The guest list for one of Google’s recent office warming parties reads like a “who’s who” of the local political and technology scenes. The mayor came, so did the state minister of economic affairs. Even the inventor of the mp3 was there. CEO Sundar Pichai tuned in via YouTube and another Google manager praised the new location’s proximity to “outstanding universities, modern infrastructure and the high life-work balance.”
You might think the party was being held in Palo Alto, the heart of the Silicon Valley and the home of Stanford University. In fact, it was a celebration for Google’s development center in Munich, Germany.
The significance of Google’s choice of location was not lost on the Germans. Sure, the iPhone, Facebook, Uber and Google all originated in the Silicon Valley, a place known for trying to keep up with Mark Zuckerberg’s “move fast and break things” mantra. But when it comes to improving on existing products, paying attention to detail and delving deep into a specific subject, Germany is a step ahead of the United States. They call it “deep innovation” and it may not be as sexy as America’s world of apps that promise to change your life, but it’s equally important for the evolution of business and society.
Whether it’s corporate financing, vocational training, science or even labor protections, Germany’s institutions are highly conducive to fostering a lasting culture of innovation.
All of that infrastructure is slowly seeing impressive results and it will be on full display starting Monday at the Hanover Fair, featuring the best of “Innovated in Germany” products that could one day change the world.
Like the Bionic Cray from Augsburg-based company German Bionic Systems. The exoskeleton is designed to amplify the body’s own strength, allowing the wearer to carry enormous loads. “I wanted to change the narrative – it shouldn’t be man vs. machine, but marry the two together,” said CEO Peter Heilgensetzer. When the Bionic Cray is strapped to the wearer’s thighs and back, it learns and then enhances the wearer’s movements, increasing their strength to carry enormous loads. It has enormous potential for carmakers, construction or nursing.
Another notable innovation is a new microscanner from Bosch that uses modern laser technology to turn any surface into a keyboard or a display. Such a device could come in handy for cars, computers games or even kitchen appliances.
In the field of medical technology, Merck is developing a new immunotherapy drug that combats a special form of skin cancer against which no contemporary medicine has proven effective. In Berlin, a small company called Epigenomics has created a blood test that detects bowel cancer. And a team at the Technical University of Chemnitz is proving that anything can be made “smart,” even socks. Its sock infused with sensors, telling doctors where the pressure points are with the potential to improve athletic performance.
And then there is the Cinematic VRT, inspired by, of all things, Gollum of “Lord of the Rings,” making it very precious indeed. “To ensure that Gollum looked realistic, they used a technology called image-based lighting technology,” said Klaus Engel, a visualization specialist at Siemens. Engel then used the same technology to build a machine that allows for photo-realistic, 3D images of the human body, designed to help with surgeries, diagnostics and much more. It’s been on the market since last fall.
The Cinematic VRT is just one of the innovations that typify what Germany does better than their US counterparts, said Professor Dan Breznitz, who teaches innovation studies at the University of Toronto in Canada. Mr. Breznitz said that German companies are very good at adjusting their business model to new technologies, allowing for business longevity. “Siemens, for example, manufactures products today that are quite different from the ones they made 100 years ago. Developing such products may not have the ‘cool factor’ of an iPhone, but they are certainly better for society.”
Though some may argue turning Gollum into something more useful than a plot driver is pretty cool, too.
“Germany does a lot of things better than the U.S.”
But there are still things that German businesses can learn from the US, such as the ability to found new businesses that grow quickly. Apple, for example, was founded 41 years ago and it’s worth more than any other company in the world today, with an estimated value of $740 billion (€691 billion) – more than seven times more than Siemens. Uber, which is still considered a startup, estimates its worth some $70 billion.
“But when it comes to old industries, the Americans simply let them die, rather than breathing new life into them with new technologies and innovations,” Mr. Breznitz said.
American employees of companies that are made irrelevant by technological progress are often left to fend for themselves. Regions that were once strongholds of industry are left to the elements and seldom recover.
The German way of innovation, on the other hand, is defined by a framework of legal provisions and institutions that run like clockwork. Such a system may seem old-fashioned at first, but it has its advantages. Germany’s dual vocational training system, which trains and places new workers, is a pillar of the country’s postwar economic vitality.
Skilled laborers in Germany often spend decades working for the same machine builder, learning the ins and outs of their products so well that they know them down to the last screw. In return, employers can count on a loyal, specialized workforce that is unparalleled in other parts of the world.
It’s evidence that years of cooperation between government, labor and industry have paid off in Germany. At the Fraunhofer Institute, the German research center that spearheaded the effort to create the mp3, research contracts from private businesses are at an all-time high.
“Germany is coming much closer to achieving its goal of playing a leading role as a hotbed of innovation,” said a report by the German Commission of Experts for Research and Innovation, which was presented to Chancellor Angela Merkel earlier this month.
The German government has already hit its target of investing 3 percent of the country’s gross domestic product (GDP) in research and development and now it has set a new goal: spending 3.5 percent of GDP on R&D by 2025. German businesses are also doing their part – investing as much as €62 billion in R&D in 2015 – more than ever before, according to a study by the Stifterverband, an organization that focuses on education and science.
Such successes underscore the notion that the race to become the world’s foremost promoter of innovation is still wide open.
“When it comes to machine learning and its application for industry, the field has yet to be carved up,” said Mr. Breznitz.
But there are areas that need improvement if Germany really wants to become the “Land of Ideas.”
Startups need to be valued more highly and promoted more than they are now. New businesses also need to be able to find support by way of more reliable access to venture capital. In Germany, so-called “risky financing” only comprises 0.3 percent of GDP. In the US, it’s 10 times more.
Germany’s highly touted Mittelstand, as the many small and medium-sized companies that account for nearly two-thirds of jobs are known, needs to free itself of its lethargy, says a report by the Commission of Experts. The innovative power of these businesses has declined in recent years, as multiple studies have shown. Instead, these businesses prefer to focus on short-term projects rather than strategically investing in new innovations.
“The order books are full at the moment, so many small businesses would rather concentrate on their next project rather than their broader, digital strategy,” said Professor Wilhelm Bauer, the executive director of the Fraunhofer Institute for Industrial Engineering.
Germany has the industrial know-how and it has the innovative spirit it needs. To tread water now would be fatal, a point that was also made in the Commission of Expert’s report. To quote former German President Roman Herzog: “The world is changing and it’s not going to wait for Germany.”
Astrid Dörner is an editor for Handelsblatt. To contact the author: email@example.com