Oral-History:Herbert Bruch

About Herbert Bruch

Herbert Bruch is a member of the Board of Grundig AG in Germany. He received his PhD in Physics in 1964. He spent his career working in the R&D department at Grundig. The interview first describes Bruch’s career at Grundig. Bruch then focuses on the innerworkings of the R&D department. He describes Grundig’s relationship with their suppliers and the use of cross-license. He explains how the R&D department develops customized components. Bruch outlines his personal responsibilities and the usefulness of his technical background. He then discusses the backgrounds of other members of the company from the members of the board to the employees of the R&D department.

About the Interview

HERBERT BRUCH: An Interview Conducted by William Aspray, Center for the History of Electrical Engineering, July 2, 1993

Interview # 173 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc.

Copyright Statement

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Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, IEEE History Center, 445 Hoes Lane, Piscataway, NJ 08854 USA or ieee-history@ieee.org. It should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user.

It is recommended that this oral history be cited as follows:

Herbert Bruch, an oral history conducted in 1993 by William Aspray, IEEE History Center, Piscataway, NJ, USA.

Interview

Interview: Herbert Bruch

Interviewer: William Aspray

Place: Fürth, Germany

Date: July 2, 1993

Career Overview

Bruch:

My name is Herbert Bruch. I am a member of the Board of Grundig AG in Germany. I got my Ph.D. in Physics in 1964.

Aspray:

Where did you train?

Bruch:

I studied at different universities. My background is in ultrasonics and acoustics. This was the reason why after some steps I started with basic R&D in Grundig. During my company career I have held several functions on both technical and management levels.

Aspray:

Would you take five minutes to go through the path of your career for me please?

Bruch:

I started in 1964 in the basic R&D laboratory working on electro-acoustics, remote controls, ultrasonic microphones, etc. I developed ultrasonic delay lines for TV applications. The first field effect transistors appeared and I started developing memories. This work was successful. For this reason I got the opportunity to transfer the R&D results into mass production. After this I was involved with electro-optic products such as traffic detectors, picture transmissions through light beams and kerr cell modulation. These experiences enabled me to be the head of an industrial engineering department with a tool and mold shop, electrical and mechanical equipment for production, and a chemical laboratory. Later I became plant manager for a PC board factory, and was given responsibility first for the video recorder production and later for video and TV production. At the age of 39 I became a member of the supervisory council of Grundig AG. At 42 I became a member of the board of management.

Aspray:

So young!

Bruch:

At that time in European companies, this was really young. As a member of the management board I was responsible for production of audio, TV, and video-recorder products. The suggestion was made to combine production and development. So I became responsible for development and production of TV and audio products, like hi-fi, SE-receivers, and car audio. After a company reorganization into business groups I became responsible for the complete TV business, including development, pre-production, components, R&D and production, and the commercial activities. In my present job as a board member, I am responsible for R&D and production of TV sets, satellite receivers, satellite technology and pre-products. Several months ago the corporate purchasing department was also integrated. Sixty to eighty percent of the value of our products is purchased items. So this makes sense. This is my actual job. I am now 54. I am a member of several supervisory councils in sister companies and some social organizations closely related to our company, Berufsgenossenschaft furFeinmechani k undElektrotechni k, an organization which covers social and safety aspects in industry.

Organization & Work of R&D Group

Aspray:

Let's talk first about R&D. Can you tell me how R&D is organized in the company? Is it centralized?

Bruch:

R&D and development are separate functions. R&D is a central task within the company. Product development is organized in the different business groups.

Aspray:

Is the basic R&D that is centralized paid for out of a centralized fund? Or, is it paid for by the division that requires the research?

Bruch:

Actually, we have a central budget for R&D. However, the costs have to be covered by the business units, who are the owners of the business and who have the best and most effective orientation to the customer.

Aspray:

To what degree do those people in the business units set the research agenda for the basic research group?

Bruch:

The R&D group is not very large in our company because we have no R&D for ICs. We have no R&D for picture tubes. We buy these items. For this reason, our R&D staff receives fifty percent of their orders for future products from the business groups and the remaining 50% comes from the BOM. Typical products for R&D are digital TV, HDTV, RDS, DSR, image sensor displays, and product ideas from the professional electronic sector.

Aspray:

What kinds of work do they do?

Bruch:

They develop prototypes of numerical control for tooling machines, all kinds of supervision technologies in subways, banks, etc. They are also involved in the development of test equipment for laboratory uses and test equipment for the car industry, such as gas analyzers. They work on new business and new activities in the environmental field, such as recycling or the control of water in cleaning processes. In their work they use knowledge of TV and VCR technologies. They develop data storage using technology developed in our VCR department. If the pre-product looks successful, it goes into product development and later into production.

Product Development Process

Aspray:

Suppose the centralized R&D group comes up with a promising idea that might have some practical value to the company. What happens next? What is the procedure for moving it towards the product?

Bruch:

First we do some brainstorming on the project. Then the project team works out a business plan together with the marketing and sales people. This plan is presented to the business group for a decision.

Aspray:

So you do some market research? Is that right?

Bruch:

Naturally. Market research is part of the business plan and we use both internal and external marketing people.

Aspray:

Do the people who come up with an idea move with it from the central R&D group?

Bruch:

Not generally. Naturally, these people have to keep in touch with the problem and with the project. But usually with a prototype or specification the project moves into the product division. Then the idea becomes a development project, which is budgeted and monitored. There is a master plan and a plan for market introduction.

Aspray:

Is manufacturing engineering done in the development group?

Bruch:

Actually no. However, in the TV business we are currently moving manufacturing engineering into the development group. Normally, development and production have to be kept as close together as possible. Since the product families are produced in different locations, it makes sense to keep product development and manufacturing engineering close to the leading factory. This factory provides assistance to the satellite factories.

Cycle Time of Products

Aspray:

What is the typical life of one of your products?

Bruch:

In the fast-moving consumer industry, the classical product lifetime is one to two years.

Aspray:

So you must have several replacements in the works at any one time for every given product.

Bruch:

There are products with longer cycle times, such as satellite receivers. In semi-professional and professional applications, cycle times are even longer. But every product undergoes a modification during its lifetime. The cycle follows a bell curve. The cycle time depends on the product. The features may remain untouched for a longer period but optical redesigns are made and the cost-price must decrease. A family of TV-sets has a lifetime of approximately two years in the market including optical and cost modification.

Aspray:

That doesn't give you enough time to make incremental improvements in your manufacturing technology for a product, does it?

Bruch:

Yes. I would say the current learning curve for our products is about half a year. Moreover, a TV set is followed by a new TV set, so the basic technology is the same. It is only the big changes, such as the change from analog to digital technology, or from wooden cabinets to plastic cabinets, where the products change substantially.

Role of Field Information

Aspray:

How does the field information come back into the loop for product development?

Bruch:

We have a marketing and sales organization. These people provide input. We have additional sources looking for product ideas. The marketing organization has its ear close to the market, close to the customer. The second source is the IC, the display and the component industry. This input is covered by the R&D people. Our own research results are also used as a basis for new products. The product description results from the optimal combination of all sources of input. This product description is analyzed and after the evaluation by the business groups the product is prepared for the market. After market introduction we monitor the product and thus we are well informed as to whether the idea is going to be successful or not.

Competition and Labor

Aspray:

In what ways do you think the approach of your competitors is different?

Bruch:

We know what our competitors are doing. We know what our customers want. We are fast in making decisions and we have clever engineers. As a European company we are strong in logistics and customer service. Our production is flexible, highly automated and equipped with advanced technology. We have subcontractors in Hungary to compensate for the cost of production in a high-cost country like Germany.

Aspray:

It is an opportunity in the sense that you have new markets and less expensive labor available to you. But it is also a challenge because you have expensive labor here in what was West Germany.

Bruch:

Yes. This is exactly right.

Aspray:

Are you actually closing plants in what was West Germany and moving things to less expensive places?

Bruch:

Yes, we have to do that. There is overcapacity in this industry and we have to reduce it.

Joint Ventures and Cross Licensing

Aspray:

You mentioned joint ventures just a moment ago. When I was reading on the history of the company, I noticed that it has had a number of joint ventures over time. What were Grundig's reasons for entering into joint ventures?

Bruch:

To combine technological, economical and market possibilities.

Aspray:

Could you elaborate on that point, please?

Bruch:

If a company is the world leader in a special technology and you need that technology, then it makes sense to join them. Capital investment in new activities is expensive. Cost sharing with a partner is a good alternative. If economy of scale is a criteria for better product prices, it makes sense to join forces and to produce together. In a joint venture you maintain ownership of the technology and you are not too dependent on other companies.

Aspray:

One reason you didn't give was an inability to distribute or market in a particular geographical region. Is that a problem?

Bruch:

Yes.

Aspray:

Is that an actual reason you enter into joint ventures?

Bruch:

This is more on the commercial than on the technical side. We have business partnerships in Indonesia, Asia, South America...

Aspray:

Rather than entering into joint ventures, do you cross-license a fair amount?

Bruch:

Yes. We have cross licenses with our mother company and with other companies. But this is mainly related to patents.

Customized Components

Aspray:

You said earlier that a very substantial portion of the cost of your consumer products is in the components that go into them. What is your relationship with your suppliers of these components? When you are designing a new product do you get involved very closely with them? Just how does that work?

Bruch:

We have partnerships for basic components and pre-products. These are close technical co-operations. Exchange of information and specifications with our main suppliers in Europe and in Asia forms the base of our business.

Aspray:

Does that mean that over time you have developed special working relationships with a single or a couple of companies, say IC companies?

Bruch:

With a couple. We have historically good contacts with our mother company, Philips, but we also have excellent relations with other leading companies in our industry all over the world.

Aspray:

When you are looking at display units or ICs, do these have to be specially made for your products? Or are these components that are more or less just available?

Bruch:

We use both standard and customized components.

Aspray:

In the case of customized components, do the people from your R&D team, or product development team, invite members of the display team from the supplier to join in the design discussion at an early stage?

Bruch:

Yes, and this is very important for success.

Aspray:

Is this a kind of mutual design effort?

Bruch:

This is the intention. R&D is expensive. To reduce costs certain agreements have to be made. For this reason a long-term partnership is needed. This kind of cooperation is necessary and has to be negotiated at an early stage of product development.

Aspray:

In a business such as the television business, where you have high numbers of products coming off of your lines, are manufacturing technologies more important than with customized big expense products?

Bruch:

This is absolutely right.

Aspray:

Yes, I understand that.

Bruch:

The product definition itself, of our side is designed electrically, mechanically, and optically under license through

Aspray:

But, in a way, you are still a value-added manufacture. Even if these components have a lot in them already, you still have to put them together. You are putting a lot of them out the door every day. So you still must have some concerns about your manufacturing. Can you tell me about the kinds of issues that arise in improving manufacturing?

Bruch:

Improvements to manufacturing can only be made integrally. Improvement hinges on development of excellent concepts. Improvement rests on components and material and labor content. In the industrial process we demand maximum efficiency every year. A very important part of our industrial process is logistics.

Aspray:

Is that something that has become of greater importance to the company over time?

Bruch:

Yes. Every couple of years we have to recheck our policy to ascertain the appropriate rate of integration. We have to adapt technology and the degree of vertical integration. I have already mentioned the change from analog to digital technology, which has consequences in testing, aligning, and handling. One aspect that I did not emphasize enough before is the role of logistics in the production process, which is very important for the time needed to market a product. Flexibility in our final products is an additional aspect. The customer wants the product immediately after their order is placed. Product design and industrial feasibilities have to follow these demands.

Specialized Test Equipment

Aspray:

Since you are maintaining within the company the engineering aspects of your products, does that mean that you need specialized test equipment or specialized design tools? Do you have to build them yourself or are they available?

Bruch:

We manufacture special test equipment for our products ourselves. Standard test equipment is purchased externally. Mechanical production line equipment is designed in-house and then purchased. We adapt standard machines to our special applications. We manufacture 30-40 percent of the tools and molds ourselves.

Aspray:

Can you give me an example of the kind of thing that you would either have to adapt or build for yourself?

Bruch:

For example, a plastic molding injection machine is a standard product. The application of robots, the design of the product, tool making, multi-machine operation and process control are modified, optimized, and adapted to our requirements.

Relation with Philips

Aspray:

Can you tell me about your relations with Philips? Do you work as a profit center? What kinds of research are shared? What kind of management is shared? Which functions are shared? How does this operate?

Bruch:

It is a partnership. With thirty-two percent share holding in Grundig and a management contract, Philips is responsible for Grundig. This management contract gives Philips all necessary responsibilities. Since 1993 the Grundig annual profit and loss account is consolidated with that of the Philips Company.

Aspray:

Do you share any personnel or costs? Do you do any marketing jointly with them?

Bruch:

We can use Philips resources. We have a cross-license agreement. We use Philips components. We cooperate on the industrial activities but in the market place we are competitors.

Bruch's Duties and Technical Background

Aspray:

Tell me about your personal day-to-day duties. What are the kinds of issues that you confront on a daily basis?

Bruch:

Fifty percent is strategic and planning work. Twenty percent is purchasing. The rest is day-to-day business.

Aspray:

Which duties are the most challenging? What I am going to eventually try to get at is what role your technical background plays in the decisions that you make in your job.

Bruch:

Managers often state that they spend most of their time working on strategic visions. In many cases the truth is a little bit different. I manage our work processes and methods with the objective of structuring them in such a way as to achieve optimum efficiency while at the same time meeting customer demands and being profitable. But I also have to do some day-to-day business. I have not lost contact with the floor. I think that this is important especially on the technical side. My commercial colleagues must not lose contact with the market. I have to keep an eye on what is going on in our industrial business. This includes concept, production place, vertical integration, material bill and labor cost, quality aspects, and customer service. I have to travel a lot. I have to keep in touch with our partners, competitors, subcontractors, and our suppliers, and I also have to maintain close contact with the line mangers in the factories. I see the managers and the people on the floor. I think it is a rather good mixture. Fifty percent strategic and fifty percent operative. That is what I do personally.

Aspray:

To what degree does your technical background enable you to do your job better?

Bruch:

I think that a technical background is a must in my job. My R&D background has taught me to think and to analyze. This enables me to check quickly whether our plans are correct and successful and will lead to successful products. My progress through the whole organization in the course of my career has provided me with knowledge and a feeling for the important things in the company. Unfortunately I have never worked in another organization for any length of time. My basic experience is in-house. I have traveled frequently to the Far East, the US, and other countries where electronic things happen. I have taken part in various seminars and training courses to improve my knowledge. Overall, if I could give a piece of advice to a young scientist at the bottom of the career ladder, I would recommend he obtains experience in at least two or three companies. In my particular case the company provided me with all opportunities and a big enough playground.

Technical Background of Board Members

Aspray:

Do the other members of the board have technical backgrounds as well?

Bruch:

On the Grundig BOM there are three colleagues with a technical background and four with a commercial background.

Aspray:

The commercial people, are they in jobs of a different character?

Bruch:

They occupy posts in finance, personnel, marketing, and sales. There are also commercial people in charge of integral business.

Aspray:

How do they deal with these problems of understanding and making decisions about the technology?

Bruch:

They are, for example, chairmen of important business groups and they are supported by technical staff within their organization.

Aspray:

What about the chief executive officer of the company?

Bruch:

The C.E.O. of our company has a commercial and legal background. He is a forward-thinking man with a completely business orientation but he also has good technical knowledge and a feeling for our products.

Aspray:

Do you think this is a successful combination?

Bruch:

Yes, this works perfectly. Most European companies that are not extremely technology-driven are managed by commercial people. This makes sense.

Recruitment and Education of Engineers

Aspray:

When the company is hiring young engineers, do you have trouble getting qualified people?

Bruch:

Not at the moment. We have high unemployment in Europe. Even good, qualified engineers have problems finding positions now. We hope that this is a temporary situation.

Aspray:

Is the university education that these people have appropriate for the job that you ask them to do?

Bruch:

On the technical side, our R&D department is mainly staffed with people who have earned a university degree. Our engineers with a polytechnic background tend to work in product development and industrial engineering. We also have some technicians who we trained in-house.

Aspray:

With continuing education programs inside the company?

Bruch:

On an internal and external basis.

Aspray:

These are things that are continuing year after year?

Bruch:

Training programs are conducted year after year if there is a demand.

Aspray:

For a typical employee, how many days a year would they spend in continuing education?

Bruch:

It depends on the level. It is difficult to give an average figure. I, myself, spend approximately ten days per year on education, participation in seminars, and training programs. But all of our staff continuously undergo internal training.

Aspray:

How do you train engineers to be managers within the company?

Bruch:

It is very difficult. We use both internal and external programs to train them. We hire external teachers to transfer their experience to our staff and we also make use of the Grundig Academy. For example, we have a program called, "Train the Trainer." This is an activity of which we are particularly proud, due to its highly successful results. We also take advantage of all the opportunities offered by our partners. For example, the IC manufacturers train and educate the software staff. Equipment-producing companies offer training for CAD operation. For the management training of qualified engineers, we make use of appropriate international management training organizations.

Aspray:

Do you have other comments you care to make?

Bruch:

I grew up with this company. It is a fascinating job because our products are designed to entertain people. Consumer electronics is a highly competitive and fast-moving industry. You cannot sit around waiting and planning exactly what is going to happen in the next half year. There are major challenges and there are extremely good opportunities to meet people in different industries. I have contacts with people from unions, universities, and politics. My job requires much traveling, but I enjoy this aspect. I grew up in this area. I love my home and my family and I like my job. It is satisfying that the products we bring to the market are extremely popular in our own country and in Europe. Some products are well known throughout the world. For example, our short wave world receivers and our dictating machines. You can find them everywhere. It is a pleasure to find a Grundig dealer almost everywhere.

Competition with Japan

Aspray:

Americans are so very concerned about the Japanese these days. What are your experiences of competition with the Japanese?

Bruch:

They are our strongest competitors. They are innovative and job-oriented. They have a long-term strategy, work rapidly, and think globally. But at the moment the Far East is also confronted with growth-limiting factors. The philosophy of growth has to be adapted to fit in a stable or even a decreasing market. This actual situation requires different methods of management. Perhaps this is an advantage for European companies because they have been struggling in this situation for a long time. But problems did not only come from Asia. There are a lot of homemade problems. Japanese companies recognized very early the importance of quality customer orientation and cost effective production. Overall, I would not say that Japanese companies are more innovative than European ones.

Aspray:

Thank you.