Germany’s Manufacturing Edge Is Fading:

Sasan Hashemi (Host): Hello and welcome to episode number three of Beyond Cost. Today, we’ll talk about why Germany might need an economic pivot together with Andreas Cornet. Andreas spent over 30 years shaping how leaders think. Now he’s pushing this discussion further with his initiative, which we’ll come to shortly. Andreas, welcome to the Beyond Cost podcast. Great to have you. Before we go into “Pivot Germany,” the agenda you shaped together with others, maybe a bit about you. You were in the industry for a very long time, over 30 years at McKinsey. Could you briefly introduce yourself to our audience?

Andreas Cornet (Guest): Yes, thanks a lot. I’m very happy to be here with you in sunny Vienna. My name is Andreas Cornet. I’m 58 years old. As you mentioned, I spent 30 years and one month at McKinsey, almost exclusively working in and around the automotive industry. I’m an engineer by training, and I would say I never stopped being an engineer. That might sound strange for someone who worked in management consulting, but I always loved the interface between technology and management. I also obtained a doctorate degree in business, even though I never formally studied business administration. In some universities, that’s possible.  By roots, I’m very European. My mother is German, my father is Dutch, and my ancestors were French. That really helps when thinking in a European context. Before McKinsey, I founded a software company while I was still a student. When I joined McKinsey, I focused on automotive topics but never lost contact with technological questions. Personally, I’ve been married for 25 years and have a 22-year-old daughter. That’s about me.

Sasan Hashemi: Thank you for the introduction. One could say you’re originally a techie. You studied mechanical engineering and then moved into management consulting. Was that something you discovered along the way?

Andreas Cornet: Yes, it’s actually funny. When I was a student at the Technical University of Hanover, I attended a workshop with Roland Berger. It was about how engineers could work in management consulting. I was so fascinated by that workshop that I thought, “This is what I want to do.” Before that, I hardly knew what management consulting really was. A few months later, when I finished my studies, I applied, went through several interviews, and ended up at McKinsey. So it was really that workshop that brought me there.

Sasan Hashemi: Interesting. Nowadays, many students see McKinsey as a stepping stone for a few years. You stayed for 30 years. How did that shape your mindset?

Andreas Cornet: I cannot imagine someone staying 30 years in management consulting without at least occasionally thinking about doing something else. I had those moments two, three, maybe four times. But every time, something exciting came around the corner. A fascinating project, a new challenge. And then the thought of leaving disappeared. What kept me there was the enormous variety of complex and challenging problems, and the opportunity to create real value.

Sasan Hashemi: Looking back over those 30 years, especially in automotive, were those really the golden years? From the 1990s onward, global expansion, growth in China, steady single-digit increases. Did something fundamentally change in mindset?

Andreas Cornet: If you look at Germany and Europe since the financial crisis, growth has basically stagnated. Automotive had steady, predictable growth for many years. It felt like a one-way street. But the rules of the game have changed. Electrification, automation, software-defined vehicles. Differentiation used to be mechanical components like injection pumps. Now it’s software, code, algorithms, data. Countries without the legacy structures, such as China, adapted faster. That created urgency for change.

Sasan Hashemi: Were there early signs that this “one-way street” might end?

Andreas Cornet: Yes and no. There was the discussion around “peak car” around 2017 or 2018. After COVID, markets rebounded, and some hoped growth would continue indefinitely. In hindsight, I wish we had been more radical. The signs were there. Some companies prepared, others didn’t. The information was available. Not everyone drew the right conclusions.

Sasan Hashemi: Now you’ve left McKinsey and published “A Pivot for Germany.” Why?

Andreas Cornet: It coincided with the 60th anniversary of McKinsey in Germany and my own 30-year milestone. It felt symbolic. Together with a colleague who also left after 30 years, we wanted to write down our experiences. Myself from automotive, he from financial services. The study is called “A Pivot for Germany.” In German, “Wachstumsinitiative Deutschland.” It’s publicly available.

Sasan Hashemi: Many people ask whether this is just a temporary bump. Energy prices, geopolitics. Do we really need a fundamental pivot?

Andreas Cornet: It’s a fair question. Germany has not grown in recent years, while most neighboring European countries grew around 1 percent. That suggests it’s not just global conditions. It’s something structural in Germany. This is about growth for society, not just shareholders. Without growth, it becomes difficult for society to thrive.

Sasan Hashemi: You describe “shift and lift.” Let’s start with shift. What does that mean?

Andreas Cornet: Shift means reallocating focus. Investments, training, employment. Toward fast-growing, innovative industries. Examples include biotech, AI applications, robotics, precision medicine, pharma, new materials, space, renewable energy. Germany has strong research capabilities. But we’re weak in commercialization. Shift also means reducing focus on industries that are mature or structurally challenged. Not necessarily exiting them entirely, but reallocating emphasis.

Sasan Hashemi: And lift?

Andreas Cornet: Lift means increasing productivity across all industries. In Germany, the average annual working time per employee is about 1,350 hours. In the US, it’s around 1,800 hours. In Italy, around 1,700. At the same time, our productivity growth has slowed. We must address both productivity and working hours. Automation, including AI, can help. But we must also be honest about structural productivity gaps.

Sasan Hashemi: Speaking of AI. Many productivity waves promised massive gains. Will AI be different?

Andreas Cornet: Currently, AI is often applied step-by-step within existing processes. That improves each step but may not fully transform the system. The real opportunity lies in rethinking processes entirely. However, history shows that productivity gains are often smaller than expected. Word processing made typing faster, but standards increased. Documents became more complex. We’ll see whether AI delivers the 50 to 70 percent gains often promised. Also, many things labeled AI are actually just advanced data analytics.

Sasan Hashemi: If you had a magic wand and could change one thing at the government level, what would it be?

Andreas Cornet: I would benchmark all systems across Europe. Pensions, labor markets, healthcare, social systems. Take best practices from Denmark, Switzerland, the Netherlands, Sweden. Ask: If it works there, why not here? We need root-cause analysis, not surface-level discussions. And we need political courage and cross-party cooperation.

Sasan Hashemi: Let's now get to Rapid Fire questions. What’s the most overrated management idea you’ve heard?

Andreas Cornet: A wrong understanding of AI.

Sasan Hashemi: One McKinsey principle you’ll keep forever?

Andreas Cornet: Obligation to dissent.

Sasan Hashemi: One thing you would redo more radically?

Andreas Cornet: Many improvement initiatives. I would be more radical.

Sasan Hashemi: A book for your 25-year-old self?

Andreas Cornet: The Happiness Advantage by Shawn Achor.

Sasan Hashemi: Will we get our act together?

Andreas Cornet: Yes. But it will be tough.

Sasan Hashemi: Andreas, thank you very much for your time. This was Beyond Cost. Check us out on YouTube, Spotify, and other channels.

Andreas Cornet: Thank you so much.