Mario Pieper is Head of Digital Business Unit and Chief Digital Officer at BSH Home Appliances, a global company with an annual turnover of around €13.4 billion, which is transforming itself from a supplier of hardware to one that additionally offers personalized digital functions, services and content. Pieper started his career in 1999 at strategy consultancy Accenture. In 2002, he began working for Deutsche Telekom, holding positions in corporate strategy and operational management. He left to co-found and run a smart home startup before joining BSH in 2014. Pieper, a speaker on a panel moderated by The Innovator’s Editor-in-Chief at the Platform Economy Summit in Frankfurt, Germany, agreed to a separate interview to talk about how the company is adopting a platform business model.
Q: Tell us about BSH and the company’s digital journey.
MP: The company was founded in Germany over 50 years ago as a joint venture between Robert Bosch and Siemens AG and since 2015 is 100% owned by Robert Bosch. We are Europe’s largest home appliance manufacturer. Our products are produced at roughly 40 factories and sold in over 50 countries with iconic brands such as Bosch, Siemens, Gaggenau, Neff or Thermador. Our success is based on building innovative, high-quality domestic appliances ranging from cookers, ovens and extractor hoods, dishwashers, washers and dryers, fridges and freezers to small appliances such as vacuum cleaners, coffee machines or food processors. Seeing and understanding the digital trend we started about five years ago to think about what kind of future we are heading towards as a home appliance manufacturer and realized that we were going to transform from pure hardware to a hardware, software and ecosystem player that focuses on the home, mainly the kitchen. With our growth strategy in mind, we asked ourselves ‘what kind of consumer facing assets have to be developed and digitalized?’ We concentrated on our products and connected them to the Internet and added new digital touch points with our end-consumers. The first stage in this development involved digitalizing the core product and the underlying processes. The second stage was seeing how our connected products could become a platform that could deliver greater value to an ecosystem. For example, how could a connected dishwasher give a better user experience if you add services such as automatic replenishment of detergent? Or how could we design a refrigerator that could automatically detect when products were running low and place an order? During the third stage, we developed an application programming interface [API] and software development kit [SDK] so that our connected appliances could be addressed by developers because we wanted to boost the ecosystem. We also contributed to the ecosystem ourselves, through, for example, the acquisition of 65 % of the shares in a company called Kitchen Stories, which offers a video-guided cooking app. And in May of this year, we announced a strategic investment in Chefling, an app that gives recipe suggestions based on the food in a customer’s pantry. We have already started on the fourth step: we believe people will need devices in the kitchen to communicate with devices in other parts of the home. Our aim is to become a platform that can also work with the entertainment, security or other systems in a house.
Q: Why is it that we have been hearing about smart homes and refrigerators that can automatically order our groceries for 20 years and it is still not a reality?
MP: It is true that people have been talking about smart homes since 1999 or 2000 but the initial approach was completely wrong. Homes don’t become smart all at once. It is more like consumers will buy one connected device and then buy another that kind of relates to it and then eventually the smart home might evolve over time. We are developing a vision of how to broaden the scope of connected devices into the home so that the house could know who you are and what you need: maybe prepare some things in the kitchen for you, vacuum and play the music you like and overall make your life better. There is a myth in the market that all of this is going to come tomorrow and generate tons of revenue. The reality is that it is a long journey. The user experience is not yet at the level that all these things can become mass market services but we all believe that this will be the case at some point in time. Hardware will still be the biggest part of our future but we believe services could represent anywhere from 5% to 10% of revenues within the next ten years. This is incentivizing the company to develop digital services and orchestrate an ecosystem play.
Q: Is the platform business model developed by the Internet giants the best way to do this?
MP: I believe that for us, the platform idea and platform businesses will be essential. Our products are now part of a platform and we have to be open to allowing competitors and complementary service companies to use that platform and become part of the ecosystem. If we are going to operate a platform for services it has to work across all relevant devices and categories.
Q: What are BSH’s biggest digital transformation challenges?
MP: One is finding the digital talent to start the journey. Another is there is no industry-wide agreement on an IoT [Internet of Things] standard. But the real challenge is the mindset of BSH employees and our ecosystem partners. This is something that takes time — really talking to the people about what digitalization will mean to their jobs and get them behind the transformation. I would say that after five years, we have maybe 80% on board. You are never going to reach everyone. Sometimes it is kind of difficult because people will ask you what will be the end result and the fact is we can’t predict everything. It is sometimes hard to find the right answers.
Q: What advice would you give to other chief digital officers?
MP: Try as early as possible to engage with a lot of people in the company to discuss what will be changing and what has to be done. It is very important that every part of your business has to have the right kind of mindset, not only the board and top management, but everybody working for and with the company. It is often very difficult to convince people but it is worth it. A few hours of communication at the outset is worth it because it could save you a year later on.
