How Boardrooms Can Drive Sustainable Innovation in Legacy Industries

Discussion with Peter Schwibinger

Dr. Peter Schwibinger, an accomplished industrial strategist with decades of experience in automotive technology, industrial manufacturing, and private equity-backed transformations, has been at the forefront of major industry shifts. From leading global R&D initiatives at Freudenberg to pioneering digitalization strategies at ThyssenKrupp Bilstein, Hella, Carcoustics and Best4Tires, his career has centered on leveraging innovation to drive efficiency, sustainability, and business growth. His expertise spans developing AI-powered industrial solutions, streamlining operations in multinational corporations, and navigating complex market transformations. Drawing from this extensive background, this article explores how traditional industries can align digital transformation with sustainable business strategies, ensuring both profitability and long-term resilience.

The Balancing Act: Financial Stability vs. Sustainable Innovation

A core challenge legacy companies face is balancing the financial demands of maintaining a profitable business with the long-term necessity of sustainable innovation. "The biggest challenge is to have the same priority for both—running the daily business to generate cash while simultaneously investing in transformation projects", notes Dr. Schwibinger. "Many companies struggle because they attempt to first improve financials and then innovate, which is not a sustainable approach".

Board members play a crucial role in ensuring that both short-term profitability and long-term strategic initiatives are treated with equal importance. This involves creating a dedicated change organization within the company—an empowered team that can drive innovation without disrupting core operations.

The misconception that transformation can wait until a company is financially stable often leads to missed opportunities. "If you wait until your finances are perfect before investing in innovation, you risk stagnation while competitors leap ahead", Dr. Schwibinger explains. Instead, sustainable innovation should be an integral part of financial planning, ensuring that companies maintain a forward-thinking approach while balancing operational efficiency.

Moreover, this balancing act requires strong internal leadership and board-level oversight to allocate resources effectively. The ability to support innovation while keeping the core business financially healthy demands a clear strategy—one that aligns investments with long-term value creation, rather than short-term cost-cutting.

Investing in Startups: Scaling Innovation with the Right Approach

As an experienced investor in Agri Tech and industrial tech startups, Dr. Schwibinger emphasizes the importance of assessing whether a startup is ready for scalable transformation. Startups operate differently from traditional enterprises; their structures must evolve in line with their business growth, ensuring that entrepreneurial agility is maintained while organizational frameworks are built. "If a startup develops its organization too early, it destroys the entrepreneurial spirit. If it does it too late, the company loses efficiency", he explains. "The key is to develop the organization at the right pace, aligning with market opportunities and internal capability development".

The transition from an early-stage startup to a growth-focused enterprise requires a delicate balance of structure and flexibility. Investors and board members should evaluate whether the startup’s leadership is capable of scaling without stifling creativity. Establishing the right governance structures, implementing data-driven decision-making, and securing financial stability through measured investment are critical steps in ensuring a startup’s success.

One of the biggest hurdles for startups is their lack of financial resources. Unlike legacy companies that can generate cash from existing operations, startups must seek external funding. Strategic partnerships, venture capital investments, and government innovation grants can provide much-needed financial support, but the startup must prove its scalability and commitment to long-term transformation.

Fostering Collaboration Between Established Companies and Startups

Germany’s Mittelstand—its backbone of mid-sized industrial firms—has an opportunity to accelerate innovation by collaborating with startups. However, cultural barriers such as the "not invented here" mindset can often hinder such partnerships. "If a company is open to external innovation, venture clienting is a great approach", says Dr. Schwibinger. "This model actively integrates startups into corporate projects, creating joint development teams to work on new products, processes, or software solutions".

Larger companies with substantial revenue streams can also establish their own corporate venture capital arms to invest in promising startups that align with their strategic goals. Additionally, a buy-and-build approach—where established firms acquire innovative startups—can expand their product and service offerings while fostering in-house innovation.

The key to successful collaboration lies in building an internal culture that embraces external ideas. Companies must establish frameworks to seamlessly integrate startup-driven innovation while maintaining operational stability. Cross-functional teams that include both traditional business leaders and startup founders can foster dynamic partnerships that generate tangible business value.

Sustainability as a Core Board Responsibility

With increasing regulatory pressures and shifting market expectations, sustainability can no longer be treated as an optional corporate initiative. Board members must have a strong understanding of sustainability legislation, key performance indicators (KPIs), and emerging trends. "Sustainability KPIs must be embedded into routine corporate reporting, just like financial metrics", Dr. Schwibinger advises. "If sustainability is merely seen as compliance, it will not be effective. It should be integrated into the company's core strategy and viewed as a value driver".

Beyond compliance, sustainability initiatives can serve as an employee engagement tool, fostering a stronger connection between the workforce and the company’s mission. Employees today seek purpose-driven work, and companies that integrate sustainability into their core operations can strengthen loyalty and organizational culture.

Sustainability is also a market differentiator. Companies that invest in green technologies, circular economies, and carbon-neutral processes will position themselves as industry leaders in the years to come. By treating sustainability as both an ethical and financial priority, businesses can align long-term profitability with global environmental responsibility.

Germany’s Position in the Next Wave of Industrial Innovation

Germany has long been a leader in industrial manufacturing, and its future competitiveness hinges on leveraging this strength in combination with AI and sensor technology.

"Germany has an excellent opportunity to build a best-in-class industrial tech ecosystem", says Dr. Schwibinger. "By integrating AI, sensor technology, and automation into complex industrial processes, German companies can lead the next wave of industrial innovation".

This shift is critical not only for staying competitive but also for addressing global challenges such as labor shortages and decarbonization. Companies that develop energy-efficient solutions and high-tech industrial products will be well-positioned to meet market demands while maintaining Germany’s reputation as a hub for cutting-edge engineering.

Key Takeaways for Executives

Summarizing his insights, Dr. Schwibinger offers three key takeaways for board members and executives:

1. Create a Common Vision to Drive Digital Transformation – Leadership must define a clear vision that integrates digital transformation into the company’s core strategy.  Engaging management and employees ensures alignment, fostering a culture where digital transformation is seen as a growth enabler.
2. Look to the Stars While Keeping Feet on the Ground – Companies should actively pursue strategic projects for sustainable innovation while maintaining strong financial health.  By generating strong cash flow from existing businesses, companies can fund their long-term transformation without jeopardizing stability.
3. Build Best-in-Class Industrial Tech with AI and Sensors – Germany’s industrial edge lies in its ability to merge classical engineering with AI-driven solutions and sensor technology. This fusion of tradition and innovation ensures long-term competitiveness in global markets.

Organizations that take a proactive approach—balancing technological advancements with financial discipline—will not only mitigate risks but also unlock new opportunities for growth and competitive advantage. 

By strategically integrating AI, automation, and sustainability initiatives, businesses can stay ahead of market shifts, foster resilience, and create lasting value for both stakeholders and society. The ability to navigate uncertainty with a well-defined vision and adaptable leadership will separate industry leaders from those struggling to keep pace.