If you look through many children’s books leading up to Christmas, you will often come across the image of hardworking elves making toys and wrapping gifts before the big day, so that Santa Claus can bring them to all the children on time. They busy themselves, packing and painting, sometimes baking and decorating. I thought of one of these pictures a few days ago when I learned of the dedication and interest with which countless employees are working to integrate Danfoss into SMA processes.
Of course, this is by no means a Christmas fairy tale. It is hard work and the reason for doing it is clear: It is about saving costs so SMA can become profitable again even in the difficult current market environment.
The cooperation with Danfoss offers the best chance to achieve this goal. Today, I want to tell you why the cooperation between SMA and Danfoss is so promising:
1) A shared corporate culture creates a bond
For successful cooperation, it is virtually essential that both partners hold similar values. At Danfoss and SMA, this is a perfect fit. This is primarily because both companies have similar origins. Danfoss and SMA were both set up by families and still remain entirely or largely in the hands of the founders’ families. “Something like that shapes the corporate culture and makes collaboration and mutual understanding easier,” explained Sune Sondergaard, the project manager responsible for the integration. In addition, there is a shared appreciation for using resources sparingly and offering energy-efficient solutions.
2) Confidence in the solar sector
This is also an important point that connects the two companies. Although Danfoss is withdrawing from being actively involved in the inverter business and sees its operating strengths in heating and cooling technology, this definitely does not mean that the Danes have no confidence in the solar sector. On the contrary, the best evidence for Danfoss’ “yes” to solar is the purchase of 20 percent of SMA’s shares at the beginning of the strategic partnership. Since then, Danfoss has been an anchor investor lending SMA additional stability.
3) Common strengths bring competitive advantages
When the partnership began in May 2014, at first the most important thing was to learn from each other. For SMA, it was particularly important to use Danfoss’ expertise in automated drives and to transfer it to PV inverters. Sune Sondergaard also sees great potential synergy here, because he knows from his time at Danfoss that his former employer has already applied this expertise to its own PV inverters.
4) Investment and cost savings through division of labor
While SMA has taken over the inverter business and thus the marketing of the former Danfoss products, they will still be manufactured in Nordborg—built to order by Danfoss. The company will also support SMA in the development of the products and provide resources. Because of the cutthroat competition on the market for automated drives, years ago Danfoss began focusing its strategy on continuous cost reduction through innovation. Therefore, SMA can also benefit from the Danes’ research and development know-how and exploit further synergies.
5) Stronger together—using economies of scale
An important mainstay of the strategic partnership is the cooperation on purchasing. Together, both partners achieve a bigger purchasing volume. This is especially important because the market for PV inverters is dominated by fierce competition where company size plays a crucial role. Since August, purchasing has been negotiated jointly, and the first successes are visible. The first negotiations have already saved SMA a six digit number from the purchasing cooperation alone.
Although SMA and Danfoss are different sizes and have different product portfolios, we have similar values and corporate cultures. Just the last few months have shown that the collaboration is very productive and profitable for both companies.
A promising German-Danish partnership on equal footing, that just works.
Until the Christmas break, the hardworking teams from Germany and Denmark will have their hands full before taking a breath and gathering their strength to continue advancing the partnership next year.
Source (picture above): Danfoss
Investor Relations editor
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