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Bosch North America

Releasing Energy and Power in an Organization

Dr. Werner Struth Chairman, Robert Bosch LLC; Member of the Board of Management, Robert Bosch GmbH; Center for Automotive Research Management Briefing Seminars Traverse City, August 9, 2012
Thank you, Jay [Baron – president and CEO of CAR]. I am very pleased to join the panel in this discussion.

Maximizing momentum and agility is critical to our industry’s success . . .
it is the fuel that keeps the innovation engine performing at top speed . . .
it helps keep consumers excited about their next new car or truck . . .
and it enables all of us to attract and retain the best talent.

As I prepared for today, I thought about how we weathered the economic storms of 2009 and maximized momentum. It occurred to me then – and, it is even more real to me today – that the storm clouds are brewing once again with the escalating financial crisis in Europe. It is a sobering situation that we are watching intently. The learnings from the past and the uncertainty that lies ahead, demonstrate the urgency and relevance of our discussion today.

Maximizing momentum does not happen by will alone, but as a result of skillfully crafting these three elements: first, a long-term, sustainable plan . . . second, clearly stated objectives that are adopted across the entire company . . . and third . . . a sound, holistic business strategy with tactics that are tracked and measured with an eye toward continuous improvement.

While Bosch uses this approach across the entire company, some may wonder if it can work in a smaller business. Interestingly, as we have acquired or partnered with various companies over the years, we have had the opportunity to look inside a variety of operations, some of which were managed exceedingly well. What we found is that this strategic approach is scalable and can be adopted in virtually any size company to maximize momentum and deliver results. But before we get into what it takes to maximize momentum, let me first give you a brief overview of Bosch’s portfolio.

Most of you know Bosch as an automotive supplier. You may know Bosch as a provider of technology for powertrain, safety, electronics and infotainment systems. In fact, Automotive Technology is our largest business sector: Bosch’s sales revenue for Automotive Technology exceeded 30 billion euros – or 42 billion dollars – in 2011. And this year, Bosch’s sales revenue per vehicle worldwide will reach nearly 400 euros.

But what you may not know is that we are also a global technology and services company beyond the automotive business. In addition to Automotive Technology – which makes up nearly 60 percent of our revenue – we provide solutions for Industrial Technology . . . and Consumer Goods and Building Technology.

From home appliances and power tools . . . to solar energy, security systems and packaging, The Bosch Group is focused on delivering technologies that are “Invented for Life.” The diversification among the sectors, as well as the synergies among them, provides stability to the company. With more than 300,000 associates in 60 countries, Bosch had a record-setting year in 2011 with sales of 51.5 billion euros – or nearly 72 billion dollars. Bosch’s North American operations posted sales of 9.8 billion dollars, an increase of 11 percent from the prior year, and the highest level of sales in the region for the decade.

This success is due to Bosch’s guiding values, many of which can be traced to our founder, Robert Bosch.

His values – which are our values – provide a strong foundation and define how we run our company. These values are:
• Future and Results Focus
• Responsibility
• Initiative and Determination
• Openness and Trust
• Fairness
• Cultural Diversity
• Reliability, Credibility and Legality

These values – along with the entrepreneurial spirit embodied by Robert Bosch – give our company a solid base on which to build, and help maximize our momentum.

Some may think that Bosch is successful because it is a large company with many resources, and for that, innovation comes naturally.

But I think that all companies – large and small – that have a strong values-based foundation to guide their actions will attract and retain top talent. Innovation is fostered best in an environment where there is integrity, consistency and predictability.

This is what we have found at Bosch: If you have a solid base, from which your decisions, actions and interactions emanate, an associate’s need for a stable, predictable environment is met. Although associates know that they are part of the fierce competition in the market, they will feel secure in their environment and focus their energies on more creative pursuits that will ultimately make the company stronger. Simply stated: Mutual trust releases energy and power.

Think of the times in your life when you were – or actually are – most creative and productive, when innovative ideas flowed. Now think about the environment you were in . . . chances are, it was at a time when you felt trust in your environment, you knew what to expect, and you felt free to let thoughts of “what-if” or “suppose-that” germinate into some of your best ideas.

If associates can rely on and articulate what their company stands for, then their thinking can rise to a higher level and they can do their best work – and that’s what momentum is all about: Maximizing the energy, power and creativity of people.

With this foundation established, there are three major areas of focus that enable companies to maximize momentum in the current environment:
• Long-term strategy
• Diverse product portfolio
• And globalization

First is long-term strategy. In many companies, short-term objectives can take the lion’s share of a leader’s time and attention and, if left unchecked, short-term objectives can overshadow long-term goals. However, balancing immediate needs with long-term gains is essential for keeping an organization and its people motivated, committed, and creating the next great idea.

Bosch remains a company that takes good care of business today and orients itself for the long-term. As a result, we strive to make sound, quick decisions, and identify profitable growth opportunities for today and tomorrow. Our strong core business – supported by our values – and our commitment to sustainability pave the way to new areas of growth.

In 2009, many automotive companies reduced or stopped their investment in research and development, as they felt it was their only course of action. Many companies reduced R&D because they felt compelled to mitigate losses and protect short-term profit. At Bosch, even though sales dropped, we maintained our investment in research and development. We balanced short-term gains with long-term objectives. In so doing, we made it a win:win, for our customers and for Bosch.

In 2011, Bosch invested 4.2 billion euros in research and development, which equates to 8.1 percent of sales, with nearly 3.3 billion euros in the Automotive Technology sector alone.

One reason we are able to continue this level of investment is that we are a self-financing, privately owned company with 92 percent ownership held by the Robert Bosch Stiftung GmbH, which is a charitable foundation. A second − and significant reason − is that we choose to do so. Although investing in the future during challenging economic times is tough, for us this was an essential part of achieving sustainability. This, too, is scalable to a given company and situation.

We assumed that the downturn would not last forever – although some days it felt like it would! R&D investment helped us prepare to move into the economic recovery in the strongest position possible. And, it signaled to our associates that we were confident in the industry and that we were focusing on our long-term strategy. In return, our associates contributed to – and trusted in – the company during the crisis.

We know that R&D enables us to tap our associates’ best thinking so they may improve upon existing technologies as well as develop revolutionary solutions. And at a time when everyone was speculating as to whether the economy had hit bottom yet . . . for us, R&D investment built a bridge from today’s technology to the idea of tomorrow’s technology.

For example, we know that the internal combustion engine will be the predominant powertrain for consumers for the next 20 years. Our forecasts show that in 2020, approximately 110 million vehicles will be powered by the internal combustion engine. In the meantime, gasoline and diesel engines continue to show significant gains – up to 30 percent – in fuel economy. While we focus considerable attention on the internal combustion engine, we also are preparing for the long-term future of electromobility.

Looking ahead to electromobility, Bosch has made significant upfront investment in this technology, dedicating nearly 400 million euros each year and 800 associates around the world to the task of electrification of automotive drives.

While we understand that the cost of lithium-ion – and other more advanced batteries – limits the current growth of this market, we believe it will become central to the future of transportation. Thus, we have dedicated people and resources to developing these technologies to make them more cost-effective in the future.

In the coming years, certain powertrains will lead and, at some point, follow. Bosch is striving to provide automakers with their powertrain of choice – which may include gas, diesel, hybrids and EVs – in the most cost-effective way possible.

Bosch’s commitment to a long-term strategy, coupled with our unique business structure, allows us to develop innovations sometimes in advance of market demand. In these cases, we continue to improve the technology and help consumers understand its benefits. When the market is right for the technology, we are there . . . ready to provide it. And hopefully, we are the first to provide it!

In some cases, we have been a leader in advancing specific technologies, such as electronic stability control, antilock brakes, clean diesel, gasoline direct injection and Start/Stop. We pioneered the development of these technologies, and are now seeing an increase in demand around the globe, with Bosch having a strong market position.

The second area of focus is the importance of maintaining a diversified product portfolio. For most global companies, having a diverse product portfolio is a form of insurance. It allows them to reach more customers with more products and balance their revenue as demand ebbs and flows.

Successful companies do their research – in terms of understanding customer needs and consumer considerations, as well as putting these factors into a larger context of where the world is headed.

As part of Bosch’s strategy, we monitor megatrends so that we anticipate, rather than react. We investigate future market demands – sometimes 20 years ahead or more – to better understand how they will impact our business. Trends like increasing energy efficiency, caring for an aging population, and increasing urbanization have impacted our portfolio decisions. Using this data, we draft scenarios on product and service portfolios so that we are ready as soon as some of these scenarios materialize.

Looking at the diversified portfolio with these considerations in mind, helps to ensure that the products and services in a company’s portfolio – whether it is large or small – are the ones that will make a difference in the future and, therefore, are worth investing in today.

Having all the major automotive areas of expertise within the walls of the company is a key advantage. From powertrains and brake control systems to steering systems, sensors and software, our team knows how to network systems. This knowledge allows us to capitalize on the increase in integration of power electronics in the electrical powertrain. In addition, our understanding of fuel-saving technologies helps the automakers meet regulations.

Bosch’s spirit of innovation has resulted in an exciting – and fun – new product with global reach – the eBike.

After starting out in Europe in 2011, we now supply nearly 40 bicycle manufacturers with our drive systems. Our aim for the next few years is:
• a market share of more than 20 percent in Europe – which would be the largest market share for that region . . .
• and to help this technology take off in the U.S.

In addition to the automotive arena, our two other business sectors – Industrial Technology, and Consumer Goods and Building Technology – also allow Bosch the benefit of diversification.

In December, Bosch integrated its Care Solutions business, which includes Social Alarm and NurseCall systems, with its telehealth business, bringing 320 associates together as the leading provider of telehealth and personal alarm systems. This collaboration allows Bosch to offer a broad portfolio of products and systems for home use, to support older persons and patients with chronic diseases. Again, Invented for Life.

While we have three distinct sectors . . . our products often complement one another, which allows us to engage in cross selling. For example, those in the construction industry may know Bosch for its power tools . . . or its security systems. We use this as a point of entry with the customer . . . and working across the company, we group our products in a way that might be of interest or make the best sense for a specific customer.

Continuing with the same example, a construction company may be familiar with Bosch hydraulics in their heavy-duty equipment or with power tools used on the job site. . . .

We seek to expand their knowledge to include household appliances, geothermal heating, security systems and other products that could be used in the structures they build . . . or maybe introduce them to a powerful clean-diesel truck equipped with Bosch technology for their work site.

The third major area of focus that enables companies to maximize momentum in the current environment is globalization. A company’s momentum will be fully realized when it puts long-term strategy and a diverse product portfolio into the context of the world. By that, I mean using innovation to spread great ideas around the globe and applying the technologies with specific local requirements and consumer needs in mind.

For example, Bosch has been working on the development of anti-lock braking systems for motorcycles. This stems from our expertise in automotive ABS and the growth of motorcycles as a form of transportation in many regions. For Bosch, beginning in 2008, we focused our development in Japan, because of the large motorcycle market. Today, we have taken this technology to North America and Europe, where it is now offered on an increasing number of models.

Another example is in India, where vehicles with one to three cylinders make up a significant share of the market. For these vehicles, we have developed a common-rail system with a high-pressure pump integrated into the engine. This cost-effective design is suitable for small vehicles used in a variety of countries.

To recap, putting the right foundation and values in place and having the right strategic focus – long-term strategy . . . product diversification . . . and globalization – are essential to maximizing momentum.

But what brings this strategy to life and energizes associates to reach farther than perhaps they ever thought possible, is leadership.

Carrying forth the legacy of leadership of Robert Bosch, as leaders, we believe it is our responsibility to:
• Ensure that the foundation remains strong.
• Lead with integrity as stewards of the company values and
• Foster innovation and reward those associates who take the risk to advance the next big idea.

I have shared Bosch’s perspective on how we maximize momentum for our customers, our company, our associates, and for us as leaders. The ideas that I have shared today are scalable to organizations large and small, and, if done strategically, can release energy and power within an organization.

For the ongoing strength of this industry, I wish us all well in that pursuit!

Thank you for allowing me to share my perspective today. I look forward to your questions and to the panel discussion.

MBS Speech 2012 - August 2012

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