we are naturally offering more extensive customization
options. But we are also in the process of
convincing our customers of the benefits
of a partially preconfigured aircraft, i.e. the
use of preselected and carefully coordinated
cabin components.
RB: you have a configurator? that's how
people order cars on the Internet.
Butschek: Precisely. We offer a great deal
of flexibility in the way we accommodate
specific requirements, but we no longer have
to reinvent, redefine, redevelop, recalculate
and redocument everything. Instead, we say:
here's the catalog. this is what you need. Now
let's sit down together and configure the aircraft that you want. We combine standardization with a large degree of customization.
RB: and customers who want more...

A factor of 4 to 8: At Airbus, complex production depends

on close collaboration.

Butschek: ...get it, of course, but on different

terms and with a possible impact on the delivery date. It is not as if we could simply pull

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19

Gnter Butschek talking to Roland Berger Partner Axel Schmidt

this bit out and slot that bit in. Some special
extras can significantly affect the structure of
the aircraft. that involves a lot of engineering.
RB: How have the airlines reacted?
Butschek: you'll be surprised: they are very
open to what we are doing. they see the point,
which is attractive costs and a flexible solution.
RB: Even so, airlines are still going to have
to put up with long delivery times in some
cases. Could that not give an edge to new
competitors?
Butschek: that is to oversimplify the issue.
airlines plan their fleets for the long term.
they have to be able to plan and prepare
their crews, maintenance capacity and the
entire logistical chain. that's why aircraft
phase-ins are traditionally planned over an
extended period. If bottlenecks occur, that
is what the leasing companies are there for,
as their business model is based on delivering
aircraft at short notice. adding a new aircraft
model to the fleet just because others have
longer delivery times? that would be a very
risky strategy and is not really a viable alternative.
RB: Boeing is hitting back with a fuel-saving,
modernized 737 that is supposed to be even
more economical to fly.
Butschek: We will see when the aircraft
arrives two years after our a320neo.

We know that some competitors see our

current generation of aircraft as the benchmark. But what are they going to do if I
suddenly add 15% extra eco-efficiency to
that benchmark?

RB: as raw materials become increasingly

scarce and expensive, the auto industry
is looking for new sources of energy. aircraft manu-facturers are going to have
to follow suit.

RB: What makes you so calm and assured?

are you not afraid of new competitors?

Butschek: "Flightpath2050" is airbus' strategy

to pursue the goals of the EU: 75% less CO2,
90% less nitrogen oxides, 65% less noise.
at the same time, we are transferring technologies from the auto industry to aviation.
We are working on fuel cells for zero-emission
ground operations. Lufthansa is testing biokerosene in regular service with an airbus
a321. the airbus Future Projects Office sponsors technology projects at universities, such
as "e-genius" at the University of Stuttgart.
the aim of e-genius is to teach us more about
the potential of electric-powered aircraft.
We are also collaborating with a number of
universities and research organizations in
the same field. For the time being, however,
we have to follow the same rule that will still
shape automotive engineering for many years
to come: using conventional energy sources
as efficiently as possible.

Butschek: We are keeping a very close

watch on activities in Brazil, China and
russia. But we have an extremely strong
market position. It took airbus 40 years to
get from 0% to a 50% market share. Besides
building an aircraft, you have also got to
prove that the new product is more reliable
and more efficient than the existing ones.
the infrastructure, the customer service,
the trust all have to be built up. We anticipate
competition. But we are well prepared for it.
RB: What will a new airbus look like in 10
or 15 years?
Butschek: I am just beginning to understand that 10 years in this business is
no time at all. We build an aircraft for 25
years. add on the servicing phase and
you are talking about four decades. I am
at least assuming that we will continue
to work with the transnational structure
we have today, with production and development facilities in Europe, asia, russia
and america. By then, however, we will
have a more effective supplier structure
that will work with us to come up with the
game changer.

RB: 10 years is not long in the life of an

aircraft. But it is a long time in the life of a
manager.
Butschek: that is true. and that is why we
must do everything we can to ensure that
our aircraft set the standards at every time
and in every respect. Once again, we've got
to reinvent the whole subject of air travel.
and we must do so very quickly.

ROLAND BERGER STRATEGY CONSULTANtS

g How

Air-conditioning

Intelligence
on wheels
E-mobility is shaking the traditional automotive industry to its very foundations. Electric cars and car-sharing projects are only the first steps toward
a new mobility culture in which different industries are converging.

locks of white light dart nervously

through the darkened hall. The guttural throb of electric bass sounds reverberates
around the auditorium. The vague silhouette
of a city takes shape on a gigantic illuminated
screen. Dancers, veiled in blue light, appear on
stage. On the semicircular screen, the milky
bodies assume a ghostly allure in their moving
neon cages until they suddenly explode in a
shower of golden dots and fly heavenward like
the undulating mass of a flock of birds. That's
how BMW celebrates a new car.
Norbert Reithofer, Chief Executive Officer of
BMW AG, takes the stage, basking in this
special moment. "We have reached a milestone in the history of the BMW Group." He is,
of course, talking about the new BMWi family's
world premiere. The BMW i3 and BMW i8 concept cars showcase the BMW Group's angle on
the future of mobility. They presage the first
volume-produced electric cars that will come
to market under the new sub-brand BMWi:
the BMW i3 in 2013 and the BMW i8 in 2014.
Reithofer sees this as development an expression of "true pioneering spirit and focused
innovative power", adding: "We, the world's
leading premium manufacturer, also want to
give our customers made-to-measure automobiles with electric motors." The catchphrase?

"Born electric". Opening the IAA motor show

two years ago, Chancellor Angela Merkel called
on the automotive industry "to practically
reinvent the car". The German government
stands by its aim of seeing at least a million
electric vehicles on the country's roads by the
year 2020. In the years ahead, the issue will
be whether Germany's car industry will continue to play a leading role. If it is to do so, its
manufacturers will have to plot a new route.
"The future as standard" is the motto of this
year's IAA spectacular the message being:
We have understood. E-mobility is bringing
profound change to automotive technology.
More than that, it calls into question the
industry's entire business model. Celebrated
in Germany especially as a high art, the automotive industry is becoming part of a system.
Merely swapping gasoline and diesel guzzlers
for battery-driven motors is only the beginning. Scenarios for our high-tech future embrace both exclusive design and personalization
as a brand's unique selling propositions. The
Internet is transforming road vehicles into
rolling communication systems, while electrical and electronic systems enhance safety
and ease of use. Led by Germany's flagship
brands, leading automotive groups are changing their image. The vehicle manufacturers
that spent decades realizing their mantra of

bigger, faster and more powerful are morphing

into mobility service providers. Using a car is
becoming more important than owning one.
The order of the day is no longer living with
the automobile but, wherever possible, living
without it. The next 15 years will confront the
industry with the greatest structural upheaval in its history. New mobility concepts, the
involvement of IT service providers and energy
providers, in-car apps and new customer
demands in terms of mobility and networking
will necessitate huge investments in IT and
infrastructure and the development of new,
efficient solutions. At the same time, they will
open the door to new business models for the
automobile industry.
For decades, the auto industry was obsessed
with pumping money into factories, dimensioning production to maximize capacity utilization and forcing more and more new variants
of cost-optimized standard models onto the
market often at substantial mark-downs.

Filling up

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Business Models

21

Acceleration
Navigation

Parking
conventional drive systems is depreciating.
Although Germany will long retain its muchvaunted "Vorsprung durch Technik" under the
hood, even this advantage will not last for
ever. Key links in the value chain, such as airconditioning and braking systems, will have
to be modified or replaced by new ones (such
as electric motors complete with batteries and
power electronics to substitute for combustion engines). Some units such as exhaust
systems and powertrains will disappear
altogether.

Now, industry players seem to have woken

up to the fact that their push model is rapidly
approaching its best-before date.

oung people growing up in an age of

expensive energy, climate change and
urbanization a generation whose
standard bearers would gladly trade
their GTI for an iPad are in the vanguard
of those calling for a mobility that is better
tailored to individual needs. This notion is far
more in keeping with their changing demands
and lifestyles than OEMs' traditional growth
philosophy. The critical issue is not how
"generation I" gets around, but what moves
it. A future without automobiles in whatever
shape or form remains inconceivable. The
vehicles themselves, however, are no longer indispensable. For the time being, auto
makers are still very much on a high: Growing
prosperity in emerging countries and the run
on Western technology and brands, especially
in China's billion-plus market, is allowing them

to volume-produce the kind of results most

industries can only dream of. Volkswagen,
Audi, Daimler, Porsche, BMW and the rest are
breaking one sales and earnings record after
another. In China alone, Daimler and BMW
saw their sales rise by about 1.5 million units
between 2006 and 2010. Two new factories
are due to open. Yet the dizzying upward
spiral makes it all the more difficult to take
an honest look at what lies ahead. Much is
at stake. The auto industry and its suppliers
are of pivotal importance to employment
and value creation in the developed world.
Together with related industries such as
plastics and rubber, automotive engineering
accounts for roughly 20% of total manufacturing revenues and provides work to nearly
1.8 million people. According to calculations
by Roland Berger Strategy Consultants, as
many as 300,000 jobs in the German car
industry alone are at risk. This is because both
production and employment are increasingly
moving offshore to fast-growing markets,
while skilled labor remains in short supply
back home. Moreover, if Germany's premium
manufacturers let their technology leadership
slip just as a new era of mobility is dawning,
things could get worse still.
The transition to alternative propulsion
systems (hybrid engines, electric motors
and fuel cells) is certainly not without its
risks. The value of accumulated expertise in

atteries aside, electric cars are technologically not very sophisticated. In the
long run, production will no longer be
a core competency which is where
niche providers and, above all, emerging competitors in Asia see their chance. They could
leapfrog an entire developmental stage in
conventional automotive drive technology and
plunge headlong into this new technology.
China is pulling out all the stops to promote
the development and engineering of batterypowered autos. Foreign manufacturers who
want a foothold here are required to cooperate
with local providers. In other words, Western
firms have to disclose their technologies,
thereby strengthening their competitors'
position in the long term. Volkswagen has
established the Kaili brand for the electric
and hybrid cars it plans to produce in China.
Daimler has teamed up with Chinese manufacturer BYD. BMW too is launching its own
auto brand in the vast Middle Kingdom
albeit without sacrificing the BMW brand.
New opportunities will also emerge for other
industries. A joint study by the German
Engineering Federation (VDMA) and Roland
Berger shows that, in the years ahead, the
German mechanical and plant engineering
industry can benefit handsomely as electromobility flourishes and grows. The introduction of vehicles with electric drivetrains will
fuel demand for mechanical engineering skills
that have hitherto rarely been used in the
production of automobiles. Attractive market

ROLAND BERGER STRATEGY Consultants

g How

opportunities should thus open up for plant

and mechanical engineers. New production
systems for electric batteries will generate
business potential totaling EUR 4.8 billion between now and 2020.

remium automobiles from Germany

are in a class of their own. Their highefficiency conventional engines set
the yardstick for the transitional fossil
fuel-based technology that can do more for
the environment than cars you plug into the
wall. Vendors are even beginning to budge
on services to implement sustainable transportation and mobility concepts. It is hard to
name any large-volume manufacturer that is
not currently working on car-sharing projects
or prominently positioning e-bikes and tunedup bicycles in its showrooms. There is clearly
much more to sustainable mobility than that,
however. These and similar concepts link a
new form of "automobility" (use instead of
ownership) to a fluid, barrier-free interface
between private cars, public transport and
non-motorized traffic.
The aim is to organize
scarce resources such as
energy, space and time in
a way that enables functional, sustainable and
livable urban development. The days of trench
warfare between cars
and buses and trains are
long gone, note Berlinbased mobility researchers Andreas Knie and
Weert Canzler, who are calling
for "a whole new post-fossil mobility culture".
That culture begins with doing without your
own car in the city.

"

companies step into the ring and the practice becomes widespread. The catch? Often
derided as a playground for well-educated
do-gooders, car-sharing on a large scale will
not only squeeze the sales of auto makers.
Fleet buyers too will poison the latter's margins, which in turn will weaken the position
of established dealers. Dealers, however, will
still be needed as made-to-measure mobility
requires intensive advice and consulting.
The search is therefore on for other revenue
sources and business models. To cope with
huge investments and plug persisting knowledge gaps both necessities as the age of
ecofriendly mobility is ushered in every car
firm is collaborating with everyone else in the
industry. And, indeed, beyond the industry,
as the example of Siemens and Volvo shows.
According to a worldwide study by IBM, expanding the automotive value chain to include
new services for the "intelligent vehicle" is critical to sustainable growth in the industry. The
networked automobile, the study indicates,
will play a key role in establishing new automotive mobility products
and services. Telematics
is one crucial technology
that presents significant
development opportunities
to the car industry. As the
study points out, mobility
services that bring different
means of transport together will substantially alter
the market: "In this new
mobility ecosystem, it will
be indispensable to forge
alliances with partners in
this and other industries so that innovative
offerings can be brought to market faster."
Car makers, power utilities and information
service providers are thus seeking to close
ranks a crucial step toward a new culture in
both industry and mobility.

The
automobile
of the future
will be connected

Car-sharing programs such as Daimler's "car2go", the "DriveNow" program shared by BMW
and Sixt, Volkswagen's "Quicar fleet" and "Mu
by Peugeot" will not put an end to urban traffic
chaos, but can at least ease the burden on
overcrowded inner cities. Roland Berger has
calculated that one shared car can replace
as many as 38 other vehicles. However, the
full impact only begins to unfold when private

"

For auto manufacturers, this creates the need

to spot trends and lead the charge. Older
people, for example, need technology that is
easy to handle and whose functions can be
controlled intuitively. On the other hand, their
children and their children's children want

A milestone in the history of BMW:

cars made of carbon composites

to configure their wheels with their smart

phone. Cars must dovetail perfectly with their
lifestyle and be permanently hooked up to
"their" networks. That, however, doesn't necessarily mean that you have to buy them: The
important thing is to have a car there when
you need it. To be always online, always connected. "The automobile of the future will be
connected to the surrounding environment,
the traffic infrastructure and the world of the
Internet," says Rupert Stadler, CEO of Audi
AG. Cars themselves will be transformed into
mobile data reception and transmission stations, controlled by voices, touch screens and
iPhone-like swipes of the finger. Integrated in
new traffic concepts and information systems,
they will reach their destinations faster, more
safely and with less impact on the environment. Car manufacturers are thus redefining
their role. Rather than specifying interfaces,
they are increasingly positioning themselves
as integrators of electronic and electrical
applications.

think: act BUSINESS

To this end, Deutsche Telekom has set up a

dedicated "Connected Car" business unit. Its
mandate is "to tap growth potential arising
from changing mobility requirements". In
taking this step, Deutsche Telekom is giving
its backing to solutions for safe and efficient
driving, economically and ecologically sensible
fleet management and the opportunities opened up by networked electric vehicles. Faced
with 350 million vehicles in Europe alone, the
German telecoms giant anticipates "substantial market opportunities".

aimler's car2go is the flagship project

that Deutsche Telekom is supporting
with an extensive array of machine-tomachine (M2M) communication and
information technology services. The telecoms
provider is supplying special M2M SIM cards to
be built into smart car2go vehicles. It is also
configuring the corresponding communication
interfaces. In addition, T-Systems is taking
care of key information and communications

technology (ICT) services. As Deutsche

Telekom sees it, car2go is clear evidence of
the growing importance of ICT to forwardlooking mobility. Modern M2M solutions are a
vital aspect. "The application we are creating
for our customer car2go shows how much
potential exists for new business models
with the connected solutions that are made
possible by ever more powerful M2M technology," comments Horst Leonberger, Senior
Vice President Connected Cars at Deutsche
Telekom.

dvanced IT technologies also come

into play at the point where electric
vehicles plug into the power grid.
These technologies allow operational,
accounting and controlling processes to be
managed. They also ensure that necessary
information is exchanged between the traffic
network, the source of power and electric
vehicles themselves. This information can, for
example, concern route and load planning, the
monitoring of battery and charging statuses,
but also the future integration of electric vehicles in what are known as "smart grids". Traffic
management systems will help to decongest
road networks and keep traffic flowing more
smoothly. Hard shoulders can be opened to

Business Models

23

traffic and speed limits varied, for instance.

Special systems can then circumnavigate congested areas and draw the driver's attention
to specific dangers ahead. The aim? Car-to-car
communication. Automobiles up ahead will
effectively pass information back down the
line in a kind of electronic chain letter. They
will let other cars "peer around the corner"
although the breakthrough is unlikely to come
before 2025. Future assistance systems will
make driving even more convenient. Video
cameras will track other road users and perceive their intentions. New navigation systems
will transform journeys into exciting tours.
"The joy of driving", a slogan that has always
been close to BMW's heart, takes on special
importance in this context. BMWi is the group's
way of staking a claim to be not only the most
innovative, but also "the most sustainable car
maker in the world". In New York, the Bavarian
auto giant complemented the launch of its i
vehicle series by setting up the iVenture venture capital company. EUR 100 million will allegedly flow into the company's development of
intelligent mobility services.
The primary focus is on solutions to make
better use of parking space, intelligent navigation systems with location-based information offerings, intermodal route planning
and car-sharing services. MyCityWay and
ParkatmyHouse mark the first steps toward
participation in companies that deliver webbased mobility services. ParkatmyHouse
allows private individuals in London to rent out
their private parking spaces over the Internet
or via a smart phone app. MyCityWay is a
mobile app that provides information on public
transport, available parking facilities and
local entertainment offerings for more than
40 cities in the USA. A further 40 cities are to
follow. And that is far from all: "Where does the
car stop and the telephone begin?" asks Chris
Anderson, chief editor of Wired, in the context
of the Audi Urban Future Initiative. For him,
cars will sooner or later become computers
on wheels, communicating with everyone
and everything while the drivers have their
vehicles steered as if by an unseen hand. Not
that that is anything new, though. Remember
Knight Rider?

ROLAND BERGER STRATEGY CONSULTANTS

g How

Can print
survive the Internet?
Advertising revenues are crumbling. Youngsters spend more time on the computer
than watching TV. The Internet and digital technologies are playing havoc with business
models in the media industry. Will newspapers soon be a thing of the past?

or the first time, the USA spent more

money USD 25.8 billion, to be precise
on Internet advertising than on advertising
in print media in 2010. Newspapers and journals could only manage USD 22.8 billion. Since
2006, the budget for print media has more
than halved. For online advertising, however,
pundits are predicting a US budget of USD 40
billion by 2014. Why? Because the Internet
supports a wider variety of advertising forms
and facilitates more direct contact with target groups. Print media simply cannot keep
up. The US newspaper market is mired in a
profound crisis. Even the venerable New York
Times (NYT), the medium of global intelligence
par excellence, has slipped into the red. Since
2006, annual sales at "the Times" have dropped from USD 3.3 billion to USD 2.4 billion, a
decline of more than 27%. Mexican telecoms
billionaire Carlos Slim, said to be the richest
man in the world, pumped USD 250 million
into the paper to save it from bankruptcy.
And now it has repaid the loan three and a
half years ahead of schedule. How can that

be? For 160 years, "the Times" was run by

men. For the first time, however, a woman
has now taken the helm of the US media
industry's flagship. Jill Abramson has been
tasked with transporting the Gray Lady into
the digital age. Gone are the days of unlimited
free use of the website and mobile offerings.
For anyone who wants to read more than 20
articles a month on the website, access to the
third-largest newspaper in the USA now costs
at least USD 15 for four weeks or USD 195 a
year. Subscribers to the print issue still have
free access a move the newspaper hopes
will make up for the ongoing erosion of print
advertising. This is the New York Times' third
attempt to make money on the Internet. And
it is the first one to succeed. The NYT sells
around 900,000 printed copies a day and
already boasts nearly 230,000 digital subscribers.
Germany is following suit. An eternity ago, it
seems, daily newspapers used to make 70%
of their revenues from advertising business.

think: act BUSINESS

In 2009, advertising revenues in Germany fell by

EUR 700 million to about EUR 3.9 billion (-15.9%).
For the first time ever, their publishers made more
money just under EUR 4.5 billion (+2.3%) from
selling their newspapers than from advertising.
The trend has not let up. In the first few months
of 2011, figures from the Federation of German
Newspaper Publishers (BDZV) point to a 4.2%
decline in the volume of newspaper advertisements.
The shift from traditional to digital media continues
unabated. Television and newspapers are seeing
the lead they still enjoy over online advertising
melt away before their eyes. According to figures
from the Circle of Online Marketers (OVK), a subset
of the German Association for the Digital Economy
(BVDW), the digital advertising market expanded
by 26% to EUR 5.4 billion in 2010. It now accounts
for almost 20% one fifth of the total advertising
market. As a result, the Internet edged ahead of
newspapers (19%) for the first time in 2010 and
became the second-strongest advertising medium
in the overall media mix. For 2011, the OVK predicts

Business Models

25

16% more growth in online advertising, taking the

gross advertising volume to over EUR 6 billion.

Hopes pinned on the Internet:

The target audience is gigantic. The number of

Internet users around the world has exceeded the
two billion mark. Compare that with 2000, when
only 250 million people on the planet had Internet
connectivity.

for the first time spent more to

In Germany too, Internet usage is scaling new

peaks. A representative nationwide online study
commissioned in 2011 by public broadcasters
ARD and ZDF counted 51.7 million Internet users
73.3% of the population (2010: 69.4%). Year-onyear, another 2.7 million people had thus gone
online. One new development is that recent growth
is primarily attributable to the interest shown by
older people. 34.5% of over-60s hang out more or
less regularly on the 'Net, an increase of 23% since
2010. The proportion of female and male Internet
users is likewise converging: 68.5% of women (+8%)
and 78.3% of men (+4%) now use the Internet.
Since 2002, the daily online ration has jumped
from 30 to 95 minutes.

In 2010, advertisers in the USA

advertise on the Internet than
in print media.

ROLAND BERGER STRATEGY Consultants

g How

The online news portals operated by newspapers,

magazines and TV channels are experiencing
constant growth too. At the last count, the number
of visitors had risen by a further 25%. The 20 biggest news portals in Germany chalked up around
8 billion visits in 2010. Top of the league is Bild.de,
which recorded growth of 46.3% to 1.8 billion visits.
This portal is followed by Spiegel
online

In 2009, advertising revenues in

Germany fell by EUR 700 million
to about EUR 3.9 billion ( -15.9%).
For the first time ever, their publishers made more money just
under EUR 4.5 billion, a gain of
2.3% from selling their newspapers than from advertising.

The shift from traditional to digital media

continues unabated. Television and
newspapers are seeing their lead over
online advertising melt away.
Theoretically, newspaper publishers harm themselves with their online media. In truth, though,
they have no choice. News on paper has long
since lost the battle to be the most up to date.
Virtual spending is now also showcasing the online
channel's superiority in terms of presentation
and availability too. 360 photos, HD videos in TV
quality and personalized news: These are just
some of the new features with which, say, Rupert
Murdoch's iPad newspaper "The Daily" plans to
fight off competition from around 9,000 other
news apps. "New eras demand a new journalism,"
Murdoch announced at the official unveiling in New
York's Guggenheim Museum. "The iPad is forcing
us to completely reinvent our craft." He went on to
speak of a "digital renaissance".

N
(1.5 billion). Together, the two sites reach 40% of
the market covered by the top 20.
Taking the Fukushima reactor disaster as an
example, Spiegel meticulously demonstrates the
superiority of digital news delivery. On Friday,
March 11, 2011, the earth shook in Japan. Shortly
afterward, a tsunami washed over large swathes of
the country's northeastern coast the top story in
the daily press the following morning (Saturday).
Yet only those newspapers with a relatively late
editorial deadline knew that Japan's government
had declared a state of nuclear emergency an
announcement that could be read online as early
as 3:26 p.m. on Friday. Newspaper readers who
neither switched on their computer nor watched
TV nor listened to the radio did not hear about
Saturday's events the core meltdown, the flareup in the nuclear debate, travel warnings, the first
massive explosions, nascent demonstrations in
Germany and mass evacuations in Japan until
the Monday, two days later. Seldom, Spiegel concluded, had the extent to which printed news lags
behind real-time reporting via electronic media
been more blatantly apparent.

o-one is desperately enamored by the

situation not for now, at least. Online
business holds "mostly challenges" for
the future, according to the Federation of
German Newspaper Publishers (BDZV). Despite
noting that some publishers are now generating
"gratifying revenues", the organization argues that
the industry is "still in the midst of a difficult transformation process". Even in 2011, the Internet will
still be unable to make up for dwindling revenues
from printed newspapers in Germany. The BDZV
therefore appeals to market players "not to moan
about mistakes and omissions, but to rise to the
challenge" of mastering the new technologies. For
years, the publishing houses shoveled fat profits
into online business as fast as they could, laying
on ever newer, better and faster offerings to get
readers who were that way inclined used to consuming news free of charge. But with purse-strings
now tighter than ever, it is all the more difficult to
establish fee-based models.
"In the app world, we are ruling out a free culture from the word go," says a confident Georg
Konjovic, head of the Premium Content Unit at Axel
Springer AG. In 2010, Internet users around the
world splashed USD 4.6 billion dollars on music
downloads reason enough, in Konjovic's eyes, to
believe in paid content for Internet journalism too.
Nor is that his only article of faith: "You shouldn't

think: act bUsiNEss

business models

REvOLUTION WITH ANGRY BIRDS

tHE MarKEt FOr VIDEO gaMES IS IN tHE tHrOES OF UPHEaVaL. tHE INDUStry
aND gaMErS aLIKE arE LEaVINg FOr tHE INtErNEt.
spoil readers with dumping prices if you
one day want to sell digital content at
print prices." Springer has long been
experimenting with this kind of model. In
summer 2011, the publisher summed
up its experience to date: BILD sells
124,000 digital copies a day, against
Welt's meager 17,000. the (physical)
Bild newspaper currently attracts 2.9
million buyers. For Konjovic, those figures
show that digital sales are still nowhere
near print figures. In light of tablets' current market penetration, however, he does
see them as decidedly promising. "they
give us confidence to persist with our
efforts to establish paid content." recent
studies predict that the number of tablet
PCs in germany will quadruple from around
2.5 million this year to nearly ten million
by the end of 2014.

he biggest hurdle facing publishers is that the "free culture" is

firmly ensconced in web users'
DNa. Since, as the Economist
claims, there is as yet no business model
that works with paying readers alone,
publishing houses are going the way of
"freemium". those like the Wall Street
Journal, the New york times and the
Financial times who at least make some
of their articles available free of charge
are hardly experiencing any decline in
either readership or advertising. Some,
such as the Wall Street Journal, are actually gaining on both counts.

the numbers still sound impressive. the german

market for computer and video games downloaded or distributed via data media was worth
EUr 1.56 billion in 2010. For that sum, nearly 58
million games changed hands over the counter
or on the web. Sales of computer games were up
7% to EUr 443 million. games for the stationary
consoles Nintendo Wii, Sony PlayStation 3 and
Microsoft Xbox 360 likewise gained ground, climbing 3% to EUr 884 million. Long the exclusive
preserve of nerds and geeks who would lock
themselves into their rooms for hours on end,
electronic gaming has, according to industry
association Nitcom, now become "a mass phenomenon".
the german association of Interactive
Entertainment Software (BIU) estimates that the
market will expand by 3% this year, while Newzoo
predicts growth of 6%. the elation is somewhat
muted, however, as the industry teeters on the
brink of fundamental upheaval. the industry and
its gamers alike are leaving for the Internet.

Browser games, downloads and games for mobile

phones are opening the video gaming market up
to millions of people. "the video gaming industry
is going under," thunders Nintendo President
Satoru Iwata. angry Birds, a game in which angry
birds are catapulted at pigs and monkeys to
do them as much damage as possible, broke
through the 200-million-download barrier in May
2011. games for smart phones too are selling
like hot cakes. according to information from
Newzoo, users are rigorous about their medium
of choice and spend much less money than they

used to on console games. Online games and

special "social games" are almost completely
cushioning the losses of the console industry.
In the UK, business with console games has at
times imploded by more than a quarter, while the
online market has leaped 66%.
Having concentrated on PCs and gaming consoles for years, heavyweight game manufacturers were hesitant at first. Now, though, the
industry is experiencing "a revolution", to quote a
headline from Financial times Deutschland (FtD).
Video game manufacturers are increasingly
looking to the Internet and fiercer competition
with online game vendors to save them. the
three biggest console-independent providers are
distributing more and more games via the online
network Facebook or on Internet platforms set up
especially for this purpose. the FtD reports that,
to avoid going to the wall, incumbent manufacturers are radically altering their business model.
the Internet is the future.
the reason is that people can play on their own
or in groups at any time and in any place and in
many cases still free of charge. the free-to-play
model charges money only for more extensive
software, subscriptions or individual settings
and add-on functions virtual goods, as they are
known. US market research organization In-Stat
reckons these virtual goods will be worth an estimated USD 14 billion in 2014 a mark-up of nearly 250% on their value in 2007 (USD 7.3 billion).
Pure online providers are playing this as their
trump card, while conventional video game
manufacturers are following suit. Offerings such
as Ubisoft's multiplayer war game ghost recon
Online are showing the way forward. Players who
want to advance more quickly or upgrade have
to invest in weapons and equipment. the twist
in the tail is that winning can ultimately be more
expensive than buying the regular fee-paying
game in a computer store.

27

ROLAND BERGER STRATEGY Consultants

g How

Living in the cloud

Hype or buzz? Virtual data centers are changing the face of the IT industry.
The fascination is huge as are the opportunities and risks.

he magic words were uttered late,

but they were uttered. After all the
mind-boggling business numbers, acclaimed
features in new operating systems and endless standing ovations, there they were at
last: "Just one more thing". The 4,000 or so
delegates to the Apple Worldwide Developers
Conference in San Francisco reverently held
their collective breath. Anyone who had secretly been hoping for a sneak preview of the
iPhone 5 or longing for an iMac with a touch
screen, however, was bitterly disappointed.
The element of surprise evaporated into a
cloud. iCloud is the virtual construct in which
the Apple community is expected to spend the
bulk of its future. It is evidently "laborious" and

"frustrating" to repeatedly have to synchronize

data across different devices. "iCloud", came
the pronouncement from the cult label's headquarters in Cupertino, California, "will keep
all key information and content right up to
date across all a user's devices." Documents,
images, music, you name it: it will all be available. On your computer at home or on your
mobile when you are on the road. As soon as
anything changes on one device, all the others
will be updated too. Automatically, wirelessly,
simply, quickly and largely free of charge.
CeBIT initially established cloud computing as
the IT industry's buzzword. And Microsoft, SAP,
Google and Amazon have had their head in the
cloud for some time.

think: act BUSINESS

or BITKOM, the Federal Association

for Information Technology, Telecommunications and New Media, "dramatic
changes" in the IT industry have long
been on the horizon. For Munich-based electronics giant Siemens, a veritable "paradigm
shift" is taking place. Cloud computing, they
argue, is increasingly manifesting itself on
the market in the form of innovative solutions
"that threaten the business model of established IT providers".
Cloud computing combines familiar technologies with new concepts. In so doing, it
opens up completely new opportunities for
the business models of IT users and providers. Software, development platforms and
the operation of both applications and basic
infrastructures (such as storage space, for
example) are made available flexibly and in
line with demand in real time as a service over
the Internet or within a corporate network.
Payment is on a per-use basis.
One of the many benefits for users is that
fixed investments will become variable costs.
Data is processed and stored and results are
made available in the cloud, the provider's
virtual data center. Updates, software maintenance, backup copies, servicing and hardware
are a thing of the past. Inexhaustible IT resources and a system that is permanently on the
leading edge and always on: that is the here
and now, and the way forward in the future.
Dr. Martin C. Wittig, CEO of Roland Berger,
feels like he has been transported back to the
beginning of the last century. Back then, just-

in-time production had revolutionized German

automobile production. "Delivery at precisely
the best possible time: Seen from this angle,
that is true of the cloud economy too. Only this
time it is about data that is available precisely
when you need it in real time."
"Impressive" admits eccentric Internet strategy consultant, author and blogger Sascha
Lobo. "Thanks to cloud computing, you get
to use extremely complex software for which
you would otherwise have to run whole server
farms. Additional computing power and software intelligence are made to measure." The
prices? "Laughably small." The dimensions of
cloud computing are new, even if the principle
is not. Cloud services have been around on
the 'Net for some time. If you have ever sent
or received e-mail via Microsoft or Google, you
have already ventured into this ethereal terrain. The data is stored not on your computer's
hard disk, but on web servers whose location
you do not know. The situation is no different for companies that make use of hosted
exchange servers. For Siemens, however, what
is happening now is "the volume rollout of IT
services on the basis of heavily standardized
applications". The traditional linear value
chain for IT services that starts with consulting and design and continues through the
engineering and operation of solutions and IT
infrastructures, including maintenance, is now
undergoing a fundamental shift. The need for
lower costs and greater simplicity is driving
this change.
"Technology evolution, business revolution,"
trumpets BITKOM, which claims that everyone

Cloud services have been around on the 'Net for some time. If you have ever sent or received e-mails via Microsoft or
Google, whose data are stored on web servers whose location is unknown to you, then you've been using the cloud.

Business Models

29

is affected. The need for technological infrastructure is declining because services are
being centralized and concentrated, it argues.
For software providers, traditional license
business is thus giving way to providing and
supporting "software as a service" (SaaS) over
the Internet. "Hardware vendors," notes Martin
Jetter, CEO of IBM Deutschland, "are becoming
few in number. For that, they are supplying
large cloud data centers." Small companies
and new startups in particular stand to
benefit. Thanks to the Internet, the pace of
innovation is accelerating and creative ideas
are being implemented professionally. Startup
entrepreneurs and developers are linking up in
virtual corporate constructs to broaden their
range of products and services. But that
does not necessarily require hefty
investments.
For their part, small and
medium-sized enterof all IT services
prises (SMEs) can
will probably be provided
sharpen their glousing cloud computing
bal competitive
solutions.
edge by gaining access
to the kind
of dynamic IT solutions that used to be the
exclusive preserve of larger companies with
dedicated IT units. The latter units are normally dimensioned to cope with maximum requirements. However, cloud computing allows
periods of peak demand to be absorbed quickly and at low cost. IT service providers such as
IBM and software giant SAP are making sure
they get a sizeable piece of the action. These
days, computer programs no longer come only
in neat packages on store shelves. They are
also delivered over the 'Net. Microsoft Office
365, for instance, lets users edit and share
Word and PowerPoint documents worldwide
with anyone, anywhere and at any time.
The only requirement is Internet connectivity.
Chats, videoconferences and shared websites
facilitate teamwork.

25%

ffice 365 is Microsoft's answer to free

Google Docs. Its web editor is regarded
as one of the finest and most extensive for Office documents. In the cloud,
documents can be shared by and processed

ROLAND BERGER STRATEGY Consultants

g How

on any computer. The cloud-based Office

version does not compete with Microsoft's
traditional installed Office packages, though.
Unlike Windows SkyDive Live, which targets
private users, Office 365 primarily addresses
the needs of small companies that have no
dedicated IT departments or server capacity.
"Cloud computing means it is no longer necessary for every company to run its own data
center," says spokesman for the SAP board
Jim Hagemann Snabe. Instead, companies can
now have their data stored safely and reliably
on huge server farms by third-party providers.
If necessary, they can also have the data for
their various business processes analyzed by
the very latest versions of rented software.
SAP sells new business software for SMEs
exclusively over the Internet from its internal
data center.

ccording to a survey by leading US

analyst Gartner, 2,000 CTOs at large
companies across all industries and
all over the world see the data cloud
as the most important innovation in IT technology for the years ahead. The market researcher indicates that EUR 53 billion changed
hands in the global cloud computing market
as early as 2010. By 2014, that figure could
rise to EUR 115 billion. The IBM Institute for
Business Value in turn surveyed more than
3,000 CIOs from 71 countries and 18 industries. It found that cloud computing will be an
issue for 60% of respondents over the next
five years, although as recently as 2009, only
30% believed in the cloud.

In Germany alone, BITKOM estimates that

revenue will increase by around 55% to EUR
3.5 billion in 2011, jumping to EUR 13 billion
by 2015. Corporate customers currently
account for EUR 1.9 billion in total revenues.
Growth rates in this segment have already
reached 70%. By 2013, the market analysts
at both Forrester and Gartner expect cloud
computing solutions to make up some 25% of
all IT services.
BITKOM expects that the growing trend to centralize the storage, analysis and processing
of all kinds of electronic data will significantly
increase capacity utilization at large data centers, driving strong growth in the IT industry in
the years ahead. More than that, the organization believes this will make whole industries
such as mechanical and automotive engineering and the power supply sector more efficient and productive. Private customers too,
BITKOM believes, will see the technological
opportunities open to them multiply. Four out
of ten German IT managers figure that server
virtualization will cut data center costs in half.
Another 44% expect savings of as much as one
quarter. 7% even anticipate saving as much
as three quarters of their IT spend to date. The
latter figure derives from a Cisco Connected
World Report involving 1,500 respondents.
This report suggests that virtualization will
advance beyond 50% of productive server systems at German data centers in the next three
years. According to Cisco, the vast majority of
IT managers 88% in all intend to migrate
at least some of their applications and data to
private or public clouds within the same time
frame. E-mail services are public clouds, as
are the services provided by Amazon. In the
case of private clouds, the customer runs the
data center itself or has it run by an external
service provider, albeit to its own specifications. Services are thus tailored to meet the
customer's precise needs.

Alongside Brazil, India and the USA, Germany

is up among the front-runners. A survey
commissioned by data integration provider
Informatica found that 93% of IT managers in
private enterprises and public administrations
see cloud computing as a "key to success".
Failure to use this technology, the study
indicated, would see firms drop off the pace
of IT development and blunt their competitive
edge.

he last crisis may be over, but the

next one is never far away. That is why
cutting costs commands top priority
for nearly all IT bosses (98%). 87% of
respondents expect using the cloud to make
them more agile and give them easier access
to business software. Around two thirds (67%)
anticipate improved business performance.
Almost as many (62%) see the cloud as a platform that will bring forth more creative services. Electronics retail chain Media Markt has,
for example, launched a new Internet platform
that, unlike Apple's iTunes, will be streamed
from the digital cloud rather than installed on
a specific device. For about EUR 10 a month,
customers will then be able to "rent" music
from a selection of 13 million titles.

think: act BUSINESS

Business Models

31

BENEFITS

THE TREND TOWARD THE CLOUD ECONOMY

Traditional economy
Skilled crafts and
farm produce
Mercantilism and
feudal economy

Fast technological progress

Broad range of goods
and services
One-way communication
Period before the
Internet age

MANUFACTURING

INDUSTRY

TRADITIONAL

ECONOMY

UP TO 1800

UP TO 1950

CLOUD

ECONOMY

DIGITAL

ECONOMY

Predominance of social online networks on the Internet

Social components as part of business models
Democratization of fundamental computer resources
Prosperity driven by the Just-in-time IT service delivery
application of knowledge Access to collaboration and connection tools is easy
Content counts:
and widespread
Two-way communication Communication on many levels

UP TO 2010

AS OF 2010

"There is no avoiding the cloud, and it

The Amazon crash, millions of Sony customers
will fundamentally change the IT market,"
watching as their data floated around the
says Microsoft CEO Steve Ballmer. Deutsche
Internet for all to see, security loopholes on
Telekom chief Ren Obermann is less gung ho: iPhones and iPads, TomTom passing on data,
"Ultimately, the success
large-scale hacker
of cloud computing will
attacks to avenge
hinge on whether IT
Wikileaks. Cloud proworks in the cloud and
viders' squeaky-clean
Ultimately,
whether it works 24/7."
value propsition that
the success of cloud
customers simply conObermann must have
computing will hinge sume the service and
had a premonition of the
can leave providers to
on whether IT works
spectacular data foul-up
take care of everything
that saw heaps of custoelse has been soiled
in the cloud.
mer data lost without a
rather nastily. Studies
trace from Amazon's web
suggest that every fifth
services. "The end
company refrains from
of cloud computing?"
using the potential of
was the fearful question whispered by
cloud computing for fear of having its data stoSwitzerand's Computerwoche journal.
len. Disasters quickly send the herd scurrying
"Out of the cloud and into the fire [of hell]"
back to the supposed safety of proprietary
taunted bloggers. In the words of the Findata centers.
ancial Times, huge hopes have been placed
in cloud computing. "Yet faith is fragile." The
The Fraunhofer Institute for Secure Inforcloud, it admonished, demands extremes of
mation Technology can understand people's
security, stability and transparency.
concerns. "As with conventional IT applica-

"

"

tions, companies have to work on the assumption that cloud services too will not always
be available and that data will get deleted or
could fall into the wrong hands," says IT expert
Angelika Ruppel. On the other hand, she notes
that "Using cloud services can, in some cases,
actually improve security." This is due to standardized security levels from surveillance
of the buildings in which servers are installed
to restricted access and encrypted data
transmission. Service level agreements define
the probability of an outage. Cloud providers
cater to special requests like the extras in
luxury cars.

t the end of the day, though, it is the

price that decides. A message that
everyone understands: Within weeks
of Amazon's data disaster, SAP entrusted solutions such as SAP Rapid Deployment
and SAP Business Objects to Amazon's cloud
web services. "Amazon's cloud platform is
SAP-accredited," the provider exulted, as if it
had received a knighthood. Tests had apparently proven that application operations at
Amazon's data centers were up to the task.

Who
7

ROLAND BERGER STRATEGY Consultants

questions for Cdric Ochsner,

COO, Chocolat Frey AG

Cdric Ochsner,

47, joined the confectionery

industry as an apprentice
in 1980. Nine years later,
he earned his Master Craftsman's
Certificate as a production expert
before studying for a degree in
food engineering and rounding off
his professional training with an
executive MBA at the University of
St. Gallen all achieved while
continuing to work full time.

. Does manufacturing
in Switzerland have a
future?

Ochsner's professional career began

at Halba and Lindt & Sprngli (Schweiz)
AG. The move to Frey came in 2002,
where he started out as a confectionery
process manager. He took over as Chief
Operating Officer at Chocolat Frey AG
in 2007 and, on January 1, 2012, will
assume the same role at Migros subsidiary
Delica AG.

1. Why does Chocolat

Frey AG need you?

Chocolat Frey is the most complex chocolate

factory in Europe. We make about 2,800 different products. Other big-name chocolate producers either specialize in a narrow range or
manufacture across a variety of locations. We,
however, have just the one facility in Buchs.
All the value we create is concentrated here.
Every day, something like 500,000 bars of
chocolate leave our factory. That is nearly 200
tons of chocolate. And that is not all: As part of
the Migros Group, we not only supply the largest retail chain in Switzerland, but also export
our chocolates to more than 50 countries on
all five continents. Exports are where our

aspect. Don't forget that our competitors are

incredibly strong. That is why we don't restrict
ourselves to product innovations alone: We
also keep a close watch on the entire process.
That begins with the moment you contact a
customer for the first time and ends when you
deliver the right quantity of top-quality chocolate on time.

business is growing fastest. We also produce a

broad spectrum of private label products that
you can buy almost anywhere in the world. All
of which adds up to a tremendous challenge
for me personally, but naturally also for the
whole team.

2. How do you define

your role?

Constantly improving our delivery capabilities,

assuring the quality of our products, aligning
production costs with the current situation...
Those are obviously my main activities.
Innovation management is another important

Chocolate is very important in Switzerland. It

is as much a part of us as watches and clocks.
When they eat our chocolate, people abroad
think of the Alps. The Swiss didn't just invent
chocolate as we know it today. They have
employed chocolatiers for generations. The
very word melts in your mouth. Thanks to their
unique skills and inventiveness, chocolatiers
embody not just the past but also the future
of Swiss chocolate. I am convinced of that
albeit on one condition: We must uphold our
commitment to quality. We must not become
complacent. Having said that, Switzerland is
not the easiest manufacturing base. The challenges today are greater than they used to be.

. Do you find yourself

caught between several
stools?
That's a tricky one. If you had asked me
whether I am caught in a sandwich, I would
have said yes. And the bit in the middle, as
everyone knows, is the best bit! But yes, the
demands placed on operations often pull in
different directions. Ultimately, though, that
is just a form of internal competition. What is
important to me is always to communicate the
opportunities and risks openly, directly and

think: act bUsiNEss

without trying to make the facts more

palatable. For me, that is essential to being
a successful COO. I'm not a weightlifter,
I'm a long-distance runner. In this position,
you need stamina. that drives me forward
and keeps me fit.

5. WhAT TAkEs Up mOsT

Of yOUr TimE?

Learning! taking a closer look instead of turning the other way. yesterday's mistakes are
tomorrow's opportunities. I leave the things
that work alone. the ones that don't work are
the ones I tinker with. Some people make the
mistake of slipping into actionism. I believe
the right thing to do is to make changes in
such a way that they are perceived as natural
and can be accepted as if things had never
been any different and the new way is the
only right way. that demands a very sensitive
touch. another aspect is improving what
we call our swarm intelligence. that means
sharing information at first hand across two
levels of the hierarchy, choosing and
placing the key positions the multipliers
in the process, committing to
change management, delegating responsibility and
empowering people.

6. hOW DO yOU UsE yOUr

business models

33

7. WhAT DO yOU

rEsOUrCEs?

sTAND fOr?

I believe in people, not processes. People need

information and clearly defined responsibility.
then they can devote themselves wholly to
their task. No one likes making mistakes.
I allow my people to celebrate successes.
Praise is extremely important. Praise and
responsibility are the most powerful engines
of motivation.

I stand for a performance culture, but one that

can be fun as well. I stand for rigorous action
and the indivisibility of delegated authority. It
is not processes that determine the success of
a venture, but the people who design complex
and complicated processes, and who constantly optimize them.

prOfiLE: ChOCOLAT frEy

AG

,
the swiss canton of Aargau
headquartered in buchs in s chocolate and chewing gum.
ure
Chocolat frey AG manufact y has been part of the migros
pan
founded in 1887, the com e of its products are manufacretail group since 1950. som ves and sold in the Group's
ati
tured for the migros cooper today exported to more than
are
ers
oth
ile
wh
,
lets
supother out
tinents. The company also
50 countries on all five con ts and hotels, bulk consumers
ran
plies its products to restau Exports account for around a
ry.
and the processing indust
third of frey's revenues.
colate
rland's market-leading cho ploys
Chocolat frey AG is switze
em
y
pan
com
re of 39%. The
producer with a market sha ted gross revenues of Chf 404
pos
and
ple
peo
0
80
n
more tha
million in 2010.

http://www.chocolatfrey.c

What

ROLAND BERGER STRATEGY CONSULTANTS

M&As:
Three steps to
success

The global fi
ning once a nancial and economic
gain. Yet th
crisis has s
e
The biggest failure rate seems alm et the M&A merry-go-r
o
o
manageme
s
nt the wron tumbling block is goin st as high as the take und turov
and quickly
g
g
eliminates way. Successful post-m about integration and er rate.
p
sy
model from
e
Roland Berg erceivable weaknesse rger integration antic nergy
ip
s and p
er facil
ates
nies seek to itates measurable pro itfalls. A new consultin
gre
g
prioritize an
d realize co ss as merging compa
mmon featu
Other topic
res that wil
s in the COO
l
cost k
work
gen
of efficienc illers into smart value shop: Why top buyers uinely add value.
engineer
are evolv
suppliers ca y lie hidden in energ
y-intensive s Where the greates ing from
n stay profi
tr
in
table in the
wake of 20 dustries And how au eserves
11's record
tomotive
e
a
r
n
in
g
s
, ev
global econ
omy runs o en as the
ut of steam

think: act BUSINESS B u s i n e s s M o d e l s

35

ROLAND BERGER STRATEGY CONSULTANTS

g What

Mergers and acquisitions

SUCCESSFUL PMI SYNERGY MANAGEMENT

While the number of M&A activities is on the rise again, companies all too often squander valuable potential.
A study by Roland Berger identifies the critical success factors.

Nomination refers to the

appointment of a PMI manager who will devote his or
her full time to the process
of integration. PMI managers
should hold a senior rank and,
above all, be involved from an
early stage. While most experts clearly agree
with this view, one has to say that hope has
yet to triumph over experience: Although 71%
of the PMI experts who completed the study
argued that PMI managers should be released
to concentrate solely on integration, only 37%
confirm that this is actually done in practice.
Selection refers to the fact
that the right actions must
be chosen to realize

identified synergies. "Four

criteria have emerged as

especially vital in the context of selection: efficiency, speed,
sustainability and culture. The cultural criterion in particular is often seriously underestimated," notes Oliver Knapp, Partner at Roland
Berger and co-author of the study.

The right alignment (or sequence) of actions is essential if

post-merger integration is
to succeed. "A clearly defined
roadmap is worth its weight
in gold especially if you
follow it!" explains Roland Berger
Partner Thomas Rinn, who adds: "Of course the
process has to stay flexible. But constantly
tweaking here and twiddling there can often
undermine credibility and jeopardize the
success of integration."

71%

WANT FULL-TIME PMI

MANAGERS

37%
Wirklichkeit
REALITY

Many companies seem to see mergers and

acquisitions as a panacea to cure dwindling
revenues and exploding costs. The harsh
reality is, however, that as many transactions
fail as succeed. Hoped-for synergies fail to
materialize. Key people see no positive
prospects for the future and either become
disillusioned or jump ship. All too often,
chaos reigns where structured plans should
be implemented. Managing synergies in the
context of post-merger integration (PMI)
harbors many hidden risks, to be sure. However, a new consulting model from Roland
Berger facilitates measurable progress as

merging companies seek to prioritize and realize common features that will genuinely add
value. Three factors are critical: nomination,
selection and alignment.

Anspruch
WISH

Google forks out USD 12.5 billion for the

privilege of ingesting Motorola Mobility.
US pharmaceuticals service provider Express
Scripts swallows rival Medco Health Solutions.
Microsoft buys Skype. And Volkswagen targets
a big splash on the international commercial
vehicle market by snapping up MAN. For all
the world's financial and sovereign crises,
browse through the business press and it
seems companies are acquiring and merging
like there is no tomorrow. The specter of
recession is driving speculation even as
globalization nourishes merger mania. Roland
Berger Strategy Consultants calculates that,
in 2010 alone, the M&A volume outside
Europe surged by an eyebrow-raising 46%.

71% of respondents would like to see full-time

PMI managers, but only 37% confirm this as
current practice.

http://www.rolandberger.com/media/publications/2011-11-14-rbsc-pub-Synergy_management_for_Post_Merger_Integration.html

Purchasing

Emerging stronger from the crisis

Why top buyers are increasingly becoming smart value engineers
During the financial crisis in 2008/2009,
purchasing outfits had to respond very swiftly
to the challenges thrown at them and master
the sustainable, ongoing management of
procurement and supply risks. The (initial)

storm has blown over. Yet although companies

are now back on course for growth, the waters
remain choppy. Purchasing therefore still has a
part to play in managing risk in volatile sourcing
markets. That is why, only two years after the

previous study, Roland Berger Strategy Consultants has now published a new issue in its
Purchasing Excellence study series. For this, the
fourth edition of a study first published in 1999,
companies from Germany, Central and Eastern

think: act BUSINESS

Europe, the USA and Asia were once again

surveyed. More than 500 respondents from
14 different industries took part in the study,
helping to isolate the trends and challenges that
face purchasing in the wake of the 2008/2009
financial crisis.
First, the most important message for all
buyers: Even after the crisis, purchasing is still
gaining in significance. It is perceived as an
important and accepted business partner at
leading companies. Accordingly, purchasing is
increasingly taking the lead in vital cross-functional projects to generate cost benefits and
guard against procurement and supplier risks.
This demands sophisticated new skills and a
wealth of knowledge on the part of purchasing
staff a fact reflected in our study by the
increasing professionalism and qualifications
found in procurement teams. Alongside the
growing proportion of academics among the

Business Models

37

Purchasing is still gaining in significance

2009
2011

Purchasing leads cross-functional projects

(% respondents)
Purchasing is increasingly responsible for crossfunctional cost and value optimization projects

ranks of buyers, intercultural, language and

specific technical skills too are playing a pivotal
role in separating the winners from the alsorans. Above and beyond traditional commercial
levers such as volume bundling, top businesses
are increasingly involving strategic partners
and suppliers as they turn to more complex
methods such as value engineering. The
sustainable development of business lines and
activities is deeply embedded in purchasing too.
Today, economic, ecological and social aspects
have been woven into the fabric of professional
purchasing strategies.

46%+12%
58%

Increase
in % points

Top buyers are thus evolving from traditional

cost-cutters into smart value engineers: people
who optimize product costs and benefits across
the board in order to actively enhance business
performance.
Details of these and other trends and challenges facing purchasing units are explored in our
"Purchasing Excellence 2011" study, which is
available as of December 2011.

http://www.rolandberger.com/company/press/releases

Energy efficiency

Powered up
While investing to improve energy efficiency will cost EUR 23 billion, the resultant savings should top EUR 100 billion
The rising price of electricity is not all bad
news. It is fueling investment in energyefficiency technologies, which in turn is driving
growth and stimulating innovation. This is the

core finding of "Enhancing Efficiency in PowerIntensive Industries", a new study published by

Roland Berger Strategy Consultants. Focusing
on four selected industries basic chemicals,

INDUSTRY-SPECIFIC INVESTMENT AND SAVINGS THROUGH 2050

Cumulative investments
Cumulative savings
Cumulative investments: EUR 23 bn

-42
-10
Basic chemicals

Cumulative savings: EUR 102 bn

-34
-7
Paper/paperboard
production

-5
Metallurgy

-20
-1 -6
Processing of stones
and earth

paper/paperboard, metallurgy and the processing of stones and earth the authors map out
strategies for action between now and 2050.
Power-hungry industries are going to develop
an even more voracious appetite for electricity
in the coming years. Electric-powered production processes are increasing power consumption. But so too is the advance of automation.
At the same time, a number of factors such
as the German government's early withdrawal
from nuclear energy and the associated supply
shortage, the higher cost of CO2 certificates
and fossil fuels, and moves to expand power
grids in order to accommodate renewable energy sources are causing the price of electricity
to rise.
"Over the next 20 years, electricity prices will
go up by about 70%," says Ralph Bchele of
Roland Berger Strategy Consultants. "To stay
competitive, companies therefore have to

ROLAND BERGER STRATEGY CONSULTANTS

g What

improve their energy efficiency." The experts

at Roland Berger see huge potential for efficiency gains in power-intensive industries in
particular. "As various providers develop new
energy-efficiency technologies, and as these
are adopted by consumers, this will pave the
way to a sustainable reduction in power con-

sumption and, hence, a significant cut in electricity costs," explains Torsten Henzelmann,
Partner at Roland Berger. Users are not the
only ones who benefit from investment in
energy efficiency, though. Positive and lasting
change can also yield advantages for the
providers of such technologies. In the years

ahead, more energy-efficient products will be a

crucial differentiating factor as well as becoming a critical barrier to entry for new market
players. This in turn will lead more companies
to ramp up their spending on research and
development, resulting in greater employment
and faster revenue growth.

http://www.rolandberger.com/media/press/releases/New_study_on_energy_efficiency.html

Automotive suppliers

Fitness program for the lean years

Roland Berger's "Global Automotive Supplier Study 2011" addresses the industry's major challenges
Right now, the world's automotive supply
industry is seeing business boom. At 6.2%,
average profit margins are higher than
they were before the crisis, with European
companies culling considerably higher
average EBIT margins (6.9%) than their North
American and Japanese rivals. A comparison
of the various segments shows that suppliers
of chassis, exterior fittings and drivetrains
are the most profitable. The outlook for the
industry remains bright, if not quite so
euphoric, for the years ahead. Slower growth
on the Chinese market, stagnating car sales
in mature markets and rising raw materials
prices will drag the industry's profitability
back down below 6%. These are the key findings of the "Global Automotive Supplier Study
2011" conducted by Roland Berger Strategy
Consultants in collaboration with Lazard.
"Profitability in the global automotive
supply industry hit a new record in 2010
only a year after plumbing new depths in
2009," says Roland Berger's Felix Mogge.
Worldwide, the average EBIT margin surged
from 1.6% in 2009 to 6.2% in 2010. "The main
driver of this positive development is the
tremendously fast recovery in global automobile production, especially in China and
other emerging countries," notes Dr. Eric
Fellhauer, Managing Director of Lazard.
Companies' extensive cost-cutting activities

in the crisis year 2009 have also contributed

to the industry's rapid resurgence.
Chinese, Korean and European suppliers
lead the field
Profitability nevertheless varies considerably
from region to region. Average EBIT margins of
nearly 7% put European suppliers well out in
front of their competitors in Japan (5.6%) and
North America (4.3%). Yet suppliers from China
and Korea bettered even this performance,
reporting double-digit EBIT margins in some
cases.

Suppliers having to step up innovation

As well as stabilizing current profit levels and
expanding their global delivery capabilities,
suppliers also face the challenge of sharpening their focus on product innovation in
the future. "Only those suppliers that manage
to set themselves apart from competitors
thanks to first-class products will be able to
keep earning EBIT margins of at least 6% in
the long run," Mogge explains. "The other
suppliers will increasingly be hassled back
into the commodity segment, where profits
of 3% are the best they can hope for."

PROFITABILITY IN THE GLOBAL AUTOMOTIVE SUPPLY INDUSTRY HIT A NEW

RECORD IN 2010
Key indicators, 2000-2010 (n = ~ 600 suppliers)
INCOME GROWTH
[2000=100]

EBIT MARGIN [%]

162
156
5.3

2.0

1.1
2006

2010

2002

11.1

8.4
6.2

100
2002

RETURN ON INVESTMENT [%]

2006

2010

http://www.rolandberger.com/expertise/industries/automotive/suppliers/2011-09-12-rbsc-pub-Global_Automotive_Supplier_Study_2011.html

2002

2006

2010

think: act BUSINESS

Business Models

39

Kiosk

Post-merger integration (PMI) underwrites the success of mergers. Because

you only get one shot to get it right
Getting the management of corporate culture
and synergies right facilitates measurable
progress in prioritizing and implementing

New book and think: act CONTENT

A robust, working business model is a
company's most powerful weapon to
beat off the competition. Professors from
the Academic Network established by
Roland Berger Strategy Consultants,
employees of Roland Berger Strategy
Consultants and other authors representing
the scientific and business communities
have penned their views in this book, which
will appeal to scientists and business
practitioners in equal measure. The basics
and application of innovative business
models are their common topics. In three
Strategy CONSULTA
ROLAND BERGER

actions that preserve value. The process of

professional synergy management breaks
down into five phases, starting with the discovery of effective levers and ending with
the realization of defined actions. Yet the
three phases in the middle nomination,
selection and alignment are equally vital.
Selection means choosing synergy levers
based on their financial impact, the speed of
implementation and the sustainability of the
impact always in line with the relevant corporate culture. Alignment means optimizing
the sequence of actions. The right thing must
be done at the right time. It is also important

chapters, the authors examine

what makes a modern, end-toend business model and the
dimensions in which innovative
business models can be designed. Using examples from
a broad spread of industries,
they also analyze how different
companies have improved their
business models, consciously
wielding them as weapons with
which to win the competitive
battle. The essence of the book is
distilled into a complementary edition
of think: act CONTENT.

to identify cause-and-effect relationships

between different actions, some of which may
be mutually exclusive while others complement each other. Nomination means appointing a PMI manager, as successful synergy
management requires clearly defined areas of
responsibility.
Authors: Thomas Rinn, Oliver Knapp, Christian Bhler
www.think-act.com
http://www.think-act.com

Authors: Thomas Bieger, Dodo zu KnyphausenAufse, Christian Krys, Michael Zollenkop

http://www.think-act.com

www.rolandberger.com

NTS

P U R C H AS IN G
E XC EL LE N C E
ST U D Y

s and benc
Pu rchas ing trend

hmark s 2011

Post-crisis purchasing
During the financial crisis in 2008/2009,
purchasing outfits had to respond very swiftly

to the challenges thrown at them and master

the sustainable, ongoing management of procurement and supply risks. The (initial) storm
has blown over. Yet although companies are
now back on course for growth, the waters
remain choppy. Purchasing therefore still
has a part to play in managing risk in volatile
sourcing markets.
That is why, only two years after the previous
study, Roland Berger Strategy Consultants
has now published a new issue in its Purchasing Excellence study series. For this,
the fourth edition of a study that was first
published in 1999, companies from Germany,

Central and Eastern Europe, the USA and Asia

were once again surveyed. More than 500
respondents from 14 different industries took
part in the study, helping to isolate the trends
and challenges that face purchasing in the
wake of the 2008/2009 financial crisis.
Authors: Axel Schmidt, Oliver Knapp, Christian
Steinbach
http://www.rolandberger.comm