efficiency

Work efficiently

eRetail sector: The EU Department of Statistics states that Germany has the lowest food prices in Western Europe. This can be attributed to the large percentage – 40% – of discounters in the market, whose aggressive pricing force the other supermarket chains to hold the line on price.

Discounters are known for constantly offering sales. They have been able to maintain their margins by constant increases in efficiency and cost reduction. In addition, they stock on those products which move fast, maintain modest store sizes, choose inexpensive locations, and pay only for targeted advertising.

Business consultants: Every segment of the German economy strives to improve on efficiency. Process optimization, cost reductions, the focus on core competencies, improved product portfolios, increased competitiveness. All of these areas enjoy special attention of top management.

This is why business consulting continues to grow at a steady pace in Germany. Although its economy accounts for roughly 20% of Europe‘s output, consultants do more than 25% of their business for German companies.

Ökostrom

Electricity: Germany is not rich in resources. Coal is no longer in abundance. There is no oil to be drilled out of the ground. There are too few mountain ranges offering hydropower. And the German population has rejected nuclear power as a long-term solution to its energy needs. In order to protect itself from the ups and downs of the international energy markets, Germany has long since focused on developing renewable energy sources.

Several laws since 1999 support the development of so-called Ökostrom or bio-energy, guaranteeing minimum prices for those utilities who produce it. Its planned outcomes – reduced dependence on fossil fuels, development of renewable resources, ensuring long-term energy supply – have begun to occur. The share of total electricity production attributed to renewables has been increased from 5.4% to 20.3% in the timeframe 1999-2011.

Gasoline: The Ökosteuer or ecology tax is also applied to gasoline and diesel fuel, making up roughly 10% of the price at the pump. The purpose of the tax is twofold: reduce consumption of what is a limited resource, and increase the efficiency of automobiles. Leading German economic institutes have documented the positive effect thusfar: less driving and the development of more fuel-efficient cars.

The laws passed were controversial. Many were skeptical that they would have the predicted effect. But since then large segments of the population are convinced that Germany is on the right path. Two changes of government have not challenged their effectiveness. Germans are proud of the fact that their electricity grids never fail, that they are shutting down all of their nuclear energy plants, and that their companies are producing cutting-edge renewable energy technologies.

Efficient products

Automobiles: Germans like to drive powerful, fast cars and are proud of their Autobahn with its lack of speed limits. At the same time they like to save money. This is reflected in their cars. Over the last twenty years the fuel efficiency of German cars has increased by 20%, while doubling their horsepower.

The VW Lupo 3L TDI is a case in point. It is the first mass produced car which can go 100 kilometers on 3 liters or less fuel, while maintaining the power of others compact cars.

The entire German car industry is constantly increasing the efficiency of its production methods. Most produce only 30-40% of the final product. The rest is developed and manufactured by a complex, sophisticated network of specialized suppliers, many of whom are located right next to their German customers.

Residential homes: Germans focus on building homes which maximize space. German houses tend to be small, certainly in comparison to homes in the U.S., which are twice the size.

German homes are built, and renovated, with an eye on energy conservation. Insulation and electricity efficiency are two of the key goals. And the German government supports these with generous subsidies via the KfW, Kreditanstalt für Wiederaufbau, the Bank for Reconstruction, founded in 1948.

This is especially the case with new construction and renovations, with the KfW offering ten different types of financial support linked to new efficiency technologies. All loans have borrowing rates guaranteed to be lower than the rate of inflation. In some situations, families receive cash payouts as subsidies.

Particularly popular, and subsidized by the government, are solar panels, which save electricity and reduce Germany‘s dependence on electricity produced by fossil fuels.

Water consumption: Since the 1980s ecological groups have been campaigning for less water use, in order to protect the environment and save money. Since then water conservation has become common in Germany. The manufacturers of showers, faucets, toilets, washers, dishwashers and other household appliances have developed and brought to market highly efficient products.

German households save so much water that waste water systems have difficulty keeping themselves clean due to too little waste water moving through the system. Local water works often need to flush through extra amounts of water in order to keep the system clean.

Pareto

The Pareto principle: Also known as the 80-20 rule, stating that in many situations approximately 80% of the effects come from 20% of the causes.

Vilfredo Pareto, an Italian economist, documented in the early 1900s that 80% of the land in Italy was owned by 20% of the population. Pareto went on to observe that 20% of the pea pods in his garden contained 80% of the peas. It has become a common rule of thumb in business that 80% of sales come from 20% of clients.

The 80-20 rule could be a metaphor about the American approach to many things, or at least about an element or aspect of the Americans approach. Americans tend not to be perfectionists. Not because they do not recognize and honor striving for the best. But because in many cases attaining, reaching, accomplishing that extra 5% is in many cases “simply not worth it”.

Worth. Value. Does the customer want that extra degree of engineering excellence? Is it necessary to calculate that many digits behind the decimal point? Is that depth of analysis necessary in order to make a decision?

80% is often enough. For Americans, depending on the situation, 60% is enough. Depending on the risk-benefit relationship, even less is enough.