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German quality may beat fast-start US business models, says expert

Germany may sometimes struggle to compete with the dynamic start up cultures found in other countries, where new companies are quickly established and venture capital funding is more readily available, but a radical change in business direction is unlikely, an expert has said. 04 Feb 2015

Munich-based Michael Horn of Pinsent Masons, the law firm behind Out-Law.com, was responding to comments from Volkmar Denner, chief executive of German technology firm Bosch, who told the Financial Times this week that Germany needs to see a real cultural shift in business to keep up with the 'disruptive' models appearing from the likes of Silicon Valley.

Denner gave the example of car service Uber, which has turned taxi markets upside down in the markets it has entered internationally.

"Uber is not a revolutionary technology, it’s a business model innovation — and there we are not good enough yet," he told the Financial Times. "That’s where I see the biggest threat."

Denner also noted his fears that German industry was struggling to adequately recognise the opportunities and market threats of technological advances in areas such as connectivity and big data.

Horn said that German business has other strengths that it will continue to play to. "Innovation of course remains crucial, but with years of economic success underpinned by a focus on product quality and investment in core expertise, Germany is not going to make any sudden changes," Horn said.

"It's true that Germany has not been particularly dynamic in adopting and implementing more risky business models," he said. "The country has comparatively little venture capital funding available compared to the UK or US, with start ups and mid-size companies often struggling to secure sizeable investment."

"Germany also displays, at times, a tendency towards slower adoption of the newest technologies. Driverless cars are a good example – while the German authorities and the country's car manufacturers recognise the massive potential impact of this innovation, other countries, including the UK, appear to have progressed further in implementing trials of the technology. Alexander Dobrindt, Germany's Federal Minister for Transport and Digital Infrastructure, has targeted testing in September of this year but, given current progress and the regulatory obstacles still to be surmounted, that timetable seems very challenging."

"Nevertheless, Germany's industrial success has been achieved in large part by focusing on and evolving what it is good at, rather than more speculative moves. Denner is absolutely right that new business models and technologies will need to be leveraged to stay competitive but I see this against a backdrop of existing industries adapting to meet new challenges, rather than a more radical move away from its role as a manufacturing and engineering powerhouse."