Inertia in Germany

In the current special of Markenartikel, an article inspired by our long-time business friend Peter Maeschig appeared with the title Inertia in Germany.

Here is the article “Inertia in Germany” in full:

There are many complaints about standstill, delays and marking time. Three consultants exchange ideas about the causes of this inertia in companies and show how convenience, consideration or regulations create huge Gordian knots.

Jens Lönneker: The basic tenor of our society, which the economy is also taking off on, is a credo that says: everything must be allowed, nobody must be disadvantaged. This leads to a psychological construction problem. Every decision means that someone is excluded. Conversely, this means that if we allow everyone and everything, we will not come to a decision. If a bridge is built in Germany today, there is a huge discussion about whether it is even necessary. The next moment there is a dispute about where
this bridge is being built. Then there are citizens' initiatives and court proceedings. This is how we quickly get to a construction period of 15 years. In the end, everything remains sluggish.

Dr. David Strack: In Germany, we are very sensitive and always look at who might be negatively affected. This leads to a standstill in action. Discrimination is an important issue, but we have to be careful not to over-regulate and only spin around in our little world. Because trade is an international, global system. We are dealing with things here that others are not dealing with. If we look at how trading models develop and decision-making processes take place, our inertia becomes apparent.

Lönneker: Then one could argue that German retail is an international success model.

Strack: If you look at the food trade in Germany, you can see that some things are progressing very slowly. Two main topics are waste management and sustainable sourcing. The topics play a major role internationally, but not in Germany. This is mainly because we are not so far advanced in the area of digitization. The Anglo-Saxons are much more advanced in waste management because they have forecasting systems that help them avoid waste.

Lönneker: But in Germany, too, we have digitally successful retailers - for example, Zalando.

Strack: Zalando or MyTheresa internationally are positive examples. These providers are not just cheap, but they are extremely service-oriented and very modern. In Germany, there are many originally very successful retailers such as C&A, Peek&Cloppenburg or Adler. They are all dead. The furniture trade will be the next industry to be hit. It's all about price there. In the retail sector, we have many industries that are not modern and
do not go along with consumer interests. It would be worth taking a look at Asia, where there are very modern concepts - also with a view to sourcing.

Lönneker: Here there is movement in this country due to the supply chain law.

Strack: In many parts, the intention of the supply chain law is also good. An important approach, however, would be to proactively sit down with the main producing countries such as China to develop sourcing strategies. Instead, we wait. We consistently ignore young consumer groups. Basically, every company would have to unleash its market researchers on TikTok. I don't know a single company that deals with TikTok. We sit in our snail shell and ignore the world. The overall political constellation, in which the focus is strongly on "managing instead of governing," is rubbing off on companies. "Just don't come up with any innovation" - that's the motto.

Lönneker: Years ago, I worked for a tea producer and we were responsible for packaging.
The range had not been changed for a long time. Suddenly they were faced with the issue that it had to be changed because the packaging design was outdated. This was because the company had been increasing prices for years. The tests now made it clear that consumers are taking a closer look at what the products cost when the packaging is changed. This put them in a paradoxical problem: if I don't change the packaging, I lose more and more customers. But if I change it, I lose them too. It was an inertia that was even benefited from for a while and only turned out to be problematic years later.

Strack: Yes, those are skimming strategies. When I was at Mediamarkt and suggested that they, as an electronics retailer, should deal with the Internet more intensively, everyone said: "We are writing one record result after another. What do you actually want from us?" I was told that customers would never buy consumer electronics on a large scale on the Internet because they were too in need of explanation. They should have launched their own digitization offensive. Above all, the training and consulting of employees is important. When the company started to do badly, the first thing they did was cut the training concepts. The consumers were sometimes better informed than the employees. Why aren't such things tackled proactively earlier? Why don't you critically ask yourself whether what I'm offering the customer is still convincing -
and above all will be in the future? Concepts have to be thought out for tomorrow.

Lönneker: I think we agree that inertia is often present in the structures. It would make sense to focus more on what the reason for this is and what can be done about it. One recommendation would be to introduce disruption routines. What can we abolish? What needs to be new?

Peter Maeschig: There is an increasing discrepancy in corporate strategies and the speed at which society and, therefore, customers are changing. We have different moments on the speed axis. With Rheingold, you developed the concept of hypersensitivity. The younger generations react much more sensitively to moralizing codes of conduct than was the case a few decades ago. We have a growing number of consumers who expect an over-functional benefit from products and services that is unimaginable for someone with an economic mind. We take into account sensitivities that have become a kind of lifestyle. Every company should talk with greater decisiveness about what it wants to talk about. Increased empathy is important. You shouldn't say everything that you think is good in terms of performance. You should make honest offers that give each individual the feeling that they are not outside a norm. We have to say goodbye to the way of thinking that companies always have to offer the market something that is better and faster. Comparatives no longer count.

Lönneker: The interesting thing is that for a long time it was about overcoming norms and boundaries. More freedom, more joy, more fun. Brands offered these promises. But at the same time, they also promised that you don't have to worry about overdoing it. However, individual freedom has lost its psychological appeal today. I have so many freedoms that I no longer know where to go. It also stresses me out. That's the game changer for brands. People want orientation and want to be told what is right and what is wrong.

Maeschig: There is a French feminist who talks about the permanently offended generation and the plague of sensitivity. How do you deal with a clientele that is permanently offended? That is the challenge for companies to serve this state of permanent emotional arousal.

Strack: We are talking about a new orientation and value pattern. Companies have to understand this and deal with it self-critically. It's no longer about being cheaper, it's about being compliant. Hypersensitivity should not be underestimated.

Maeschig: At this point, I would like to discuss the question of how I solve the problem. I am an opponent of brute disruption. In most cases, this goes wrong because the clients cannot cope with this type of abrupt change. If I completely replace an old sales system with a digital platform sales system, I have to expect that my company will be driven to the brink of the abyss in the short term. The old ones don't play along anymore, the new one doesn't work yet. The destructive power of creation does not lie in wanton destruction. A lot has to change, but in the sense of a constructive process of destruction, in which you think about what you are getting and how you give the whole thing a new spectrum of perception.

Strack: The status determination is very important. Companies have to understand why they are where they are and define what the solution is in the eyes of consumers. This is a real transformation process. It takes a long time, but it is serious.

Maeschig: First we have to observe, then we can understand and draw conclusions. Especially in a time when a lot is moving, it is important to take the time for this.

Lönneker: The new technologies encourage reactions to certain actions to be recorded quickly digitally and evaluated using data analysis. At Unilever, to my knowledge, the number of researchers has been reduced and the number of data analysts has increased. The problem is that the question of understanding is secondary.

Strack: Dealing with possible sensitivities produces an extreme inhibition, also with a view to data protection. If someone makes me great offers when I give them my data, why shouldn't I give it to them? Most consumers don't have a problem with that. Currently, data is collected but not used. Customer orientation does not mean dealing with sensitivities, but with solutions that the
Consumers want. We are still in the transition from a supply- and industry-dominated to an end-consumer- and demand-oriented economy, in which products are built when there is sufficient demand.

Maeschig: It is not about orienting oneself to sensitivities, but about taking sensitivities into account. We have to observe them precisely in order to find the right conclusions for product concepts.

Strack: If a company defines a purpose and shows that it is working on it, consumers are willing to go along with the company. This really has to be lived and be transparent. It doesn't have to be perfect in the first moment, but a development into a vision must be recognizable. Unfortunately, this leads to standstill in Germany, because you always want this over-perfection and avoid being criticized.

Maeschig: That's an important point. Purpose should not be understood as a final decision, but as a goal. And you embark on this path. In most companies, the factual transfer of the purpose into the organization is missing. It is about taking people with you and explaining to them that you are working to change.

Lönneker: In Germany, many companies are afraid to try something because they are accused of not doing something right, instead of being told: "Nice that you tried it." As a result, we quickly lose our visionary power.