It’s time to wake up

Mr. Hinz, you’ve said that we are “going through the most fundamental and far-reaching transformation since the beginning of industrialization”. Is that a good or a bad thing?

First and foremost, it’s a fact we have to recognize. The industrial revolution ended up being a disruption that changed the way we live here forever. In comparison, all the subsequent changes in the last century were evolutionary. Today, we’re experiencing yet another disruptive leap in development because digitalization affects every area of life. The change is all-encompassing, and it’s taking place at maximum speed all at the same time: in the transformation of energy and mobility systems, remote medicine, the “All Electric Society”, artificial intelligence, quantum technologies and much more. You don’t even know where to begin and where to end. Basically, the core realization behind everything is that knowledge and data will be the industrial currencies of the future. Data is the new gold, so to speak.

The crucial question is how Germany and Europe are preparing for all these developments. Despite the pandemic, the economic forecasts for our industrial sector are surprisingly positive. Do you share that optimism?

Yes and no. We have another successful year behind us, and that’s certainly reason to celebrate. Still, I see this as both a blessing and a curse. These accomplishments can also overshadow the existing problems and prevent us from setting the right course. We have to realize that the prosperity of today is based on work done in the past. But that simply won’t cut it in the disruptive upheaval I was talking about. Yesterday’s successes won’t carry us into tomorrow. That’s why I’m strongly urging that we make Germany and Europe more resilient to disruption.

Only during the pandemic did it become painfully clear just how dependent we are on the world market and on supply chains, which can also break down. What conclusions do we need to draw from this?

There are two answers to this question. For one, we certainly need to liberate ourselves somewhat from our current supply chain dependency. In essence, it’s a matter of rebuilding systemic expertise in key industries in the long term, along the entire value chain. We haven’t had that for a long time, and that’s a problem! We need to regain a far higher level of technological sovereignty in this regard – in all areas.

And the second answer?

It would be a fatal misconception to believe we can do without global production and sales markets in the long term. Germany and Europe are not islands that can survive on their own. That’s why I’m deliberately speaking only of a partial decoupling and urging everyone to focus more on monitoring quality in existing supply chains.

It’s true that we’re not an island – indeed, our dependence on China has the potential to be catastrophic, including after the pandemic is over. After all, we’re talking about a country that’s not only an important trading partner, but also a “systemic rival”.

Yes, that’s the way it is, and we have to deal with it. Despite that, I’m still convinced that trade with China has been and will continue to be a decisive factor in Germany’s success story. It’s the largest sales market in the world, and we need it. Of course, we face a problem in that many things there are not how we’d like them to be, whether it’s in terms of domestic, foreign or economic policy. Responding to this will be a political balancing act that needs to be reassessed over and over again.

But again, hasn’t the case of Russia and Nord Stream 2 shown how problematic it is to knowingly enter into such dependencies?

We shouldn’t do so knowingly or close our eyes to such dangers; either would be negligent and ignorant. All the same, I still maintain that we should act prudently and take a two-pronged approach: global trade on the one hand and partial sovereignty on the other. To be clear, however, the US undeniably made the right decision a few years ago when they massively ramped up their microelectronics capabilities in order to be less vulnerable given the developments in China and Taiwan. We need to do the same thing! When I look at what’s happening here in Europe, especially in the area of battery technology, I’m very confident that we will. At least in this one sector, it seems that people have “woken up”.

Regarding the digital transformation, however, you think some people are still sleeping. You warned against lethargy a few years ago, in any case. Then, at the beginning of the pandemic, you suddenly got more confident and thought the situation had been a wake-up call for companies in Germany. What’s your assessment of the situation today?

During the pandemic, we were able to observe how our member companies did quite well in handling the transformation of standard business and communication processes. Looking ahead, though, it’s about much more. I’m actually much more concerned about this than I was a few years ago. As I see it, we have to be very careful to avoid becoming even less competitive globally.

In which sectors and fields have we already fallen behind?

I can think of a whole range of digitalization topics, like 5G technology in mobile communications. There’s also the matter of our value chain expertise in areas of microelectronics. I’m afraid it will be difficult to catch up with the competition here. That said, I think there are areas where the good news far outweighs the bad – including in renewable energies and environmental technology, and also in quantum technology, for example. We need to do much more than in the past to ensure that our innovations are also used domestically and give us a return on our investment. This is the only way we can hold our own as a leading player between the two main world powers – the US and China. Our chances for success are good if we roll up our sleeves and get to work.

Many people see a huge opportunity in the “green transformation” in particular. Larry Fink, the CEO of BlackRock, has said that the next thousand unicorns – meaning startups with a pre-IPO market valuation of over $1 billion – will come from green tech. The question is: will German and European companies be in the mix?

Now I’m not a prophet, but there’s definitely a chance, and I’m actually quite confident about it. We’re ultimately talking about a huge field in which European companies are very well positioned overall. That’s especially true for Germany, where there’s such a strong political demand for environmental action.

So hats off to Fridays for Future, which can definitely be seen as a driving force behind this movement?

It’s undoubtedly commendable how the young generation has taken to the streets and demanded a change in mindset. In my opinion, though, it’s not enough to say where the journey should end. We also need to know how to get there. We can’t just say goodbye to fossil fuels overnight, even if we all know the future will be electric. Rather, we need a smart strategy to arrive in that future, and I’m convinced that the combustion engine will continue to play a role for quite a while for economic reasons alone. At some point, though, it won’t run on fossil fuels anymore, but on synthetic fuels.

All the same, we can’t afford to postpone action on global warming any longer. That doesn’t mean making hasty decisions, but we still need ambitious goals. Or do you see things differently?

No, not at all! We absolutely need very ambitious goals, and in order to achieve them, we need to learn to think outside the box again and be disruptive. This means doing things differently than we have been for the last 20, 50 or 100 years. Above all, we need to formulate a smart strategy and then implement it step by step with total consistency. That’s one of the reasons why I’m calling for a master plan for Germany and Europe. This plan needs to guide us toward achieving not only our environmental goals, but also our economic policy objectives. If we’re committed to being globally competitive in the future, we also need to assume responsibility for the generations to come.

What could a master plan like the one you propose look like?

It would be presumptuous of me to get into all the details here. Like at a well-functioning company, an overall strategy like this would have to be developed at the management level – while involving all the relevant experts and considering related assessments, of course. I’m not talking about some paper that’s written up only to disappear into a drawer. I’m talking about a very concrete master plan, with interim goals, milestones and clearly assigned responsibilities. It doesn’t matter whether it’s a three-year or a five-year plan. The important thing is to provide clear guidelines that everyone is held accountable to.

That may work in China, but is it also possible here in Germany?

It has to be! In the democratic federal system in which we’re fortunate enough to live, our politicians have to be able to set a strategic course, even if that sometimes involves making unpopular decisions. To that end, we need courageous, experienced and qualified people in politics who move things forward in our country instead of getting in the way. At the risk of ruffling some feathers: the bureaucrat must become the enabler!

But don’t regulations – on data protection, for instance – inevitably entail bureaucracy?

An American would say “secure it, but enable it.” In other words, data protection and other regulations can’t just be government-mandated shackles. We need to strike a balance and ensure the optimum level of safety without strangling innovation and technologies right from the start. If we can manage to limit ourselves to a sensible and necessary regulatory system that’s pragmatic and unbureaucratic, it might also become our next big export. Safety, security and sustainability are not inherently hurdles and barriers. They also present opportunities for our country.

Back to the master plan: it’s ultimately the companies that will have to implement this strategy, right?

Exactly. And that will only work if they succeed at another balancing act. On the one hand, the focus remains on short-term profitability; all this upheaval and change won’t pay for itself. On the other hand, however, companies also have to implement the objectives set by the government in the medium and long term. This is partially about the plan to make Germany and Europe climate-neutral, but it’s also a matter of building up comprehensive value chain expertise in this country again in order to counter the industrial production power of China.

You just mentioned unpopular decisions that also have to be made. We still have to try to get people on board with all these projects, don’t we?

That’s certainly true. However, we clearly also need to change the way we think about this as a society. We all need to get out of the comfort zone that has allowed us to rest maybe a bit too easy for the last 70 years. If you look at China, it’s not just the form of government that sets them apart. The mindset is also quite different. That’s why I think it’s time to shake off our complacency and start tackling our problems head-on!

You’ve addressed politics, business and society...

Right – for me, it’s about three main aspects: political responsibility, industrial responsibility and social responsibility.

...Now we should talk about education and training.

Some things apply here in more or less the same way. We’re still very stuck in tried-and-tested curricula, didactics and teaching methods that reflect neither the subject matter nor the speed we see in the market. At the same time, I don’t want to criticize everything. The current generation of students is certainly more reflective and confident than we were at that age. Nevertheless, I firmly believe that our education system – our ways of imparting knowledge – must fundamentally change. For example, I was just talking about value chain expertise. The fact is, we would no longer be able to establish high-volume chip production here in Germany working solely with German expertise. The skills are simply elsewhere, especially in Taiwan. And the problem doesn’t rear its head at universities; it already starts in our schools.

How do you mean?

A lot of concepts in the STEM fields are just too abstract and may seem “uncool” at first. We need to make the complex world of electrical and information technology tangible again and transform it from the abstract into reality – into daily life. I’ll give you an example: the children’s TV show “Sendung mit der Maus” recently visited our testing institute with some children, who were given a tour and the chance try out some things and tinker around themselves. Towards the end, I noticed a set of twins telling their parents that they’d had a great time and this was what they wanted to do when they grew up. That’s the way it should be!

Instead, the subject of electrical engineering is becoming increasingly unpopular (see the article on page 30). Could we maybe use an image campaign – like the one for trade professions about “the economic powerhouse from next door”?

It could put the focus on what electrical technicians are capable of, and the fact that we absolutely need them in order to cope with all these challenges. The shortage of skilled workers is clearly one of the main problems of our time. Without the appropriate manpower – and especially womanpower – even the best master plan for the industrial transformation won’t be of any use.

MARTIN SCHMITZ-KUHL

is a freelance author from Frankfurt am Main, Germany, and an editor of VDE dialog.