Roland Berger & Partner GmbH

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Roland Berger & Partner GmbH

Arabellastrasse 33
D-81925 Munich
Germany
Telephone: (49) (89) 9223-0
Fax: (49) (89) 9223-202
Web site: http://www.rolandberger.com

Private Company
Incorporated: 1967 as Roland Berger GmbH
Employees: 1,341
Sales: DM 680 million ($347 million) (1999)
NAIC: 541611 Administrative Management and General Management Consulting Services; 541613 Marketing Consulting Services; 541614 Process, Physical Distribution, and Logistics Consulting; 541612 Human Resources and Executive Search Consulting Services; 54191 Marketing Research and Public Opinion Polling

German-based Roland Berger & Partner GmbH is among the leading management consulting firms in Europe. With an emphasis on strategy consulting the company also offers advice in the fields of administrative, process, information technology (IT) and e-commerce, human resources, and marketing management. While Roland Berger & Partner is the company’s executive search arm, it also operates its own market research institutes, the Roland Berger Institute for International Marketing Research GmbH and the IJF Institute for Youth Research GmbH. About half of Roland Berger’s revenues come from industrial clients and about one-third from clients in the services sector. Roland Berger maintains 30 offices in 21 countries worldwide. International clients account for about 45 percent of the company’s sales, and some 57 percent of the roughly 950 consultants are not German. Since a management buyout in 1998 Roland Berger is owned by the company’s 120 partners and associate partners. Founder and CEO Roland Berger holds a 9.9 percent stake in the company.

Origins in 1967

The founder of Roland Berger & Partner GmbH International Management Consultants was born in Berlin, Germany, in 1937, two years before World War II broke out. Roland Berger grew up in a well-to-do family with Bavarian roots: His father was a director-general and ministerial counselor. As a high school student in Nuremberg, Berger studied humanities, Latin, and Greek and he graduated in 1956. Afterwards, Berger studied economics and business in Hamburg and Munich. As a student he completed several internships at industrial, bank, and insurance companies. During his time as a student Berger also got his first experience as an entrepreneur. Registered under his mother’s name until his 21st birthday, Berger established and managed a laundry business which, because modern washing machines were not widespread at that time in German households, became quite successful. In 1962 Berger received a degree in business administration from Munich’s Ludwig-Maximilian University and his high grades ensured him a position as the best student of the year.

Berger’s future aspirations had a more intellectual focus than running a laundry business required. He envisioned a job that would be theoretical, but also pragmatic, and that would allow him to work at a variety of tasks, while also contributing to the public good and meeting interesting people along the way. One day, while delivering fresh laundry to a client, he became involved in a conversation about this topic. The woman to whom he was delivering the laundry told Berger about her son, who worked in Milan for an American consultancy; she recommended Berger visit him there. Berger, who spoke Italian well, was intrigued by the idea. After running the laundry for three years, Berger decided to sell the business which by then employed 15 people. He traveled to Italy and was hired on the spot by the Boston Consulting Group, one of America’s leading management consultancies. For a few months Berger worked at the Boston office before he returned to Italy. For four years Berger worked as a consultant at the Milan office and finally became a partner.

Following his strong desire to be independent and stand on his own two feet, Roland Berger, at age 29, founded his own consulting business in 1967. Starting out with one secretary in Munich’s upscale Bogenhausen neighborhood, his business soon employed three people. Consulting was perhaps a unique undertaking for a man of Berger’s age and station; his peers were heavily involved in the ideological discussions of the late 1960s, and becoming a social revolutionary fit the Zeitgeist more than giving advice to capitalist enterprises. Moreover, management consulting was a very uncommon business in Germany at that time. Berger spent an estimated one-third of his time evangelizing for this “new” profession, which was al-ready big in the United Kingdom and the United States.

Renown in the 1980s

While most German management consultants in the late 1960s focused on cost-cutting strategies and offered primarily administration and operations consulting, Roland Berger positioned himself as a marketing and strategy consultant. Berger’s first client was an advertising agency owned by one of his classmates. His first big challenge followed when the travel firm Touropa asked the 30-year-old Berger to help them solve a marketing problem. Berger’s solution, which eventually was enacted, was the merger of Touropa with three other mid-sized German companies, Scharnow, Hummel, and Dr. Tigges. This took place two decades before merger-mania broke out world-wide. Together these companies formed the new travel giant TUI, which in the following decades would become one of the world’s leading players in that industry. Other assignments for Roland Berger included a market introduction strategy for Goretex, a new textile fiber brand, and a marketing strategy for a large German bank. Other large corporate clients were German chemical giant Hoechst AG and German food industry conglomerate Dr. Oetker.

In the early 1970s Roland Berger evolved from a one-man consulting business to a partnership with a growing number of partners. The company established its own market research subsidiaries, one for general marketing research and one aimed specifically at the youth market. Another subsidiary was founded for executive search services. All these subsidiaries were organized under the Roland Berger & Partners Holding GmbH corporate umbrella.

Roland Berger’s revenues experienced explosive growth during the 1970s and 1980s. Between 1967 and 1970 revenues doubled every year. Three years after its founding, Berger’s consultancy generated DM 5.6 million in revenues. From 1971 to 1972, while expanding his business, Berger also made a name for himself teaching marketing and advertising at the Munich Technical University. New partners came on board, and the range of services was continuously broadened. By 1974 Roland Berger was number three in the German consulting market, bypassed only by McKinsey & Co. and Kienbaum. The company had become a full service consultancy, whose product line included general management consulting, human resources consulting, logistics, and IT consulting.

About half of the strategies developed by Roland Berger dealt with increasing profits, while the other half dealt with strategies for growth, mergers, and diversification. More than 40 percent of Roland Berger’s sales derived from big corporations, about 40 percent came from mid-sized companies— especially breweries—while about 20 percent originated from clients in small businesses and public administration. Another area that Roland Berger focused on was acquiring high quality, well-paid staff. As a result, Roland Berger made about DM 120,000 revenues per employee, while other management consultancies in Germany brought in sales, on average, of DM 70,000 to DM 80,000 per employee.

In 1981 Roland Berger organized its strategic consulting subsidiary, the Gesellschaft fur Strategische Planung. However, when strategic consulting accounted for almost 70 percent of all business, the company reintegrated that business back into Ro-land Berger & Partner. In 1987 Roland Berger’s sales passed the DM 100 million mark for the first time. By then Roland Berger had become the largest German management consultancy, with 180 consultants and 70 administrative staff. Eighteen of the 20 largest German companies from the nation’s industrial sector were on Roland Berger’s client roster, as were eight of the ten largest German banks and six of the top ten German transportation firms. The Roland Berger had come to signify management know-how and professionalism in Germany.

At this point Berger began looking for a business partner with the financial background to help his company ensure continued growth and international expansion. The size and importance of his company attracted Frankfurt-based Deutsche Bank, which acquired a 24 percent share in the company. This stake was upped to 75.1 percent a year later, though Berger retained a veto right and owned the remaining shares. As part of the agreement with Deutsche Bank, Berger was required to stay in his position as CEO until at least 1995. Roland Berger Verwaltungsgesellschaft mbH was founded as the new holding company which owned the majority of all Roland Berger companies while 19 partners held minority shares.

During this time Roland Berger became the first German consultancy to introduce annual press conferences. Because of the rather modest size of his company, balance sheet figures were not the main focus of these events. Instead, a national or international economic issue was discussed.

Company Perspectives:

Today we are already the leading globally active top-management consultancy of European origin. Our roots are in the center of Europe, and its diversity of languages, cultures, legal and market structures. European management culture for us means being able to handle diversity: Not thinking in patterns and methods, but sensibility for different cultures, flexible adoption to changing rules and the ability to operate worldwide without losing sight of regional peculiarities. This turned out an advantage especially in global competition. We feel committed to this management culture and it determines our consulting philosophy: individually tailored concepts instead of standardized solutions, created in close teamwork with the client, and the facilitation of their practical realization. Creative strategies that work!

Shifting Gears in the Early 1990s

Right from the beginning, Roland Berger paid close attention to foreign markets. As early as 1969 the company’s first foreign presence was established in Milan, Italy. In 1976 Ro-land Berger opened its first office in Latin America, in Sao Paulo, Brazil. One year later the company co-founded The International Group Consultancy and Research (TIG), a consortium that consisted of management consulting firms from the United Kingdom, France, Italy, Switzerland, and the Nether-lands. In 1979 Roland Berger started cooperating with the Japan Management Association, one of Japan’s largest top management consultancies. In the following year Roland Berger be-came the first European company to join the oldest and most reputable trade organization of consultant companies in the United States—the Association of Consulting Management Engineers (ACME). By 1986 more than 20 percent of Roland Berger’s revenues came from abroad. A first endeavor to break into the U.S. market via a joint venture with the consultancy of Hayes Hill ended in 1986, but Roland Berger was planning to set up his own office in New York. In the same year an office was set up in Spain, followed by branch offices in Vienna, Paris, Lisbon, London, and Buenos Aires in the late 1980s.

The fall of the Berlin Wall in 1989 and the following disintegration of the Soviet Union opened new international markets for Roland Berger, and the company’s expansion into Central and Eastern Europe began. In Russia Roland Berger organized management training programs for managers of the old government-owned companies. In China the consultancy developed a strategic plan for the tool and die industry. In 1991 Roland Berger acquired 100 percent of the shares in Japanese consultancy Vaubel & Partners, a firm in which it had held an interest for several years. The ten-year-old consultancy was founded by German CEO Dirk Vaubel and offered services mainly to German companies which were expanding into the Japanese market. The company was renamed Roland Berger, Vaubel & Partners Ltd. and employed about 15 consultants and 15 staff. Roland Berger’s foreign sales climbed from 22.8 percent of its total sales in 1987 to 27.7 percent in 1991. In 1994 Roland Berger’s first office in China was established in Shanghai. A second one opened in Beijing in 1995.

While the company expanded into Central Europe and Asia, its Western European branch offices reached critical mass with between 15 and 50 employees. A new office was opened in Brussels in 1993. Five years later Roland Berger expanded with new offices in India and Malaysia. In the United States the situation was more complicated. The Federal Reserve Bank did not allow commercial banks and their subsidiaries to become involved in consulting activities. With the Deutsche Bank as major shareholder in Roland Berger, this rule precluded the latter from establishing its own U.S. presence; however, the company continued to work cooperatively with a few American partners.

By 1997 Roland Berger employed about 800 consultants, and revenues had climbed to over DM 500 million. About one-third of the company’s sales came from abroad, as did about half of Roland Berger’s consultants. Besides the traditional clientele from private companies, Roland Berger’s roster of clients from governments, non-profit organizations, and public administrations continued to grow.

Targeting the United States in 1998 and Beyond

In 1998 Roland Berger became independent again, as the company’s managers staged a buyout of 90 percent of Deutsche Bank’s shares in the consultancy. The other 10.1 percent were then acquired from Deutsche Bank by January 1, 2000. The transaction cleared the way for Roland Berger to enter the United States—the world’s largest market for consulting services. A branch office was set up in New York City. Another office was established in Detroit, Michigan, where Roland Berger targeted suppliers to automotive suppliers—companies such as TRW Inc, Lear Corp., and Johnson Controls Inc.

However, competing in the United States would be no easy task for Berger; the U.S. was the land of top management consulting firms and home to 14 of the world’s 15 largest strategy consultancies, according to a Kennedy Information Re-search Group study from 1999. Berger was also forced to enter the battle for the best talent from U.S. business schools, and the Roland Berger name was not as familiar to young grads as the names of the major U.S. players. Among the questions Roland Berger planned to address in the 21st century was that of whether to achieve a critical mass of consultants through the its own growth or to consider a merger with another mid-sized U.S. strategy consultancy. Regardless, the company planned to set up a Silicon Valley office by 2001.

In the meantime Roland Berger was looking for new areas in which to specialize. The company had positioned itself as the leading European strategy consultancy for the “e-transformation” of large clients hoping to be ready for a much-heralded Internet economy. At the same time, however, recruiting capable consultant talent for that area was becoming more difficult than ever as many were leaving to work for independent Internet startups. Roland Berger responded to this challenge by sponsoring a professorship for e-business at the Technical University in Munich and by establishing a new chair in “E-Business and Information Technology” at INSEAD, the renowned business school in Fontainebleau near Paris.

Key Dates:

1967:: Roland Berger founds a consultant business.
1969:: First foreign office is established in Milan, Italy.
1976:: Office in Sao Paulo, Brazil, opens.
1987:: Deutsche Bank becomes major shareholder.
1990:: Expansion into Eastern Europe begins.
1991:: The company acquires Japanese consultancy Vaubel & Partners.
1994:: First office in China is established.
1998:: The company becomes independent again after a management buyout.
1998:: Offices in New York and in Detroit, Michigan, are established.

Another strategy for generating growth at Roland Berger was to further promote the idea of “consulting for equity,” which meant being paid with shares in startup companies rather than in cash, which such new companies always lacked. To help finance these activities Roland Berger formed a strategic alliance with German venture capital firm bmp AG; the venture went public in July 1999 and financed about 62 startup companies in the fields of e-commerce, media, entertainment, software, biotech, and other high-tech markets. Roland Berger also planned to establish the first German “turnaround fund” with German bank HypoVereinsbank; the fund would buy companies with growth potential, restructure and make them profitable again, and then sell them to interested investors for a profit.

In terms of international expansion, a branch office in Warsaw was added to Roland Berger’s network of branch offices of Eastern Europe in June 2000; existing locations there included Moscow, Riga, Kiev, Prague, Budapest, and Bucha-rest. On November 22, 2002, the man who created the German consultancy and reached the status of a media darling in his home country will turn 65. Needless to say, he has already put together a strategic plan for the company when his leadership is over.

Principal Subsidiaries

Roland Berger & Partner S.R.L. International Management Consultants (Italy); Roland Berger & Partner GmbH International Management Consultants (France); Roland Berger & Partners Ltd. International Management Consultants (United Kingdom); Roland Berger & Partner Lda. International Management Consultants (Portugal); Roland Berger S.A. International Management Consultants (Spain); Roland Berger AG International Management Consultants (Switzerland); Roland Berger & Partner, LLC International Management Consultants; Roland Berger & Partners S/C Ltda. (Brazil); Roland Berger y Asociados S.A. International Management Consultants (Argentina); Roland Berger & Partner International Management Consultants Sp.zo.o. (Poland); Roland Berger (Shanghai) International Management Consultants Ltd.; Roland Berger & Partner Ltd. International Management Consultants (Japan); Roland Berger & Partner GmbH International Management Consultants (Russia).