In times of Corona: Roland Bent, CTO of PHOENIX CONTACT GmbH & Co. KG, on the corporate vision of sustainability

Mr. Bent, how have you personally perceived the last months of the Corona crisis? 

Time passes by at an enormous speed. Apart from two business trips in Germany, I spent most of the time in my office in Blomberg. Even visits to our subsidiaries in Europe are the exception. God knows I am not pessimistic. But I don’t believe that there will be a miracle cure and everything will be like it used to be and next year we can already switch back to the old mode. We will still have to work in a special situation for quite some time. But none of us can afford lethargy and resignation if we want to boost the economy again. We have learned that it is possible to manage the situation by behaving rationally. I am firmly convinced that we will continue to manage this in our company.

“Empowering the All Electric Society” – how important is this corporate vision of a world based on sustainable energy especially in these times?

We link our future as a company to a global perspective of sustainable energy use. In this process, which not only we as a company consider to have no alternative, we have to define our role. Climate change and reduction of CO2, the growing world population and a predicted doubling of the world’s energy demand by 2050 – to solve these contradictions, abstention and omission are not sufficient. New technological approaches are needed. We believe that the world is indeed facing an energy revolution that will usher in the end of the fossil energy age. A society whose entire energy needs are covered by electricity generated from renewable sources, a completely CO2-free energy supply – this vision has enormous power. It also has the potential to eliminate the unavailability of energy as one of the most important barriers to economic development in the world without destroying our natural resources for it.

In order to resolve these contradictions, renunciation and omission are not enough

And how complicated, how realistic is this technological perspective?

Of course, one can ask whether this will remain a utopia. How is regenerative electrical energy to be made available for the world, where even in Germany, and only in the case of electrical energy, it only has a share of 40 to 50 percent? The solvability becomes clear if you simply clear your head from old ways of thinking. The sun’s radiant power produces ten thousand times more energy than the world needs on any given day. One percent of the earth’s surface would be enough to supply the world with energy. The next critical question is then always whether this could ever be organized economically. Even today, electricity generation with sun and wind can be cheaper than with coal. Then there might come the next objection, that renewable energy is always generated where it is not needed at the moment. It is volatile and must be transportable and storable. For me as a technician, this is where a key technology comes into play that makes this vision possible in the first place: Power to X- the use of regenerative electricity to generate gases such as hydrogen or other fuels that can be transported in tankers and pipelines. But above all they can also be stored. Then comes the argument of low efficiency. Again, you have to think from the target state. The Power to X technologies are the key to making attractive areas such as deserts and offshore parks usable for the generation of renewable electricity. They thus enable inexpensive generation on a large scale. However, if regenerative electricity is available at low cost and in large quantities, the efficiency of the conversion only plays a minor role. With this in mind, we must actually come to the conclusion that we must finally start to push the wheel of economies of scale. The technical possibilities for implementing the vision are here today.

How do you see the role of your company in this transformation of the energy industry?

A decisive factor is the so-called sector coupling. We have to ensure that all energy-producing, consuming and storing sectors of the economy and of social life are networked with one another. Networked solutions help to bring energy that has been generated in surplus in one place to places where it is needed at the moment. And this is exactly where we see our contribution as a company. The preconditions for sector coupling are electrification, networking and automation – these are our core competencies. This enables us to help solve the major global and social problems and at the same time participate in economic development.

Electromobility has become an important business area for your company. How will development continue there?

The corona crisis will not stop the transformation of the mobility sector. As with other areas of the All Electric Society: Corona tends to have an accelerating effect, politically and in terms of public perception. The worldwide investment programs – in China, the EU’s Green New Deal and the programs in Germany for charging infrastructure, mobility change and hydrogen – all address sustainability issues in order to stimulate the economy. There is a global convergence of economic and ecological interests. But let us not fool ourselves: Of course the situation in the automotive industry is difficult at the moment.

There is a worldwide convergence of economic and ecological interests. 

And how does Phoenix Contact feel the Corona crisis economically?

We live in a networked global economy and of course we are feeling the consequences in the company. The first blow hit us with the complete lockdown in China at the beginning of the year. Then came Europe. We took measures and developed scenarios in the company to be able to manage all this. Fortunately, our worst fears did not materialize. Looking at the first half of the year, we are of course below the previous year in terms of sales. This is in the mid single-digit range, probably similar to the situation in the entire German electrical and electronic industry. This puts us in a good position compared with other sectors such as automotive or mechanical engineering. In China we had a complete rebound effect in the meantime, when business started up again. This is now becoming somewhat flatter again because the global effects are also being felt there. For us, the USA is our biggest problem child. Today, we are steering towards the future – we have scenarios, we have expectations. But we are producing and are able to deliver, we have made great efforts to ensure that our customers get what they have ordered. To this end, we have also accepted higher costs and opened up new logistics channels. Of course, the safety of our employees was our top priority. Fortunately, to date we have not had any infections that have been triggered in the company.

Can supply chain risks be minimized through de-globalization?

I would see a stronger local consolidation of value-added stages not as de-globalization, but as another form of internationalization, which we certainly have a sympathy for. Totally interlinked value creation across many regional instances, which only leads to a product at the end, which then has to be distributed globally again – this concept has revealed weaknesses during the crisis. This is not the goal of our globalization either. We will continue to adhere to a worldwide and decentralized production, which has always been our motto “local for local”. We want to achieve relative autonomy at a local location by sourcing locally and also keeping resources and skills for development so that we are agile for customers there. We want to avoid situations in which a certain part is produced in one place in the world, which – if it fails – brings everything to a standstill at the other production and assembly locations. Strengthening resilience by merging value creation – that would be a lesson from the crisis for me. Digitization will help us to achieve this intelligently and economically – even at locations with higher wage levels.  

Sympathy for a stronger local consolidation of value creation stages

Does this mean a new role for the local sites?

Yes, I believe so. We already have development capacities in China to make market and customer-specific adjustments and implement solutions. We are also doing this in the USA and at other locations where we see the potential. It also makes sense from a geopolitical perspective. Even before Corona, the tendency towards economic nationalism and protectionism, including populism, resulted in market foreclosures that we have to deal with. We have to try to create a reasonable added value in the regions. That means not only a factory, but also engineering and the value chain. This does not mean that we want to do everything in parallel in all regions of the world and multiply our structures. This would not make economic sense; we will continue to use global chains. The trend has become clearer what the “follow the customer” principle means. It is far more than marketing that underlines this local commitment. The big challenge here is to make it economically viable. After all, we didn’t globalize just for fun, but also because of price pressure and concern for our global competitiveness. We now have to come up with solutions to reconcile both. 

We didn’t globalize for fun, but rather because we were concerned about our global competitiveness 

How has Corona affected the communication and worldwide collaboration of the company’s locations?

One effect was and still is, despite all the low blows, the strong motivation to say: We’ll get it done, we’ll get through it together. This is a spirit of cohesion and the will to jointly master the crisis. We were all amazed at how this worked via digital communication and what we could achieve. I was fascinated to see the creativity with which the Chinese teams approached the problems and the natural solidarity with one another. Isolated groups were formed to prevent infections, even if this meant professional and personal cutbacks for each individual. Even in the worst of times, the Italian teams were highly motivated to look for all possible ways to continue supplying customers. The mission statement of our company, which we talked about, had an important function for identification and motivation. The employees recognize for themselves the meaningfulness of what they do despite all the difficulties. In these times, communication and the active involvement of the employees as well as the visibility of the management is elementary. If at any time the right moment is right to replace “Command and Control” as a management tool, it is now.

 

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Roland Bent