Miele keeps it in the family

15 November 2011

Markus Miele talks about Miele’s management philosophy and its commitment to sustainability.

Markus Miele, the great-grandson of Carl Miele, who, in the late 19th century, co-founded the German consumer giant that bears the family surname, is aware that it's highly unusual, even in today's Germany, for a business to have existed for so long as a family firm. He also, as the current co-proprietor and managing director, appreciates it is rarer still that not just one, but both founding families - Dr Reinhard Zinkann Jr is a co-director - are still firmly in the driving seat.

"We are incredibly lucky that there were sons or daughters who could take over the business, who were able to take over the business, and who wanted to take over the business," is Miele's simple view of the matter.

"Miele clearly believes that pedigree is worth something."

Miele clearly believes that pedigree is worth something: earlier this year the family business teamed up with 250-year-old European glassware maker Riedel Crystal for a campaign promoting Miele dishwashers' suitability for glass. Fittingly, at the press announcement in May, Miele made a joint statement with Maximilian J Riedel, the 11th-generation head of Riedel USA.

42-year-old Miele admits to having occasional differences with Zinkann on product development and other key areas, but overall he insists the pair "get on very well".

"He is almost ten years older than me, so it's a different generation and he sometimes has different views on products and ideas. But I think that's good because if we always had the same opinion, we could make do with just one of us. We have quite emotional discussions sometimes, but we will both answer 95% of questions in the same way. There will be 5% where we have different backgrounds, different perceptions of consumers, of products, and so on."

In those instances, Miele says the key is simply talking, since the shareholders have no vote. "It's very easy, talking," he explsins. "You do a lot of talking and try to convince the other party that your idea is a good idea. He will say, 'No, it's not a good idea, because of this or that'. Then you refine your idea, take it to a better level and present it again."

At the heart of Miele's astounding success - 16,000 employees drove revenue of €2.8bn in 2009-10 - is an unusually close hands-on management style that values easy access to day-to-day product development work, even in the face of higher running expenses. Miele
is upfront and matter-of-fact about the advantages of retaining the company's manufacturing base at home in expensive, highly regulated Germany, versus the misleading allure and false economies of outsourcing; the headquarters has been sited in or near Gütersloh since the company's inception in 1899. High production standards have been maintained ever since, which, according to Miele, allows for rapid decision-making on the floor.

"We have some outsourcing, but very little; 90% of products come out of Germany," he says. "Most of the manufacturing sites are within 30 or 40 minutes' driving distance from our headquarters. It's good because you have frequent discussions, see what's happening on the shop floor and act very quickly when necessary. It's very easy to control the quality. You have to invest heavily in automation but this also ensures quality levels."

Power to the people

It's no surprise that the company motto is 'Immer Besser' or 'Forever better'. Being a high-end manufacturer has helped to protect the business from price increases; for example, the firm hiked its own prices by 10% in 2010 to absorb the added cost of raw materials such as steel.

"Miele hiked its own prices by 10% in 2010 to absorb the added cost of raw materials such as steel."

But Miele also likes to pay close attention to the way his company engages with people, most recently through creating public retail spaces to demonstrate the latest models in person to prospective customers; the MD is very particular about the style in which showrooms are marketed to the public. Where once the showrooms were just about "nice displays", now it's a "completely different game".

"You don't call them showrooms; they are galleries," he insists. "We want to let the consumers really experience our products. They have to use them to realise the benefit of Miele. I'm pleased to say that the concept has been extremely well received. We have a lot of cooking classes, lunch and dinner. It's good that they are able to experience our products hands-on."

The staff are a crucial part of the experience, he says, but the galleries are also there for the benefit of the firm's employees, some of whom don't have appliances such as washing machines and tumble-dryers at home. "We encourage them to see what the result really is," Miele says.

The company has undergone a period of transition in 2011. In March, it recruited Heiner Olbrich from Adidas as the new general manager for marketing and sales, to succeed Reto Bazzi, who is retiring. One of Olbrich's priorities will be to launch in Brazil, and he will be doing so off the back of a lot of success - Bazzi's 20-year tenure saw the firm's representation rise to 47 countries, including Russia, China and India, and a respectable increase in worldwide turnover from €2bn to nearly €3bn.

Appliance of science

"Miele favours putting newly developed technologies and designs through their paces at home."

The company has also been keen to collaborate with institutions of higher learning this year, with R&D top of the agenda. In April, it opened a new research laboratory named Mieletec at the Fachhochschule Bielefeld, with the company pledging long-term financial support enabling prospective university graduates, as well as doctoral students, to work on "intelligent cooking methods" and improvements in energy-efficient appliances, most notably induction cookers.

Work will focus on power supplies, air sensor optimisation, new materials and flow simulations for water, steam and air that may be incorporated into next-generation washing machines, steam cookers, dishwashers and ovens. Miele himself confirmed that he saw Mieletec as "a permanent and intensive scientific exchange".

Although he passionately believes in collaborations on this scale, it's typical of his hands-on approach to running the company that Miele favours putting newly developed technologies and designs through their paces at home.

"I can talk to the marketing and sales people, as well as the engineering team. But there's something else I do - I frequently test the new appliances in my own kitchen. For example, I have two washing machines and two tumble-dryers; one pair are always prototypes, which don't always work. I ask my wife for her verdict on the new tumble-dryer. Is it too loud? Does it take too long? Is it easy to clean or not?"

What, in Miele's view, is the making of an effective manager?

"In the 1960s and 1970s, according to management theory at that time, you would've said that a good manager could sell appliances, or toothpaste," he says. "But from my point of view it's important that you know what you're selling, because then you can sell it with your heart, you know the history of the competition, of your own factories."

Sustainable growth

Technologically, the business has come a long way from the cream separator, butter churn and tub washing machine developed by Carl Miele under the Meteor brand at the turn of the last century. Modern industrial design is complex and often highly problematic, which Miele feels necessitates close contact with engineers on the factory floor - a habit his great-grandfather was famous for.

"I have a lot of help from good people, of course," he says. "It's always interesting to see what's coming up, whether that's in the area of materials, process or tools. There are so many improvements in the industry that can be made, and I find it interesting to take charge in this area, so I like to keep in close communication with the engineers."

However, he admits that sometimes engineers have good ideas that the consumer doesn't like. On some occasions, the company decides not to progress with a new product idea after running tests.

"Dishwashers now use 57% less water and 56% less energy."

"We came up with a dishwasher with a cutlery tray, and when I took that home my wife said it was no use. So we had to go back to the drawing board."

As for sustainability, the home appliance industry as a whole will also have to go back to the drawing board if Miele's views are anything to go by. He admitted in June that the current opportunities to improve water and energy-efficiency in this type of technology are becoming more limited.

"If we have not already reached the physical limits of energy-efficiency, further reductions in consumption will become more difficult to realise, unless the laundry or dishes are not adequately cleaned or the price of the units becomes too high," he says.

According to Miele, who claims to offer products built to last 20 years, the typical energy consumption of a washing machine has fallen by over 50% since 1990, while water consumption has been reduced by 45%. Dishwashers now use 57% less water and 56% less energy. There may be room for more efficiency improvements by interfacing with smart grids; a washing machine, for example, could be made to start automatically at times when electricity is cheaper.

Such technology would require the industry to collaboratively develop common interfacing standards. The prospect was first raised at the Universal Home project in 2008 and Miele is now working with the German energy giant RWE on a smart grid collaboration, announced by Zinkann at the International Radio Exhibition in Berlin last year.

German consumer giant Miele has been at the forefront of high-end domestic appliance manufacturing for more than 110 years.