Like all companies, family-owned businesses have to undergo transformations to become more innovative and to stay competitive. Maschinenraum is a shared ecosystem for innovation and the digital as well as sustainable transformation of German family firms. The Choice met its Managing Director, Tobias Rappers, who explains how family-run businesses should go about creating a brighter future for generations to come.
What are the greatest challenges that family firms face in transforming their businesses?
One of the specialties of family businesses, especially in Germany, is that most of the time they are traditional companies with more than 100 years of heritage behind them. Their core idea is to pass their business on to the next generation. Families have been very successful in making their companies bigger and bigger, with the task for the previous generation having been to globalize the business. But today, the situation is being completely disrupted in so many ways: with new technologies, new customer needs, new business models and the different expectations of a new generation of employees. If you have the traditions of a company that is 100 years old, it is very difficult to adapt to these new contexts at the speed needed to stay competitive.
The challenge is to update the culture of the organisation and the ways of working. German family businesses are also often not visible to the outside world because they are very closed companies. They are very successful and well-known in their segment but are not so known in the start-up scene or in other industries where they might find collaborative partners. It’s a big challenge to create this visibility.
We’ve covered the challenges they face, but family businesses must have advantages too?
Family businesses are long-term oriented, they don’t need to look at the quarterly figures or do things in the interest of shareholders. They can have a very strategic focus. In family businesses, you have also generational changes, which means that you have younger people coming into the company with more open mindsets and a closer relationship with technology. It’s a big advantage when it comes to revitalising an organisation. They also have a very high degree of loyalty from their employees because families are seen as role models. So, if they say ‘we are going in this direction’, everybody follows.
You can’t read the future in books, but you can co-learn and co-create to share the experience of other companies and explore those topics together.
According to Maschinenraum, cooperation, co-creation and co-innovation are the only way to implement new business models that can survive in an international digital environment. Can you develop this idea?
You need to create organisations that are able to learn and to catch up with a changing situation very quickly. You can’t read the future in books, but you can co-learn and co-create to share the experience of other companies and explore those topics together. If you find similar peers, you can even do co-innovation by bringing together the strengths and knowledge of the companies involved. This is the idea behind Maschinenraum. We want to unite German family businesses that share the same attitudes and values, even if they come from different industries, because they all face the same challenges. Together, they can create a desirable future.
Why are they interested in working with you?
We see ourselves as an ecosystem. We welcome all German family businesses who have understood that they can be stronger if they are open and they share experiences by learning with others. The “Handelsblatt”, a famous German business newspaper, called Maschinenraum the “alliance of the willing”. It means that we make sure that we identify the right topics to facilitate change in the companies working with us. In Maschinenraum, we are connecting departments of organisations, so they can share their experience in a peer-to-peer network.
Today, if you are only looking at your own industry, you won’t find innovation. But if you combine industries, there are blue waters and true innovation ahead. We can connect teams to create synergies and explore new ideas. This is a sustainable way of doing things for companies because it opens up many opportunities and will transform most of them in the years ahead. We are also fostering communication in order to showcase companies’ attractiveness and innovation. And we are sharing capabilities and resources to explore new topics and to validate new ideas together. Maschinenraum manages this ecosystem. It would be very difficult for a company to do it alone.
If you only do things that are within easy reach and stay in your comfort zone, you won’t identify new opportunities or adapt your core business for the future.
Can you give us a concrete example of the help you provided to a family business?
We launched Maschinenraum in March 2020 and are happy to already have 25 family businesses as members. We spend a lot of time with each company to understand their challenges. To increase the attractiveness and visibility of family businesses among new talent, for example, we partnered with ESCP Business School and other universities. Within this partnership, we showcased Fiege Logistik, one of the German market leaders in logistics. We had a lecture with thirty MBA students and three different family businesses, explaining how to make a career in their particular field. At the end, Fiege Logistik hired three students from ESCP.
We have also built connections between several companies’ departments. For instance, there is a meeting every month for strategic planning departments where companies – like Phoenix Contact – can present their perspectives. Another example: our member company Schöck wanted to operationalise its strategy by using OKRs (objective key results). So, we invited three other companies that had successfully introduced OKRs into their organisations, and they shared with Schöck how they did it. In the end, Schöck decided to implement OKRs, but it did so with more knowledge on how to improve this topic. And they saved a lot of time and money.
Digitalisation and sustainability are the two main game-changers across all industries.
Maschinenraum is the result of a transformation at the Viessmann Group, a German manufacturer of heating, industrial, and refrigeration products, and which has been family-owned for four generations. Why did they decide to create Maschinenraum?
The transformation journey of the Viessmann Group began with Martin Viessmann and his son Maximilian. They realised that their company needed an update. Maximilian started to implement changes in the organisation, working on internal topics like culture, leadership, tools, internal communication… They analysed start-ups, explored new fields and tried out new business models. The two central challenges were digitalisation and sustainability. These are the two main game-changers across all industries. But the word ‘digitalisation’ doesn’t exist anymore in the Viessmann Group because we need to be digital in every aspect of products, services, processes, communication, marketing, sales…
It took them almost six years to navigate all these aspects, and it is obviously a never-ending story. Maximilian had this comment afterward: We need to make sure we continuously learn, improve and stay ahead of issues. But doing it alone is much more difficult than if you find peers who are facing the same challenges. So, he decided to bring German family businesses together on a very neutral platform and to create Maschinenraum as a shared innovation ecosystem without intermediaries or any aim to make big profits, in order to increase businesses’ resilience and make them ready for the future.
What advice would you give to the next generation of family business leaders looking to transform their companies?
I would focus on the human factor and advise them to involve their employees in the journey. Because if they don’t understand why the company has to change, it’s very hard for them to engage. So, transparency is key. You have to be very open and explain your decisions. It’s important for them to trust that you are leading the company in the right direction and that they will play a role in that.