IESF Manufacturing Industry Insights interview with Dr. Christian Friege
At IESF we work for clients with an international ambition. We operate in 15 sector practices that bring sector specific leadership and knowledge directly to the client. Manufacturing is one of our biggest focus industries. In this Industry Insights interview we showcase one of our clients: Cewe is a German photographic processing company based in Oldenburg. IESF Germany Topos Personalberatung successfully managed several executive search projects for them among which: Head of Finance, Head of Controlling, Head of Business IT and Director Marketing and Sales. You will find out how Cewe developed and how they switched their complete business model. And learn what the five success factors are that other companies, facing similar tasks, can learn from.
Dr. Friege, what were your motives for joining a company like CEWE?
‘I have been with CEWE for several years now and prior to joining I’ve always worked closely with the customer across different industries. This has been a special matter of the heart for me in my previous activities, and I find it reflected here in an outstanding way. With the CEWE PHOTO BOOK, we have a fascinating product that we deliver in very high quality, so that our customers are satisfied to the highest degree. We can see this, for example, in a remarkably high Net Promoter Score, which we constantly measure and which we use as an essential element of corporate management. The second point that excited me is the company’s value system. CEWE has a clear commitment to sustainability, which goes far beyond the purely environmental aspect. It includes, for example, the appreciative treatment of employees and the clear example of the honourable, and as a Lübeck resident I say Hanseatic, businessman.’
CEWE’s history is very impressive. How was it possible for the company to develop in this way?
‘In 1912, Carl Wöltje founded a portrait photo studio in Oldenburg. He then brought this through the First World War with his later wife. At the beginning of the fifties, he was granted a license from the company Agfa Color and on the basis of this license, the company CEWE was then built up with great entrepreneurial foresight. If you really count back to 1912, I am only the fifth head of the company during this period. That says a lot about this company, about the tradition and the roots of this company. In the early 2000s, many specialist photo labs went bankrupt, not so much because of digitalization, but because prices had fallen to the point where they could no longer operate profitably. At that time, CEWE was a company that was largely unknown to consumers, but in terms of technology we were the cost leader and the largest photofinisher in Europe. Fortunately, we also had managers with high foresight at that time. The company started experimenting with digital media as early as 1991. For example, there was the Digi-Fotomaker. With it, people could order pictures directly from their digital camera at stations in the store. With one to two orders per day, it was clearly a loss-leader business at the time. Nevertheless, CEWE has always believed in the digital business and has continued its course here unwaveringly.And from 2002 onwards, this digital business really took off. We launched the CEWE PHOTO BOOK in 2005 and actually did two things at the same time. We managed to switch from analog to digital and we built up a brand product from a supplier for private labels. And we did this in the period between 2005 and 2015. Today, it’s hard to imagine what a huge effort was made by all the company’s employees. For example, we had to close half of our production facilities and cut around 1,000 jobs during this period. We financed very fair social plans at the time, in other words we operated as “honourable businessmen”. There was simply no other way. Today, we are back at about the same number of employees as in the analogous times. And I am allowed to say this here in such a praising way, because I was not involved in this great development myself.’
Was there a point in this development where it became clear that the old/analog business model would no longer work and you would have to switch to digital?
‘That’s a very interesting question, because at the time when the digital business represented only 1% of our sales and the analog 99%, it was already clear to the management what was coming. For me, this is also a good example of entrepreneurial courage and foresight to have already said at that time that we would concentrate on this small share of the business going forward. Today, by the way, it amounts to 98% of our sales. When we talk about digitalization, Industry 4.0, etc., I think it’s difficult to make a plan and forecast exactly what will happen. But if you see there are opportunities and you’re willing to take the risks a step at a time (which will include trial and error) and if you can energize the employees with your vision, then the likelihood of achieving good results is significant. I don’t believe in the big master plan approach. It can’t be any other way, because no one can reliably tell you today exactly what the business world will look like in five or ten years. And we at CEWE are also always moving forward. From the outside, you can probably only see that we have gone from being an analog to a digital provider. Internally, of course, we look very intensively every day at how we can digitize further processes, how we can make production more efficient and leaner, and what opportunities we have with new products, for example in the use of smartphones. The journey is far from over here.’
You described the difficult path of digitization earlier. For example, the layoff of around 1,000 employees. How were you able to take your employees along with you on this journey?
‘We have a lot of loyal employees here. And of course, we made sure that we trained people who, for example as photo lab assistants, could no longer work in their learned profession today, so that they could now operate printing presses, work in quality assurance or take on other important tasks in the company. These are people who have a great deal of experience and also identify with the company.’
Has this development also been accompanied by a change in culture?
‘That’s certainly the case. But not so much in terms of processes and structures within the company, but rather in the direction of our customers. We used to supply the big drugstores, but today we create individualized products that customers can even have sent directly to their homes. As a result, we now have many more calls to customer service, for example, than we used to. And we have much more direct interaction, since we also develop software for the customer. This focus on the end customer has been a much bigger cultural change than, for example, the question of how we organize our production.’
What did this “sudden” customer contact mean for the company?
‘CEWE used to have virtually no presence in marketing, for example. Today, we have a large department that does very modern online marketing, conducts brand management, and this extends to TV advertising for the CEWE PHOTO BOOK on a significant scale. And not only in Germany, but in many countries in Europe. Of course, this leads to the fact that the entire social system at CEWE gets a completely new orientation. And I think that is very remarkable, how a complete company has been turned around 180 degrees not only from analog to digital, but also from white label to a brand company.’
In 2010, CEWE was named Best Innovator by WirtschaftsWoche and A. T. Kearney. What did you receive this award for?
‘In general, we received a lot of praise and recognition for the transformations we have already described. And in both categories, analog – digital and white label – brand. It’s always gone hand in hand. And with a bit of pride, I would like to point out that there have been other brands in photofinishing that you don’t find like that anymore. These had made the decision, unlike CEWE, not to go digital because they felt it would put their analog business at too much risk. We were always of the opinion that we could not oppose the foreseeable technologically superior process, namely digital photography. We clearly preferred to be the ones pushing this process forward.’
How would you describe the radical nature of this change?
‘Strategically, it was as radical as possible. In terms of implementation and the question of how we treat our employees, it was as radical as possible. Striking this balance took a lot of energy, but today we are getting the appreciation back from our employees. We have limited job cuts and the closure of operating sites to what is necessary in order to be successful again in the new business model. And we tried at all levels and by all means to involve the people. My predecessors have demonstrated exemplary responsibility toward our employees.’
What do you see as CEWE’s five success factors that other companies facing similar tasks can learn from?
‘When we talk about digitalization and Industry 4.0, the first would be: no master plan, but many small steps. Secondly, success only comes when you also allow failure. Thirdly, it is of course important to permanently review your strategy, but, if you water it down more and more, then you will not be successful either. It is certainly better to clearly identify and pursue a strategy and to look around every six or twelve months and check whether we are still on the right track. The potential applications of digitization are extremely diverse, both in terms of the market and internal processes. And therefore, fourthly, there is also no rule about where to start, there is only the risk of not starting. And fifthly, it is important to know that in the end it is always the customer who decides on success. If you don’t manage to put yourself in your customer’s position and look at their market performance from their perspective, then you don’t stand a chance of succeeding with whatever digitalization you do. And this dominance of customer satisfaction is becoming much stronger with digitalization. If you don’t recognize this dominance, then you don’t even need to start with digitization.’
