The economic sector likes buzzwords: Is "digitalization" just the latest hype, or is the world actually changing for good, as many experts are predicting?
Suter: The term is broad enough to encompass everything that has anything to do with bits and bytes – but we have known for 30 years now that computers are changing the world. What is certainly true, however, is that we are currently experiencing a new wave of technology that offers incredible opportunities. A Swiss SME can set up and manage exceedingly complex production processes or distribution networks around the world. Just a few years ago, this was reserved only for major global companies.
Naumann: Simply put, digitalization is the new reality. Although I find it interesting that these new technologies can affect both the income side and the cost side. On the one hand, digitalization offers great opportunities through new smart products and business models. I consider the whole app business to be a prime example of how the digital revolution can be harnessed for successful business. On the other hand, the Internet of Things is changing the production and service processes that have been in place thus far now that machines can send and receive their data across any distance, with entirely new client options for service and maintenance models.
We often speak of the winner-takes-it-all principle in the digital world. Is this a risk for Swiss SMEs?
Suter: Since the home market is fairly manageable, even the smallest companies in Switzerland have long been accustomed to holding their ground in international competition. If globalization continues to expand, they will have more of an advantage because they have a great deal of experience in this field.
Are SVC Ltd. companies using these opportunities?
Naumann: Yes. Most of the projects that we review nowadays have a significant digital component.
Suter: A good example from our current portfolio is Les Toises / Gammed SA, which uses strong digital support in its processes to provide medical care.
What about established SMEs? Have they been struggling so far with the digital transformation?
Suter: As a general rule of thumb, the larger its radius is, the more dependent a company is on automation or digitalization. The more local it is, the more it can get away with still being analog. But I wouldn't rely too heavily on this tradesman approach. At the end of the day, the client is the one who decides. If a company cannot deliver for the price that customers are willing to pay, then it is out of the picture.
Naumann: Today, companies need to know exactly what part of the value chain they can make a difference in and outsource everything else down the line.
The primary mission of SVC Ltd. is to maintain or create jobs in Switzerland. Isn't digitalization doing exactly the opposite?
Naumann: Of course, employees could lose their jobs because the work they have done manually so far can be taken over by a computer or outsourced thanks to new technology. But I am certain that this outsourcing process will end creating more jobs for Switzerland as a whole. Digitalization gives a high-tech country with excellent universities huge opportunities to create new jobs. And I'm not just saying that because I work next door to the Google offices in Zurich.
Mr. Suter, you oversee the companies in the SVC Ltd. portfolio. What are the three most important tips you would give to an entrepreneur?
Suter: First of all, know your clients. They are constantly changing – and you need to be right there with them. You need to truly understand them and their business. This is not the forte of our SMEs. They are often very proud of their spick and span factory building, the incredible accuracy of their solutions, and their excellent punctuality – but a slightly less accurate solution might be enough for the client, or they may prefer a wider selection. Secondly, remember your marketable strengths: It makes no sense to manufacture your own screws or to write a program for your own accounting system – there are already good, cost-effective solutions for both of these in the market. You need to focus on what creates a margin.
Suter: Choose the best people and give them your trust. The more complicated and digital the world is, the higher the demands are on employees. For instance, the needs of the client change at a furious pace, and your employees have to do their part.
Naumann: Maybe just one more thing: Think about succession early on. We even have instances of succession planning at SVC Ltd. What we have discovered from this is that it is never too early to address the issue.
Lastly, exactly how digitalized is SVC Ltd. itself?
Naumann (laughing): Not exceptionally so far. Up until now, our digitalization efforts have been limited to the usual aspects of office automation. But we are making progress – our current project in this field is to introduce paperless document management for our Board of Directors & Investment Committee meetings.
Frank Naumann is CEO of SVC Ltd. and a Director at Credit Suisse (Switzerland) Ltd. He heads Divisional Collaboration Support at Credit Suisse. Frank Naumann joined Credit Suisse in 1999 as head of the internal consulting unit (Business Process Transformation) in the Credit Suisse Private Banking division.
Johannes Suter is a founding member of SVC Ltd. and was its first CEO. Today, he is Managing Partner and CEO of Helvetica Capital AG, which manages SVC Ltd.'s portfolio, among others.