Innovation
Germany's lessons in football and business
By Michael Hennigan, Finfacts founder and editor
Jul 10, 2014 - 7:21 AM

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Germany's devastating 7-1 defeat this week of host country and World Cup record holder Brazil, in a semi-final of this year's tournament, reflects the culmination of a roadmap from failure and lessons learned are also the hallmark of German success in business.

Simon Kuper, the Financial Times columnist, writing from São Paulo today says that a decade ago this week, the German team was at rock bottom, having exited Euro 2004 without beating anyone, not even Latvia.

In 2003, a year before the Euro 2004 exit, a book by Prof. Hans-Werner Sinn, with the title  'Ist Deutschland noch zu retten?' (Can Germany be Saved?) was published.

The president of the Ifo institute and one of the country's best-known free market economists had a gloomy prognosis and the book's jacket had the summary:

"Taxes keep rising, the pension and health insurance systems are ailing. More and more companies are going bankrupt or are leaving the country. Unemployment has reached alarming levels. Germany is outperformed by its neighbours. It’s growth rates are in the cellar, and it can’t keep up with Austria, the Netherlands, Britain or France. Germany has become the sick man of Europe."

Simon Kuper says today: "Your past is irrelevant" - - that is true up to a point and Argentina was one of the world's richest countries in 1914.

However, German business was not restarting from a blank slate post-1945 and it's similar with sport.

German exports have more than doubled as a share of GDP from 1990 to over 50% today.

The euro, labour/ welfare reforms, and proximity to the low-wage markets of Eastern Europe helped.

However, many of the big firms are leaders in key areas in demand in emerging markets while for Germany’s Mittelstand (SME - small & medium size firms), with a large number of medium size firms (>50 employees) increases the likelihood of exporting.

The SMEs prefer to finance themselves with their own resources; they invest for the long-haul; have a high innovation intensity; give attention to staff training through the apprenticeship system and the focus is usually to excel in niche specialised markets.

In 2012, 12% of German SME's exported to the EU compared with a Union average of 8% and France's level of 2% - - there is no Irish data.

The ex-EU trade total was 6% for Germany and France was at the EU average of 4%.

The Mittelstand account for a quarter of German exports and Germany at about 270,000 exporters, has almost treble the level of France.

In 2012 Germany had almost 11,000 large firms (250+ employees) compared with France's 4,000 and Italy's 3,000.

There are also lessons for Ireland's indigenous exporters: a country can be like a company that has two many products in too many markets or a restaurant that has too many choices, which damages its overall consumer impact in terms of quality and service.

Developing new markets is not easy for countries like France with its poor tradition of exporting and it's certainly a challenge for Ireland in areas of the world where we have no brand recognition.

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Simon Kuper's list of 8 lessons:

  1. Never let a crisis go to waste;

  2. Your past is irrelevant. Brazil’s five world titles mean nothing today;

  3. Don’t blame individuals;

  4. The most important thing in football is the pass. It is not the dribble, or passion, or psychology;

  5. Learn from the best countries - Germany learned from the Dutch and Spanish on pace; ethnic diversity from the French and fitness from the US;

  6. The conclusion from 5 is that a foreign coach should be hired from Europe;

  7. Set the target to be no. 1;

  8. It will take time and Germany leads football in nutrition, statistics, physical preparation and so on - - these are areas where Brazil should be as good.


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