Transformation requires strategy
Against a backdrop of far-reaching geopolitical shifts, changing global power dynamics and the simultaneous processes of social integration and disintegration, the question of Germany’s future business model is taking on a new sense of urgency.
This is not merely a matter of economic competitiveness, but equally concerns the long-term foundations of social prosperity, technological sovereignty and global responsibility. If the industrial core of the economy erodes, manifesting itself in declining competitiveness, the loss of highly skilled and well-paid industrial jobs, and increasing deindustrialisation, we must redefine the productive, technological and institutional foundations on which future value creation can be based.
Industrial policy describes the entirety of government measures aimed at shaping economic and technological development pathways. Its aim is to create framework conditions under which industrial enterprises can compete successfully on the international stage and tap into new growth potential. At the same time, it is evident that an industrial policy focused primarily on maintaining the status quo has its limits. Critics rightly point out that traditional instruments such as subsidies, tax breaks or protective measures can stabilise existing structures without sufficiently promoting necessary transformation processes.
This creates a tension: state intervention can ensure stability in the short term and limit systemic risks, but at the same time it can reduce the pressure to adapt and weaken long-term competitiveness. Industrial policy therefore necessarily operates within the tension between stabilisation and transformation – not as an either/or choice, but as a challenging balance between both objectives.
The experiences of the COVID-19 pandemic have highlighted this tension. Germany has undergone a partial paradigm shift in industrial and regulatory policy, moving away from pure market liberalism towards a more state-coordinated industrial policy (focused on resilience and economic security), in the course of which state intervention in supply chains, production capacities and strategic industries has been legitimised to an extent that was previously almost unimaginable.
We use foresight methods
At the same time, this policy follows in the tradition of long-standing interventions in the context of structural change, such as those in the coal and steel industries. Against the backdrop of the current multiple crises, however, it is foreseeable that the state will find it difficult to implement similarly extensive and long-term measures for other sectors coming under pressure, such as energy-intensive industries, the automotive sector, the chemical industry and mechanical engineering. In view of fiscal constraints, demographic pressures and growing security and climate policy requirements, there is a need for a more prioritised, strategically focused industrial policy that must make do with more limited financial resources and therefore requires more precise, technology- and transformation-oriented instruments.
Such an industrial policy requires a deep understanding of industrial value creation systems. What is crucial here is not merely the examination of individual sectors, but an understanding of their interactions with energy supply, technological developments, securing a skilled workforce and employment trends, infrastructure and geopolitical dependencies. Competitiveness today is increasingly systemic in nature.
In order to open up new scope for action for a modern industrial policy within these constellations characterised by complexity and interdependencies, we supplement our approach with foresight methods – that is, a scientifically grounded examination of possible, plausible and strategically relevant future developments.
Harnessing future potential through foresight
Our aim is to provide strategic guidance that goes beyond traditional industrial policy models and to identify measures that equally strengthen technological innovation, economic resilience and society’s capacity for transformation. In addition to the sometimes necessary stabilisation of existing companies and sectors, this involves, in particular, their targeted renewal and the active shaping of transitions between so-called ‘sunset’ and ‘sunrise’ industries.
Among other things, we are exploring the potential that Advanced Systems Engineering can offer as a further development of traditional German engineering.
The future competitiveness of industrial systems will depend largely on how successfully we manage to think of software, AI, hardware and production capabilities in an integrated manner and translate them into new industrial architectures. We are also examining the role that German industrial players can play in potential technological upheavals such as humanoid robotics. And we are deliberately focusing our attention on emerging fields of the future, such as a space-based economy, which could enable new forms of technological value creation in the long term. Even though these developments are still in their infancy, we are monitoring their strategic relevance in the context of technological sovereignty and global innovation and competitive dynamics.
