Is good enough, really good enough

Good - but really good enough?

GOOD - REALLY GOOD ENOUGH? Swiss entrepreneurs discuss coping with the corona crisis and what the future of the Swiss economy will look like

In co-operation with:

Table of Contents

04 resilient? Yes sure. 12 Leadership: Awaken the strengths in your team 18 How much government should it be? 22 Does family help in times of crisis?

26 Quickly with fresh ideas from the Corona crisis 32 Faster and more agile 40 The future is bleak - but not for us 44 “We have to deal much more closely with customer needs!”

Summary

The corona crisis stopped economic and social activities in Switzerland. At the same time it awakened the energy, creativity and innovative strength of many people. The country coped well with the first phase of the corona crisis. "We can Corona," claimed the Federal Council

The two organizations wanted to interactively maintain the dialogue between entrepreneurs, but also representatives from politics and universities, even in these conference-free times. SEF.Interaktiv aims to analyze the current challenges posed by the lockdown. Over 200 participants of the SEF took the time in early summer to discuss in virtual groups, to describe their experiences during the crisis and to formulate possible solutions. The participants looked forward and made suggestions on how Switzerland could better cope with future crises: With investments in education, in digital technologies, with more agile companies and a more flexible state, for example not just physical

Has borders, but also virtual regions beyond state borders in order to be able to better combat pandemics. They also looked into the question of whether family businesses hold up better in crises (answer: yes, but ...) and how much government it needs (answer: enough, but not too much ...). They discussed what real customer proximity means (answer: being faster and more reliable than the competition) and what leadership in crises really means (answer: communicating a lot). And very important: empower the employees! The bottom line: Yes, Switzerland has come out of the crisis (for the time being) well. But we can do better than that. The present paper summarizes the most important findings. The discussion was supplemented with a survey on current topics among all participants. The results can also be found in this white paper.

Alain Berset proudly after the lockdown ended. Indeed: Switzerland and its economy have proven to be astonishingly robust against the unprecedented interventions in economic and social life in Switzerland since the Second World War. At the same time, however, there were also weaknesses in the local economy. As part of a globalized economy, it was not immune to the consequences of mutual dependencies: supply chains were interrupted, gaps in digitization were discovered, thin capital ceilings were revealed. How can we get out of the crisis better than we went in was the basic question of an initiative of the Swiss Economic Forum that was spontaneously created in cooperation with IMD. Under the name SEF.

04 resilient? Yes sure.

The optimistic: The crisis also has positive aspects, thinks Ursula Nold, President of the Migros Cooperative Association Migros does not just want to master the crisis, but also use the Covid crisis as an opportunity for new developments. The head of economics at the NZZ, Peter A. Fischer, is also surprised at how courageously the Federal Council reacted to this crisis and sees “reason for a certain optimism”. FDP National Councilor Christian Wasserfallen praises the agility that Swiss companies, especially SMEs, have shown. Katharina Lange, professor for leadership at IMD, even saw a “Sully moment” (see box) how Switzerland reacted in lockdown: “Switzerland's management of the crisis was admirable!” The skeptical: “It depends on what industry you are in,” they warn, not all of them have had good moments. Indeed: where, for example, representatives of the sporting goods industry such as bicycle dealers can hardly keep up with the deliveries, on the other side of the scale event organizers can only stare in frustration at their halls and halls, which have been empty for months and will continue to do so in the future . In the first phase, Switzerland coped well with the crisis. This is how most of the panelists from SEF.Interaktiv saw it. However, with restrictions, especially when it comes to the easing steps. One reason for the good performance is the flexibility and adaptability of many Swiss companies and especially their employees. That's what the experts say. However, this assessment is too optimistic for some entrepreneurs from the circle of the SEF. They point to the big differences depending on the industry and fear the effects of a second wave.

Resilient? Yes sure.

5

However, the basic positive feeling is not wrong. At the beginning of July, economic activity in the Swiss economy was already over 93 percent of the average level of the past three years. This is shown by an analysis of real-time data from the Geneva-based private bank Lombard Odier. The bank analyzes figures from seven categories: imports, exports, mobility, retail trade, food consumption, presence at work and air pollution in production. Taken together, this gives a current picture of the state of the economic recovery compared to the average of the three years before the crisis. And the emergency loan program set up by the federal government with the banks in “Sully” fashion, namely at lightning speed, is being used significantly less than expected. Apparently the companies don't need as much emergency capital as they thought.

6

Resilient? Yes sure.

But what is the reason for this resilience in the Swiss economy?

On the one hand, all those involved agree that the Swiss government acted quickly and decisively in March. In addition, good structures are in place. Short-time working, for example, as a stabilizing element in the crisis, has proven its worth. The emergency loan program mentioned above also receives a lot of praise. This is an example of how the economy - in this case the banks - and politics work well together in a crisis. In addition, the state is only slightly indebted and has even been able to reduce debts over the past 20 years. So the starting position was already good. On the other hand, the economy has also largely proven to be strong and resilient. And finally, it was also “soft” factors that helped in difficult times. Ursula Nold notes, for example, that the crisis would have welded many people together. Albrecht Enders, Professor for Strategy & Innovation and also a member

the management of the IMD, brings in an outside perspective: For him as a German, it is fascinating how the Swiss are pragmatic and blindfolded looking for ways out of the crisis across all barriers and circles. It is a privilege to be able to live and work here, which Katharina Lange can only confirm. The positive basic tone, albeit with reservations, was also confirmed by the survey of all participants in July. Although a third of those surveyed had experienced a 20 to 50 percent drop in sales and a further 20 percent had even lost more than half of their business in lockdown, almost half saw the future positively after the end of the lockdown. At the same time, however - and this confirms the shared view of the situation among the participants in SEF.Interaktiv - 30 percent expect a gloomy future.

Resilient? Yes sure.

7

LEARNINGS

The structures in the state and economy in Switzerland are healthy.

In times of crisis, people from all areas stand together here.

The crisis affects industries and companies in very different ways.

How much did the lockdown affect your sales?

30%

No reduction, no upturn

34%

Reduction of sales by 20 - 50%

14%

Reduction of sales by 50 - 75%

14%

Increase in sales by 10 - 25%

8%

Reduction of sales over 75%

50%

0%

25%

75%

100%

Survey by SEF.Interaktiv participants in July 2020

8

Resilient? Yes sure.

How do you assess Switzerland's economic future in the next 12 months?

48%

Neutral

41%

negative

11%

positive

Survey by SEF.Interaktiv participants in July 2020

How do you estimate your own professional future in the next 12 months?

7%

39%

36%

18%

Rather negative

Rather positive

positive

Neutral

Survey by SEF.Interaktiv participants in July 2020

Resilient? Yes sure.

9

Flashlight: Sully

• January 15, 2009 • US Airways Flight 1549

10

Resilient? Yes sure.

US Airways flight 1549 will take off from New York on January 15, 2009. Chesley Sullenberger, known as Sully, sits at the controls of the Airbus 320. Sully is an experienced pilot with over 20,000 hours of flight time. Shortly after take-off, both engines fail due to a bird strike. Sully has to decide within seconds whether to bring the plane, which is still climbing, safely back to the airport or whether to risk an emergency landing. The lives of over a hundred people depend on this second decision. He decides to land on the Hudson River because he doesn't think the plane will make it back onto the runway. The landing succeeds, all 155 passengers get away without major damage.

Resilient? Yes sure.

11

12

Leadership: awaken the strength in your team

For the SEF.Interaktiv participants, one of the key issues in a crisis is leadership: not that leadership is trivial in good times, but leadership in a crisis is crucial. What does that mean? You have to be incredibly close to the front in order to be able to deal with the small crises in the big crisis immediately, says one participant. The employees expected instructions on the direction in which they should go at such moments. You have to exude calm in order to provide security in uncertain times, and it is crucial here to communicate convincingly. This is what MGB President Ursula Nold says. Although she would like to emphasize something else: The crisis has strengthened the self-efficacy of the employees: Employees were responsible for themselves, making decisions

decentralized and encouraged cooperation. Those who could rely on good partnerships came through the crisis well. Many SEF participants also see it this way: It was good to pass responsibility on to teams internally and to let the employees do it. There was a lot of energy available that could be used. However, good partnerships are not only important with employees, but also with customers. Many at SEF.Interaktiv talk about their great efforts to stay in contact with their customers, especially now, especially in such crisis situations. Good relationships have not only proven themselves, but have even surpassed themselves, quickly and pragmatically.

Ursula Nold underlines this development from the perspective of Migros: The crisis has brought people together. On the one hand, intensive work has been carried out internally, for example in the Migros industry and logistics, in order to be able to supply the Swiss population with food and everyday goods. You saw an incredibly high level of commitment on the part of employees. In addition, there was also a strong trend towards local and regional products, because people wanted to show solidarity with local producers. Migros was also highly valued by customers. Your employees have received thousands of thank-you letters.

Leadership: awaken the strength in your team

13

As Chief Operating Officer of the major bank UBS, Sabine Keller-Busse has to guarantee the functioning of the entire organization, in good times as well as in bad: How do I ensure that the bank remains operational without interruption? How do I maintain a high level of customer service and ensure the safety of employees who are spread around the world? And that in a company that is considered systemically relevant and therefore has to function? UBS sent its employees to work from home early on, and over 80% of them. According to Keller-Busse, the annual investments of over CHF 3.5 billion in IT systems would have paid off. In addition, roles have been brought back to the company intensively in recent years, they can rely on their own service centers and are therefore less dependent on external service providers. Corporate customers have been able to make a lot of liquidity available as part of the federal loan program, and that at high speed, also thanks to the support of bots. Here, too, the early digitization has borne fruit. UBS processed 24,000 loan applications within a very short time. At UBS, ultimately, the established and annually practiced

Crisis management processes now paid off in management during a major crisis.

Expressed in figures, the participants confirm the statements: a third has communication at the top of their priority list, every tenth relies on flexible employees and every twentieth on a stable infrastructure. Every eighth simply says, one should keep calm. At the top, however, is a point that sounds banal, but is essential in a crisis: Have enough liquidity!

14

Leadership: awaken the strength in your team

LEARNINGS

Good, close and trusting communication with customers and employees.

Wake up the tiger in the company: empower the employees.

Nothing works without sufficient liquidity.

What was most important in the crisis?

Sufficient liquidity

41%

Good communication internally and externally

28%

keep Calm

14%

Flexible employees

7%

7%

Functioning supply chains

3%

Good IT infrastructure

Survey by SEF.Interaktiv participants in July 2020

50%

0%

25%

75%

100%

Leadership: awaken the strength in your team

15

Flashlight: Sweden

• 90% of the workforce on short-time work • 300 SAS employees ready to work immediately

16

Leadership: awaken the strength in your team

In Sweden, those responsible at the airline SAS asked themselves in March what would happen if they put 90 percent of the workforce on short-time work. They decided, with the help of experts, to train the cabin crews in a rapid bleaching facility over 3.5 days to become auxiliary nurses. After all, the flight attendants already brought basic knowledge on board for emergencies. Hundreds of SAS employees wanted to take part, 30 were able to benefit from the training as a pilot test just two weeks after the introduction of short-time work. A further 300 SAS employees were operational within two months. Within a very short time, more employees from the hotel and restaurant sector joined the team. There is now a similar program for auxiliary teachers. This was made possible, among other things, by the close contacts within the Swedish economy and society.

Source: https://www.imd.org/research-knowledge/articles/How-reskilling-can-soften-the-economic-blow-of-COVID-19

Leadership: awaken the strength in your team

17

18 How much state should it be?

18

How much state should it be?

01

02

The Swiss government acted out of a mixture of fear and creativity, and he was pleasantly surprised. That says Peter A. Fischer, head of the influential economic department of the otherwise rather critical of the state NZZ. However, the statement only applies to the initial phase. At the start of the lockdown, the government “used its stabilization measures wisely”. Rudolf Minsch, as the representative of Economiesuisse - the organization is not necessarily known for being close to the state - also praises the first measures taken by official Switzerland, as well as the debt brake and the well-balanced national budget. Only then are the measures acceptable at all. Minsch, like Peter A. Fischer, criticizes the government for taking off the brakes too late. A participant with an Indian background, but based in Switzerland, on the other hand, praised Swiss politics in principle: None of the leading politicians - in contrast to many other countries - wanted to take advantage of the crisis for their own profit. It was about the country and only about the country. The party leader of the liberal party of the FDP. Liberal Switzerland (FDP), Petra Gössi, experienced the crisis in the political center of Switzerland. But their scope of action was limited for a certain period of time, because parliament was not able to act for a long time. All competencies lay with the Federal Council. Fundamental rights were restricted. Communication in the parties and with the population was massively disrupted. Politically, the crisis was a major challenge. Petra Gössi

It pays to have a functioning state, for everyone, for the economy, society and culture. Neither an ultra-liberal nor a socialist state could have acted so sensibly. 04 Politics and administration have to check how much precaution is necessary, what and how much, for example, must be available in the compulsory stocks.

A boost to digitization is needed in politics in order to keep it able to act even in crises.

03 Risk management needs to be strengthened. There will always be crises.05 And very important: Overcoming the crisis will put a lot of strain on the next generation. You have to give these generations a perspective, not just hand over debts.

How much state should it be?

19

has learned five lessons from this: Arturo Bris, Professor of Finance at IMD, warns of the political challenges in the coming months: Small economies are often successful, but Switzerland as a state does not have the protection of a large organization like the EU like others small nations. The country must therefore fight for the connection and not isolate itself. Individual participants warned against too much state intervention, now and later. For others, however, this antagonism went too far: It is not about economy versus population, the two belong together in Switzerland. However, one would like to see more of this radical slimness that the state demonstrated in the crisis, a rethinking of regulations, more flexibility. And maybe it just needs an impulse program based on the loan program.

Hans Hess, President of Swissmem, the association of the machine, electrical and metal industry, however, warned against too much direct support from the state: Change must be allowed, even if his industry is currently suffering severely from a lack of incoming orders, payment defaults, delivery difficulties. Ultimately, it is primarily up to the entrepreneurs themselves to find a way out of the crisis. Business journalist Peter A. Fischer also warns that the loan program does not really support companies in a targeted manner and that necessary structural change is slowed down or even prevented. Nevertheless, 3 out of 4 of the participants are of the opinion that the state interventions are good and appropriate. Only 3 out of 10 of them have resorted to state aid themselves, or had to fall back on it.

LEARNINGS

In times of crisis, you also need a strong state.

The interventions should be as short and as small as necessary.

The debts from the crisis should not be passed on to future generations.

20

How much state should it be?

How do you rate the state's interventions and offers?

Reasonable

Very good

Exaggerated

Neutral

12%

14%

21%

53%

Survey by SEF.Interaktiv participants in July 2020

Have you made use of state aid (direct payment, loans, etc.)?

38%

3%

59%

Yes

No

Still checking

Survey by SEF.Interaktiv participants in July 2020

How much state should it be?

21

22

Does family help in a crisis?

Family businesses make up a significant part of the Swiss economy. More than two thirds of all SMEs are family owned. Peter Vogel, Professor of Family Business & Entrepreneurship at IMD, identifies six points that distinguish family businesses and also make them more crisis-resistant:

01

02

03

LONG-TERM THINKING AND ACTING: For family businesses, 25 years is the same as a quarter in a listed company. You really think long term.

FINANCIAL STABILITY: Family businesses are on average less in debt and therefore more financially independent.

EMOTIONAL BOND: The emotional bond between the owner and the

Business is usually much higher than in non-family businesses. That means that everyone rolls up their sleeves in a crisis.

04

05

06

SOCIAL COMMITMENT AND PHILANTHROPY:

SOLID VALUES AND LOYALTY: The value system between owner families and employees is also more sustainable. This means that the loyalty of the owners to the workforce is high, as is vice versa that of the employees to the owners.

ENTREPRENEURSHIP: In family businesses, great entrepreneurship reigns. This also includes the ability to constantly reinvent yourself and take advantage of business opportunities in crises.

Family businesses are often strongly embedded in their social environment, which leads to increased social commitment. So there is also a social loyalty.

Does family help in a crisis?

23

But in this crisis, these strengths alone are not enough, says Vogel. Because at the same time almost all companies are stuck in the fourth industrial revolution and thus in a digital disruption phase. The challenges are particularly great in the crisis and those companies that have already digitally transformed years ago will come out of the crisis stronger. Rudolf Minsch, chief economist at Economiesuisse, reminds us of the truism: Save time, then you have an emergency. That applies to the state, but also to companies. And family businesses in particular tend to be more solid and financed over the long term. IMD professor Peter Vogel advised the owners not to be afraid to get outside help. For example, with independent board members. It is crucial

Filling leadership positions in a future-oriented and top-class position, because the “Rubberstamp Boards” that used to be typical in SMEs are no longer sufficient these days. And in times of crisis, it is important for non-owner-managed companies to communicate intensively between the board of directors, management and the owner family, including the following generations. Such crises often led to an acceleration in the question of succession. As in all other companies, it is recommended that employees be intensively involved in family businesses in order to make better use of knowledge from the front, to pursue a bottom-up approach and to empower employees, especially in family businesses. According to the survey, the participants of SEF.Interaktiv are clearly of the same opinion: Family businesses are better equipped to cope with the challenges of a crisis including lockdown and the long-term consequences.

LEARNINGS

Family businesses usually have a more solid financial base.

The longer-term orientation helps family businesses to better cope with the crisis.

Extraordinary events also accelerate fundamental issues such as succession in family businesses.

that family businesses have their boards of directors and

24

Does family help in a crisis?

Who could master the lockdown better?

Owner-managed companies

Manager-run company

92%

8%

Survey by SEF.Interaktiv participants in July 2020

Who is better placed to cope with the crisis in the long term?

15%

Public company

family business

85%

Survey by SEF.Interaktiv participants in July 2020

Does family help in a crisis?

25

26

Quickly with fresh ideas from the corona crisis Case study: How MBA graduates could help a SME By Arnaud Chevallier, IMD Professor of Strategy

As a Swiss company, Agathon is active in the manufacture of grinding machines. The growth course decided on in 2019 came to an abrupt halt with the outbreak of the corona pandemic. But there are opportunities. A group of MBA graduates worked with the company's management team to find a way out. Based on the broad expertise and international background of those involved, they worked out solutions that affect all key areas of the company and show a way out of the crisis.

Top quality in a “niche of the niche” Agathon, a family company with over 100 years of history, is based in Bellach, Canton Solothurn. The company is the world's leading manufacturer of high-tech grinding machines for indexable inserts in the micrometer range and employs 230 people. Indexable inserts are used to manufacture high-precision parts such as washing machines and aircraft engines. The company's second business area is the manufacture and sale of standard parts for mechanical engineering as well as tool and mold construction. Agathon is mainly active in Western Europe, but has also expanded into the USA, Japan and China.

Broad specialist knowledge and a structured process

Members involved. On the IMD side, 29 participants in the Global Management Foundations (GMF) program, consisting of Executive MBA candidates, worked in seven teams led by Professors Albrecht Enders and Arnaud Chevallier.

In 2019 Agathon decided on a growth strategy. After the first promising reactions in the market, customers have cut their budgets and stopped spending since March because of the pandemic. The company therefore expects a significant decline in sales for 2020. In view of the enormous uncertainty, Agathon now has to decide whether to continue on the path originally chosen or to change course. IMD and Agathon therefore got together to develop recommendations for further action. At Agathon, the CEO and two other C-level

Quickly with fresh ideas from the Corona crisis

27

The participants in the GMF program are executives from a wide range of industries, regions and disciplines. The program applies rigorous selection criteria and only accepts business executives who have great potential. The training in strategic thinking helps the participants to bring structure to the Agathon project. The systematic process defines the framework, creates a diagnosis, defines possible solutions, selects the best solution from this and then tries to convince the client. In just nine days, the participants were able to understand the complex problems of Agathon, to propose concrete solutions that are creative and yet are based on clear facts.

28

Quickly with fresh ideas from the Corona crisis

Check assumptions and open up new paths It is important to define the criteria in order to evaluate solutions in the first place. This can be difficult internally, as managers are often too involved in their operational areas to have the necessary distance. The project teams therefore collected opinions from Agathon and agreed on weighted criteria that really corresponded to Agathon's priorities. This included the speed and simplicity of the implementation, the generation of income, the costs and the degree of risk reduction.

§ One of the most promising

§ Another suggestion is to rebuild Agathon’s website into an advanced digital platform that better suits customer needs and inquiries.

Solutions for Agathon is to move away from the mere provision of machines, services and spare parts and to focus more on the customer. This could be an intensive analysis of every single phase of the customer journey in order to identify possible improvements and new revenue opportunities that could lead to a competitive advantage. § Another practicable solution is to increasingly integrate innovative technologies into the parts manufactured by Agathon. This could make it easier to interact with customers and shorten production time.

§ The recruitment of additional staff in key locations

could also drive customer interaction and sales.

Quickly with fresh ideas from the Corona crisis

29

A breath of fresh air and thinking Agathon executives were impressed and enthusiastic about these and many other recommendations developed as part of the program. “The program not only met my expectations, it actually exceeded them,” said CEO Michael Merkle. "You could feel an enormous creativity, a lot of structure and numerous practical solutions that could be implemented quickly." Company executives felt the process was helpful in two ways. First of all, that a group of talented executives who were trained in structured thinking developed a series of innovative ways forward in a very short time, which would have been difficult internally.

“We know our industry, we know our solutions,” said CEO Michael Merkle. “But we were looking for new solutions that we hadn't yet on our radar,” said Merkle. Some of them would have confirmed the company's thinking, while others presented exciting new opportunities. Strategy design is often the easier part of the process; the implementation, however, requires more detailed definition and planning of short, medium and long-term measures. This is done with a detailed implementation plan.

30

Quickly with fresh ideas from the Corona crisis

CONCLUSION

The pandemic continues to keep the global economy in suspense. The Agathon case shows how managers from outside the industry can develop fast and pragmatic solutions in their further training that show an SME new paths. In this way, it can still implement its strategy and hopefully achieve the double-digit growth it is aiming for.

Quickly with fresh ideas from the Corona crisis

31

32

Faster and more agile

Switzerland is successful and very competitive, it ranks third in the IMD World Competitiveness Index (see Flashlight). However, according to Arturo Bris, Professor of Finance and Director of the IMD World Competitiveness Center, Switzerland will only be able to advance to the top if it increases in agility and speed. For Peter Vogel, Professor of Entrepreneurship at IMD, the key is how you are positioned in a moment when everything comes to a standstill globally. This is what sets this crisis apart from all the others before. The main thing is the immune system: Do you have reserves or do you sail close to the wind and rely on a fair-weather model? The focus should always be on the customer. A recently published study by the auditing and consulting company PwC clearly points to the customer centricity factor as a success factor. But companies often see their customers only as a sales market. Or squeeze out your business model until it no longer works. A crisis like that of the Corona virus brutally reveals all failings. Then it arises

Ask how quickly you can react. The goal should always be to develop solutions together with the customer. A good example is Wilhelm Schmidlin AG from the canton of Schwyz. Urs Wullschleger is managing director and owner together with his brother. When they took over the family business 13 years ago in the 3rd generation, they thought about how to stand out from the market in order to be more resistant to a possible crisis. His company can now manufacture bathtubs and shower trays as well as washbasins as individual items instead of just standard sizes and deliver them at very short notice and extremely reliably, something that the competition does not even offer. That is a decisive competitive advantage, which is only possible thanks to the production in Switzerland. This agility and speed now help Schmidlin even in this crisis, because the price plays a somewhat subordinate role for the customer thanks to the obvious added value of custom-made products with short delivery times. The SEF-Interaktiv participants agree: Agility is

crucial. However, one should involve all stakeholder groups in order to find the best solutions. Analyzing the business completely from the customer's point of view is important, then you can really align yourself with the customers. This is the only way to become faster and easier. This is how you prepare yourself for the next crisis, so to speak. Urs Wullschleger gives the participants another tip on the way into the future: If you don't have a special idea for further developing your own business model, it helps if you at least optimize the processes so that you are faster and more agile than the competition be. In the self-assessment they give themselves

In terms of agility and speed, SEF entrepreneurs were given a grade between good and good. So there is still a lot to be done. And also in terms of the business model: Half of them think that they have to adapt their business model.

Faster and more agile

33

Agility is also needed in financial management, because here too the cash flow, especially across borders, can stall. The federal loan program was certainly able to provide support here. And finally also agility in the digital world. Many companies weren't really prepared, both internally and with customers. You had to catch up in a hurry. So a real estate company began to train its customers online in all things online. Here, too, the crisis is leading to a digital boost - and to increased sales in the IT sector, as entrepreneurs from this sector confirm. Shouldn't the state also become more agile? After all, in a WEF study, the difficulty of “doing business” in Switzerland is repeatedly warned. The loan program has shown that it could run lean and lean. No, waves Simon Jäggi from the State Secretariat for Economic Affairs (SECO)

from, that was an exceptional situation. He reflects on other measures: Should we lower customs duties and fees? Hans Hess would welcome that very much: The old braids such as industrial import duties would have to be cut off.

LEARNINGS

Those who are agile and fast are less exposed to price competition.

Swiss companies can become even more agile and have to rethink their business model.

The state is only agile in times of crisis.

34

Faster and more agile

How do you rate the reactions of Swiss companies to the Corona crisis in terms of agility and speed?

10 9 8 7 6 5 4 3 2 1

6.6 Average rating

Survey by SEF.Interaktiv participants in July 2020

How will your business model change with the crisis?

50%

43%

7%

Must be adapted

Stayed the same

Will change completely

Survey by SEF.Interaktiv participants in July 2020

Faster and more agile

35

Hans Hess, President of Swissmem, says there are many things that have to be rethought, including supply chains. However, he does not believe in the end of globalization. Companies have to find a balance between customer proximity, costs and production reliability. 40% of the SEF participants agree: The supply chains must be reconsidered, more broadly based, and yes, that also includes more warehousing, even if that causes a little extra costs. On the other hand, hardly anyone thinks about relocating abroad. A good example of this is Jura, the coffee machine manufacturer: In the first few months of 2020, it recorded an increase of 25% over the previous year. But that was only possible because the company had multiple supply chains, so production would work even if one of the two stalled. Flashlight: supply chains

Are you considering whether you would like to relocate one or more locations of your company abroad after the crisis?

96% no

4% yes

Survey by SEF.Interaktiv participants in July 2020

36

The future is bleak - but not for us

Are you considering moving part of the supply chain / warehouse closer to your own locations after the crisis?

40%

Yes

Doesn't matter to me

30%

30%

No

Survey by SEF.Interaktiv participants in July 2020

What counts now after the crisis?

55% be innovative and offer new products / services

24% seize opportunities and expand business quickly

14% rethink everything

7% stay calm and wait and see how everything develops

Survey by SEF.Interaktiv participants in July 2020

The future is bleak - but not for us

37

Flashlight: IMD World Competitiveness Report

• Singapore stays too

at the top this year

38

Faster and more agile

Every year the IMD Business School compares all countries around the world in terms of competitiveness. On the one hand, entrepreneurs are asked about their own countries, and on the other hand, hard facts are compared with one another. Singapore remains at the top again this year, ahead of Denmark, which jumps from eighth to second place. The country is strongly advancing the transformation of the economy towards green. Switzerland ranks third thanks to its strong economy and good infrastructure, but also thanks to an efficient government. All results can be found here.

Source: https://worldcompetitiveness.imd.org/rankings/WCY

Faster and more agile

39

40

The future is bleak - but not for us

Seldom has a view of the time ahead of us been so unclear. The future lies in the fog, so to speak. Nobody knows how the virus will develop, especially in view of the colder season when the flu will also come back. When is there a vaccination against Covid19? What will the next waves of infection look like? In Switzerland? In Europe and the world? One thing is clear for everyone involved at SEF.Interaktiv: There must be no second lockdown. The damage would be devastating. There are also two perspectives with regard to the future: on the one hand, domestic demand has recovered quickly, and there are even catch-up effects. But not only NZZ chief economist Peter A. Fischer warns of a wave of bankruptcies later in the year. The Swiss economy is dependent on foreign trade, and if the economy in other countries does not recover, this will also affect Switzerland. FDP National Councilor Christian Wasserfallen, as well as Hans Hess, are fairly certain that there will be strong slumps in the export sectors in the third and fourth quarters. Only China shows a somewhat faster recovery.

Water traps like Hess therefore warn that Switzerland must respond by investing in good framework conditions such as training and further education and technologies of the future such as 5G. Counting on a surge in innovation in companies is risky. Many are currently wondering how to invest if they are not making money. There are also concerns among small and medium-sized companies: the real crisis is still ahead of them. The participants in SEF.Interaktiv see it that way too. According to them, it is precisely these companies that are most at risk from the crisis and its consequences. Because what comes will be much more difficult. Among other things, there is a threat of a large wave of layoffs. Not wrongly. The experts from BAK Economics estimate in July that another 95,000 jobs will be lost by the end of the year.

That would also lead to a difficult situation socially. Does the Swiss government actually have a “worst case” scenario, some wondered? That's where Christian Wasserfallen comes in. In particular, he doesn't like the international development. Rightly so: the EU Commission's summer forecast is bleak. For the EU area, she expects negative growth of 8.3 percent. In the middle of the crisis it was “only” minus 7.4%. Wasserfallen would therefore like the companies - he himself sits on committees of various companies - to move their supply chains closer to Europe again and - as far as possible - to develop alternatives. Particularly in key technologies such as the manufacture of batteries, priority should be given. In the survey, the participants expect a neutral-negative development for Switzerland in the next 12 months. Just over one in ten people is optimistic about the next year. Amazingly, however: the respondents see their own professional future as much more positive (see graphic).

95,000 jobs will be lost by the end of the year.

The future is bleak - but not for us

41

It is also clear to Economiesuisse representative Rudolf Minsch: The next crisis is sure to come. However, Switzerland has already experienced many crises, and experience with shocks helps to better deal with such developments. What worries him is the mountains of debt, both from governments and corporations. In the votes there are definitely concrete ideas about what needs to change in the future. For example, home office: At UBS, according to Chief Operating Officer Sabine Keller-Busse, it is assumed that more employees will work partially and more flexibly from home in the future. It is conceivable that this adds up to up to a third of the workforce. Many participants also think that Switzerland should do more when it comes to cyber security if more and more people are working from home. Innovation in the digital transformation, but also protection of the digital infrastructure must be tackled by politics and business. What happens when the world of work looks new and is decentralized? There

other, new working models emerge. For this, labor law must also be adapted. FDP President Petra Gössi gladly accepts the recommendations. It is true that this new world is also a challenge for politics. Not just for them: Sabine Keller-Busse asks, for example, how companies in a home office world can treat all employees equally, from communication with them to further training. What does such a new world mean for the state? One has to forget physical state borders and think about virtual borders, depending on the danger situation, in order to be able to cope better with problems with cross-border commuters, in the event of new outbreaks of infection, is recommended. What remains despite the uncertainty is a positive mood: You have to use the momentum to change, not take your foot off the gas. A new lifestyle might also emerge and it should be anticipated.

42

The future is bleak - but not for us

LEARNINGS

Switzerland cannot fix it alone. The future is just as dependent on economic developments abroad.

The new world of work with a lot of home office requires new protection mechanisms for employees and infrastructure.

The worst case would be a second lockdown.

The future is bleak - but not for us

43

"We have to deal much more closely with customer needs!" 44

Albrecht Enders is Professor of Strategy and Innovation at the Institute for Management Development (IMD) and a member of the Executive Board. He was involved in the conception and implementation of SEF.Interaktiv. He sees the Swiss economy well equipped to master the crisis, but also a lot of potential that needs to be exploited. Albrecht Enders, how well is Switzerland and its economy doing in this corona crisis from your point of view? Albrecht Enders: Well, I'm very impressed. Cooperation between companies works just like cooperation between companies and the state. The country is small, the people stick together and try very pragmatically to get through this crisis. What did you notice positively? Whether here at IMD, where I'm also on the management board, or at other companies that I look into - it was and will be responded quickly and with agility. And not just in top management. Ideas definitely come from the workforce. Here at IMD too: We are a completely different organization today than we were six months ago. Six months ago we wouldn't even have thought of the programs that are now standard! This is a compliment not only to the management, but also to the employees who have contributed many ideas. What do you see as a negative point? Switzerland is still very expensive! This is a subject where we have our backs to the wall compared to our foreign competition, which can work with completely different cost structures. For every organization, like the IMD, that has to produce at local costs, this problem has worsened with the crisis. I see it all the more positively, how quickly and innovatively the companies have changed. In a case study, you had recommendations for a Swiss company, the grinding machine manufacturer Agathon AG in Bellach, drawn up by MBA graduates at IMD. What is their main recommendation? Basically, it was about how to go to the market and how to communicate with customers. And also very important: How to get into new areas beyond the current applications. The fact is that the possible applications for Swiss high-precision technology are much broader than the manufacturers can imagine. You have to think about who you want to work with to find out about these new applications.

interview

45

How did the project come about? You know, that was another Swiss thing: thanks to the MBA graduates, a medium-sized company where I am on the board of directors was able to access the knowledge of outstanding students from all over the world - within two weeks . It is an outstanding experience for the participants and very beneficial for Agathon. Is there a core set of recommendations on what a company can and should do in this crisis? It seems to me that we have to deal much more intensively with customers and their needs. But also how we can make our products and innovations visible to a broader pool of potential customers and not just rely on internal or external customer representatives - i.e. approach the market more broadly, that is a point that applies to many companies. We have to, have to - also at IMD! - Charge our brands with positive aspects such as leadership and innovation, so that outside in the market, we are immediately thought of when a topic from our area of ​​activity comes up. In the SEF.Interaktiv initiative, the participants were skeptical about the Swiss economy about the next 12 months. At the same time, the same respondents were optimistic about their own future. How do you explain this contradiction? That has to do with the innovations that have brought many companies in motion that have developed new products, new market segments and new approaches. That is why the entrepreneurs assume a steep growth curve for themselves. Whereby: when you see the slump in sales that many have experienced, it takes a lot to get back to the previous sales targets. If they'd just sat around for six months, they sure wouldn't be so positive. The basic mood at SEF.Interaktiv was that the crisis can also give a kick in terms of agility and the speed of change. Is that how you see it? There are still no studies on the current situation, but Swiss companies have been under pressure for years to have to prove their premium positioning. Something was different in the Corona crisis: we had time. Before, everyone was at the limit - and suddenly nothing sold and you had time to think about how to approach customers in the future. You need a clear head for innovation, because the Corona period was very beneficial. This also applies to me: I hiked in the mountains at six in the morning and got over the

46

interview

Page 2Page 3Page 4Page 5Page 6Page 7Page 8Page 9Page 10Page 11Page 12Page 13Page 14Page 15Page 16Page 17Page 18Page 19Page 20Page 21Page 22Page 23Page 24Page 25Page 26Page 27Page 28Page 29Page 29Page 36Page 36Page 36Page 36Page 36Page 36Page 36Page 36Page 36Page 42Page 49Page 39Page 35Page 42Page 47Page 49Page 39Page 39Page 42Page 45Page 49Page 39Page 39Page 42 51 Page 52