Berlin Innovation & Governance Trip

Day 1-5: MBRSG (2023)

Caption: Brandenburg Gate (Berlin)

Germany is known for its economic power but only 29 Fortune 500 companies come from the country. What makes the nation so fantastic? This study abroad trip was to find out, and while we worked hard, we also got opportunities to network and absorb culture!

During this trip, we attended a reception given by the Ambassador under the patronage of HE Abdulla Bin Touq Al Marri, the UAE Minister for Economy. This was a reception for the the occasion of ITB Berlin. We would like to thank the Minister for the selfie!

This approachability of the UAE leaders is what is so inspirational about the UAE! Their young Ministers make time for their citizens and residents (even outside the country)!

Caption: Selfie with HE Abdulla bin Touq Al Marri, UAE minister for Economy.

We began with a visit to the UAE Embassy in Berlin, where we met the Ambassador HE Ahmed Alattar. UAE has had diplomatic relations with Germany for close to half a century! HE Alattar told us that the UAE succeeds because power is diffused (it is a constitutional federation). This makes the country unique, where its decisions are democratized. This process happens via the majlis and the seven emirates' linkage to the federal government. UAE is Germany’s most important Arab trading partner. Germany’s primary export goods to the UAE are aircraft, cars, machinery, electrical appliances, and chemical products, and critical imports are mainly aluminum and petrochemical products. Germany is the UAE's largest European trading partner, accounting for 22% of total Arab-German trade. Mr. Harald Bos suggested that in the UAE, it could be an advantage to focus on the 300 Mn Arab market and create a market strategy like the EU. This policy is already being implemented, as seen with the recent trade agreement with Turkey.

Diversity and diffused decision making allows us to get the best ideas and with political will we can move forward quickly - you need both!

Caption: With the UAE Ambassador to the Federal German Republic, HE Ahmed AlAttar and Mr. Harald Boy

Harald Bos spoke about policy decisions for sustainability and its long-term impact. For example, we discussed the role of subsidies in changing behaviors. Subsidies and taxes were two different things. In subsidies, the state spent or lost money, and in the other, in taxes, the state collected money. If the public behavior returned to normal (driving at peak congestion) when the state collected money, the question was, what would the state do with the money it collected? Where was it going to invest in? For sustainability, we need long-term investments for the future! Policymakers must consider planetary boundaries (plastics, lithium batteries, etc.) for future sustainability and the costs to protect the planet and people.

There was a discussion on the German education system, which fuels industrial growth. Germany has a robust vocational training program, and its SMEs provide the bulk of employment and contribution to GDP. The Vocational Training Act was first implemented in 1969 and amended in 2020, and over 330 occupationsrequire vocational training. Historically, some of the Madrasas formerly had a similar role in the UAE but no longer. In applying these lessons to their context, policymakers must know that training, testing, and certificates are standardized in Germany. Hence, the quality of work (German quality) has a high reputation. More information: here

We met the Deputy Director of Digital & Service Industries, German Trade & Invest, Ms. Asha-Maria Sharma, on our 4th day. According to Asha-Marie Sharma, SMEs (Mittelstand) are the backbone of the German economy (99% of all firms). The Mittelstand accounts for 60% of the workers, and 70% are medium to larger SMEs. In addition, large firms source materials from other SMEs creating a healthy economy (More information: here). According to GTAI, there are 4259 SMEs per 100,000 residents! Hence governments and large companies need to encourage SMEs and facilitate their growth. This goes beyond a procurement strategy. There is a significant investment in SMEs in Germany by the German government in terms of funding, research, networking, facilitating growth opportunities, training, and more.

The Mittelstand accounts for 84% of apprentices and internships. Interns and Apprentices are paid, but also remember that everyone pays taxes, and the certifications are standardized. An apprentice does not “hop” jobs. An apprentice program is 1.5-3 years! This is a contractual agreement to ensure that what the company invests in talent is not wasted. Germany will face a skilled worker shortage of 4 million laborers by 2035. One challenge is that it is tough to attract talent as the conditions for citizenship are so difficult and complex (see here). Hence governments need more than a talent attraction plan. It will not benefit the country unless they have a retention strategy. They need to work closely with SMEs to facilitate the process.

Startups often face survival issues because of cash flow. To enable start-ups to survive, they need sources of income. This could be in the form of Angel Investing, start-up incubators, or other strategies to help them find customers that pay on time. Harald Bos explained that Berlin’s relatively lower rents were one reason startups moved to Berlin (but the cost of living was increasing!). Governments need to manage real estate and the cost of living if they want start-ups to survive. This can come in the form of incentives or more accessible funding, or subsidies for co-working spaces. Harald explained how startups were advised which state they should base themselves in as different states had different incentives for various sectors. This requires a federal strategy and one that German Trade & Invest provides. They offer free consulting for firms bringing in FDI and startups that want to internationalize (as they have 80 offices worldwide. By providing free services for investors and startup founders, there is a greater likelihood of them succeeding and adding to the country's GDP.

Ms. Asha-Maria Sharma, in her presentation, outlined the innovation ecosystem, where there is a healthy interaction between the government (Federal, state, and local), large firms, SMEs, nonprofits (for example - foundations), research institutes like Max Planck and Fraunhofer institutes, etc.), applied universities and universities. There are 29,000 research institutes in Germany researching 650 subject areas (and, more importantly, providing funding)! Did you know, for example, that Germany has 18 clusters in MedTech out of 46clusters? Governments need a long-term cluster strategy, at least at the seeding stage, which boils down to ecosystem building!

Further reading: A cluster development tool we developed at MBRSG: here; Article on creating entrepreneurial cities: here and another on building tech zones to enhance AI: here

For innovation, the research ecosystem is vital for success. We were fortunate to participate in a research dialogue on our fourth day at the Max Planck Institute – a nonprofit, non-governmental research center (they have 18 Nobel laureates) and famous for its basic research (you need to feed the innovation pipeline). We met with the Director of the Center for Humans & Machines, Iyan Rahwan, and his inspiring team. I would suggest reading their guiding principles: here. While at MBRSG, we take a different perspective (more applied). We all want the same thing – tech for good and a healthy innovation pipeline! But this innovation pipeline needs a long-term investment of 15 years, substantial research funding (basic, applied, and commercial research), and multiple players. To build this, you need academic freedom (whether it is time, headspace to engage in ideas, networking, or funding), and this is critical to grow the innovation pipeline.

Caption: Max Planck Institute: Centre for Human and Machines (after the research dialogue)

SMEs are also strongly supported via The Digital Hub Initiative, there are 12 hubs, and selected startups get strong support – they get co-working space, networking opportunities, access to funding, and potential customers. Each hub has a specific focus! For example, fintech – Frankfurt, future industries – Stuttgart, or creative industries – Berlin. At the federal level, there is a need for a robust supporting strategy where competition between states is minimized for the same industry category, and industry clusters are allowed to “spillover.”

Asha-Marie spoke about the building of a reputation and brand for Industrie 4.0. I was surprised the logo of GTAI is secondary to the logo - “Germany Works.” This was a focussed strategy as Germany is a better-known brand than the company. They decided to work on what works best for Germany - the final output – getting firms to trade with and invest in Germany. Building reputation is critical for nations. HE Ahmed Alattar has a series of very inspiring videos that he has worked on that build the reputation of UAE by highlighting the stories of relationships, and we were lucky to preview them at the reception (more here). Policymakers should understand brand architecture (I have a few papers on this topic; just email me if you want to discuss more) of which story-telling is an important skill.

See the video on Germany works: https://youtu.be/s6MVuqNph1c

Another important topic was skill redundancy. The time it takes for employees to learn new skills if the industry is dying is 25 years or 1 to 2 generations (not months)! This is one area that needs to get better across the world whether you look at education, professional training or government policies. Germany has a labor shortage, so they had few alternatives: to increase the retirement age, allow new migration or automate. Germany has one of the highest retirement ages (67 years). Raising the retirement age from 62 to 64 led to strikes in France, showing how cultural biases affect the implementation of policy decisions. Of course, a late retirement age may not work for everyone and all professions (this is whole topic by itself).

Governments must fund pension plans using low-risk options as life expectancy grows, the birthrate decreases, or talent migration reduces. This is tough to do, as many populations are against working longer years and time but want the security of a longer retirement life. In addition, you need to predict inflation and also keep in mind medical costs will increase with age. Further, as one generation retires, we also have knowledge obsolescence, and AI cannot capture this as most knowledge remains tacit! So how can governments augment skills and plan for obsolescence? A wicked problem indeed!

Skill obsolescence was discussed during our visit to the Porsche factory in Leipzig (part of East Germany). It is one of the most modern factories and a great example of 4IR. The amount of automation, logistics, and organization coordination was phenomenal (we had visited Tesla a few years earlier). They think of everything, almost textbook Taylor and Fayol. There are about 4000 workers. They use job rotations to manage efficiency, productivity, and quality. Porsche produces 600 cars on a mixed production line (combustion and battery) where each vehicle is customised – so this is amazing to see in real time (see a video: here). But context matters – so automation is critical for Germany, most of Europe, and Japan. How relevant is this in Asia and Africa, where there is surplus labor, youth populations, and cheaper labour rates?

Caption: Porsche Leipzig

It is important to know that Germany is the pioneer of the Fourth Industrial Revolution (no, not WEF). Ms. Asha-Maria Sharma wrote a case study for us on this topic for the MBRSG book “Future Government .” But the $IR strategy which is built on the back of AI, will bring a big challenge in the future in terms of cybersecurity. We attended a talk by Mr. Carsten Vossel, the MD and owner of a CCVossel (an example of an excellent Mittlestand) and were amazed to know there are over 30,000 hacking attempts per minute daily! The solution, according to him, was to have well-educated people. Continuous education on digital safety, robust vulnerability checks, having a backup (not necessarily digital), and an agile approach to cybersecurity. Hackers typically work on weekends when staff are off!!! Germany is the 5th largest digital economy in the world, according to GTAI! Carsten Vossel introduced us to the concept of “zero days,” the time from which the vulnerability is known, and how long it takes for everyone to install the patches. Our complex software development process makes systems vulnerable for many reasons (as discussed in my new book, coming soon).

Caption: At ICN with Prof. Dr. Stephan Sonnenburg and Mr. Carstel Vossel

One interesting fact that came up repeatedly on the right to personal privacy was, in part, a legacy from the Cold War years. During this time (in East Germany), the secret police kept files on everyone (1950-1990) and encouraged neighbors and family to spy on each other. Though they tried to burn the files when The Wall came down, many were saved and continue to be a source of heartbreak for many. Imagine if you found out your best friend was spying on you! These files are preserved in the Stasi-Unterlagen-Archiv. At the Bundestag, we learned that not only are the plenary Parliamentary sessions broadcast, but they recorded using shorthand, and then printed (as seen in the bound volumes behind me) as they believe this is less tamper-proof. So while Germany is all about AI, they are also thinking in case of system failure – there is a backup plan! The shorthand typists also train themselves to remember every one of the 736 parliamentarians using a memory game to ensure they know who spoke, interrupted, etc.

The issue of integration and culture came up via the discussions we had with several of our hosts on East and West Germany. Some came from personal stories, another from a historian who was in Bonn when it was the capital and who relocated to Berlin when the capital shifted, from second-generation Berliners, homeowners in East Berlin, and industries who built new factories in former East Germany. Though the wall came down, there is still a generational divide, and experts think it will take 2-3 generations to bridge the gap. So very clearly, policymakers need patience when dealing with culture change, which takes time.

Caption: With Mr. Bendix Lippe at the Deutscher Bundestag

At MBRSG, we believe skills make our students exceptional, not just knowledge! So we had a chance to brush up our creativity skills, which are a necessary first step for innovation. We were lucky that the all-women group attended a Lego Serious Play creativity workshop on Women's Day organised by Prof. Stephan Sonnenberg at the triple-accredited ICN Business School. He highlighted that these games only spark creativity, and we should treat them just as tools. His memorable quote, “A fool with a tool is still a fool.”

He told us that creativity needed to be nurtured by culture, or it would die, and that it was a process of perseverance. It was also about sensemaking by taking in diverse points of view. For example, we will need creativity to solve the issue of putting Berlin back on the international flight path route. We took different routes via Munich, Frankfurt, Egypt, Paris, and Bosnia! Policymakers need creativity to solve wicked problems, which requires time and diversity of thinking! It also often needs political will (leadership support).

Caption: Sparking creativity with Lego Serious Play

Finally, we visited BCG Brighthouse, which consults on Purpose. They believe Purpose is timeless and is what will guide mission (what you do), vision (where you are going), culture (how you do things), and innovation (how you explore the way). This is very true for the public sector as they are supposed to deliver public value, but often politics gets in the way, and we lose our purpose!

Policymakers need to articulate their purpose for not just the whole-of-government approach but how each government organization and division delivers the government's purpose. For example, in Germany, arts and culture is a right written into their constitution, so it is not uncommon to see art everywhere, and what we loved was how many museums were free to the public! We even saw art installations and graffiti in the Parliament!

I had the honour to give a talk at BCG Brighthouse on AI decision scales - extracted from my new upcoming book (co-written with Himanshu Vashishtha and Dirk Nicolas Wagner). We spoke about perceptions of AI and the role of purpose and values in guiding organizational products, strategy, and accountability. This talk resonated with their new white papers recently published (more here). Incidentally, this is a topic I am passionate about, and I work with IEEE on several ethics committees, and have published in California Management Review (see here). I have addressed this topic very often in my blogs. Lot more articles will be posted in the next few days from the delegation that visited. Stay tuned.

Blog on Day Zero: here

Other Blogs can be accessed: at www.melodena.com

THANK YOU

Thank you to the following people and their teams for their valuable insights:

UAE Embassy to the Federal Republic of Germany: HE Ahmed Alattar, UAE Ambassador to the Federal Republic of Germany; Ahmed Alharthi, Head of Economic Affairs Section; Ahmed Shalaby, Economic Ad; visor; Harald Bos, investor and former resident of the UAE

Deutscher Bundestag: Bendix Lippe, formerly working for the Deutscher Bundestag and now working with the ARD General Secretariat, Paola Breuer, for organizing the visit and tour.

Porsche: Cristina Mas from the Porsche Experience Center and Moritz Gast for the coordination.

ICN Business School, Berlin: Prof. Dr. Stephan Sonneburg, Permanent Professor

CCVossel GmbH: Carlsten Vossel, Managing Director and owner

German Trade & Invest: Asha-Maria Sharma, Deputy Director, Digital & Service Industries; Marie-Christin Menke, Manager, Mechanical & Electronic Technologies,

Max Planck Institute, Center for Human and Machines: Iyan Rahwan, Director; Nils Köbis, Senior Research ScientistYvonne Bialek, Scientific Coordinator,

BCG Bright House, Berlin: Bjorn Ingenleuf, Creative Director; Angus Nicholls, Associate Creative Director; Simona Koch, Associate Strategist (thank you, Abhishek Balakrishnan, for the introduction).

Thank you, Prof. Dr. Louise Bielzer and Dr. Dirk Wagner, for the support and suggestions for planning the trip. And, of course, to our Dean, Director of Academic Affairs, and the team in MBRSG that makes this happen. Shoutout to our delegation: Meera AlSuwaidy; Sumaiya Al Ghassani, Indra Thamizhan, Sara Ghalayani, and Dajana Malesevic.