FAIRLAWN, Ohio—There are a number of megatrends developing in the world, but the top executive of ContiTech A.G.'s global hose business said companies shouldn't look at these as threats, but rather as opportunities to grow and succeed with new business models.
Delivering a keynote address at the recent Hose Manufacturers Conference in Fairlawn, Andreas Gerstenberger, executive vice president of Germany-based Continental A.G.'s Industrial Fluid Solutions business, talked about how Conti had changed during its roughly 150-year history. Having spent most of its time as a tire and rubber product manufacturer, it has changed its focus to a more diversified automotive and industrial goods supplier, focusing on technology and solutions.
He also said the megatrends in automotive and industrial hose businesses will continue to change businesses, and new business models are needed to address these changes.
Gerstenberger pointed at Uber as an example of a firm that came up with a new business model, and now it has market capitalization close to Volkswagen and Daimler A.G., and higher than that of General Motors.
"What does it make or produce?" he asked. "What are its assets? Us, and our desire for mobility."
The business climate can be a volatile environment, Gerstenberger warned. He talked about Kodak, a onetime world leader that didn't change. Other great names of the past he mentioned that either are no longer in business or nowhere near their past glory included Blackberry, Nokia and Blockbuster.
"In a constantly changing world of climate, technology, data, digitalization and even politics, new business models must keep pace with these elements if they are going to succeed—not just today, but into the future as well," he said.
There has been talk about Industry 4.0—especially in Europe and increasingly so in North America—featuring on such technologies as smart factories, automation and robotics. And the "Internet of Everything," the ContiTech executive said, is projected to have an economic impact of $6 trillion by 2020, with roughly 50 billion connected devices and machines, along with more than 250 million connected cars.
Continental employed less than 1,000 software engineers just a decade ago, Gerstenberger said. That number has ballooned to more than 30,000. "We believe that everything that can be digitalized and create value will be digitalized," he said.
And with the automotive world starting to evolve away from the combustion engine to such technologies as electric vehicles, that doesn't always have to be a negative. For example, he said the Tesla E-vehicle needs many more coolant hoses than traditional cars.
Not just automotive
While the automotive sector is in the midst of its biggest transition in 130 years, the industrial marketplace also is undergoing a major transformation, according to Gerstenberger. Future business models should focus on less hierarchy and more agility, flexibility and diversity in the work force. "In order to grow and stay ahead of the competition, businesses must capitalize on these valuable assets," he said.
The ContiTech official said his own business unit follows the mantra of Smart Solutions Beyond Rubber, "but not instead of rubber."
"We're proud of our history, in developing, producing and selling rubber-based products," Gerstenberger said. "We were very successful in it for many years, and want to continue to do so. But we realized that alone will not be enough."
The path to a successful future will include a solution-based focus on services, systems and products. "We at Continental believe that the business model that has focused on value creation with mechanical solutions will become less important in the next decade," he told the conference. "In its place, we believe that the new business model focuses on mobility services and smart mobility technologies, adding further value with sensor technology, electronics, software and digitalization."
In order to stay ahead of the changes, the Industrial Fluid Solutions business created two new functions: one that provides innovation and digitalization, and the other that focuses on business development. "The implementation of the subsequent strategies is then promoted by all business units and the regions," Gerstenberger said, "thus empowering an efficient way of working that is ready for the future."
From his business unit's perspective, he said the future likely will see fewer customers looking to buy a "black hose in a box." Instead, they will be wanting a combination of products, services, components and systems.
"Then you combine it all together, make it smart, and it's a solution," he said. "Every effort we take within Continental and ContiTech is moving in that direction. Every investment we do in the future will be questioned if it is supporting this new vision and strategy."
He discussed how conveyor belting—another business ContiTech is deeply involved with—also is an area where sensors and smart technology are helping transform what was once nothing else but a combination of "stupid rubber, textile and steel" that performed a mechanical function. But when looked at from a different perspective, it was found all the information being transferred over and within the belt could be used in ways never imagined.
Gerstenberger even said it may make sense in the future to sell conveyor belting by the hour, much like Uber does with mobility. "You don't need to own a conveyor belt because you probably aren't in the conveyor belt business," he said. "You just wanted to get something transferred via the conveyor belt to generate something of value."
He also said sometimes it's better to enter partnerships when appropriate—even with former competitors—to further your company's position.
"It's not possible or feasible to acquire everything you need," Gerstenberger said. "Be flexible and collaborate rather than seeing everybody as your enemy. This is what we believe, and ContiTech already has started to transform automotive and industrial business models from a global perspective."