While the world is looking at Brexit through a UK filter, the rest of the European Union is also preparing for fallout. In Germany, falling exports and plunging industrial orders are igniting recession worries. Populist rightwing parties are scoring surprising results in state elections. Chancellor Angela Merkel is being forced to toughen its stance toward China on intellectual property, which in turn threatens Germany’s export-dependent economy. There is a lot going on in the country, which, for years, has been a beacon of stability.
Jason Stanford, Senior Vice President of global communications, recently asked Thomas Wimmer what this means for the EU – as well as for the business climate:
What do companies most often get wrong about doing business in Germany?
It may sound like a cliché, but … Germany is different. It is a large and very mature economy, export-driven and, thus, very international by nature. However, the country has retained a distinct business culture and that can be a challenge for foreign companies doing business here. The “not invented here”-syndrome is quite pronounced and it is often very difficult to implement ideas that may have worked elsewhere. Another often-underestimated aspect is the level of decentralization in business, politics and media. The decision-making processes, especially in politics, can be extremely complex and seemingly opaque. This is why working with people who know the territory is so important!
What’s the biggest lesson you’ve learned about advising businesses?
I’ve worked in public affairs and corporate advisory for 25 years. The one key lesson, I guess, is how different one client and one project typically are from any other. Almost all of our clients have very distinct corporate cultures, and, often enough, we are dealing with very strong individuals. What may have worked perfectly well with one client may not work at all with another. It is important to truly understand where your client is coming from, what drives them, and what’s really important for them.
It looks like the German economy has a rough road ahead. What special challenges does that pose for communicating with the public?
Germany has done exceedingly well for more than a decade. However, times are changing quickly. Despite the fact that we’ve done very well recently, the societal climate has become extremely divisive and, at times, outright aggressive. This doesn’t bode well for the era we seem to be entering now. A more challenging economic environment will mean shrinking profits, more restructurings, rising unemployment, and, overall, more pressure on all parties involved. In such an environment, it is all the more important to communicate with a clear purpose, doing so with commitment and a degree of humility.
In the U.S., companies are being encouraged to lead in the vacuum created by the political system. The UK, which used to be a source of stability in the EU, is now a source of chaos. The U.S. President’s tweets can send markets tumbling. The Western Alliance no longer even seems like an alliance. What advice do you have for companies in the EU in this new era of instability?
Have principles … and apply them. There is always the attempt to respond tactically to a fast-changing environment. The less predictable that environment becomes, however, the less useful such attempts are. This calls for a new focus on strategic thinking: Regardless of short-term surprises and unpredictable maneuvers by certain actors, what does your business stand for and where do you need to be in three to five years? I know this may sound somewhat counterintuitive in times of “disruption” where supposedly everything changes all the time. Nevertheless, I would argue that businesses need a compass more than ever before if they do not want to drift hopelessly.
The Business Roundtable recently called for a post-Milton Friedman world in which businesses take the lead on social issues. How are you advising clients to respond to that?
In the long run, businesses cannot survive, let alone be successful, if they are seen as operating against the Zeitgeist. At some point, they all have to consider how to align their business models with changing societal expectations. A prominent example from Germany is the on-going attempts by our former energy “giants” to transform their very DNA in the context of Germany’s energy transition – a process that is entirely driven by changing societal priorities and resulting regulations.
However, changing stakeholder expectations are not only relevant in the “old economy.” They are often equally important for innovative and disruptive companies. For very different reasons, these companies – as well as many others – are experiencing disruptions in their very own business models that they arguably hadn’t expected. Once a company has firmly entered the spotlight of public scrutiny, it’s very difficult to come out of it unscathed, unless there are substantive and well-communicated attempts to realign with the social environment.
The Business Roundtable announcement seems to be a classic attempt to undertake such a social realignment, at least symbolically. It remains to be seen how much substance there is to it.
Any predictions about changes ahead for the political landscape?
Who makes political predictions anymore? In corporate and public affairs, we tend to think in scenarios, not “predictions.” One scenario with regards to German politics – not totally unrealistic, by the way – is a possible breakdown of the current government coalition within the next six months. Such a development would have very significant repercussions not only for Germany, but also for the entire EU.
From this point onwards, however, we’d have to charge you for any further elaboration …
Thomas Wimmer is a Managing Director at Hill+Knowlton Strategies, specializing in public affairs and corporate advisory. He is based in Berlin, Germany.
Jason Stanford is the Senior Vice President of global communications at Hill+Knowlton Strategies. He is based in Austin, Texas.