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Over the past decade, the German economic business model delivered impressive growth. But the world has changed, and recent developments like massive geopolitical and macroeconomic shifts, increasing and volatile fuel, energy and commodity prices or persistent supply chain constraints pose a fundamental threat to it. As companies across a wide spectrum of German flagship industries are affected, the new geopolitical and macroeconomic reality requires Germany to fundamentally rethink its business model to secure its place in the future. This will be a challenging task for the country. Yet, if Germany succeeds in transforming its business model, it could unlock additional GDP of ~€205bn compared to current projections.
By discussing Germany’s major challenges, this report suggests strategies for the government and other key decision-makers to facilitate a successful transformation of the economy towards a “Business Model Germany 2.0”.
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Major challenges for the “Business Model Germany”
Increasing geopolitical risks and instability
Governmental focus on geostrategy and protectionism (subsidies for strategically important industries, technological de-coupling)
Significant change in macroeconomic conditions (high inflation and interest rates accompanied by slow growth and rising fiscal debt)
Increasing and unpredictable fuel, energy and commodity prices
Persistent supply chain constraints and vulnerabilities
Major global environmental challenges
Demographic and workforce challenges
The new reality requires Germany to fundamentally rethink its business model
To secure its place in the future, the German economy needs to face up to the new reality through fundamental transformation. Due to the challenges described above, companies across the country’s core industries are affected, threatening Germany’s resilience, economic and social prosperity and future perspectives. In order to ensure long-term success, Germany needs to fundamentally transform its economy and business model, rethink its industry portfolio and improve its attractiveness as a future-proof location for businesses.
Executives across German flagship industries need to act now to lead their companies to a promising and financially sustainable future. German government and other key decision-makers need to pull the relevant macroeconomic levers to facilitate a successful transformation of the country’s economy towards “Business Model Germany 2.0”
Main Macro transformation levers for government and other key decision-makers
- 1Industry portfolio
Identify the sectors with the highest potential to create value in the future and define the portfolio of industries which will build the foundation of “Business Model Germany 2.0” - 2Location factors and differentiators
Identify Germany’s key strengths and find ways to sharpen these core capabilities in the future, while investing in new future-proof differentiators - 3Dependencies and resilience
Identify the major dependencies of Germany’s future economy and define strategies to mitigate related risks - 4Global footprint and geostrategy
Evaluate the global footprint of “Business Model Germany 2.0” and associated political, geostrategic and diplomatic requirements and develop a clearly elaborated and well aligned geostrategy to act effectively on the world stage
Strategic imperatives for government and other key decision-makers
As they lead the German economy into a successful future, decision-makers need to keep three strategic imperatives in mind.
- 1Understand strengths and weaknesses of the current German business model in terms of industry exposure, global footprint, supply security and geopolitical resilience
- 2Address the key enablers of “Business Model Germany 2.0” in an effective and cost-efficient manner
- 3Align and cooperate with key stakeholders and stay constantly prepared to deal effectively with fast-evolving geopolitical, macroeconomic, demographic and environmental developments
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