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Oral-History:Kurt Schips

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== About Kurt Schips  ==
 
== About Kurt Schips  ==
  
German businessman, Kurt Schips, offers a compelling glimpse into his career with Bosch GmbH. Born in Stuttgart in 1927, Schips’s education was interrupted at an early age by World War II, in which he fought on the German side. Released as an American prisoner of war in 1945, Schips finished high school, completed his technical education, and joined Bosch, where his father worked, in 1952. While working on an additional degree in economics, Schips rose through Bosch ranks, starting first as a patent attorney and eventually serving as a senior executive vice president on the management board.  
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[[Image:1136 - Schips.jpg|thumb|left]]
  
Schips’s oral interview features a discussion of Bosch’s corporate culture, particularly in comparison to the successes of Japanese and American technical firms. The decentralized structure of Bosch creates a concentration of technical matters, R&D, and management decisions in divisions that operate almost veritably as separate companies: this keeps the company flexible and responsive in real-market time. Of particular note in this interview is Bosch’s aggressive stance towards patents, keeping R&D as in-house as possible, and the company’s policy of staying within the scope of their technical knowledge in any new product line or diversification. The talk concludes with Schips’s views on technical versus management knowledge and his assessment of how European sophisticated thinking has hindered the market, in comparison to Japanese vision and American motivation.  
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<p>German businessman, Kurt Schips, offers a compelling glimpse into his career with [[Robert Bosch|Bosch]] GmbH. Born in Stuttgart in 1927, Schips’s education was interrupted at an early age by World War II, in which he fought on the German side. Released as an American prisoner of war in 1945, Schips finished high school, completed his technical education, and joined Bosch, where his father worked, in 1952. While working on an additional degree in economics, Schips rose through Bosch ranks, starting first as a patent attorney and eventually serving as a senior executive vice president on the management board. </p>
  
<br>  
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<p>Schips’s oral interview features a discussion of Bosch’s corporate culture, particularly in comparison to the successes of Japanese and American technical firms. The decentralized structure of Bosch creates a concentration of technical matters, R&amp;D, and management decisions in divisions that operate almost veritably as separate companies: this keeps the company flexible and responsive in real-market time. Of particular note in this interview is Bosch’s aggressive stance towards patents, keeping R&amp;D as in-house as possible, and the company’s policy of staying within the scope of their technical knowledge in any new product line or diversification. The talk concludes with Schips’s views on technical versus management knowledge and his assessment of how European sophisticated thinking has hindered the market, in comparison to Japanese vision and American motivation. </p>
  
 
== About the Interview  ==
 
== About the Interview  ==
  
Kurt Schips: An Interview Conducted by WILLIAM ASPRAY, IEEE History Center, July 6, 1993  
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<p>Kurt Schips: An Interview Conducted by WILLIAM ASPRAY, IEEE History Center, July 6, 1993 </p>
  
Interview # 170 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc. and Rutgers, The State University of New Jersey
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<p>Interview # 170 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc. </p>
 
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<br>  
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== Copyright Statement  ==
 
== Copyright Statement  ==
  
This manuscript is being made available for research purposes only. All literary rights in the manuscript, including the right to publish, are reserved to the IEEE History Center. No part of the manuscript may be quoted for publication without the written permission of the Director of IEEE History Center.  
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<p>This manuscript is being made available for research purposes only. All literary rights in the manuscript, including the right to publish, are reserved to the IEEE History Center. No part of the manuscript may be quoted for publication without the written permission of the Director of IEEE History Center. </p>
  
Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, Rutgers - the State University, 39 Union Street, New Brunswick, NJ 08901-8538 USA. It should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user.  
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<p>Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, 39 Union Street, New Brunswick, NJ 08901-8538 USA. It should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user. </p>
  
It is recommended that this oral history be cited as follows:  
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<p>It is recommended that this oral history be cited as follows: </p>
  
Kurt Schips, an oral history conducted in 1993 by William Aspray, IEEE History Center, Rutgers University, New Brunswick, NJ, USA.  
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<p>Kurt Schips, an oral history conducted in 1993 by William Aspray, IEEE History Center, New Brunswick, NJ, USA. </p>
 
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<br>  
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== Interview  ==
 
== Interview  ==
  
Interview: Kurt Schips <br>Interviewer: William Aspray <br>Place: Garaling, Germany <br>Date: July 5, 1993<br>  
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<p>Interview: Kurt Schips </p>
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 +
<p>Interviewer: William Aspray </p>
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<p>Place: Garaling, Germany </p>
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<p>Date: July 5, 1993 </p>
  
 
=== Management Styles in US, Germany &amp; Japan  ===
 
=== Management Styles in US, Germany &amp; Japan  ===
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
You know why I was smiling when you mentioned Japan, the United States, and Europe as you described your project? The reason is that, a couple of years ago, we discussed this issue in our company of why is it the Japanese are so successful? That discussion went on and on and on. Some of my colleges thought they knew everything about why the Japanese are so successful. After some time I really got fed up. I thought I should spoil the whole affair a little bit and I said: "Now I know exactly why the Japanese are so successful. The reason is very simple. I personally met most of the leading managers of the electronics industry in Japan. What they all have in common is that they are elderly people and have basically no knowledge of English at all. Therefore they never get information about modern management. They were running their companies like an old battleship, that is why they are so extremely successful." I mention this only to spoil a serious discussion. But after all, I am not so sure if there is not some truth in it. I think one of the reasons in Japan—as compared with Europe and especially as compared with the United States—is that they are not influenced so strongly by the financial results in a short-term way. They deliberately or unconsciously are looking for a market-share and then they transfer it into a profitable business. That's one explanation. That is why I smiled when you mentioned this.  
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<p>You know why I was smiling when you mentioned Japan, the United States, and Europe as you described your project? The reason is that, a couple of years ago, we discussed this issue in our company of why is it the Japanese are so successful? That discussion went on and on and on. Some of my colleges thought they knew everything about why the Japanese are so successful. After some time I really got fed up. I thought I should spoil the whole affair a little bit and I said: "Now I know exactly why the Japanese are so successful. The reason is very simple. I personally met most of the leading managers of the electronics industry in Japan. What they all have in common is that they are elderly people and have basically no knowledge of English at all. Therefore they never get information about modern management. They were running their companies like an old battleship, that is why they are so extremely successful." I mention this only to spoil a serious discussion. But after all, I am not so sure if there is not some truth in it. I think one of the reasons in Japan—as compared with Europe and especially as compared with the United States—is that they are not influenced so strongly by the financial results in a short-term way. They deliberately or unconsciously are looking for a market-share and then they transfer it into a profitable business. That's one explanation. That is why I smiled when you mentioned this. </p>
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
Do you think that's true also of German companies? After all, between the end of World War II and now they built up from a devastated economy and became very powerful.  
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<p>Do you think that's true also of German companies? After all, between the end of World War II and now they built up from a devastated economy and became very powerful. </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
When I compare Japan, Germany, and the United States, I see Germany in the middle. Not extreme financial treatment, nor extreme technology treatment, it is somewhere in between. The success the German industry had after the war was based on several factors. They had good human resources and they had a chance to start at the beginning. They had to buy new machinery, so equipment was relatively new. The people were highly motivated to survive. Many of our problems today are coming from rules that allow people to have enough money even if they are without any work. Even then, they can still make their living. That's not a very strong impetus for the population as a whole to be as creative or as active as in the years after the war.  
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<p>When I compare Japan, Germany, and the United States, I see Germany in the middle. Not extreme financial treatment, nor extreme technology treatment, it is somewhere in between. The success the German industry had after the war was based on several factors. They had good human resources and they had a chance to start at the beginning. They had to buy new machinery, so equipment was relatively new. The people were highly motivated to survive. Many of our problems today are coming from rules that allow people to have enough money even if they are without any work. Even then, they can still make their living. That's not a very strong impetus for the population as a whole to be as creative or as active as in the years after the war. </p>
  
 
=== Background, Education &amp; Bosch Career  ===
 
=== Background, Education &amp; Bosch Career  ===
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
Can you tell me about your own career? Can you tell me when you were born, where you were educated, what you career path was?  
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<p>Can you tell me about your own career? Can you tell me when you were born, where you were educated, what you career path was? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
I was born here in Stuttgart in 1927. I grew up in Stuttgart and received my high school education here. At 16 years of age I was called into what they called "the labor service" and later on the army. I was an American prisoner of war. I was discharged in the summer of 1945. I opened a radio repair shop at age 18 in one of the smaller cities in the environment of Stuttgart. After a year or so I had the chance to go back to high school again. I finished high school and started to study electronics in the technical university of Stuttgart. I finished in 1952. At that time we had a recession. My father was working for Bosch for forty years, therefore I asked for employment at Bosch. I asked for a job in technical sales in exports, but at that time there was not much of an export business. When I was invited, I was told, "well, we have only one vacancy in our company that is in the patent department." I looked hurt, but had no choice but to say yes, and started to be trained as a patent attorney for four years in the patent department. I started to like this profession. After four years I had the chance to become head of the patent department of one of the subsidiaries of Bosch in Hildesheim, named Blaupunkt. I served there for eight years. At the end I was responsible for patents, licensing and advanced technology research. That was my first managerial experience. Besides my activities in the company, I studied economics at the University of Göttingen.  
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<p>I was born here in Stuttgart in 1927. I grew up in Stuttgart and received my high school education here. At 16 years of age I was called into what they called "the labor service" and later on the army. I was an American prisoner of war. I was discharged in the summer of 1945. I opened a radio repair shop at age 18 in one of the smaller cities in the environment of Stuttgart. After a year or so I had the chance to go back to high school again. I finished high school and started to study electronics in the technical university of Stuttgart. I finished in 1952. At that time we had a recession. My father was working for [[Robert Bosch|Bosch]] for forty years, therefore I asked for employment at Bosch. I asked for a job in technical sales in exports, but at that time there was not much of an export business. When I was invited, I was told, "well, we have only one vacancy in our company that is in the patent department." I looked hurt, but had no choice but to say yes, and started to be trained as a patent attorney for four years in the patent department. I started to like this profession. After four years I had the chance to become head of the patent department of one of the subsidiaries of Bosch in Hildesheim, named Blaupunkt. I served there for eight years. At the end I was responsible for patents, licensing and advanced technology research. That was my first managerial experience. Besides my activities in the company, I studied economics at the University of Göttingen. </p>
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
Why did you do that?  
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<p>Why did you do that? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
As an engineer I did not like to hear my law-trained and economics-trained colleagues talking about things I did not understand very well. So I said to myself, "let's try and see if I can adopt this knowledge too." I did it in Göttingen. But before I could gain my master's degree in economics I got the opportunity to become a technical manager of a subsidiary of Bosch in Berlin. That was in 1964. It was in the times just after the erection of the wall. It was a somewhat chaotic situation, but I liked it. It was far away from headquarters. I had relatively great freedom to develop the company. But in 1968 I was asked to come to the headquarters as head of all patent and license operations of the Bosch corporation worldwide. I took over more or less reluctantly because it was narrowing down my freedom and the scope of my activity. But I was asked to do it and I did it. After two or three years I took over, from one of the members of our management board responsibility to supervise one of the smaller subsidies of Bosch in the field of electronics and what we call investment goods: packing machinery, industrial equipment, and so on. Gradually, I took over more and more managerial responsibility. At the beginning of the 1970’s I was appointed as an associate member of the board of management. Step by step I was promoted to vice president, executive vice president, and the last position was called senior executive vice president. In my last position I was responsible for all activities of Bosch in the field of communications. There are about 40,000 employees and a 6.5 billion deutsche mark business. Besides that I still had the responsibility for the patent and license activities of Bosch. I also had to look over all construction activities of Bosch, including investment in land and buildings as well as what you may call "investment controlling." you know, we are highly diversified and it is always a problem for the central management to allocate the money to the various divisions. Part of this task was to assign investment funds to the various activities.  
+
<p>As an engineer I did not like to hear my law-trained and economics-trained colleagues talking about things I did not understand very well. So I said to myself, "let's try and see if I can adopt this knowledge too." I did it in Göttingen. But before I could gain my master's degree in economics I got the opportunity to become a technical manager of a subsidiary of Bosch in Berlin. That was in 1964. It was in the times just after the erection of the wall. It was a somewhat chaotic situation, but I liked it. It was far away from headquarters. I had relatively great freedom to develop the company. But in 1968 I was asked to come to the headquarters as head of all patent and license operations of the Bosch corporation worldwide. I took over more or less reluctantly because it was narrowing down my freedom and the scope of my activity. But I was asked to do it and I did it. After two or three years I took over, from one of the members of our management board responsibility to supervise one of the smaller subsidies of Bosch in the field of electronics and what we call investment goods: packing machinery, industrial equipment, and so on. Gradually, I took over more and more managerial responsibility. At the beginning of the 1970’s I was appointed as an associate member of the board of management. Step by step I was promoted to vice president, executive vice president, and the last position was called senior executive vice president. In my last position I was responsible for all activities of Bosch in the field of communications. There are about 40,000 employees and a 6.5 billion deutsche mark business. Besides that I still had the responsibility for the patent and license activities of Bosch. I also had to look over all construction activities of Bosch, including investment in land and buildings as well as what you may call "investment controlling." you know, we are highly diversified and it is always a problem for the central management to allocate the money to the various divisions. Part of this task was to assign investment funds to the various activities. </p>
  
 
=== Patent Strategy at Bosch  ===
 
=== Patent Strategy at Bosch  ===
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
Let us talk about patent strategy within the company. In a field such as electronics, where things are changing rapidly, patents themselves may play a different role than they do in more stable industries. Can you talk about the way that patents operate in your business?  
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<p>Let us talk about patent strategy within the company. In a field such as electronics, where things are changing rapidly, patents themselves may play a different role than they do in more stable industries. Can you talk about the way that patents operate in your business? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
In this company, which is now more than 100 years old, it is remarkable that patents played a role from the beginning. The founder of the company, when he decided to go into automotive electrics, established patent research before he became active, which was quite unusual in those times. Already by 1910 the first employee was in the company doing patent affairs. It developed gradually. One of my first tasks was to formulate the strategy of patent and license work within the Bosch group. We decided that the first priority of our patent work was to keep the scope of our activities free of hindering patents. The first thing is either to destroy patent applications that were relevant to us or to buy rights on it. The second priority was to safeguard the results of R&amp;D within our company by application of patents in Germany and so on. And the third priority was to make money out of our patents and our know-how. We established a clear role of priorities, which are now common in the company.  
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<p>In this company, which is now more than 100 years old, it is remarkable that patents played a role from the beginning. The founder of the company, when he decided to go into automotive electrics, established patent research before he became active, which was quite unusual in those times. Already by 1910 the first employee was in the company doing patent affairs. It developed gradually. One of my first tasks was to formulate the strategy of patent and license work within the Bosch group. We decided that the first priority of our patent work was to keep the scope of our activities free of hindering patents. The first thing is either to destroy patent applications that were relevant to us or to buy rights on it. The second priority was to safeguard the results of R&amp;D within our company by application of patents in Germany and so on. And the third priority was to make money out of our patents and our know-how. We established a clear role of priorities, which are now common in the company. </p>
  
 
=== Management of Advanced R &amp; D  ===
 
=== Management of Advanced R &amp; D  ===
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
Perhaps you can say something about the organization and management of advanced research and development in the company. Is it centralized?  
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<p>Perhaps you can say something about the organization and management of advanced research and development in the company. Is it centralized? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
We have in many ways a somewhat unique structure in our company. The basic units are the divisions. They are responsible for R &amp; D, production and sales. When they are big enough — and most of them have the proper size — they fully have to look after their own r &amp; d. But in the case, say, of the group of communications-orientated divisions there is a need to have some overlapping R &amp; D activities — things which do not fit exactly in division one, two, or three. This is done by what we call an advanced development department. That is the second level. And for all divisions we have a central research unit. This central research is mainly maintained to look after basic technology and materials, which are so expensive that you cannot handle them in an advanced development department, or in the R &amp; D departments of the divisions. So we have three layers. But that is not a hierarchical structure. Most of the decisions are made in the divisions because our belief is that the divisions should act like independent companies in order to be flexible enough to cope with the demand of the market.  
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<p>We have in many ways a somewhat unique structure in our company. The basic units are the divisions. They are responsible for R &amp; D, production and sales. When they are big enough — and most of them have the proper size — they fully have to look after their own r &amp; d. But in the case, say, of the group of communications-orientated divisions there is a need to have some overlapping R &amp; D activities — things which do not fit exactly in division one, two, or three. This is done by what we call an advanced development department. That is the second level. And for all divisions we have a central research unit. This central research is mainly maintained to look after basic technology and materials, which are so expensive that you cannot handle them in an advanced development department, or in the R &amp; D departments of the divisions. So we have three layers. But that is not a hierarchical structure. Most of the decisions are made in the divisions because our belief is that the divisions should act like independent companies in order to be flexible enough to cope with the demand of the market. </p>
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
If one division's researchers come up with some promising ideas, how are they communicated to other divisions at the company?  
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<p>If one division's researchers come up with some promising ideas, how are they communicated to other divisions at the company? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
That is the task either of the advanced development departments of a group of divisions or of central research. They have to watch what is going on. They should know it very well. When something comes up that is important to other divisions, or to other groups of divisions, they will learn about it and then they have to talk amongst themselves to find a solution. If there is no solution, the problem was to be solved by central management. But usually we can rely upon the common sense of our managers.  
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<p>That is the task either of the advanced development departments of a group of divisions or of central research. They have to watch what is going on. They should know it very well. When something comes up that is important to other divisions, or to other groups of divisions, they will learn about it and then they have to talk amongst themselves to find a solution. If there is no solution, the problem was to be solved by central management. But usually we can rely upon the common sense of our managers. </p>
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
What is the process like of taking a promising idea developed by the researchers to product development?  
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<p>What is the process like of taking a promising idea developed by the researchers to product development? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
That's a two-fold process. From time to time, central research presents their results to the development department of the divisions. Then a division can ask to get the results. That's one way. The other is they have to do some sales work, when there is not an obvious demand. As you can imagine, this is not always successful. Our research people have ideas, they come to some results, but sometimes the results are not very appealing to our people on the front of the business. I think that's a problem we all have in organizing R&amp;D.  
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<p>That's a two-fold process. From time to time, central research presents their results to the development department of the divisions. Then a division can ask to get the results. That's one way. The other is they have to do some sales work, when there is not an obvious demand. As you can imagine, this is not always successful. Our research people have ideas, they come to some results, but sometimes the results are not very appealing to our people on the front of the business. I think that's a problem we all have in organizing R&amp;D. </p>
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
Do the researchers travel to the next stage with a project typically? Or do they pass it on?  
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<p>Do the researchers travel to the next stage with a project typically? Or do they pass it on? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
Sometimes they pass it on. That is a desire of the central management, that the people of the central R &amp; D or of the advanced development departments go with their results into the divisions. Otherwise, the transfer of know how is not efficient enough. On top of this, we have to take care that employees in central research are not getting too old. Therefore we need fluctuation. Here we have to work against human behavior to stay where they are, where they are successful and rewarded. It is the task of the central management to stimulate fluctuation between various layers of R &amp; D.  
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<p>Sometimes they pass it on. That is a desire of the central management, that the people of the central R &amp; D or of the advanced development departments go with their results into the divisions. Otherwise, the transfer of know how is not efficient enough. On top of this, we have to take care that employees in central research are not getting too old. Therefore we need fluctuation. Here we have to work against human behavior to stay where they are, where they are successful and rewarded. It is the task of the central management to stimulate fluctuation between various layers of R &amp; D. </p>
  
 
=== Production Process  ===
 
=== Production Process  ===
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
At what point is so called manufacturing engineering brought into play?  
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<p>At what point is so called manufacturing engineering brought into play? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
A second unit of about the same size as central research is production technology. That work is done only on a central basis. They develop new soldering technology, welding technologies, stamping, and pressing processes. These guys at this central production technology development organize at least once a year meetings of all what we call "production planners" at the division level. They join them, present their results, and give them information about recent developments within the company and outside. They also have to serve as lookout for activities outside of the company — to watch the general technology progress. They tell you their findings in these meetings. That's one thing. The second is that every division, once a year, gets a visit from some of the central people. I would not say it is exactly an audit, but it comes close to it. From the central management how the production technology is developed in a certain division we can ask our people at the central level. So we know fairly well how far advanced the various activities are.  
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<p>A second unit of about the same size as central research is production technology. That work is done only on a central basis. They develop new soldering technology, welding technologies, stamping, and pressing processes. These guys at this central production technology development organize at least once a year meetings of all what we call "production planners" at the division level. They join them, present their results, and give them information about recent developments within the company and outside. They also have to serve as lookout for activities outside of the company — to watch the general technology progress. They tell you their findings in these meetings. That's one thing. The second is that every division, once a year, gets a visit from some of the central people. I would not say it is exactly an audit, but it comes close to it. From the central management how the production technology is developed in a certain division we can ask our people at the central level. So we know fairly well how far advanced the various activities are. </p>
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
The actual design work of taking the idea of a product that has been approved for production, but for which there is still a lot work to figure out how to make it properly and get quality, does that takes place on the division level?  
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<p>The actual design work of taking the idea of a product that has been approved for production, but for which there is still a lot work to figure out how to make it properly and get quality, does that takes place on the division level? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
Only on the division level because they have the link to the market. It never will take place at the advanced development or at the central research level.  
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<p>Only on the division level because they have the link to the market. It never will take place at the advanced development or at the central research level. </p>
  
 
=== Technology from Outside  ===
 
=== Technology from Outside  ===
  
'''Aspray:'''  
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<p>'''Aspray:''' </p>
  
I don't know the Bosch company very well, but my impression from what you are telling me is that the company's philosophy is to keep the R &amp; D in house, not to simply be an acquirer of technology. Is that a correct assumption?  
+
<p>I don't know the Bosch company very well, but my impression from what you are telling me is that the company's philosophy is to keep the R &amp; D in house, not to simply be an acquirer of technology. Is that a correct assumption? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
That is correct, but we also try to acquire technology from outside. This is not self-sustaining because of the "not-invented-here" attitude. The management has to push the engineers from time to time to go outside and look for what is already available before they start an expensive r &amp; d project. When it comes to a product, it must be done in-house because otherwise we cannot guarantee the quality standards we are looking for. The typical design of the product must be done within the company.  
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<p>That is correct, but we also try to acquire technology from outside. This is not self-sustaining because of the "not-invented-here" attitude. The management has to push the engineers from time to time to go outside and look for what is already available before they start an expensive r &amp; d project. When it comes to a product, it must be done in-house because otherwise we cannot guarantee the quality standards we are looking for. The typical design of the product must be done within the company. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
In what kinds of circumstances would you decide to acquire licenses from some other company or even purchase a small company?  
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<p>In what kinds of circumstances would you decide to acquire licenses from some other company or even purchase a small company? </p>
  
'''Schips:'''  
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<p>'''Schips:''' </p>
  
When we see there is development that could be of interest for us or if there is a patent which may hinder us in the future, then we approach the owner and start license negotiations or even take-over activities — but not in a hostile way. We avoid that and we are successful doing so. We always try to come to a mutual agreement.  
+
<p>When we see there is development that could be of interest for us or if there is a patent which may hinder us in the future, then we approach the owner and start license negotiations or even take-over activities — but not in a hostile way. We avoid that and we are successful doing so. We always try to come to a mutual agreement. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
What do you do in order to enter certain kinds of markets in different geographical regions? Or specialized industries where you have to know something about the industry? Is that a case where you commonly enter into agreements with other companies?  
+
<p>What do you do in order to enter certain kinds of markets in different geographical regions? Or specialized industries where you have to know something about the industry? Is that a case where you commonly enter into agreements with other companies? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Yes. For instance, when we approached the united states market for the third time. The first time was 1910, and we lost everything during World War I. We started again in 1920, and we lost our property in 1945. We had to find our place in the market again, and we ran across other companies that developed when we were not active in the United States. For instance, one of our main competitors had developed a principle for electronic injection and had a strong patent position. So we had to negotiate with them, and come to an agreement.  
+
<p>Yes. For instance, when we approached the united states market for the third time. The first time was 1910, and we lost everything during World War I. We started again in 1920, and we lost our property in 1945. We had to find our place in the market again, and we ran across other companies that developed when we were not active in the United States. For instance, one of our main competitors had developed a principle for electronic injection and had a strong patent position. So we had to negotiate with them, and come to an agreement. </p>
  
 
=== Product Life  ===
 
=== Product Life  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
What is the product life of most of the Bosch products? I am asking because of some questions I want to ask about the research process.  
+
<p>What is the product life of most of the Bosch products? I am asking because of some questions I want to ask about the research process. </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Bosch is a highly diversified company, as you might be aware. 50% is automotive equipment. Roughly 25% is communications. A further 25% is household goods and investment goods. Depending on the product line, the life span of a product is different. One extreme is consumer goods. For instance, in the field of entertainment — electronics, television receivers, car radios — the life span for a product is typically less than two years. But in the investment products field, the life-span can be 15 years. Packing machinery could be made in a similar shape for a decade or even more. With our automotive products, I would say the average is five years.  
+
<p>Bosch is a highly diversified company, as you might be aware. 50% is automotive equipment. Roughly 25% is communications. A further 25% is household goods and investment goods. Depending on the product line, the life span of a product is different. One extreme is consumer goods. For instance, in the field of entertainment — electronics, television receivers, car radios — the life span for a product is typically less than two years. But in the investment products field, the life-span can be 15 years. Packing machinery could be made in a similar shape for a decade or even more. With our automotive products, I would say the average is five years. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
For those parts of your product line that have short-term lives, what effect does this have on your R &amp; D process? You must have several projects along the way at different stages. How do you manage that?  
+
<p>For those parts of your product line that have short-term lives, what effect does this have on your R &amp; D process? You must have several projects along the way at different stages. How do you manage that? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
This is again done by the divisions. The management of the division has to look after their own R &amp; D work. There are some projects close to implementation in the market. Others are in a more or less premature stage. Usually in any division management, we have a technical manager. In the larger operations we may even have two people: one looking after R &amp; D and one for production. These two people, or one person in the smaller units, have to look after these R &amp; D activities and are responsible that at the proper time the necessary products are developed.  
+
<p>This is again done by the divisions. The management of the division has to look after their own R &amp; D work. There are some projects close to implementation in the market. Others are in a more or less premature stage. Usually in any division management, we have a technical manager. In the larger operations we may even have two people: one looking after R &amp; D and one for production. These two people, or one person in the smaller units, have to look after these R &amp; D activities and are responsible that at the proper time the necessary products are developed. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
Is there an accepted amount of time when the director of research in one of these divisions is talking to his research staff about project completion? Is there an expectation that this research will have a pay-off in five years or three years or ten years? Are there rules about that?  
+
<p>Is there an accepted amount of time when the director of research in one of these divisions is talking to his research staff about project completion? Is there an expectation that this research will have a pay-off in five years or three years or ten years? Are there rules about that? </p>
  
 
=== Effect of 35-Hour Week  ===
 
=== Effect of 35-Hour Week  ===
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
When we start a project, the aims are specified from a technical point of view. But also from a sales point of view: what turnover can be expected and at what time the product should be available for the market. At the very beginning of the project they define these aims. Unfortunately, there are sometimes delays — unexpected problems or additional wishes coming from the sales people. There is a steady struggle between the people involved. One of the basic problems in modern industry is to be at a very early stage on the market. Here in Germany we have a special problem that you do not encounter in the states nor in Japan. You may have heard that our unions are very strong in favor of the so-called 35-hour week. That means that the average German employee is working every year about 1600 hours. In Japan they still work 2100 hours. Most of the people are looking into this problem from a cost point of view. But I think that's only half of the story. Maybe even less than half of the story. In my opinion, the greater effect of these shorter working hours is that development departments cannot be so fast as development departments in Japan. When you start from the assumption that the quality of the engineers in Japan and in Germany are at the same level, which you can dispute but I think its at least initially a fair assumption, then the development engineer in Germany is available at his working place only 1600 hours a year. But the development engineer in Japan is available 2100 hours. Many of our development engineers are on a voluntary basis working longer hours, but that applies as well for the Japanese. The gap you figure is 500 hours that the Japanese are working more. In these extra hours, they can speed up development. And in the next year this comes on top of it. After a couple of years, you find that the Japanese are much faster in the market than the Germans. That is a problem I already see now, but in the future it will even be more serious.  
+
<p>When we start a project, the aims are specified from a technical point of view. But also from a sales point of view: what turnover can be expected and at what time the product should be available for the market. At the very beginning of the project they define these aims. Unfortunately, there are sometimes delays — unexpected problems or additional wishes coming from the sales people. There is a steady struggle between the people involved. One of the basic problems in modern industry is to be at a very early stage on the market. Here in Germany we have a special problem that you do not encounter in the states nor in Japan. You may have heard that our unions are very strong in favor of the so-called 35-hour week. That means that the average German employee is working every year about 1600 hours. In Japan they still work 2100 hours. Most of the people are looking into this problem from a cost point of view. But I think that's only half of the story. Maybe even less than half of the story. In my opinion, the greater effect of these shorter working hours is that development departments cannot be so fast as development departments in Japan. When you start from the assumption that the quality of the engineers in Japan and in Germany are at the same level, which you can dispute but I think its at least initially a fair assumption, then the development engineer in Germany is available at his working place only 1600 hours a year. But the development engineer in Japan is available 2100 hours. Many of our development engineers are on a voluntary basis working longer hours, but that applies as well for the Japanese. The gap you figure is 500 hours that the Japanese are working more. In these extra hours, they can speed up development. And in the next year this comes on top of it. After a couple of years, you find that the Japanese are much faster in the market than the Germans. That is a problem I already see now, but in the future it will even be more serious. </p>
  
 
=== Centralization and Decentralization  ===
 
=== Centralization and Decentralization  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
Why has Bosch made the decision to be in the organization of its decentralized company?  
+
<p>Why has Bosch made the decision to be in the organization of its decentralized company? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
For flexibility. We felt that at a certain point — and it was at the initiative of our chairman — we were reacting too slowly to the demands of the market and therefore, the idea came up. We created divisions.  
+
<p>For flexibility. We felt that at a certain point — and it was at the initiative of our chairman — we were reacting too slowly to the demands of the market and therefore, the idea came up. We created divisions. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
What aspects are centralized within the company? Do you centralize capital, do you centralize any marketing or other functions?  
+
<p>What aspects are centralized within the company? Do you centralize capital, do you centralize any marketing or other functions? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
We centralized legal affairs, patent operations and financial management. Every division has its own head of economics. But he is on a very short lead. If there is an excess of money in a division, this money goes to the central financial department. We also have some centralized marketing, especially if the name Bosch is involved. There should be rules to be followed in any division in order to have a unified appearance to the market. Everything else we gave to the divisions.  
+
<p>We centralized legal affairs, patent operations and financial management. Every division has its own head of economics. But he is on a very short lead. If there is an excess of money in a division, this money goes to the central financial department. We also have some centralized marketing, especially if the name Bosch is involved. There should be rules to be followed in any division in order to have a unified appearance to the market. Everything else we gave to the divisions. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
I know that some electronics systems manufacturers are now also starting to centralize purchasing because so much of their buying is semiconductors, which make up a lot of the cost of the products.  
+
<p>I know that some electronics systems manufacturers are now also starting to centralize purchasing because so much of their buying is semiconductors, which make up a lot of the cost of the products. </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Quite right. We have a central purchasing office that relies on the purchasing offices of the divisions. But when it comes to, for instance, steel, copper, or semiconductors, they coordinate the division level of purchasing offices in order to use the benefits of buying power.  
+
<p>Quite right. We have a central purchasing office that relies on the purchasing offices of the divisions. But when it comes to, for instance, steel, copper, or semiconductors, they coordinate the division level of purchasing offices in order to use the benefits of buying power. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
You suggested that there was another way that the company was decentralized in terms of its product lines. Do you want to speak to that?  
+
<p>You suggested that there was another way that the company was decentralized in terms of its product lines. Do you want to speak to that? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
That brings us back to Robert Bosch, the founder of the company. One day he felt he was too dependent on automotive products. Automotive was not only a success story. There are some ups and downs in between. Therefore he started to look for other business. That was the origin of activities of Bosch in the field of entertainment goods. There was also hydraulics (not only for automotive products, but also for machinery), manufacturing equipment, and household goods. With a smile I would say unfortunately we were not successful enough because the automotive side of our business grew also. Sometimes extremely fast so we never got more than 50% of our business to be non-automotive. At the moment we have about 50-50 between automotive and non-automotive. It remains to be seen what the future holds.  
+
<p>That brings us back to [[Robert Bosch|Robert Bosch]], the founder of the company. One day he felt he was too dependent on automotive products. Automotive was not only a success story. There are some ups and downs in between. Therefore he started to look for other business. That was the origin of activities of Bosch in the field of entertainment goods. There was also hydraulics (not only for automotive products, but also for machinery), manufacturing equipment, and household goods. With a smile I would say unfortunately we were not successful enough because the automotive side of our business grew also. Sometimes extremely fast so we never got more than 50% of our business to be non-automotive. At the moment we have about 50-50 between automotive and non-automotive. It remains to be seen what the future holds. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
One can live with that kind of success.  
+
<p>One can live with that kind of success. </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
We can, of course. We always try to do more, but the automotive side was successful and others could not overcome them.  
+
<p>We can, of course. We always try to do more, but the automotive side was successful and others could not overcome them. </p>
  
 
=== New Business Areas &amp; Allocating Capital  ===
 
=== New Business Areas &amp; Allocating Capital  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
In choosing new business areas, does there have to be some sort of relationship to old businesses? Some synergy between them? Some sense of knowing how to manage them? What considerations go into those?  
+
<p>In choosing new business areas, does there have to be some sort of relationship to old businesses? Some synergy between them? Some sense of knowing how to manage them? What considerations go into those? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
 
<p><flashmp3>170_-_schips_-_clip_1.mp3</flashmp3></p>
 
<p><flashmp3>170_-_schips_-_clip_1.mp3</flashmp3></p>
  
We always try to stay within the scope of technology known to us. We have a German saying, which is hard to translate. It means "shoemaker, continue to work on shoes; do not make fancy things." That is a guide for our selection of new products. Hydraulics, which I already mentioned, is typical. We used this technology for automotive equipment and now we use it also for other machinery. Another case is the [[Refrigerator|refrigerator]]. The basic elements of the refrigerator are the motor and compressor. For both elements we had the technology to produce. Another example was optics, used for headlights. You can also use optics for other products, so we started a photo business. We had a fairly large operation in the field of hand-held movie cameras, employing up to 4000 people. That came out of our optics know-how. In a movie camera there are moving parts. You have a similar technology in packing machinery. So another new field developed. But sometimes we had marketing problems when we ran across different behavior in markets new to us. Of course we were not always successful. We once started a business of prefabricated housing. Although it was somehow related with something we already did, it was a failure. Here we were too far away from our existing business and from the experience we had.  
+
<p>We always try to stay within the scope of technology known to us. We have a German saying, which is hard to translate. It means "shoemaker, continue to work on shoes; do not make fancy things." That is a guide for our selection of new products. Hydraulics, which I already mentioned, is typical. We used this technology for automotive equipment and now we use it also for other machinery. Another case is the [[Refrigerator|refrigerator]]. The basic elements of the refrigerator are the motor and compressor. For both elements we had the technology to produce. Another example was optics, used for headlights. You can also use optics for other products, so we started a photo business. We had a fairly large operation in the field of hand-held movie cameras, employing up to 4000 people. That came out of our optics know-how. In a movie camera there are moving parts. You have a similar technology in packing machinery. So another new field developed. But sometimes we had marketing problems when we ran across different behavior in markets new to us. Of course we were not always successful. We once started a business of prefabricated housing. Although it was somehow related with something we already did, it was a failure. Here we were too far away from our existing business and from the experience we had. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
Has the company left business areas in your time?  
+
<p>Has the company left business areas in your time? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Yes, that is natural. When you look at a tree, it is growing. But it is also giving away not only leaves, but also branches. So that is what we do. We acquired new branches, new activities, but at the same time we gave up — stopped or sold — business. We started business in the photographic movie area. We did it for 60 years or so. And after the photographic market decreased, especially for movie cameras, we stepped out of this business. So we feel strong enough, even after sixty years of activity in a certain market area, to step out. We think that is vital for every company that likes to survive. You cannot stay on your old original product and only develop it. From time to time, you have also cut things. You cannot only get new products.  
+
<p>Yes, that is natural. When you look at a tree, it is growing. But it is also giving away not only leaves, but also branches. So that is what we do. We acquired new branches, new activities, but at the same time we gave up — stopped or sold — business. We started business in the photographic movie area. We did it for 60 years or so. And after the photographic market decreased, especially for movie cameras, we stepped out of this business. So we feel strong enough, even after sixty years of activity in a certain market area, to step out. We think that is vital for every company that likes to survive. You cannot stay on your old original product and only develop it. From time to time, you have also cut things. You cannot only get new products. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
What kinds of decisions have to be made in allocating capital to your various divisions — as seen from the topside?  
+
<p>What kinds of decisions have to be made in allocating capital to your various divisions — as seen from the topside? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Every year, every division has to make a proposal for the budget of the next year. Included is also a view for the next three years. So every year central management gets a plan from every division: what they expect to do, what turnover they expect, and so on. Then this plan is discussed — this happens every fall — between the central management and the management of the various divisions. After this process, these plans are united in a plan for the whole company. During this process the central management has to make a decision: in which division or which product line is it useful to invest money and to which amount?  
+
<p>Every year, every division has to make a proposal for the budget of the next year. Included is also a view for the next three years. So every year central management gets a plan from every division: what they expect to do, what turnover they expect, and so on. Then this plan is discussed — this happens every fall — between the central management and the management of the various divisions. After this process, these plans are united in a plan for the whole company. During this process the central management has to make a decision: in which division or which product line is it useful to invest money and to which amount? </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
I know it’s an important activity, but how routine is it? Is it like creating the business anew each year?  
+
<p>I know it’s an important activity, but how routine is it? Is it like creating the business anew each year? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
It is for the division managers the most important thing every year. They should feel like an owner of their business. They have to defend it to the central office. So there's a struggle going on. That is not done in an easy way. Certainly the central management must be flexible enough to make adjustments each year.  
+
<p>It is for the division managers the most important thing every year. They should feel like an owner of their business. They have to defend it to the central office. So there's a struggle going on. That is not done in an easy way. Certainly the central management must be flexible enough to make adjustments each year. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
In some sense a lot of your budget is already set because you have made commitments in the long term to capitalize or with product development and so on.  
+
<p>In some sense a lot of your budget is already set because you have made commitments in the long term to capitalize or with product development and so on. </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Yes.  
+
<p>Yes. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
So there's a fair amount of stability there.  
+
<p>So there's a fair amount of stability there. </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
That's what we try to achieve: stability, because we have a preview to the following years. But we also have flexibility because every year is on the test bench, must be discussed, even in the year before it was decided, "well, there is a five year program."  
+
<p>That's what we try to achieve: stability, because we have a preview to the following years. But we also have flexibility because every year is on the test bench, must be discussed, even in the year before it was decided, "well, there is a five year program." </p>
  
 
=== Background of Bosch Management  ===
 
=== Background of Bosch Management  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
On the Bosch board of management, what is the background of the people that hold those positions?  
+
<p>On the Bosch board of management, what is the background of the people that hold those positions? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
We have people trained in economics, law, marketing, and engineering. All sorts of people. What may be a little bit unique is that some of them have line as well as staff responsibilities. In my case I had line responsibility for all the communication subsidiaries of Bosch, while my staff function was patent and licensing, investment, controlling, and so on. Some board members have only staff functions and some only line functions. But most of them have both. The thought behind that approach is that when you are responsible for both line and staff, you are not so much inclined to look into things only from one point of view. That adds some balance in thinking, which is implemented by this structure.  
+
<p>We have people trained in economics, law, marketing, and engineering. All sorts of people. What may be a little bit unique is that some of them have line as well as staff responsibilities. In my case I had line responsibility for all the communication subsidiaries of Bosch, while my staff function was patent and licensing, investment, controlling, and so on. Some board members have only staff functions and some only line functions. But most of them have both. The thought behind that approach is that when you are responsible for both line and staff, you are not so much inclined to look into things only from one point of view. That adds some balance in thinking, which is implemented by this structure. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
I see. What kind of technical knowledge do people have to have to be members of this board?  
+
<p>I see. What kind of technical knowledge do people have to have to be members of this board? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
Today, all of them are trained in a university. They all have doctorate or master's degrees from a technical university. In the past, we called them engineering schools. You do have not a similar institution in the states. They made a career by first being an apprentice and then going to school. This was a school something between high school and university. It was sometimes called "academy" in Germany. They were promoted as "engineers" without diploma. So they came from the workbench and have been successful managers in our company starting as apprentices. For instance, our manager who looks after marketing in general started as an apprentice of the company. Later on, he went to the university. This is not unusual. We try to remain open for everybody, but for the time being, most now are coming from the university.  
+
<p>Today, all of them are trained in a university. They all have doctorate or master's degrees from a technical university. In the past, we called them engineering schools. You do have not a similar institution in the states. They made a career by first being an apprentice and then going to school. This was a school something between high school and university. It was sometimes called "academy" in Germany. They were promoted as "engineers" without diploma. So they came from the workbench and have been successful managers in our company starting as apprentices. For instance, our manager who looks after marketing in general started as an apprentice of the company. Later on, he went to the university. This is not unusual. We try to remain open for everybody, but for the time being, most now are coming from the university. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
In doing your own job, what difference does it make that you have an engineering background?  
+
<p>In doing your own job, what difference does it make that you have an engineering background? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
All this management education brought up the idea — at least in Germany but I think also elsewhere — that a good manager can run every company. I think that's a fatal mistake. That is true when he competes against another "general" manager. But when he has a competitor who has managerial experience and specific experience in his field, in his product range, then he is always going to come out second. It is a mistake that occurs more and more frequently, unfortunately. People believe they should look for a good manager, who will get the wisdom necessary to do the job, from one-day selling mineral water and the next day running a company with electronic products. Again, there are examples that prove that it is possible. But in general, it takes so long — even when he is excellent — until he gets all the information he needs. In this time the company has a high-paid apprenticeship at the top. Now I'm coming back to your question. I was responsible for the communication activities of Bosch. At university I learned the technologies in this field. So when I had discussions with my division managers, I was always regarded as somebody who at least had a basic knowledge. I think it depends on the company, but in a technology-driven company it is necessary at some place in the top hierarchy to have technology background.  
+
<p>All this management education brought up the idea — at least in Germany but I think also elsewhere — that a good manager can run every company. I think that's a fatal mistake. That is true when he competes against another "general" manager. But when he has a competitor who has managerial experience and specific experience in his field, in his product range, then he is always going to come out second. It is a mistake that occurs more and more frequently, unfortunately. People believe they should look for a good manager, who will get the wisdom necessary to do the job, from one-day selling mineral water and the next day running a company with electronic products. Again, there are examples that prove that it is possible. But in general, it takes so long — even when he is excellent — until he gets all the information he needs. In this time the company has a high-paid apprenticeship at the top. Now I'm coming back to your question. I was responsible for the communication activities of Bosch. At university I learned the technologies in this field. So when I had discussions with my division managers, I was always regarded as somebody who at least had a basic knowledge. I think it depends on the company, but in a technology-driven company it is necessary at some place in the top hierarchy to have technology background. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
But not everybody on the management board needs to have it.  
+
<p>But not everybody on the management board needs to have it. </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
No, not everybody. Certainly not.  
+
<p>No, not everybody. Certainly not. </p>
  
 
=== Job Mobility within Bosch  ===
 
=== Job Mobility within Bosch  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
Assuming that your personal view that you just expressed is a company-shared view, top management-shared view, what does this mean about the appointment of people to higher-level positions in the company. Are they done from within primarily? Or do you bring people from the outside?  
+
<p>Assuming that your personal view that you just expressed is a company-shared view, top management-shared view, what does this mean about the appointment of people to higher-level positions in the company. Are they done from within primarily? Or do you bring people from the outside? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
It is done primarily from inside. We do not exclude people from outside. I would guess 10%, maximum 20% of the managers — probably closer to 10% than to 20% — come from outside.  
+
<p>It is done primarily from inside. We do not exclude people from outside. I would guess 10%, maximum 20% of the managers — probably closer to 10% than to 20% — come from outside. </p>
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
What does the company do to prepare engineers to move up through the ranks to be managers?  
+
<p>What does the company do to prepare engineers to move up through the ranks to be managers? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
First, the most important thing is training on the job. When an engineer comes from the university and starts his career, let's say in development, he has to learn about the dos and don'ts within the company, company structure, and so on. That's extremely valuable. I mentioned I went to university at Göttingen to study economics. It was impressive for me to see how much I have learned about in practice before I was exposed to it from an academic point of view. Young engineers learn a lot during the first years when they are open-minded. When they show some potential to become a manager and show an interest to do this, then we have several promotion programs. We send them to attend management programs in Europe and the United States. MIT, for example.  
+
<p>First, the most important thing is training on the job. When an engineer comes from the university and starts his career, let's say in development, he has to learn about the dos and don'ts within the company, company structure, and so on. That's extremely valuable. I mentioned I went to university at Göttingen to study economics. It was impressive for me to see how much I have learned about in practice before I was exposed to it from an academic point of view. Young engineers learn a lot during the first years when they are open-minded. When they show some potential to become a manager and show an interest to do this, then we have several promotion programs. We send them to attend management programs in Europe and the United States. MIT, for example. </p>
  
I once attended a summer course at Stanford. Also in Europe, Fountainbleau for example. These are preparations for people who are on the promoting list. We send people away, but we also have a Bosch College, as we call it. That is a very useful tool. It was drafted especially for the purpose of upgrading people who, let's say, have ten years or fifteen in the company, have made their ways through the ranks, but have lost connection to developments which were going on in universities. For instance, computer knowledge, or organizational methods, or basic mathematics to refresh the knowledge they once learned at university. The training at this Bosch College is run by an internal group of people, but the teachers are coming from universities. We try to make our managers capable to cope with the problems they come across in their daily work.  
+
<p>I once attended a summer course at Stanford. Also in Europe, Fountainbleau for example. These are preparations for people who are on the promoting list. We send people away, but we also have a Bosch College, as we call it. That is a very useful tool. It was drafted especially for the purpose of upgrading people who, let's say, have ten years or fifteen in the company, have made their ways through the ranks, but have lost connection to developments which were going on in universities. For instance, computer knowledge, or organizational methods, or basic mathematics to refresh the knowledge they once learned at university. The training at this Bosch College is run by an internal group of people, but the teachers are coming from universities. We try to make our managers capable to cope with the problems they come across in their daily work. </p>
  
 
=== Greatest Challenges  ===
 
=== Greatest Challenges  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
  
I don't want to prolong this discussion too long because I know you have other things to do. But I have two more questions for you. The first one is: what is your greatest challenge in doing your work on a day-to-day basis? What's the hardest, most subtle kinds of issues that you have to address?  
+
<p>I don't want to prolong this discussion too long because I know you have other things to do. But I have two more questions for you. The first one is: what is your greatest challenge in doing your work on a day-to-day basis? What's the hardest, most subtle kinds of issues that you have to address? </p>
  
'''Schips:'''  
+
<p>'''Schips:''' </p>
  
I think for a manager in general the most rewarding and the most important thing is to safeguard the future of the unit he is responsible for. Including all the problems involved. From people, to financial resources, to pushing development, to looking after lean production.  
+
<p>I think for a manager in general the most rewarding and the most important thing is to safeguard the future of the unit he is responsible for. Including all the problems involved. From people, to financial resources, to pushing development, to looking after lean production. </p>
  
 
=== International Competition  ===
 
=== International Competition  ===
  
'''Aspray:'''  
+
<p>'''Aspray:''' </p>
 
+
My last question brings us back to where we started which is, do you want to say anything more about your competition from Japan or other parts of Europe or the United States?
+
  
'''Schips:'''
+
<p>My last question brings us back to where we started which is, do you want to say anything more about your competition from Japan or other parts of Europe or the United States? </p>
  
Let me start on this question with two remarks. When I started my career here at this company, our most important competitor in the automotive field was a company in Great Britain. We had a high regard for them and we were even working with together in certain fields. They were good competitors. Reasonable ones and from a technology point of view, very advanced. What happened to them? They are almost out of business in the meantime. Why? Not mainly because of "British disease." Mainly because their main customers disappeared. The automotive industry in Britain fell down although not completely. Having relied mainly on their local customers, they still have some market share, but they are no longer the dominating competitor. That is one observation.
+
<p>'''Schips:''' </p>
  
The second is, when I came to Blaupunkt, an entertainment goods company and I went to a trade fair, we had in Germany at least 30 or 40 competitors. When I go to a fair nowadays, there are only 2 or 3 competitors. And 1 or 2 of them are foreign. You see the big change that is occurring. We have to live with it. We are not, by far not, at the end of the period we are in now. After this recession we face here in Germany the economic and the industrial landscape will be entirely different. In worldwide competition I think Germany does have a good chance. But we must consider that the Japanese are extremely strong. They learned their lesson. When I first came to Japan 30 years ago, I was a lonely scout. When I told my colleagues that there is something building up, they nodded, took note of it, but it was not something that was of high emotional value. That changed. From an industrial point of view they are well organized and extremely fast. Fast is the key. The united states industry, which was, after the last war, the big example to be followed for all Europeans, advanced production technology and advanced managerial knowledge. Like pickers, we went to the united states and tried to learn it. But American industry fell down a decade ago. There was an extreme weakening of industry in the united states in general. But we notice it is improving again. How far it will improve remains to be seen, but American industry is definitely improving its efficiency. Maybe not only the efficiency. They lost the long-term perspectives in their environment. The take-over battles, according to my personal opinion, were absolutely crazy. It was a waste of energy and financial means you can hardly understand.  
+
<p>Let me start on this question with two remarks. When I started my career here at this company, our most important competitor in the automotive field was a company in Great Britain. We had a high regard for them and we were even working with together in certain fields. They were good competitors. Reasonable ones and from a technology point of view, very advanced. What happened to them? They are almost out of business in the meantime. Why? Not mainly because of "British disease." Mainly because their main customers disappeared. The automotive industry in Britain fell down although not completely. Having relied mainly on their local customers, they still have some market share, but they are no longer the dominating competitor. That is one observation. </p>
  
But American industry is coming back. The European industry is again somewhere between the Japanese and the Americans. What will be seen in the next years is hard to predict. If the free trade formula will succeed — German industry is very much in favor, but German industry is not Europe, we are part of Europe and we have to accept what the majority is thinking. There could be a change. It could also come from the United States. You still have your protectionist approach, very strong. Some of your senators and trade representatives still are always thinking of how they can protect farmers and parts of industry. The Japanese are doing it their way. Maybe it is not what sometimes was suspected, that there is a master plan in Japan. But they are used to living together, and have done so over many centuries, and all of the Japanese believe, "what I do not seed in the spring I cannot harvest in the fall." It is experience that we forget sometimes. They have a vision. At least in Europe, we have a lack of vision. Maybe you Americans are more open-minded. You can be more easily motivated, in contrast to the highly sophisticated thinking that characterizes Europe. Maybe that is an advantage in the future. Life shows us that there's always a new way of advancing.  
+
<p>The second is, when I came to Blaupunkt, an entertainment goods company and I went to a trade fair, we had in Germany at least 30 or 40 competitors. When I go to a fair nowadays, there are only 2 or 3 competitors. And 1 or 2 of them are foreign. You see the big change that is occurring. We have to live with it. We are not, by far not, at the end of the period we are in now. After this recession we face here in Germany the economic and the industrial landscape will be entirely different. In worldwide competition I think Germany does have a good chance. But we must consider that the Japanese are extremely strong. They learned their lesson. When I first came to Japan 30 years ago, I was a lonely scout. When I told my colleagues that there is something building up, they nodded, took note of it, but it was not something that was of high emotional value. That changed. From an industrial point of view they are well organized and extremely fast. Fast is the key. The united states industry, which was, after the last war, the big example to be followed for all Europeans, advanced production technology and advanced managerial knowledge. Like pickers, we went to the united states and tried to learn it. But American industry fell down a decade ago. There was an extreme weakening of industry in the united states in general. But we notice it is improving again. How far it will improve remains to be seen, but American industry is definitely improving its efficiency. Maybe not only the efficiency. They lost the long-term perspectives in their environment. The take-over battles, according to my personal opinion, were absolutely crazy. It was a waste of energy and financial means you can hardly understand. </p>
  
<br>  
+
<p>But American industry is coming back. The European industry is again somewhere between the Japanese and the Americans. What will be seen in the next years is hard to predict. If the free trade formula will succeed — German industry is very much in favor, but German industry is not Europe, we are part of Europe and we have to accept what the majority is thinking. There could be a change. It could also come from the United States. You still have your protectionist approach, very strong. Some of your senators and trade representatives still are always thinking of how they can protect farmers and parts of industry. The Japanese are doing it their way. Maybe it is not what sometimes was suspected, that there is a master plan in Japan. But they are used to living together, and have done so over many centuries, and all of the Japanese believe, "what I do not seed in the spring I cannot harvest in the fall." It is experience that we forget sometimes. They have a vision. At least in Europe, we have a lack of vision. Maybe you Americans are more open-minded. You can be more easily motivated, in contrast to the highly sophisticated thinking that characterizes Europe. Maybe that is an advantage in the future. Life shows us that there's always a new way of advancing. </p>
  
[[Category:People_and_organizations]] [[Category:Engineers]] [[Category:Corporations]] [[Category:Business,_management_&_industry|Category:Business,_management_&amp;_industry]] [[Category:Business]] [[Category:Marketing_management]] [[Category:Research_and_development_management]] [[Category:Manufacturing_industries]] [[Category:International_trade]] [[Category:Culture_and_society]] [[Category:Defense_&_security|Category:Defense_&amp;_security]] [[Category:World_War_II]] [[Category:Patents]] [[Category:Power,_energy_&_industry_application|Category:Power,_energy_&amp;_industry_application]] [[Category:Consumer_electronics]] [[Category:Standardization]] [[Category:Automotive_electronics]] [[Category:Workplace]] [[Category:Quality_of_work_life]]
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[[Category:People and organizations|Schips]] [[Category:Engineers|Schips]] [[Category:Corporations|Schips]] [[Category:Business, management & industry|Schips]] [[Category:Business|Schips]] [[Category:Marketing management|Schips]] [[Category:Research and development management|Schips]] [[Category:Manufacturing industries|Schips]] [[Category:International trade|Schips]] [[Category:Culture and society|Schips]] [[Category:Defense & security|Schips]] [[Category:World War II|Schips]] [[Category:Patents|Schips]] [[Category:Power, energy & industry application|Schips]] [[Category:Consumer electronics|Schips]] [[Category:Standardization|Schips]] [[Category:Automotive electronics|Schips]] [[Category:Workplace|Schips]] [[Category:Quality of work life|Schips]]

Revision as of 20:25, 28 March 2012

Contents

About Kurt Schips

German businessman, Kurt Schips, offers a compelling glimpse into his career with Bosch GmbH. Born in Stuttgart in 1927, Schips’s education was interrupted at an early age by World War II, in which he fought on the German side. Released as an American prisoner of war in 1945, Schips finished high school, completed his technical education, and joined Bosch, where his father worked, in 1952. While working on an additional degree in economics, Schips rose through Bosch ranks, starting first as a patent attorney and eventually serving as a senior executive vice president on the management board.

Schips’s oral interview features a discussion of Bosch’s corporate culture, particularly in comparison to the successes of Japanese and American technical firms. The decentralized structure of Bosch creates a concentration of technical matters, R&D, and management decisions in divisions that operate almost veritably as separate companies: this keeps the company flexible and responsive in real-market time. Of particular note in this interview is Bosch’s aggressive stance towards patents, keeping R&D as in-house as possible, and the company’s policy of staying within the scope of their technical knowledge in any new product line or diversification. The talk concludes with Schips’s views on technical versus management knowledge and his assessment of how European sophisticated thinking has hindered the market, in comparison to Japanese vision and American motivation.

About the Interview

Kurt Schips: An Interview Conducted by WILLIAM ASPRAY, IEEE History Center, July 6, 1993

Interview # 170 for the IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc.

Copyright Statement

This manuscript is being made available for research purposes only. All literary rights in the manuscript, including the right to publish, are reserved to the IEEE History Center. No part of the manuscript may be quoted for publication without the written permission of the Director of IEEE History Center.

Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, 39 Union Street, New Brunswick, NJ 08901-8538 USA. 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:

Kurt Schips, an oral history conducted in 1993 by William Aspray, IEEE History Center, New Brunswick, NJ, USA.

Interview

Interview: Kurt Schips

Interviewer: William Aspray

Place: Garaling, Germany

Date: July 5, 1993

Management Styles in US, Germany & Japan

Schips:

You know why I was smiling when you mentioned Japan, the United States, and Europe as you described your project? The reason is that, a couple of years ago, we discussed this issue in our company of why is it the Japanese are so successful? That discussion went on and on and on. Some of my colleges thought they knew everything about why the Japanese are so successful. After some time I really got fed up. I thought I should spoil the whole affair a little bit and I said: "Now I know exactly why the Japanese are so successful. The reason is very simple. I personally met most of the leading managers of the electronics industry in Japan. What they all have in common is that they are elderly people and have basically no knowledge of English at all. Therefore they never get information about modern management. They were running their companies like an old battleship, that is why they are so extremely successful." I mention this only to spoil a serious discussion. But after all, I am not so sure if there is not some truth in it. I think one of the reasons in Japan—as compared with Europe and especially as compared with the United States—is that they are not influenced so strongly by the financial results in a short-term way. They deliberately or unconsciously are looking for a market-share and then they transfer it into a profitable business. That's one explanation. That is why I smiled when you mentioned this.

Aspray:

Do you think that's true also of German companies? After all, between the end of World War II and now they built up from a devastated economy and became very powerful.

Schips:

When I compare Japan, Germany, and the United States, I see Germany in the middle. Not extreme financial treatment, nor extreme technology treatment, it is somewhere in between. The success the German industry had after the war was based on several factors. They had good human resources and they had a chance to start at the beginning. They had to buy new machinery, so equipment was relatively new. The people were highly motivated to survive. Many of our problems today are coming from rules that allow people to have enough money even if they are without any work. Even then, they can still make their living. That's not a very strong impetus for the population as a whole to be as creative or as active as in the years after the war.

Background, Education & Bosch Career

Aspray:

Can you tell me about your own career? Can you tell me when you were born, where you were educated, what you career path was?

Schips:

I was born here in Stuttgart in 1927. I grew up in Stuttgart and received my high school education here. At 16 years of age I was called into what they called "the labor service" and later on the army. I was an American prisoner of war. I was discharged in the summer of 1945. I opened a radio repair shop at age 18 in one of the smaller cities in the environment of Stuttgart. After a year or so I had the chance to go back to high school again. I finished high school and started to study electronics in the technical university of Stuttgart. I finished in 1952. At that time we had a recession. My father was working for Bosch for forty years, therefore I asked for employment at Bosch. I asked for a job in technical sales in exports, but at that time there was not much of an export business. When I was invited, I was told, "well, we have only one vacancy in our company that is in the patent department." I looked hurt, but had no choice but to say yes, and started to be trained as a patent attorney for four years in the patent department. I started to like this profession. After four years I had the chance to become head of the patent department of one of the subsidiaries of Bosch in Hildesheim, named Blaupunkt. I served there for eight years. At the end I was responsible for patents, licensing and advanced technology research. That was my first managerial experience. Besides my activities in the company, I studied economics at the University of Göttingen.

Aspray:

Why did you do that?

Schips:

As an engineer I did not like to hear my law-trained and economics-trained colleagues talking about things I did not understand very well. So I said to myself, "let's try and see if I can adopt this knowledge too." I did it in Göttingen. But before I could gain my master's degree in economics I got the opportunity to become a technical manager of a subsidiary of Bosch in Berlin. That was in 1964. It was in the times just after the erection of the wall. It was a somewhat chaotic situation, but I liked it. It was far away from headquarters. I had relatively great freedom to develop the company. But in 1968 I was asked to come to the headquarters as head of all patent and license operations of the Bosch corporation worldwide. I took over more or less reluctantly because it was narrowing down my freedom and the scope of my activity. But I was asked to do it and I did it. After two or three years I took over, from one of the members of our management board responsibility to supervise one of the smaller subsidies of Bosch in the field of electronics and what we call investment goods: packing machinery, industrial equipment, and so on. Gradually, I took over more and more managerial responsibility. At the beginning of the 1970’s I was appointed as an associate member of the board of management. Step by step I was promoted to vice president, executive vice president, and the last position was called senior executive vice president. In my last position I was responsible for all activities of Bosch in the field of communications. There are about 40,000 employees and a 6.5 billion deutsche mark business. Besides that I still had the responsibility for the patent and license activities of Bosch. I also had to look over all construction activities of Bosch, including investment in land and buildings as well as what you may call "investment controlling." you know, we are highly diversified and it is always a problem for the central management to allocate the money to the various divisions. Part of this task was to assign investment funds to the various activities.

Patent Strategy at Bosch

Aspray:

Let us talk about patent strategy within the company. In a field such as electronics, where things are changing rapidly, patents themselves may play a different role than they do in more stable industries. Can you talk about the way that patents operate in your business?

Schips:

In this company, which is now more than 100 years old, it is remarkable that patents played a role from the beginning. The founder of the company, when he decided to go into automotive electrics, established patent research before he became active, which was quite unusual in those times. Already by 1910 the first employee was in the company doing patent affairs. It developed gradually. One of my first tasks was to formulate the strategy of patent and license work within the Bosch group. We decided that the first priority of our patent work was to keep the scope of our activities free of hindering patents. The first thing is either to destroy patent applications that were relevant to us or to buy rights on it. The second priority was to safeguard the results of R&D within our company by application of patents in Germany and so on. And the third priority was to make money out of our patents and our know-how. We established a clear role of priorities, which are now common in the company.

Management of Advanced R & D

Aspray:

Perhaps you can say something about the organization and management of advanced research and development in the company. Is it centralized?

Schips:

We have in many ways a somewhat unique structure in our company. The basic units are the divisions. They are responsible for R & D, production and sales. When they are big enough — and most of them have the proper size — they fully have to look after their own r & d. But in the case, say, of the group of communications-orientated divisions there is a need to have some overlapping R & D activities — things which do not fit exactly in division one, two, or three. This is done by what we call an advanced development department. That is the second level. And for all divisions we have a central research unit. This central research is mainly maintained to look after basic technology and materials, which are so expensive that you cannot handle them in an advanced development department, or in the R & D departments of the divisions. So we have three layers. But that is not a hierarchical structure. Most of the decisions are made in the divisions because our belief is that the divisions should act like independent companies in order to be flexible enough to cope with the demand of the market.

Aspray:

If one division's researchers come up with some promising ideas, how are they communicated to other divisions at the company?

Schips:

That is the task either of the advanced development departments of a group of divisions or of central research. They have to watch what is going on. They should know it very well. When something comes up that is important to other divisions, or to other groups of divisions, they will learn about it and then they have to talk amongst themselves to find a solution. If there is no solution, the problem was to be solved by central management. But usually we can rely upon the common sense of our managers.

Aspray:

What is the process like of taking a promising idea developed by the researchers to product development?

Schips:

That's a two-fold process. From time to time, central research presents their results to the development department of the divisions. Then a division can ask to get the results. That's one way. The other is they have to do some sales work, when there is not an obvious demand. As you can imagine, this is not always successful. Our research people have ideas, they come to some results, but sometimes the results are not very appealing to our people on the front of the business. I think that's a problem we all have in organizing R&D.

Aspray:

Do the researchers travel to the next stage with a project typically? Or do they pass it on?

Schips:

Sometimes they pass it on. That is a desire of the central management, that the people of the central R & D or of the advanced development departments go with their results into the divisions. Otherwise, the transfer of know how is not efficient enough. On top of this, we have to take care that employees in central research are not getting too old. Therefore we need fluctuation. Here we have to work against human behavior to stay where they are, where they are successful and rewarded. It is the task of the central management to stimulate fluctuation between various layers of R & D.

Production Process

Aspray:

At what point is so called manufacturing engineering brought into play?

Schips:

A second unit of about the same size as central research is production technology. That work is done only on a central basis. They develop new soldering technology, welding technologies, stamping, and pressing processes. These guys at this central production technology development organize at least once a year meetings of all what we call "production planners" at the division level. They join them, present their results, and give them information about recent developments within the company and outside. They also have to serve as lookout for activities outside of the company — to watch the general technology progress. They tell you their findings in these meetings. That's one thing. The second is that every division, once a year, gets a visit from some of the central people. I would not say it is exactly an audit, but it comes close to it. From the central management how the production technology is developed in a certain division we can ask our people at the central level. So we know fairly well how far advanced the various activities are.

Aspray:

The actual design work of taking the idea of a product that has been approved for production, but for which there is still a lot work to figure out how to make it properly and get quality, does that takes place on the division level?

Schips:

Only on the division level because they have the link to the market. It never will take place at the advanced development or at the central research level.

Technology from Outside

Aspray:

I don't know the Bosch company very well, but my impression from what you are telling me is that the company's philosophy is to keep the R & D in house, not to simply be an acquirer of technology. Is that a correct assumption?

Schips:

That is correct, but we also try to acquire technology from outside. This is not self-sustaining because of the "not-invented-here" attitude. The management has to push the engineers from time to time to go outside and look for what is already available before they start an expensive r & d project. When it comes to a product, it must be done in-house because otherwise we cannot guarantee the quality standards we are looking for. The typical design of the product must be done within the company.

Aspray:

In what kinds of circumstances would you decide to acquire licenses from some other company or even purchase a small company?

Schips:

When we see there is development that could be of interest for us or if there is a patent which may hinder us in the future, then we approach the owner and start license negotiations or even take-over activities — but not in a hostile way. We avoid that and we are successful doing so. We always try to come to a mutual agreement.

Aspray:

What do you do in order to enter certain kinds of markets in different geographical regions? Or specialized industries where you have to know something about the industry? Is that a case where you commonly enter into agreements with other companies?

Schips:

Yes. For instance, when we approached the united states market for the third time. The first time was 1910, and we lost everything during World War I. We started again in 1920, and we lost our property in 1945. We had to find our place in the market again, and we ran across other companies that developed when we were not active in the United States. For instance, one of our main competitors had developed a principle for electronic injection and had a strong patent position. So we had to negotiate with them, and come to an agreement.

Product Life

Aspray:

What is the product life of most of the Bosch products? I am asking because of some questions I want to ask about the research process.

Schips:

Bosch is a highly diversified company, as you might be aware. 50% is automotive equipment. Roughly 25% is communications. A further 25% is household goods and investment goods. Depending on the product line, the life span of a product is different. One extreme is consumer goods. For instance, in the field of entertainment — electronics, television receivers, car radios — the life span for a product is typically less than two years. But in the investment products field, the life-span can be 15 years. Packing machinery could be made in a similar shape for a decade or even more. With our automotive products, I would say the average is five years.

Aspray:

For those parts of your product line that have short-term lives, what effect does this have on your R & D process? You must have several projects along the way at different stages. How do you manage that?

Schips:

This is again done by the divisions. The management of the division has to look after their own R & D work. There are some projects close to implementation in the market. Others are in a more or less premature stage. Usually in any division management, we have a technical manager. In the larger operations we may even have two people: one looking after R & D and one for production. These two people, or one person in the smaller units, have to look after these R & D activities and are responsible that at the proper time the necessary products are developed.

Aspray:

Is there an accepted amount of time when the director of research in one of these divisions is talking to his research staff about project completion? Is there an expectation that this research will have a pay-off in five years or three years or ten years? Are there rules about that?

Effect of 35-Hour Week

Schips:

When we start a project, the aims are specified from a technical point of view. But also from a sales point of view: what turnover can be expected and at what time the product should be available for the market. At the very beginning of the project they define these aims. Unfortunately, there are sometimes delays — unexpected problems or additional wishes coming from the sales people. There is a steady struggle between the people involved. One of the basic problems in modern industry is to be at a very early stage on the market. Here in Germany we have a special problem that you do not encounter in the states nor in Japan. You may have heard that our unions are very strong in favor of the so-called 35-hour week. That means that the average German employee is working every year about 1600 hours. In Japan they still work 2100 hours. Most of the people are looking into this problem from a cost point of view. But I think that's only half of the story. Maybe even less than half of the story. In my opinion, the greater effect of these shorter working hours is that development departments cannot be so fast as development departments in Japan. When you start from the assumption that the quality of the engineers in Japan and in Germany are at the same level, which you can dispute but I think its at least initially a fair assumption, then the development engineer in Germany is available at his working place only 1600 hours a year. But the development engineer in Japan is available 2100 hours. Many of our development engineers are on a voluntary basis working longer hours, but that applies as well for the Japanese. The gap you figure is 500 hours that the Japanese are working more. In these extra hours, they can speed up development. And in the next year this comes on top of it. After a couple of years, you find that the Japanese are much faster in the market than the Germans. That is a problem I already see now, but in the future it will even be more serious.

Centralization and Decentralization

Aspray:

Why has Bosch made the decision to be in the organization of its decentralized company?

Schips:

For flexibility. We felt that at a certain point — and it was at the initiative of our chairman — we were reacting too slowly to the demands of the market and therefore, the idea came up. We created divisions.

Aspray:

What aspects are centralized within the company? Do you centralize capital, do you centralize any marketing or other functions?

Schips:

We centralized legal affairs, patent operations and financial management. Every division has its own head of economics. But he is on a very short lead. If there is an excess of money in a division, this money goes to the central financial department. We also have some centralized marketing, especially if the name Bosch is involved. There should be rules to be followed in any division in order to have a unified appearance to the market. Everything else we gave to the divisions.

Aspray:

I know that some electronics systems manufacturers are now also starting to centralize purchasing because so much of their buying is semiconductors, which make up a lot of the cost of the products.

Schips:

Quite right. We have a central purchasing office that relies on the purchasing offices of the divisions. But when it comes to, for instance, steel, copper, or semiconductors, they coordinate the division level of purchasing offices in order to use the benefits of buying power.

Aspray:

You suggested that there was another way that the company was decentralized in terms of its product lines. Do you want to speak to that?

Schips:

That brings us back to Robert Bosch, the founder of the company. One day he felt he was too dependent on automotive products. Automotive was not only a success story. There are some ups and downs in between. Therefore he started to look for other business. That was the origin of activities of Bosch in the field of entertainment goods. There was also hydraulics (not only for automotive products, but also for machinery), manufacturing equipment, and household goods. With a smile I would say unfortunately we were not successful enough because the automotive side of our business grew also. Sometimes extremely fast so we never got more than 50% of our business to be non-automotive. At the moment we have about 50-50 between automotive and non-automotive. It remains to be seen what the future holds.

Aspray:

One can live with that kind of success.

Schips:

We can, of course. We always try to do more, but the automotive side was successful and others could not overcome them.

New Business Areas & Allocating Capital

Aspray:

In choosing new business areas, does there have to be some sort of relationship to old businesses? Some synergy between them? Some sense of knowing how to manage them? What considerations go into those?

Schips:

We always try to stay within the scope of technology known to us. We have a German saying, which is hard to translate. It means "shoemaker, continue to work on shoes; do not make fancy things." That is a guide for our selection of new products. Hydraulics, which I already mentioned, is typical. We used this technology for automotive equipment and now we use it also for other machinery. Another case is the refrigerator. The basic elements of the refrigerator are the motor and compressor. For both elements we had the technology to produce. Another example was optics, used for headlights. You can also use optics for other products, so we started a photo business. We had a fairly large operation in the field of hand-held movie cameras, employing up to 4000 people. That came out of our optics know-how. In a movie camera there are moving parts. You have a similar technology in packing machinery. So another new field developed. But sometimes we had marketing problems when we ran across different behavior in markets new to us. Of course we were not always successful. We once started a business of prefabricated housing. Although it was somehow related with something we already did, it was a failure. Here we were too far away from our existing business and from the experience we had.

Aspray:

Has the company left business areas in your time?

Schips:

Yes, that is natural. When you look at a tree, it is growing. But it is also giving away not only leaves, but also branches. So that is what we do. We acquired new branches, new activities, but at the same time we gave up — stopped or sold — business. We started business in the photographic movie area. We did it for 60 years or so. And after the photographic market decreased, especially for movie cameras, we stepped out of this business. So we feel strong enough, even after sixty years of activity in a certain market area, to step out. We think that is vital for every company that likes to survive. You cannot stay on your old original product and only develop it. From time to time, you have also cut things. You cannot only get new products.

Aspray:

What kinds of decisions have to be made in allocating capital to your various divisions — as seen from the topside?

Schips:

Every year, every division has to make a proposal for the budget of the next year. Included is also a view for the next three years. So every year central management gets a plan from every division: what they expect to do, what turnover they expect, and so on. Then this plan is discussed — this happens every fall — between the central management and the management of the various divisions. After this process, these plans are united in a plan for the whole company. During this process the central management has to make a decision: in which division or which product line is it useful to invest money and to which amount?

Aspray:

I know it’s an important activity, but how routine is it? Is it like creating the business anew each year?

Schips:

It is for the division managers the most important thing every year. They should feel like an owner of their business. They have to defend it to the central office. So there's a struggle going on. That is not done in an easy way. Certainly the central management must be flexible enough to make adjustments each year.

Aspray:

In some sense a lot of your budget is already set because you have made commitments in the long term to capitalize or with product development and so on.

Schips:

Yes.

Aspray:

So there's a fair amount of stability there.

Schips:

That's what we try to achieve: stability, because we have a preview to the following years. But we also have flexibility because every year is on the test bench, must be discussed, even in the year before it was decided, "well, there is a five year program."

Background of Bosch Management

Aspray:

On the Bosch board of management, what is the background of the people that hold those positions?

Schips:

We have people trained in economics, law, marketing, and engineering. All sorts of people. What may be a little bit unique is that some of them have line as well as staff responsibilities. In my case I had line responsibility for all the communication subsidiaries of Bosch, while my staff function was patent and licensing, investment, controlling, and so on. Some board members have only staff functions and some only line functions. But most of them have both. The thought behind that approach is that when you are responsible for both line and staff, you are not so much inclined to look into things only from one point of view. That adds some balance in thinking, which is implemented by this structure.

Aspray:

I see. What kind of technical knowledge do people have to have to be members of this board?

Schips:

Today, all of them are trained in a university. They all have doctorate or master's degrees from a technical university. In the past, we called them engineering schools. You do have not a similar institution in the states. They made a career by first being an apprentice and then going to school. This was a school something between high school and university. It was sometimes called "academy" in Germany. They were promoted as "engineers" without diploma. So they came from the workbench and have been successful managers in our company starting as apprentices. For instance, our manager who looks after marketing in general started as an apprentice of the company. Later on, he went to the university. This is not unusual. We try to remain open for everybody, but for the time being, most now are coming from the university.

Aspray:

In doing your own job, what difference does it make that you have an engineering background?

Schips:

All this management education brought up the idea — at least in Germany but I think also elsewhere — that a good manager can run every company. I think that's a fatal mistake. That is true when he competes against another "general" manager. But when he has a competitor who has managerial experience and specific experience in his field, in his product range, then he is always going to come out second. It is a mistake that occurs more and more frequently, unfortunately. People believe they should look for a good manager, who will get the wisdom necessary to do the job, from one-day selling mineral water and the next day running a company with electronic products. Again, there are examples that prove that it is possible. But in general, it takes so long — even when he is excellent — until he gets all the information he needs. In this time the company has a high-paid apprenticeship at the top. Now I'm coming back to your question. I was responsible for the communication activities of Bosch. At university I learned the technologies in this field. So when I had discussions with my division managers, I was always regarded as somebody who at least had a basic knowledge. I think it depends on the company, but in a technology-driven company it is necessary at some place in the top hierarchy to have technology background.

Aspray:

But not everybody on the management board needs to have it.

Schips:

No, not everybody. Certainly not.

Job Mobility within Bosch

Aspray:

Assuming that your personal view that you just expressed is a company-shared view, top management-shared view, what does this mean about the appointment of people to higher-level positions in the company. Are they done from within primarily? Or do you bring people from the outside?

Schips:

It is done primarily from inside. We do not exclude people from outside. I would guess 10%, maximum 20% of the managers — probably closer to 10% than to 20% — come from outside.

Aspray:

What does the company do to prepare engineers to move up through the ranks to be managers?

Schips:

First, the most important thing is training on the job. When an engineer comes from the university and starts his career, let's say in development, he has to learn about the dos and don'ts within the company, company structure, and so on. That's extremely valuable. I mentioned I went to university at Göttingen to study economics. It was impressive for me to see how much I have learned about in practice before I was exposed to it from an academic point of view. Young engineers learn a lot during the first years when they are open-minded. When they show some potential to become a manager and show an interest to do this, then we have several promotion programs. We send them to attend management programs in Europe and the United States. MIT, for example.

I once attended a summer course at Stanford. Also in Europe, Fountainbleau for example. These are preparations for people who are on the promoting list. We send people away, but we also have a Bosch College, as we call it. That is a very useful tool. It was drafted especially for the purpose of upgrading people who, let's say, have ten years or fifteen in the company, have made their ways through the ranks, but have lost connection to developments which were going on in universities. For instance, computer knowledge, or organizational methods, or basic mathematics to refresh the knowledge they once learned at university. The training at this Bosch College is run by an internal group of people, but the teachers are coming from universities. We try to make our managers capable to cope with the problems they come across in their daily work.

Greatest Challenges

Aspray:

I don't want to prolong this discussion too long because I know you have other things to do. But I have two more questions for you. The first one is: what is your greatest challenge in doing your work on a day-to-day basis? What's the hardest, most subtle kinds of issues that you have to address?

Schips:

I think for a manager in general the most rewarding and the most important thing is to safeguard the future of the unit he is responsible for. Including all the problems involved. From people, to financial resources, to pushing development, to looking after lean production.

International Competition

Aspray:

My last question brings us back to where we started which is, do you want to say anything more about your competition from Japan or other parts of Europe or the United States?

Schips:

Let me start on this question with two remarks. When I started my career here at this company, our most important competitor in the automotive field was a company in Great Britain. We had a high regard for them and we were even working with together in certain fields. They were good competitors. Reasonable ones and from a technology point of view, very advanced. What happened to them? They are almost out of business in the meantime. Why? Not mainly because of "British disease." Mainly because their main customers disappeared. The automotive industry in Britain fell down although not completely. Having relied mainly on their local customers, they still have some market share, but they are no longer the dominating competitor. That is one observation.

The second is, when I came to Blaupunkt, an entertainment goods company and I went to a trade fair, we had in Germany at least 30 or 40 competitors. When I go to a fair nowadays, there are only 2 or 3 competitors. And 1 or 2 of them are foreign. You see the big change that is occurring. We have to live with it. We are not, by far not, at the end of the period we are in now. After this recession we face here in Germany the economic and the industrial landscape will be entirely different. In worldwide competition I think Germany does have a good chance. But we must consider that the Japanese are extremely strong. They learned their lesson. When I first came to Japan 30 years ago, I was a lonely scout. When I told my colleagues that there is something building up, they nodded, took note of it, but it was not something that was of high emotional value. That changed. From an industrial point of view they are well organized and extremely fast. Fast is the key. The united states industry, which was, after the last war, the big example to be followed for all Europeans, advanced production technology and advanced managerial knowledge. Like pickers, we went to the united states and tried to learn it. But American industry fell down a decade ago. There was an extreme weakening of industry in the united states in general. But we notice it is improving again. How far it will improve remains to be seen, but American industry is definitely improving its efficiency. Maybe not only the efficiency. They lost the long-term perspectives in their environment. The take-over battles, according to my personal opinion, were absolutely crazy. It was a waste of energy and financial means you can hardly understand.

But American industry is coming back. The European industry is again somewhere between the Japanese and the Americans. What will be seen in the next years is hard to predict. If the free trade formula will succeed — German industry is very much in favor, but German industry is not Europe, we are part of Europe and we have to accept what the majority is thinking. There could be a change. It could also come from the United States. You still have your protectionist approach, very strong. Some of your senators and trade representatives still are always thinking of how they can protect farmers and parts of industry. The Japanese are doing it their way. Maybe it is not what sometimes was suspected, that there is a master plan in Japan. But they are used to living together, and have done so over many centuries, and all of the Japanese believe, "what I do not seed in the spring I cannot harvest in the fall." It is experience that we forget sometimes. They have a vision. At least in Europe, we have a lack of vision. Maybe you Americans are more open-minded. You can be more easily motivated, in contrast to the highly sophisticated thinking that characterizes Europe. Maybe that is an advantage in the future. Life shows us that there's always a new way of advancing.