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A Driving Force for Innovation

Tuesday, August 1, 2006 - 15:35

Horst von Sanden talks about how Mercedes-Benz used its traditional strengths to forge ahead in a new market, consistently delivering innovation and quality while extending its appeal to new niches. By Penny Sutcliffe

On 29 January, 1886, Karl Benz applied for a patent for his motorised vehicle. In November of the same year his Patent No. 37435a was granted and his Patent Motor Car, as this three-wheeled vehicle has since been known, received official recognition as the world's first automobile.

Unlike other inventors, Benz did not merely install an internal combustion engine into an existing coach chassis, thereby making it capable of autonomous motion (which in Greek/Latin translates to auto/mobil). It was quite clear to Benz that a vehicle powered by an internal combustion engine was subject to engineering principles quite different from those applying to a horsedrawn carriage, and he proceeded to create a solution using innovative technology and classic engineering. The rest, of course, is history and legend.

Recent official statistics from the Federal Chamber of Automotive Industries, commonly known as VFACTS, show that in the year 2005, for the fourth straight year, Australians bought more Mercedes-Benz cars than any other luxury brand in the market. To date, Mercedes-Benz in Australia has seen an increase in sales of 20 per cent over last year.

New culture, inevitable lessons

According to Horst von Sanden, Managing Director of the Mercedes Car Group in Australia , leaders must "recognise that you are not the only one with great ideas. It pays to listen to all levels, across all areas of your business".

While von Sanden's total career with Mercedes spans 20 years, 1994 marked a turning point for him. It was then that he headed up a marketing department in Germany, and began to realise what innovation and change really mean.

Competitiveness was escalating in the automotive market. Other brands too were coming up with innovative technology, targeted at different markets. Mercedes-Benz was forced to rethink its philosophy and look at competing in different markets and segments. This required a completely different culture.

"Things had to be done, and decisions had to be made that were unthinkable in Mercedes-Benz before. Management had to change their strategy, marketing had to give off new messages, and sales had new targets to reach. This new era required a huge change, but employees were going to challenge some decisions. They thought, things have worked well in the past, why change them now?" says von Sanden.

But current sales were "just stable", measuring around 200,000 cars being distributed worldwide. Mercedes's new target was one million. "The only way this was going to happen would be to conquer new customer groups. We had to walk away from our conservative approach and think younger, be design-conscious and become more dynamic. It required us to not wait for trends to emerge, but rather, create them," he explains.

And did they meet their targets? It's well known in automotive circles that Mercedes, who also owns smart (the fuel efficient small car, a brand of the Mercedes-Benz parent company, Daimler-Chrysler), exceeded its expectations, and continued to unleash new models including, most recently, the R-Class - a new crossover vehicle concept, in the luxury market for the first time.

The "sports tourer" is targeted at people in need of an off-roader for the suburbs, a people mover for those who don't want to drive a bus, and a luxury car for families.

That's a lesson von Sanden has not forgotten, especially in the five years he has been with the Australian division of the company. "I've learnt that you can change a direction dramatically without losing your roots. It is possible to appeal to traditional customers and a younger market simply by being innovative, but still applying the attributes that have always worked for a company. For us they were quality, safety, reliability, re-sale value, innovation and technology."

Yet, as many leaders would agree, it's one thing to convince your market, but quite another to convince your team. "I believe in candour, and building a candid culture. Be honest, open and sincere about why you want to change and what you want to achieve. Encourage your employees to do the same.

"I have a very integrative management style. I like that at Mercedes we are building a very good team spirit. All ideas don't just come from me. They can't. I'm surrounded by many people who, in their field, are much better than I am - and I don't have a problem with that - I encourage them to speak up about ideas that they have. I involve them every step of the way."

Von Sanden describes his job as facilitating the good energies and skills, bringing a team together and driving them forward. "The days are long gone where at the top you have a person who 'knows it all' and 'knows it better', that's not how it works today, well, certainly not with me."

The company regularly conducts strategic leadership forums where they select employees from all areas of the business and across all management levels. They take a few days out of the office and look at the big picture, brainstorm, discuss and capture ideas from different areas.

Von Sanden also ensures managers take the time to regularly speak with employees, find out their concerns, and capture their ideas and suggestions. It's not just done on an ad hoc basis, it's seen as a crucial part of how they innovate themselves.

"I really believe in the 'wisdom of the crowd'. I always try to keep in touch with everyone, and benefit from their knowledge. I would recommend to any leader to get all members of your team together. Put their contributions on the table, track their skills from all ends. It helps you gain a foresight on vision."

In fact, one of Mercedes's latest and most successful initiatives was an idea passed down from one of his own staff. In 2003, a staff member raised the idea of a unique Mercedes presence at major Australian airports.

"He explained how, for a few thousand dollars more than the cost of a billboard we could rent a bit more space and create an entire terminal that is just as visible. Time-poor customers could drop off their cars for servicing while they were away and use the Mercedes-Benz valet service to get to and from the terminal of their choice.

"I guess that is a good example of having an open and creative culture, where it is encouraged and rewarded to speak your mind."

"Well," says von Sanden, "I thought it was a great idea. After brainstorming and evaluating the concept with our CEO, we decided to give it a go. We found that with many luxury car owners travelling more often for business and pleasure, the time was ripe for such a retail concept."

So on 13 February this year, Mercedes opened its Airport Express terminal for Mercedes-Benz drivers. It comes complete with valet transport to and from airport terminals, dry-cleaning drop off and collection, a gift store, free magazines, daily newspapers of choice, relaxation lounge, flight arrival/departure times and seven service bays to service and wash your Mercedes-Benz while you're away.

Leadership in the fast lane

When it comes to making good decisions, speed is a major factor that von Sanden places a large amount of importance on. He shies against getting bogged down in making decisions guaranteed to be 100 per cent accurate.

"Speed is more important, especially so in today's business world. In fact, if you want to keep up with innovation, it is critical. Sometimes when you have reached a certain point, and are running out of time, you have to live with a possible 70 or 80 per cent accuracy in your decision making.

"It's not just about being fast. It also means a willingness to revise a decision if it does end up in the '20 per cent that went wrong pile'. In hindsight, you will often find that if you waited much longer, you would have wasted too much time, or simply missed out on important opportunities," says von Sanden.

"I enjoy having debriefs with my team to talk about what works and what doesn't. I have no problem in admitting mistakes. It's good to have a culture where it's okay to make mistakes, and where appropriate, encourage it and reward the risk and courage it took to make it, rather than punish it."

Von Sanden recalls when he first began his career at Mercedes: "Back then it was much more autocratic, the old rules applied; there was an idea created at the top level, it was passed down; it was expected that the team would do exactly what they had in mind."

Yet that is not an experience recalled in angst. Yes, von Sanden struggled a little with such a way of thinking, it wasn't his way of doing things. But overall he found it a good experience that even today can be necessary.

"It is still true at times. Top-down management style is something people don't like, and many think it shouldn't exist. But there are situations where you need it. I give the example of a fire brigade; if a house is burning you need a leader who gives orders, obviously there is not much time for discussion. It really depends on the situation as to what management style you apply; in emergency cases, it is necessary.

"When facing the crisis point in a certain situation, I stop, I listen, I process, then often have to make the call."

When asked about the difference in culture between Germany and Australia , von Sanden doesn't find much. "There is so much talk that Australians have work/life balance nailed, leaning more to the life side. But it's simply not true. I find that Australians work just as hard, if not harder than Germans. In fact, I spend much more time here encouraging my staff to take their holidays. Go away, get refreshed. Come back full of ideas."

He uses a sporting analogy to describe his management style: "You usually find good sportsmen, sure they like to win, but more so, they love the game. They are passionate about it. They are focused. They dream. They train. They get coached.

"Being a good leader is not so different. You have to love being a leader and be inspired by being one. You need to enjoy coaching people, creating a candid culture, and genuinely like people."

In its true essence, he describes management as maximising the output of human beings. "If you understand people, and you enjoy breaking records with them, I believe you'll make a good leader."