Interview with Professor Dr. Arnd Huchzermeier on the effect of digitalization on the value chain of products

Interview with Professor Dr. Arnd Huchzermeier

Digitalization can affect all steps of the value chain of products: Primary activities like inbound logistics, production, distribution and marketing & sales can be digitalized as well as secondary activities like procurement and human resource management. For every of those areas the question is: What does digitalization exactly mean and how can firms benefit? We asked Professor Dr. Arnd Huchzermeier to provide a few case examples and to share his view on where the German industry stands in terms of digitalization.

Professor Dr. Arnd Huchzermeier:
Let me provide two interesting and current benchmarks. The first one is about digitalized manufacturing, the second one about customer retention.

In an online-offline world, every retailer faces high turnover in its customer base: the next shop is just one click away. With the help of Artificial Intelligence, companies can zoom in on their most loyal customers or customers that are about to defect. A lapsed customer is quite costly for firms to reactivate and may never come back. In retail, it is common practice to use relatively inexpensive give-aways for all of the company’s customers, but this is rather an in-effective means of driving retailer loyalty. The response rates of such blind action, as one would have guessed, are close to zero. Consequently, we have helped a major German hypermarket retailer to identify their most valuable shoppers and target only those indicating a behavior typical of a churner for a series of valuable coupons.

Brown-field manufacturing plants are all exposed to high demands on product customization and product innovation. This is a direct consequence of a customer-focused and enabled value chain. For example, the Daimler plant in Bremen with an annual output of more than 430k vehicles will also produce the new e-vehicle EQ as of 2019. The fixed tact assembly lines needs to be adjusted to cope with higher work demands and high volatility in customer orders for that matter. Building a greenfield factory is not an option, when assembly systems can easily cost up to 1B € due to software installations. We found that it is possible to conceptually modify such lines to effectively cope with both types of requirements for enhanced worker flexibility.

WHU Executive Education:
In the Industrial Excellence Award, you get deep insights how companies deploy and execute their digital strategy. How is the German industry prepared to tackle this challenge?

Professor Dr. Arnd Huchzermeir:
No question, there are numerous excellent and leading-edge companies in Germany that are really pushing for highly automated and flexible production systems. This does often come with the opening of newly designed plants though which is not an option for, e.g., small and medium-sized enterprises. Based on this insight, we conducted interviews on company’s shop floor and tested the subjective and objective strategy understanding of employees. “Subjective” in this context means that employees feel being “informed” about the operating unit’s key objectives, whereas “objective” refers to being able to explain it in words and to identify key actions taken to achieve the goals. On the positive side, most employees feel that they understand their business unit’s strategic objectives; on the negative side, the large majority cannot report on any existing action plan to achieve these objectives. Of course, the latter also strongly correlates with inaction regarding continuous improvement activities by many. This impediment to productivity through digital strategy deployment is highly regrettable; however, it can easily be fixed.

WHU Executive Education:
Professor Huchzermeier, you are teaching in our Digital at Scale Program. Will you cover some of this in the program?

Professor Dr. Arnd Huchzermeir:
Certainly. I am very eager to discuss these management issues with our participants.

What is the Digital at Scale Program?

WHU and McKinsey & Company offer the “Digital at Scale - Steering Your Business Into a Digital World Program” which is designed for managers and executives in digital roles or executives with roles in commercial, operations, or HR functions who want to transform their business unit/function. The 4-day program addresses why, how and in which areas companies should digitally transform.

The Executive Education Program will take place in April and May 2018.

Learn more about the Program

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Executive Education Workshop

The upcoming Campus for Finance – WHU Private Equity Conference 2018, revolving around the topic “Falling Apart or Growing Together – Is Crisis-Shattered Europe Still Worth the Investment?” will take place on March 22 & 23, 2018 at WHU Campus Vallendar.

Professionals with at least two years of work experience may apply for the Professional Program, in which they get the chance to participate in a high-quality and exclusive Executive Education workshop on the topic “Private Equity and Corporate Transformation”!

For more information on the conference program and to apply, please visit the conference website: www.campus-for-finance.com/pec/program or contact the team personally: professional.program@cff-pec.com

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Interview with Professor Dr. Nihat Aktas on Mergers & Acquisitions

Prior studies indicate that a large number of mergers and acquisitions (M&As) fail to generate the expected return for acquirer shareholders, and that some of them even lead to substantial value destruction. We talked to Professor Dr. Nihat Aktas, who holds the Chair of Mergers and Acquisitions at WHU since 2013, about reasons and implications for companies.

Professor Dr. Aktas, can you explain why a large number of mergers and acquisitions fail?

A high share of mergers and acquisitions transactions fail because opportunities and risks are not analyzed and managed rigorously. M&As are an important growth strategy for firms. Since opportunities and risks are closely connected, M&As need to be strategically planned and carefully executed.

What do you recommend to companies to face these challenges?

First, companies need to have a clear strategy and well established merger motive. Then, they need to be able to master the mergers and acquisitions process – from idea origination through post-merger integration. Each step of the process (i.e., target screening, modeling synergies, valuation, negotiation, bidding, due diligence, deal closing, post-merger integration) is key to deliver shareholder value in the long run.

How can you achieve this?

For example, WHU offers an Executive Education program, in which executives and managers can learn about these aspects. The focus is first on understanding why it is important to implement M&As, and in which contexts M&As are a value-creating response to a firm’s growth challenges. The next step is to understand how to effectively and efficiently implement M&As.

Do I need any M&A experience to participate?

No, participants do not need to have prior M&A experience to join this program. The program is designed for board members that would like a quick refresher on M&A topics or for young talents and experienced managers who want to boost their career by advancing into a position with greater focus on strategy and corporate development in their firms.Our program is also well suited for senior executives whose firms are potential acquirers or targets for acquisition by another firm.

The "Mergers and Acquisitions in Practice Program" will take place on June 7-9, 2018 at WHU Campus Düsseldorf.

Learn more!

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First WHU Executive Education Program in Africa

From November 21-22, 2017, WHU Executive Education hosted its first program in Africa. The 2-day program in Zambia on “Entrepreneurial Finance” was led by WHU-Professor Dr. Serden Ozcan. The 36 participants included senior corporate executives, bank managers, senior government officers from pension funds, stock exchanges, and development agencies from Zambia, Zimbabwe, South Africa, Ivory Coast and Ghana.

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New: Digital at Scale Program

Training program for executives to be held in April and May 2018

In cooperation with McKinsey, WHU – Otto Beisheim School of Management is offering a new, English-language executive education program entitled “Digital at Scale - Steering Your Business into a Digital World.” Spanning four days, the event will provide executives with hands-on instruction to help them make active use of digitalization and improve the competitiveness of their respective companies.

The digital transformation of the economy and society as a whole has long since become more than a mere vision of the future, and yet many companies are still at the beginning of a long journey. New products and services, innovative business models and fast-growing new competitors are all accelerating developments in the market and generating increased competitive pressure. “Businesses must assess the digital potential of organizational structures, processes and product portfolios, and proactively initiate changes; otherwise, they will lose market share and watch as innovative companies pass them by,” explains Professor Dr. Stefan Spinler, chairholder of Logistics Management at WHU and an instructor in the four-day program.

The program takes a practical approach in all aspects of digitalization: Before the program begins, participants will rate their respective companies’ digital capabilities using the McKinsey Digital Quotient tool. Based on this, program participants can then zero in on the areas of greatest importance to each company. Throughout the program, there will also be a discussion of the ‘why’, ‘what’ and ‘how’ of the digital transformation.

In lectures WHU professors, associate faculty members and McKinsey partners will provide up-to-date insights into digitalization, from both a scientific and a management perspective. In keynote speeches, experienced experts will present ways in which digitalization can contribute to business success. In visits to the Digital Capability Center in Aachen and the Experience Studio in Berlin, participants will learn more about digitalization and the project known as “Industry 4.0.” They will apply their newfound knowledge to their own businesses and create a “digitalization roadmap” to specify how they can use digitalization in practice to improve the competitiveness of their companies.

This training program is designed particularly for board members and senior executives interested in learning more about the importance of the digital transformation for their company and the areas of application involved, and to executives with areas of responsibility in the digital realm. The four-day program is divided into two modules. Module 1 will be held on April 13 and 14 in Düsseldorf and Aachen; participants will travel to Berlin for the second module, which takes place May 4 and 5.

More information about the program

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