Annual Company Analysis, Strategy and Tactics

Annual

Company Analysis, Strategy and Tactics

inotec group

2024

15 July 2024

INO Holding GmbH

Dr. Ulf Sparka I Niels Markus Arens I Attila Besikcioglu

July 2024

Introduction

This is the inaugural iteration of the A-CAST document, which was developed with the support of the Future Council. The Future Council has been operational for approximately one year and has been instrumental in developing a novel reference scenario, defining an alternative strategy, and refining the mission and vision for the inotec Group.

1. COMPANY Stakeholders, WHAT DEFINES THEM, and their interests in their cooperation or relationship with the Company

The following stakeholder map was developed in collaboration with the Future Council.

The requested mission, vision, values, long-term goals, and all additional information about the stakeholders on the map are not known in detail, so there needs to be some assumptions made for the key stakeholders:

Obermark: Information will be provided.

Future Council: The guidelines and rules for the Future Council as a board are well defined and aligned with the inotec group and Obermark. The collaboration and team set-up is being developed continuously. The individual members of the board are probably comparable with the holders of key positions mentioned below.

Customers:

The inotec group serves a wide range of customers operating in different markets. Some of them are likely to share a similar world view, resulting in a similar set of values. This includes a certain determination to be successful with their business model and to work with others in a fair way. It can also be assumed that they share a similar mission and vision, including the ongoing digitalization of the world and their contribution to making their customers successful in their fields of business.

Key position holders: Holders of key positions are a number of individuals with important roles within the inotec group. Their ideas and performance shape the future of the inotec group. The (work) values of the inotec group should be in line with the personal values. The information available about their personal lives suggests that their mission is to create a "good life" for themselves and their families, including some financial freedom and a sense of purpose in their lives. Their personal vision and long-term goals are probably not easy to summarize because of their diverse characters. Usually, they are aware of their status as holders of key positions, which allows them to pursue their interests vis-à-vis the inotec group.

1. Company MISSION AND MISSION STATEMENT

A new mission statement was developed together with the Future Council of the inotec group:

We empower our partners with tailored AutoID solutions to achieve operational

excellence – our contribution to a more sustainable tomorrow.

The new mission statement will be communicated through face-to-face meetings with the inotec team and visuals displayed throughout the building.

1. Company VALUES AND VALUES STATEMENT

The values formulated back in 2017 were updated during a workshop with the entire mangement team, including the managers of the European subsidiaries.

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The values will also be implemented through direct communication with the team, will become visible in inotec's daily activities and will be an integral part of the annual performance review. Once again, the sustainable implementation of the values is part of the culture change and transformation phase of the inotec group. The first steps of this transformation are taken, but many steps are still to go. Developing and communicating corporate values is part of the process, bringing them to life and integrating them into daily work is the critical element. The Group is at the beginning of this journey.

1. COMPANY MAIN BUSINESS SEGMENTS

Usind a technology and an approach of added value, there are six different product and service segments:

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1. Barcode

inotec group offers a wide range of self-adhesive labels with and without serialized AutoID prints. Various digital printing technologies in combination with specific adhesives are used to create customized solutions.

2. Inmould

Inmould labels are special barcode labels that become an integral part of the customer’s injection-moulded product.

3. RFID & RFID inmould

RFID and RFID inmould labels contain a built-in RFID (radio frequency identification) element. This technology uses chips with a non-volatile passive memory to store digital information that can be read by specific RFID antennas, allowing the customer to read labels remotely and in bulk—and most of the RFID labels contain printed information readable by barcode scanners. inotec holds a patent to combine RFID with injection moulding, integrating the benefits of both technologies into one product.

4. Trade

Market demand for products not manufactured by inotec group fall within the trade segment. Orders usually have higher volumes with lower margins.

5. Consultancy & Software

inotec group offers consulting support to customers to determine which AutoID technology should be implemented. Basic software solutions are available to link the AutoID application to the customer’s existing IT system.

6. Miscellaneous

inotec offers additional services such as installation services for new warehouses.

On the customer side, there are five main market segments, most of which can be served by one or more of the product segments listed above:

1. Logistics

All logistics applications, with a focus on returnable transport items.

2. Warehouse logistics

Covers all AutoID needs for warehouses, with a focus on shelf labelling.

3. Industrial applications

This includes the marking of carriers and production items.

4. Health & Pharma

inotec group could serve a number of applications, but so far the focus is on the labelling of blood bags and components for analysis.

5. Trade

An interesting summary of special applications, e. g. for the toy market

For the purposes of this report, we have decided to follow the technology and value-added segmentation presented above.

1. One-FIRM-Company or Multi-FIRM-Company

The inotec group consists of the three companies inotec, identytag and Winckel. inotec has sales-focused subsidiaries in France, the Netherlands, the United Kingdom and Czech Republic. Although they are all separate legal entities, they can be viewed as a ‘one-business company’. They are all active in the AutoID market and serve the same or similar customers. The separate allows a better structuring of the product and services portfolio and the handling of top- and mid-tier applications within the group. It should be noted that inotec has a ‘one face to the customer’ approach and the combined sales organization handles all of the offerings.

1. Company ULTIMATE GOAL

The ultimate goal of the inotec group in order to successfully support Obermark´s business model is to achieve a RoOC > WACC, which currently to means a RoOC > 12,8%. The inotec group has a RoOC of 16,6% based on the forecasted financial plan from Q2 2024. The positive impact on RoOC results in similar proportions from the cash flows generated and the change in VoOC. However, over the past 12 months, inotec has not achieved this goal – due to capital requirements and the consolidation of the company´s value due to the unstable economic situation in Europe, the RoOC was -5,7% in the short term.

The achievement of the ultimate goal is supported by a number of long-term objectives. For more details, see “CURRENT STRATEGY – IDENTIFICATION”.

1. EXTERNAL CONTEXT

All of the following dimensions will deal with the current and the future situation in 5–10 years from now. There are no real tools available to make a reliable forecast and the Future Council was deeply involved in creating these potential scenarios. It was decided to list all the scenarios discussed by the Future Council to illustrate the different possibilities. The probability of each scenario was estimated and all the scenarios with a “high” probability were used to create a consistent reference scenario. Some of the scenarios listed involve very drastic changes but none of them is completely unrealistic.

NONMARKET CONTEXT

Situation in macro-economy (Dimension 1)

High Probability

A linear extrapolation of the current situation:

Over the next 5–10 years, the focus on logistics, security, digitization, and the Industrial Internet of Things (IIoT) will continue to grow at a steady pace. The demand for AutoID solutions continues to grow strongly.

Accelerated growth due to rapid industrial digitization:

Rapid industrial digitalization over the next decade, driven by technological advancements and the IIoT, is leading to an accelerated growth in demand for AutoID solutions.

Digitization first:

Despite various flashpoints around the world, people in Europe are once again most concerned about climate change and a loss of prosperity. Conflicts in the world are confined to individual local regions and do not spread. The situation calms down. In the wake of the Green Deal and a high level of social acceptance for the implementation of sustainable regulations, the focus is increasingly placed on sustainable consumer goods solutions (e.g. deposit systems). At the same time, the growing problem of a of a skilled labour shortage is forcing manufacturing companies to digitize their processes and production workflows on a massive scale in order to remain productive with as few employees as possible. Only companies that can successfully manage to integrate the latest technologies and automation solutions into their business processes will be able to survive.

Survival of the fittest:

On the one hand, the global economy is in a fragile state as it faces various challenges; on the other hand, it is so interconnected that it can respond to many of these challenges with workarounds. In particular, global supply chains are becoming increasingly vulnerable as regional conflicts (Ukraine, Israel, Taiwan...) cause disruptions or require re-routing, or affect availability and/or prices. To become more resilient and self-sufficient, nations, economic units, and systems need strategies in a growing number of product groups. This particularly applies to industries involving pharmaceuticals, energy, high-tech, defence industries, in addition to water, food, and infrastructure. Since very few can afford this strategy on their own, alliances will be sought at the next level to form entire blocs, such as the "Western world", "China", "BRICS", Africa and the countries rich in natural resources. Bloc formations in the past show that in a race of systems, those with the highest levels of education will ultimately dominate and will have to deal with the aggressive behaviour of those who are increasingly left behind, compounded by the fact that the former are the more attractive and in turn become increasingly attractive. There will be rivalry between the systems and further division and an ever faster technological race, especially in weapons, AI, and food production. The main scenario, places Germany in the Western world, which will be first or second in most technologies. AutoID is definitely one of them, its importance is recognised today and will certainly grow.

Rapid progression in the development and acceptance of AI:

AI makes data the third factor of production. AI expands the technological possibilities to combine scarce resources in order to produce not only more but also new output. Data thus appears as an independent production factor alongside capital and labour. AI will completely redefine the relationship between data, capital, and labour. In data capitalism, data is the dominant factor. AI turns data into an intangible asset, and capital-free disruption becomes possible.

Digital platforms instead of vertical value chains:

The vertical industry structure will give way to a diagonal platform structure and data architecture. This will result in companies transforming themselves from being specialised production units into hybrid and open collaboration units instead. There is a greater potential for value creation between companies and sectors. Managing the ecosystem will be a core competence.

A stable unstable world:

Regional conflicts persist worldwide. The major economic regions (Asia, Europe, North America) remain fundamentally intact. Rational behaviour is assumed on all sides. Irrational behaviour only has a regional impact on supply chains and demand.

Consistent application of the European Green Deal due to several climate events:

The European Green Deal both offers opportunities and entails risks for the economy., The transformation towards sustainability creates opportunities for growth in various industries. New business models, changing demand, and new offers are just a few of the ways this will happen. This market shift offers the opportunity to grow the portfolio with customers (e.g. in packaging/recycling/textiles) or with new offers (built to last/recyclable/CO2 neutral). The risk posed by the green transformation is that restructuring the economy in terms of energy and technologies will require a considerable amount of investment and additional costs (CO2 and the pricing of transport), resulting in higher prices for customers, which could in turn lead to a decline in demand.

Less employees:

12.9 million people will retire by 2035, almost a third of today's workforce. Only 6 million new employees will come from the younger generation, leaving a gap of over 6 million that will not be bridged with the resources within Germany. The shortage of specialists and managers will force companies to take a fundamental look at what they offer as employers. Employee-centredness will become a key success factor. Future generations will be able to choose where and, above all, how they want to work. The image in the labour market is relevant and will lead to new offers for employees that go far beyond what would be viewed as traditional attractive offers. Such creative and flexible offers can be seen today in ‘work from anywhere’, ‘team weeks’, a sabbatical option every 5 years, housing subsidies, the 4-day week, among others.

Mid Probability

Every man for himself and trade wars:

Democracies are are facing unprecedent pressure worldwide. Hezbollah and Hamas have terrorised Israel and all its supporters for years. The conflict is here to stay. Trump's re-election has dealt a fatal blow to Ukraine's fragile support base, leaving France, the UK, and Germany with no option but to step aside. As the battle of attrition has not produced a winner for months, the line of conflict becomes frozen, and the conquered territories along the Dnieper are annexed by Russia. In return, Ukraine gets NATO security guarantees for the remaining territories, but the powder keg continues to fume. China seizes the opportunity to overrun Taiwan and annex it without any significant resistance from the USA. Europe is powerless against China. As a result, the German economy is teetering on the brink of collapse, as politically induced trade embargoes imposed by the USA and Europe focus internally on their own economies. inotec's business will focus strongly on Germany and its western allies. The business model would remain fundamentally unthreatened.

Prevailing international (armed) conflicts continue to spread:

The economy is under further pressure due to escalating military conflicts and there is a risk of a global recession. Supply chains are negatively impacted by problems in logistics and increased trade embargoes/restrictions. The relevant capital for investments in infrastructure is withdrawn and reprioritised. The resulting uncertainty leads to both a decline in consumption and the protection of private households' financial reserves. Businesses take action to reduce their production and storage capacities. Investments in innovation and sustainability are cut back and halted. Energy prices rise, driving insolvencies. The stock markets flee into gold, currencies, and government bonds.

Late Roman decadence and infirmity:

The global economy is in an unstable situation because it is exposed to various challenges. However, it is so interconnected that it will respond to many of those challenges with workarounds. Global supply chains are becoming increasingly vulnerable to disruption, redirection, and influence from regional conflicts (Ukraine, Israel, Taiwan, etc.). To become more resilient and independent, nations, economic units, and systems must implement strategies in more product groups. . This is particularly true of industries involving pharmaceuticals, energy, high-tech, weapons, as well as water, food, and infrastructure. As very few can afford this strategy on their own, alliances will be sought at the next level to form entire blocs, such as the "Western world", "China", "BRICS", Africa, and the countries rich in natural resources. History shows us that in a race of systems, those with the highest levels of education will ultimately dominate. There will be radicalisation between the systems and further partitioning and an ever-faster technology race, particularly involving weapons, AI, and food production. Germany will fall further and further behind in this scenario. The cycle of poorer education, poor infrastructure, and a dependence on resources will lead to more and more top performers leaving the country, accelerating the downward trend. Germany will remain important in some sectors, and these leading industries will certainly also require AutoID technologies. If inotec’s customers are among the industries that left behind and go bankrupt, it is relevant.

Slowed growth due to a global economic downturn:

A global economic downturn in the next 5–10 years will undoubtedly lead to slower growth in the logistics and IIoT sectors. Nevertheless, inotec is confident that demand for its products and services will continue, albeit at a slower pace. In such a scenario, the group will focus more on improving the efficiency and cost-effectiveness of its solutions.

Shift in demand due to the emergence of new technologies:

Over the next decade, new technologies will emerge that will disrupt the current AutoID market. This changes the nature of demand for AutoID solutions. Inotec is ready for this. We pivot our products, services, and offers to align with the new demands of the market.

Low probability

World War III:

The lunatics of this world gain the upper hand. Russia gloats as it continues to wage war for years, confident that the world is preoccupied with global crises. The terror of Hamas is now spilling over into Western states. China seizes the opportunity and invades Taiwan, leading to a confrontation between the protective powers of the USA and China. Under Trump, the USA is drawn into military conflicts with the Russia/China axis. Europe honours its NATO commitments, and the disaster is complete. inotec's business would focus strongly on Germany as further global expansion is barely conceivable in such times. There would be no fundamental threat to the business model although the demand for consumer goods (e.g. fashion) would plummet due to dependencies abroad. The availability of low-cost RFID chips will become a problem, meaning that simpler barcode solutions will grow again.

The world as we know it:

The fundamental current conflicts have been resolved- The world is back to how it was in before COVID and Trump.

Protectionism:

This is similar to the "stable unstable world", but with a trade conflict between the three major economic areas, leading to greater protectionism, supply chain issues, and a strong trend towards "local for local".

Pure VUCA (Volatility, Uncertainty, Complexity, Ambiguity):

We wake up not only to another war but also other breakthrough inventions that change the world at a stroke. Crises have long since ceased to be managed, and short-term trends dominate. In this scenario, there is much to gain and much to lose. Investors will focus on economic sectors that promise security, such as security industries (digital and physical, such as those involving weapons), insurance or suppliers of basic needs, as well as cutting-edge industries in AI, space, nuclear fusion, etc., will be the focus of investors. If inotec counts these among its customers/non-customers, this will influence the strategy.

Situation in natural environment and climate change (Dimension 2)

High Probability

Houston, we have a problem:

The EU and Germany are reacting to the increasingly obvious consequences of climate change (droughts, floods, storms, etc.), but only when the consequences become visible and tangible. Stricter legislation is gradually coming into force to curb CO2 emissions. The 2 degree target may not be achieved, but the key climate tipping points and catastrophes can be avoided. Whenever a new tipping point (problem) is reached, politicians call for more far-reaching measures – with success. This environment would be positive for inotec. The speed of change for its own product range would be moderate. The path to sustainable solutions is successively paved step by step, and inotec can make a significant contribution along the way.

Higher global warming than anticipated:

Environmental changes could have a long-term negative impact on inotec; however, this will not happen "overnight", making close monitoring is advisable.

The European Green Deal:

Depending on the future course and impact of climate change, this could accelerate the scenario or amplify or exacerbate its effects.

A largely unchanged situation:

For the next 5–10 years, the situation remains largely unchanged. Western Europe remains to be relatively free of major natural disasters. inotec’s operations and key customers are not directly affected by climate change or environmental issues. The risk of local extreme weather conditions will increase and inotec may consider developing a multi-site strategy to manage this risk

. Major changes in regulations and societal expectations regarding environmental sustainability would be likely (which will be explored in the next dimension).

AI Push:

Identifying and tracking objects and people can contribute to a better understanding of the links to climate change. Combined with AI, entirely new services can be developed for environmental research and management.

Mid Probability

An expansion of international conflicts:

Planned climate change legislation is watered down and/or postponed. Subsidies are suspended for the time being. Natural disasters cause additional damage and pose challenges for production and logistics.

Demographic change:

Commitment to sustainability and other ESG issues are almost hygiene factors that play an important role for candidates in the selection process. If, after joining a company, they find that only green washing is taking place, Gen Z will be little or not at all prepared if at all to accept this situation and will be quick to change.

Global warming in line with expectations (2 degrees):

The general weather and environmental situation in Europe is not changing to an extent that would affect inotec’s business.

Regionalisation:

The weather is becoming more extreme, but there are also bountiful regional harvests. In the Alps, for example, summer tourism is flourishing, and the increasing switch to renewable energies is leading to greater independence from oil-producing countries. Such regions will benefit greatly and will see massive investments. Other regions, such as California, will gradually become less attractive as heat and water shortages require more and more technology, and some regions and islands will become uninhabitable. The opportunities and risks will therefore be distributed very differently from region to region. inotec can grow if it does well in the right regions.

Accepting destiny:

Climate change continues to cause regional disasters. Affected regions recover more slowly and return to pre-disaster levels later and later, if at all. On the one hand, migration is an issue, but people also settle down effectively in this scenario and develop regional recipes, alliances, and lifestyles. Prosperity declines, but in this scenario also sees successful inventions in water, plants and environmental technologies. People accept and adopt to climate change.

React!

Climate change is one of many catastrophic triggers in a Vuca world. In this scenario, technological innovations that promise solutions are hyped and probably have the greatest chance of being realised. On the other hand, in this scenario, attention may shift most quickly to the next crisis point

Low probability

A passed tipping point:

The climate catastrophe is unstoppable, and humanity has made a mess of it. Tundra soils are releasing incredible amounts of CO2 and other greenhouse gases. The melting of the polar ice caps is accelerating faster than any serious forecast could have predicted. The consequences for northern Germany are storm disasters, droughts and increasingly unpredictable harvests. In the equatorial region (e.g. Africa), conditions are hostile to survival. There will be unprecedented movements of refugees. Northern countries will try to protect their borders.

inotec business model would not be threatened for the time being. "Good business" would be done with eyes open until the bitter end. However, inotec will have to meet high sustainability criteria as an employer and with its products.

The tide has turned:

The 2-degree target is met. The impact of extreme weather events is extreme locally, but moderate globally and nowhere near as bad as feared. The global economy can cope with the transition to sustainable energy production with sustainable products. In this scenario, numerous initiatives for more sustainable society and consumption offer great opportunities for inotec's product range.

Less than expected global warming:

In this case, there would be no change no changes from the current situation.

Societal and political (Dimension 3)

High Probability

Regulatory changes focused on sustainability:

Political changes are leading to increased regulation around sustainability and the reduction of carbon emissions. This affects both inotec and its customers, who need to adapt their operations to comply with these regulations. inotec's AutoID solutions help companies improve their logistics efficiency and create a circular economy, thereby reducing their environmental footprint.

Rising societal expectations for corporate social responsibility:

There is a dramatic increase in societal expectations for companies to demonstrate strong corporate social responsibility, particularly in relation to climate change and sustainability. This influences the expectations customers and employees, and companies that can demonstrate their commitment to these issues will have a competitive advantage. inotec's commitment to sustainability in its operations and solutions that help customers to improve their own sustainability could prove to be a significant asset.

Technological change driven by climate change:

As climate change progresses, technological adaptations will be required. For example, there may be an increased demand for logistics and supply chain solutions that can cope with unpredictable weather patterns and/or other climate-related disruptions. inotec's ability to innovate and adapt its AutoID solutions to these new challenges could drive its success over the next 5–10 years.

A linear extrapolation of the present situation:

Over the next 5–10 years, social and political trends will continue. There will continue to be a high demand for instant service fulfilment, sophisticated logistics and AutoID solutions. Employee and candidate expectations will evolve towards a greater emphasis on corporate culture, meaningful work and sustainability. These factors continue to stimulate a steady demand for inotec’s products and services.

Stability:

The basic political and social framework remains unchanged. After years of a trend towards secession from Europe, global changes are leading to a stronger focus on one Europe.

Right down the middle:

Centrist parties manage to stay in power and keep the extremes of the far left and far right out of government. Governments in Germany and the EU have stable majorities. Prosperity continues to rise moderately. Conditions will be reasonably stable. Cooperation with other economic areas would be promoted where possible. Demand for AutoID solutions would remain high, driven by rising prosperity.

Educational transformation:

Society´s acceptance of the use of AI solutions is delayed or hindered by a lack of knowledge and training. There is a significant shortage of relevant specialists to implement AI integration in identification solutions.

Overlooked:

Societies are increasingly controlled by different communication structures and opinion leaders. This leads both to multipolar structures and fragmentation in democracies and to apparently well-functioning societies in controlled systems because they are aligned. Both tend to be less stable than those in the past and are particularly vulnerable if basic social promises of prosperity and security are not kept. Within society, the increasing spread of wealth is a growing danger. However, successful and forward-looking societies will also manage to rally the population behind them. Special attention (soft signal) is given to education. Germany will continue to be overlooked, and citizens who can afford it will emigrate. There would be a risk of unstable and dysfunctional multi-party governments that would be quickly replaced and superseded. Existing low-tech business relationships such as those with inotec would be jeopardised.

A shift towards e-commerce and direct-to-consumer models:

Societal changes and the evolution of retail concepts are leading to a dramatic shift towards e-commerce and direct-to-consumer models. This shift increases the need for efficient, reliable, and technologically advanced logistics solutions. As a result, the demand for inotec's AutoID solutions is escalating beyond current projections.

Mid Probability

Fighting within the ranks:

Societies are increasingly controlled by different communication structures and opinion leaders. This leads both to multipolar structures and fragmentation in democracies and to apparently well-functioning societies in controlled systems because they are aligned. Both tend to be less stable than those in the past and are particularly vulnerable if basic social promises of prosperity and security are not kept. In this scenario, Germany manages to be relatively successful, even if in many areas (housing, education, medical care) the absolute levels of the past will never be reached again, but successful and forward-looking societies also manage to rally their populations behind them.. The focus (soft signal) is on education. In Germany this will be increasingly privatised.

A decline in global stability:

A decline in social and political stability increases global volatility. This leads to greater planning uncertainty. Moderately successful and less flexible companies will disappear from the market.

Democracy in danger:

"Nobody intends to build a wall". But everything that can go wrong is going wrong. The world is being run by people like Trump, Putin, Xi Jinping, and Tino Chrupalla. As a result, democracies that encourage open and constructive debate about the best possible solutions are significantly weakened, and each country looks out for and acts in its own interests. The global environment is less predictable and stable. Countries close themselves off.

A fundamental right to yoga during coffee breaks:

Politics is losing its grip on reality. Laws are passed by parties that have an idealistic view of the world, but no connection to feasibility and reality. In the end, politicians think they know best. Germany makes itself comfortable. The lack of necessary reforms and a strengthening of worker´s rights means that Germany continues to lose its competitiveness as a business location. Investments are not being made and the problem of skilled labour is not solved. Government intervention has major consequences for employers (trade unions, wages, employee rights, employer obligations) as well as on the product side (e.g. as a result of sustainability requirements).

Social tensions will rise:

Sections of the German population would be less willing to take on certain jobs (e.g. in logistics, production, skilled trades), adding to an already shrinking population. At the same time, the willingness to accept and integrate people from other nations is rapidly diminishing due to increasing international conflicts. This conflict will occupy the minds of politicians and businesses alike, forcing them to make tough decisions and take consistent action. The divisions in society can only be overcome if everyone involved is prepared to compromise and break new ground. This realisation may take a long time and will only come as the downside become more tangible.

Social acceptance:

As part of the European Green Deal agreement, legislation will be reviewed and tightened or brought forward. However, new regulations are being introduced in areas that were previously exempt from requirements and burdens are introduced. An example of this is the CSRD reporting requirement. With the generational change in companies, expectations of sustainable companies and offerings are rising and tolerance for old solutions is falling. As the transformation will take several years, the roadmap should be planned today.

Low probability

Control:

Societies are increasingly controlled by different communication structures and opinion leaders. This leads both to multipolar structures and fragmentation in democracies and to apparently well-functioning societies in controlled systems because they are organised in the same way. Both tend to be less stable than those in the past and are particularly vulnerable when basic social promises of prosperity and security are not kept. In this scenario, everyone increasingly becomes the architect of their own destiny. The state will no longer be able to fulfil its role; self-organised, market-based forms of organisation will increasingly emerge, which will be both successful and able to spread rapidly via the Internet.,. Identification systems could play an important role in gaining control.

An increase in stability again:

The world returns to its pre-COVID and pre-Trump state.

Military first:

Societal acceptance of higher defence spending is increasing. The federal budget is revised and the debt brake may be loosened, leading to less foreign investment in Germany. This flight of capital accelerates the wave of insolvencies already underway and intensifies market consolidation in certain sectors.

INDUSTRY CONTEXT

Regulatory (Dimension 4)

High Probability

A linear extrapolation of the present situation:

Existing regulations persist and evolve at a steady pace, requiring greater supply chain transparency, thereby driving demand for AutoID solutions, while also imposing increased costs related to CE marking, ESG and transparency requirements.

Greater emphasis on sustainability regulations:

Growing concerns about climate change are leading to stricter sustainability regulations across the EU. This will potentially include stricter standards for supply chain transparency. These new regulations increase the demand for inotec's AutoID solutions, which can help businesses in meet these new requirements, while also requiring further investments by inotec to comply.

Stringent regulations on data privacy and security:

With the increasing digitalisation of supply chains, the EU is imposing stringent regulations on data privacy and security. This has an impact on inotec's products, potentially increasing the demand for secure AutoID solutions, while also requiring investment in robust data security measures.

Increased standardization across the EU:

The EU is moving towards higher standardisation of regulations across member countries. This development simplifies compliance for companies operating in different countries, potentially reducing regulatory costs for inotec while maintaining the existing demand for its products.

Moderate policies:

Legislators create sensible policies for the major problems of our time (energy, sustainability, supply chain law, data protection, etc.). These rules are open to technology and encourage creativity in the industry. Everyone likes to know from which particular organic farm their breakfast eggs come from. But how this transparency is achieved is left to the actors involved in the supply chain. There will be regulations (e.g. mandatory labelling solutions) to which inotec can respond very well with its current capabilities.

Enforced regulations "on the backs" of the banks:

ESG, CSRD and other regulations increase the pressure on all companies to behave in a "compliant" manner. Increased transparency (e.g. in the Supply Chain Act) is leading to more traceability of corporate transactions and processes.

Delegating responsibility:

In a world of increasing opportunities and their seemingly unlimited availability, the call for regulation in various areas will always be loud. However, the state is less and less able to enforce its rules and laws. In this scenario, there will always be an attempt to raise regulations to a higher level (such as the EU) in order to make them universally binding and comprehensible. This will not be easy, but it will ultimately bring success and be the hallmark of a strong economic area. At lower levels, different interest groups will create their own (regional) regulations. Identification in all technical forms will become more important.

Technological solutions and privatisation:

The state can no longer keep pace with developments. It increasingly delegates the design and drafting of legislation to the private sector, where influential organisations are emerging. The enforcement of these laws is also increasingly being organised by the private sector, for example by large TÜVs, security services, monitoring software, etc. This would provide great opportunities for AutoID and automation.

Mid Probability

Introduction of new technologies and related regulations:

The introduction of new technologies in the supply chain and logistics sector leads to the creation of new regulations. Depending on the nature of these technologies and regulations, they could either stimulate or suppress demand for AutoID solutions. They could also potentially create new regulatory costs for inotec.

Waiting for regulation:

Legislation on the application and use of AI is pending, delaying the implementation of technically feasible solutions. To quote Microsoft CEO, Satya Nadella, Davos 2023: "If you wait until the legal framework has been clarified, it will be too late." How does the American credo, "Don't wait for permission, ask for forgiveness", fit with German corporate culture?

More sanctions:

Certain goods may no longer be fully exported and/or imported from affected countries. The cost of monitoring compliance with sanctions increases.

Integration:

Immigration laws and integration aids will be revised and adapted several times. It may be advantageous for certain countries within the EU to go it alone and give everyone in the market other options (e.g. in the Netherlands, 75% of Ukrainian refugees are in work).

Over-regulation:

Regulations are often "well-intentioned" but "badly done" and have little steering effect. Legislators manoeuvre themselves into a blind alley and are hardly able to fulfil their own tasks of correct guidance, because new technologies (e.g. how do we deal with AI?) are not understood by legislators and are therefore regulated too late. This is a bad scenario for inotec. While a healthy level of regulation can be positive, a flood of regulation, e.g. on the topic of sustainability, can threaten business activities. How is it still possible to operate profitably and predictably in such an environment?

Resignation:

The state is less and less able to enforce its rules and laws. In this scenario, laws are less and less enforced, creating lawless areas. Regulation will be perceived as burdensome and dysfunctional (because nothing works). This does not bode well for AutoID.

Low Probability

No rules:

The AutoID market is left to its own devices and there are no rules. There is no limit to the creativity of business in combining hardware and software solutions. The use of AI and the possibilities of AutoID will lead to unprecedented transparency in material, financial and information flows. This will create new AutoID giants that will emerge at the right point in the supply chain and successfully exercise their power over the others. It will be important to keep abreast of developments, especially in the software sector, in order to remain able to integrate with hardware solutions.

De-regulation:

The current trend will be reversed in favour of reducing bureaucracy. Existing requirements will be further reduced.

Technology (Dimension 5)

High Probability

Via head start though technology:

AutoID is an investment in the future. Technological development is progressing but is increasingly taking place in clusters. Investments will therefore flow specifically into such clusters and become increasingly focused. It will be important to be well networked with these leading clusters or even to play a recognised role in them. If this is successful, economic success can be planned, as can R&D.

Foreign investment:

Technological development is progressing but is increasingly taking place in clusters. These are forming less and less in Germany. Even strong companies will therefore become increasingly dependent on other countries – even other systems – if Germany is no longer able to keep up with cutting-edge technologies. Large companies will therefore also increasingly move their R&D abroad, and the brain drain will exacerbate this unfortunate situation.

The end of old industrial forms:

Germany will score points with its basic research capabilities. Where large sums of money are invested (in hype industries), great things are created in Germany in certain areas. It is easy to live in the shadow of these innovative companies. But the decades-long strength of German industry to constantly improve things over long periods of time and become the market leader will disappear. Opportunism and boldness will replace the importance of old traditional companies.

Continuous development, especially of existing technologies in conjunction with AI:

RFID technology is about 30 years old. So far, however, it has only been moderately industrialised. In the future, the key will be to better combine existing technologies with AI, rather than developing completely new technologies.

A bigger AutoID bouquet:

There have been significant breakthroughs in the labelling of objects (e.g. with ink, laser, or image recognition using optical features). Barcodes, in particular, are under pressure and will disappear from the market. RFID will retain its raison d'être in the AutoID market due to its mass advantages.

Opportunity through technology:

As part of increased demand for climate- or CO2-neutral products with lower energy consumption increases, new technologies are being developed, such as the availability of climate-neutral printing inks.The aim is to reduce energy consumption by 40% by 2030. To achieve this, energy-intensive production and machinery will be improved or replaced. Technological advances are part of the solution, but they are investment intensive.

A linear extrapolation of the present situation:

For the next 5—10 years, optical AutoID and RFID will remain the dominant technologies in the AutoID market. inotec will continues to benefit from its deep expertise in these areas. Production technology continues to evolve, with a gradual increase in the automation and digitalisation of the production processes.

Mid Probability

A leapfrog development; AI gains dominance:

A technological development takes place that revolutionises existing logistics concepts.

Things stay as they are:

Developments in the AutoID market (especially barcodes and RFID) continue to grow without a new technology (e.g. laser marking) disrupting the market. An increasing need to label objects will slowly but surely create a growing market for inotec. This scenario would be positive for inotec. The ability to combine different labelling solutions in engineering remains important in order to develop the right AutoID solution for customers’ individual application.

Data security as an added value:

The security of identified data is enhanced by new technologies, such as AI analysis of user behaviour patterns or language (NLP), is improved.AI and blockchain undoubtedly changing the way digital identities are verified. With their immense potential, they will pave the way for a more secure, reliable, and user-centric approach to verifying digital identities.

Accelerating technology:

Technological developments that benefit the military will gain more momentum and can accelerate technology adoption. Other developments may be put on the back burner.

The arrival of robots:

The shortage of skilled labour will give automation technology an enormous boost. Jungheinrich, for example, is investing in robotics specialist Magazino, even though the forklift business is still flourishing, because it recognises that there will be problems with logistics staff in the future. According to CEO Lars Brzoska: “We want to be at the forefront of change instead of being driven by it.”

A breakthrough in direct marking technologies:

Technological advances are leading to improvements in the resolution and durability of direct marking technologies, making them viable for mass market applications. This could shift demand away from traditional AutoID elements and require inotec to invest in this new technology.

An increase in real-time tracking applications:

As technology advances and costs decrease, real-time location applications will become more prevalent. This would increase the demand for active tag solutions, potentially creating a new market for inotec's products.

Advances in AI and camera recognition technologies:

Significant advances in AI and camera recognition technologies are enabling the identification of individual items. This could revolutionise the retail industry and impact the demand for traditional AutoID solutions. inotec would need to adapt to this new technology to remain competitive.

Growing demand for RFID Tags with sensors:

As concerns about climate change and supply chain transparency increase, the demand for RFID tags with built-in sensors for temperature, humidity, etc. is growing. While the production costs of these tags are currently high, technological advances and increased regulation could make them more economically viable, creating a new market for inotec.

Low probability

A status quo in technology (more or less):

Apart from minor developments, the technology will remain as it is today.

A replacement of barcodes and RFID:

Integrated labelling of objects in a value-added process replaces traditional barcode or RFID labelling methods. Technological advances are making it possible to apply labels quickly and to most surfaces. The further development of image recognition combined with AI will make a major contribution to the unambiguous identification of objects.This would be a major problem for inotec and would mean the end of barcodes. RFID would still be viable.

Suppliers and supply (Dimension 6)

The inotec group´s products are essentially based on four sourcing categories, each of which should be considered separately.

Printing materials, films and coatings:

These are the materials used to print or protect the printed image. inotec has specifically tested and qualified a whole range of materials for different applications, in some cases developing them in collaboration with the manufacturer.

In principle, there are many manufacturers of these materials, but for the specific application there is a direct dependency on the respective qualified material. In order to reduce this dependency and to further reduce the cost of materials, alternative materials are continuously developed (or qualified) to create a multiple sourcing situation. However, it should be noted that for some key materials, alternatives have not yet been qualified, resulting in a dependence on multiple manufacturers, including the base material for all inmould products. Virtually all of these materials are derived from petroleum products and are therefore also subject to corresponding cost increases.

Adhesives:

For inotec, this is the most important product group. Special solutions have been developed and qualified together with manufacturers, resulting in unique selling propositions for each product. Work continues on new adhesives and possible alternatives. As a result, prices can be reduced and security of supply increased. All these products are based on petroleum products and are subject to the same supply risks and cost situation.

RFID:

The RFID products offered by the inotec group are largely dependent on so-called RFID inlays, which differ in terms of the manufacturer´s antenna and the chips used. The inlay manufacturers order the chips from different semiconductor manufacturers.

Currently, inotec works with four major inlay manufacturers. The products of these manufacturers differ in some respects but are basically interchangeable. For larger projects, separate contracts are signed with each manufacturer to fix price and quantity for the duration of the project. The ability to purchase inlays from different manufacturers puts the inotec group in a good position. However, some inlay manufacturers try to approach the inotec group's end customers and negotiate directly with them, which is not in the inotec group's interest. inotec is reducing its business with these manufacturers and intensifying its sales and R&D activities to defend the market.

Semiconductor manufacturers supply the chips for the RFID inlays and thus determine the technical functionality of the chips. There are three relevant manufacturers worldwide who work together with so-called ‘foundries’. Due to the small quantities purchased by the inotec group, there is no direct relationship with any semiconductor manufacturers.

Although this market constellation provides a certain degree of security of supply, the inotec group cannot escape the general supply situation on the global semiconductor market. It has started to order inlays well in advance, and, where possible, has increased its inventories for RFID inlays.

RFID inmould requires special production steps. inotec has signed a firm development agreement with one inlay manufacturer, which secures the production of RFID inmould. In principle, the inotec group could also produce the inlays itself, but the quantities currently required do not justify the investment of several million euros, although competitors of the inotec group have gone down this route.

Service provider:

inotec works closely with an IT service provider that developed the ERP system used by inotec and currently supports it under a service contract. The loss of this service provider would have a massive negative impact. Alternative scenarios need to be put in place, which are likely to involve additional internal and external resources and costs. An initiative was launched to design an alternative ERP system and an initial workshop was held with the support of an external service provider has been held to get a feel for the possibilities and approaches for such a serious, complex and far-reaching project. For more details, please refer to the chapter Q.

In general, the bargaining power of the suppliers depends heavily on the sourcing situation. inotec actively tries to avoid single-sourcing situations, but there is still some a strong dependence on selected suppliers. The quantities sourced by inotec group are still small, and there is an unbalanced relationship with some global suppliers.

In recent years, inotec has been confronted with price increases in all purchasing categories.

High Probability

A linear extrapolation of the current situation:

For the next 5–10 years, inotec will continues to manage its supplier relationships in a similar way to today. The company will continue to deal with price increases, supplier dependencies, and the challenges of securing necessary materials and services. inotec will remain reliant on certain key suppliers and will continue to work to identify and qualify alternatives.

A shift towards sustainable materials:

As the effects of climate change become more pronounced, there will be a shift in the industry towards more sustainable materials. This could create challenges for inotec if its current suppliers are unable to provide these materials or if they are more expansive. It could also create opportunities if inotec is able to identify and qualify new suppliers of sustainable materials.

Increased competition between suppliers:

For the next decade, increased competition among suppliers could lead to technological advances and cost reductions. This could potentially benefit inotec both by providing a wider range of options for materials and services and by potentially reducing costs.

A circular economy:

The Supply Chain Act requires an adapted supplier assessment and regular quality control.

For a more circular economy, there will be a greater focus on material selection, leading to new suppliers and raw materials.

Tightening of the belt:

The supply issues of the Corona period have faded into the background. Goods in the AutoID market are generally available again quickly. However, the AutoID market is highly price-sensitive due to both this supply capability and global uncertainty. Customers will buy the "cheapest" AutoID solution in the short term, but not the cheapest in the long-term, the planning horizon on the customer side is shortened. For inotec as a supplier, this trend means that inotec must be prepared for tough price negotiations. If the customer´s ability to deliver is no longer respected, savings will have to be made on the supplier side in order to maintain the previous margin level. This will require tougher negotiations and alternatives in the supplier base and therefore probably a higher degree of comparability (standardisation) of the purchased products.

Stability in volatility:

The status quo with somewhat volatile supply chains will remain and become the "new normal". Local sourcing will continue to increase but at higher purchase prices. There will be a mix of low costs offshore and higher costs nearshore for the same quality. Margin pressure on inotec will increase.

Price matters:

In this scenario, delivery reliability determines the highest price. Suppliers will therefore change more often. Scale matters, especially internationally, in order to remain able to deliver.

Mid Probability

Disruption to the global semiconductor market:

Ongoing or new disruptions in the global semiconductor market affect the availability and cost of RFID inlays. This could lead to further price increases and supply challenges for inotec. inotec may need to find additional or alternative suppliers or consider manufacturing inlays itself.

Advances in AutoID technology:

New technologies are emerging that are changing the landscape of AutoID solutions. This could include new ways of creating AutoID elements, or new types of elements altogether. Depending on the nature of these technologies, they could be either a challenge or an opportunity for inotec.

Purchasing Excellence:

In the next few years 80% of B2B interactions between buyers and sellers will be digital, and a large part of the interaction will be recorded to extract competitive and market information in addition to offering details and improving the sales process in real time (Machine Learning + Natural Language Processing Ml/NLP).

Oil price shock:

Supply bottlenecks and higher energy prices cause prices to rise again and inflation begins to rise again to record levels. Rising interest rates are the result. Not all suppliers can keep up with the market situation, and a consolidation of companies takes place. Suppliers ration supplies to particularly important and long-standing customers. Some suppliers only deliver against prepayment.

Taking control of the procurement process:

Supplier service levels will become more unreliable and unpredictable Employee turnover within a corporate network will increase and social media recruitment will become standard practice.

Deglobalisation:

Increasing tensions and egocentrism among world powers weaken global trade in goods. In this scenario, inotec will need more resilience (multi-supplier strategy) with a healthy mix of domestic and foreign suppliers in order to avoid becoming dependent on individual key components. The flow of goods will be concentrated in Germany and the EU.

An increase in stability of the supply chain; more reliable international suppliers:

Prices and availability will be simplified and inotec will be able to maintain price advantages in purchasing. inotec will further develop its multi-supplier strategy and procurement will become a commodity at inotec.

More unstable supply chains:

Due to major political problems, offshore supply from suppliers is decreasing. In addition to shortages, prices will rise sharply. inotec will come under significant pressure in terms on both products and prices. Alternative solutions will increasingly enter the market, shifting the price/performance ratio of existing applications.

One economy:

In this scenario, the supply side will be better for inotec, as all essential goods are produced in the same economic system. However, it will also become more comparable; and sourcing will not be able to make any distinctions. In the context of functioning supply chains and networks, there is a high degree of planning security for companies.

Low probability

The good old days:

Uncertainties in the world are overcome and global trade increases. Demand for AutoID exceeds market capacity. Deliver capability becomes a competitive advantage again.

In this case, inotec should take advantage of new opportunities on the global market to protect existing supply relationships and develop new relationships on the supplier side.

Multi sourcing:

What will tomorrow bring? Who knows. Accordingly, SC partners should prepare for all uncertainties. Broad-based sourcing is a must, and high vertical integration and independence are great strengths.

Customers and demand (Dimension 7)

Demand for the jobs the Company’s products or services perform for others

What job is done by the group's products?

The inotec group´s products ensure that an object – be it a container, a shelf, a storage location, or any other object – can be clearly identified, and not just any object, but a specific object. With the right IT system, for example, it is possible, to record which components have been used in a car, who delivered them and when, and at which workstation they were installed. This concept of one-to-one identification cab be found in all applications, even in simple situations: It´s not just a container that´s identified, but the one containing a specific product; it’s not just a chair that´s rented, but a specific chair with certain characteristics.

All the underlying applications for this identification task are currently growing, as the requirements for traceability of individual items are generally increasing. (See first chapter).

The expected market prices vary considerably, depending on the application. From the customer's point of view, inotec group offers a critical c-part: The single label ‘doesn´t cost much’, but is critical for the application. The better the customer's requirements are met, and the more unique selling points are offered, the higher the prices can go.

inotec group is taking advantage of the present market situation to systematically increase prices, and the improved GM is supported by these efforts. The quotation for new projects is always calculated on the basis of the current cost structure. As a result, all cost increases are included and, additionally, inotec will also include an additional uplift when the market situation allows it to do so. The situation with long-term customer contracts is more challenging, and inotec is actively approaching customers to renegotiate long-term contracts. In some projects, inotec faces direct competition and a competitor is also qualified for the same project. In this case, a price increase may not be possible.

No specific research of price sensitivity has been carried out. The general increase in the cost of RFID inlays and raw materials in recent months felt by all customers and they are more willing to accept inotec’s price increases (to some extent). This situation will not last forever, and customers have already started to increase the competitive pressure for inotec by activating additional supply sources. inotec will develop new products and new material combinations to stay ahead of the competition. Prices for raw materials are expected to stabilise, and to decline in early 2024. This will also trigger customer requests to reduce the selling prices of inotec’s products. inotec will not pass on all material cost reductions to customers.

To date, inotec has not focused specifically on the defence sector. However, inotec is investigating whether involvement in logistics applications for the defence sector could be beneficial.

Developments at the Company’s main customer groups

The inotec group serves a wide range of customers in different markets. It is often necessary to distinguish between the buyer and the user of the products. For example, returnable transport items (RTI) labels, are often purchased by injection moulders but used by the operator of the RTI pool. Storage equipment is installed by rack builders, who act as purchasers, but the labels are used by the warehouse operator. This chapter the focuses is on the buyer´s perspective.

Injection moulding manufacturers: This is inotec´s most important customer group and the main purchaser for inmould products. Several of these manufacturers compete with each other, and inotec supplies the main manufacturers of RTIs in Germany and Europe. The market for these manufacturers is growing and will continue to be supported by the above-mentioned trends. inotec is a reliable partner for these customers and has a long-standing business relationship with most of the RTI manufacturers.

Shelf manufacturers: Shelf manufacturers are currently benefiting from the boom in online retail, a boom that is expected to continue in the coming years. There are a few large manufacturers active throughout Europe. inotec is regularly asked for and included in tenders, but inotec is only one potential supplier, and inotec has to differentiate itself via quality and service in a price-driven market.

Industrial customers: Many industrial customers are optimising their processes and modernising their existing production facilities. As shown above, this trend is expected to continue and the demand for AutoID solutions will continue to grow. inotec group is a well-known solution provider, but is one supplier among many, and often does not meet the extremely low price targets for disposable labels.

Food retail: Large grocery chains order labels for AutoID applications directly from inotec, which has built a reputation for providing suitable solutions. Once selected, inotec is the sole supplier and maintains close contact with the customer. It is to be expected that, in addition to large new projects, there will also be continuing need to replace damaged or lost RTIs.

System integrators & multipliers: So-called system integrators often support customers in the implementation of AutoID projects by offering a complete solution that includes hardware, software, and labels. inotec group works with various integrators and multipliers and focuses on item labelling. Often these are single projects, but a cooperation with a system integrator usually last over several years.

The following situations are theoretically possible in the next 5–10 years:

High Probability

A linear extrapolation of the present situation:

Over the next decade, the demands of current customer groups and the market situation will continue to develop in a similar way to today. Traceability requirements will increase, leading to a growing demand for inotec's products. The market situation will allow systematic price increases although competition will remain a challenge.

Crisis as an opportunity:

Companies are already unable to maintain their products, services and offers due to staff shortages (as seen in poorer opening hours, less choice, slower processing times). Those that can maintain and improve their standards with an attractive corporate culture and operational excellence can differentiate themselves positively in the market. At the same time, scarcity will create new needs that will lead to new or increasingly different offerings (e.g. automation technology, interim management/contract labour). If new goods cannot be produced or supplied in sufficient quantities, the reuse/repair (of components) may become more important. In an environment where teams change more quickly and are more versatile, the need to track and to identify people and assets may increase significantly. Asset management will be a key issue.

New customers & new offerings:

Due to the shift from a linear to a circular economy, the following industries will increasingly come into focus: electronics & ICT (e.g. electronic waste is the largest increasing waste stream; in Germany today there is only a recycling rate of 38.7% compared to 81.2% in Croatia, of which 52.7% is household appliances), vehicles and batteries, packaging and plastics, textiles (1% recycled textile fibres and extended producer responsibility EPR will come by the end of 2025), construction and buildings, and food chains. In these areas, the transition to a circular economy will increasingly lead to resale, repair, reuse, etc., and new business models such as product as a service will develop. These will provide additional opportunities for identification solutions. It will become more relevant both to handle orders from customers for customers and to more deeply enter the value chain: the demand for products that are CO2 or climate neutral will increase, as will the requirements for a company's environmental management system. Government and corporate contracts will sometimes only be awarded to companies that are certified to ISO 14001 or EMAS.

A significant increase in eco-conscious retail and consumer demand:

Increased awareness of environmental sustainability due to the effects of climate change will lead to a significant increase in green retailing practices and consumer demand. Retailers and consumers will increasingly favour traceable, sustainable supply chains, which will significantly increase the demand for inotec’s products.

Increased regulation affecting customers´ operations:

Supply chain transparency regulations, driven by climate change concerns or other factors, are becoming more stringent. This directly increases the demand for inotec’s products as customers need to comply with these regulations.

Evolution in the retail landscape:

Changes in the retail landscape, such as the rise of direct-to-consumer models or a increase in online shopping, are creating new demand for efficient and reliable logistics solutions. This will create new opportunities for inotec to expand its customer base and offer new solutions.

Slightly positive development:

Customers and customer problems remain fundamentally unchanged. There is a fundamental increase and demand for logistics processes. Due to sustainability factors, customer demand for more durable products and solutions will increase.

More of the same:

The AutoID solutions (barcode and RFID) previously offered in the inotec portfolio will continue to grow moderately as the need for identification increases.

This scenario is relatively predictable and means that inotec can continue to focus on barcode and RFID. Inmould will continue to be highly relevant due to container systems and the trend towards re-use.

Digitalised sales process:

In the next few years, 30% of outbound sales masses are expected will be generated synthetically. Digital advisor will become qualitatively attractive and increase in various applications, e. g., Zalando AI as a digital fashion advisor. Initial application tests in the US have achieved 40% better results than personalised sales because more information can be processed more quickly. These tools will be increasingly integrated into all CRM tools and will require regular adaptation. Revenue from digital twin solutions will be around 16 times higher in 2030 than in 2022. Digital twins will be increasingly fed with data and tested to determine which sales messages, sales processes, and marketing campaigns are most promising.

Enhanced offerings:

Improved accuracy and efficiency: AI can help improve the accuracy and efficiency of identification solutions. For example, AI algorithms can be used to recognise barcodes and RFID tags even if they are damaged or dirty. This could reduce errors and improve productivity.

Mid Probability

Go with the flow:

In this scenario, it is important to identify trends at an early stage (see the RFID Market Survey). Where are the clusters, strong regions, and strong companies? The company must align itself with these, go with the flow and grow. Clear positioning rather than opportunism will be required.

Strong positive development:

Customers and customer problems remain fundamentally unchanged, and there is a fundamental increase in demand for logistics processes. Due to sustainability factors, customer demand for more durable products and solutions will increase.

One size does not fit all:

Due to the growing AutoID portfolio on the market, customers are demanding a customised solution. The key lies in the implementation of existing technologies and their application to individual customer problems. There will be a great need for digitisation and transparency without the customer being an expert in this area. Companies that take the customer "by the hand" and offer them a tailored solution consisting of hardware and software will be best placed to succeed

The next crisis:

Demand collapses in many countries around the world, leading to increased local sourcing (for security patriotism reasons). Demand in the defence industry and its suppliers will increase, and the allocation of critical components will be regulated by law in some cases. Due to the high level of uncertainty, customers will demand new framework conditions such as longer payment terms and will request more picking warehouses. Payment behaviour will deteriorate significantly, and the number and duration of reminders will increase.

Low probability

Price is king:

Some of the old business will slowly decline and be phased out. New customers and trends will need to be constantly researched and developed. Competition will increase. Price will be important, unique selling propositions and patents will take a back seat, and customers will take the second-best, cheaper solutions.

Customisation first:

Price plays a secondary role. Speed and customisation will be important. Unique selling points are very important. Opportunism will be the order of the day; success can lurk around every corner and cannot be planned for.

Standardisation:

Customers' problems are comparable and similar in terms of their application. This leads to standardised systems, e.g. for mapping of logistics processes in the supply chain. This comparability leads to strong competition and little potential for differentiation.

In this environment, it will be difficult for inotec to compete and achieve the necessary margins. A key element will be internal efficiency in automation. Another key element will be cost-effective sourcing. inotec will have to find its niche.

Competitors going after the Company’s main customer groups (Dimension 8)

The inotec group has a number of direct competitors, some of which focus on specific market segments, however. The main competitors are the following four:

Schreiner Group: Schreiner Group has a much broader product portfolio, including, for example, technical labels and many medical products. The profits from these areas appear to be heavily invested in RFID and the labelling of returnable transport containers, which is a direct market challenge for the inotec group.

Plöckl Media Group: This company has managed to win IFCO (a pool operator) outright appears to be able to defend it effectively. The company is investing heavily in a ‘me too’ product portfolio and is actively trying to lure customers away from the inotec group.

IPEX: IPEX has also succeeded in launching inmould products that are superior to inotec's products in one respect. The company is very active in the market and will gain market share due to multi-sourcing-strategies of our customers. IPEX's strategy is somewhat unclear, and the focus seems to be on a new business area.

ONK: ONK is inotec’s main competitor in warehouse logistics. ONK probably has a higher market share and is able (or willing) to sell storage products at a much lower price than inotec.

This short list is only a subset of the competitors targeting the same AutoID market. Differentiation and customer proximity have been the key factors for the inotec group to remain successful in the market The enriched solution portfolio of inotec group helped to grow in the market.

The following situations are theoretically possible in the next 5–10 years:

High probability

Linear Extrapolation of the present Situation:

inotec will continue to compete with the same key competitors over the next decade. Differentiation and customer intimacy remain critical for inotec to maintain its market position. inotec's competitors continue their current strategies, with varying degrees of direct threat to inotec's customer base.

Increased competition due to climate change awareness:

As awareness of climate change increases, more companies are entering the market with sustainable AutoID solutions. Entirely new competitors with a green value proposition are also expected to attempt to exploit the inertia of the "top dogs" and gain market share with disruptive approaches. This leads to increased competition for inotec, but also to potential opportunities for collaboration.

Technological innovation by competitors:

One or more of inotec's competitors makes a significant technological breakthrough, such as a new type of AutoID solution or a more cost-effective production method f. This could potentially change the competitive landscape and force inotec to innovate.

New entrants from related Industries:

Companies from related industries, such as inlay manufacturers or IT (including new start-ups), enter the AutoID market, bringing unique perspectives and capabilities. This could increase competition and potentially disrupt the market.

AI intensifies competition:

Competitors that are early adopters of AI will be able to leverage the benefits to provide better offerings to the market.

According to a study by Dell, AI enables approximately. 12% more tasks to be completed, tasks to be completed approx. 25% faster tasks to be completed, and 40% better results. Other studies go even further in terms of increased efficiency.

Competitors are poaching employees:

The poaching of employees and entire teams will experience a significant professionalisation and can lead to a haemorrhage in important departments and areas if colleagues are followed.

This leads to a significant increase in terms and conditions (which include more than just benefits and compensation). These increases will lead to higher staff cost ratios

Competitors become solution providers:

Competitors are adopting inotec's strategy and increasingly becoming solution providers, offering consultancy and implementation support. This could eliminate one of inotec's competitive advantages.

Selective competition:

There is no supplier on the market that offers exactly the same range of services as inotec. However, this is not absolutely necessary to offer system solutions. Many competitors specialise in inotec's partial solutions and compete selectively, sometimes on price.

Mid Probability

Market consolidation:

Over the next decade, mergers and acquisitions will lead to a consolidation of the AutoID market. This could result in fewer but larger and more powerful competitors for inotec.

Agile competition:

Weak competitors are disappearing from the market and the number of M&A options is increasing and offering opportunities. In particular, agile competitors are adapting more quickly to new market conditions and customer requirements, and market shares are shifting. New alliances are also forming to address the market.

Ambitions of regional competitors:

The AutoID market in Germany is highly fragmented. There are a number of companies with similar competencies. The companies' ability to survive is often based on their regional roots and long-term supply relationships with regular customers. An aggressive growth strategy by these competitors and SMEs, possibly subsidised by the parent company, could be problematic for inotec.

One size fit all:

Standard label manufacturers are flooding the market with "good enough" solutions and succeeding. Labelling goods and digitally mapping the flow of goods will be child's play. Extremely low barriers to entry enable customers to track goods and map material flows in their ERP systems. Inexpensive and robust labelling solutions can be purchased from Amazon or Flyer Alarm. The necessary software modules are available at low cost and the good ones can onboard themselves. Standard solutions are flooding the market, leaving only extreme niche applications. This is where the air is getting thin for inotec to establish itself as an application expert in the long-term.

Low Probability

Service provider between converter and end customer:

The application of AutoID requires a very high level of expertise to integrate the solution. A trend is emerging that is creating a new category of competitor. These are pure application specialists who solve the customer's problem in a vendor-neutral way. If these vendors do a good job, inotec loses direct access to its customers. The supplier knows all the advantages and disadvantages of the various AutoID manufacturers and converters and skilfully plays them off against each other. The result is a price war.

Massive price war:

A few of inotec's competitors (e.g. in EPS, etc.) are engaged in a massive price war that is ruinous for the entire industry in order to gain market share and consolidate the market.

Solutions for jobs similar to the Company’s, used outside the Company’s main customer groups (Dimension 9)

In a technology-driven environment, previously unthought-of solutions can quickly become feasible and competitive with those offered by the inotec group. Some examples are listed here, but are by no means exhaustive.

The following situations are theoretically conceivable in the next 5–10 years:

High Probability

Not to be displaced:

According to RFID market research, there is no threat of the technology or the means by which inotec provides its services being replaced. The market will grow and inotec has strengths (e.g. inmould) that cannot be substituted. These strengths need to be reinforced.

New solutions coexist:

In addition to the current solutions, alternative solutions will be established in the market, which will leading to partial substitution of inotec's existing product portfolio. Withdrawal or R&D are the only solutions.

Specialists win the race:

The application of AutoID is highly complex. For example, the digitally mapping of a manufacturing company's flow of goods requires labelling expertise, software expertise and process expertise. Standard solutions are not used because, at second glance, a QR code on a component is too short-sighted. More is needed (e.g. immould, laser marking, image recognition) and, above all, a mature integration service into in the customer's software landscape. A typical AutoID project is therefore made up of competent software companies with links to traditional ERP systems, labelling experts (barcode, RFID, laser or printer) and companies that take a close look at the manufacturing process. The market is highly differentiated and characterised by individual, specialised solutions.

Mid probability

Customised solutions are few and far between:

The inotec market remains stable in terms of value for money. Specialised solutions are being developed, but the price structure means that they are only really applicable to a small market.

Customers do it themselves:

Customers are integrating services from their suppliers in order to have greater vertical integration and be less dependent on processors. For example, injection moulders can extend the value-added process. Manufacturers themselves are learning how to digitally map their material flows and align their systems, as this is seen as a critical core competence by customers. This means that more expertise and value is retained by the customer. The consulting services and products of inotec are not eliminated but are provided by the customers themselves. The scope of inotec will be reduced.

Climate change drives demand for less material-intensive solutions:

As the effects of climate change become more pronounced, there's a shift towards solutions that use fewer materials or are more sustainable. This could drive demand for alternatives to traditional labels, presenting a challenge for inotec.

Substitution for the way we perform the job which the Company’s main customers want to have done (Dimension 10)

inotec generates the majority of its sales from labels or tags applied to physical objects for automatic identification. This business is at risk if the label can be replaced by another technology or if the need to identify the item is eliminated. Here are the key considerations, combining the current situation with a 10-year time horizon.

Fully automated warehouses could lead to a reduction in the need for labelling. This trend could be reinforced by the increased use of robotics in warehouses and, in the future, drones to deliver goods. Nobody wants to run warehouses – it's about delivering goods.

There are promising attempts to use cameras to further automate retail stores by automatically identifying the goods shoppers are buying. In theory, this could be applied to other areas. It seems reasonable that the same approach could work in a warehouse, where items could be removed from stock while the camera system takes care of the automated booking.

Various types of delivery services are growing at the expense of bricks-and-mortar retail, and it is not yet clear whether the need for identification will decrease or increase as a result of this trend.

The following situations are theoretically conceivable in the next 5–10 years:

High probability

Linear extrapolation of the present situation:

Over the next decade, the potential alternatives to inotec's services will continue to develop at a similar rate. Technological advances improve the efficiency of automated warehouses, delivery services grow, and electronic marketplaces expand, but inotec's services remain relevant due to their effectiveness and established customer relationships.

Direct labelling:

No customer wants to buy a label. They want to identify the items in their processes. The combination of an advanced camera with a direct marking technology (e.g. laser or inkjet) could be a good enough solution for some applications. As a result, the market for printed labels could shrink.

Mid Probability

Widespread adoption of RFID elements:

The cost of RFID tags drops significantly,, leading to a widespread implementation of RFID tags in all items produced. There is no need to mark them with an additional label, the RFID functionality is included in the item itself. This presents both a challenge and an opportunity for inotec: while its traditional labels may face reduced demand, its RFID solutions may find wider applications.

If you have vision(s), you don't need to go to the doctor:

Image recognition combined with AI solves several problems at once. Unprecedented process transparency, the creation of a digital twin in real time, and virtually no changes to the manufacturing process as the component does not need to be marked. However, the use case is primarily limited to an internal value-added process, as there is no marking outside the factory premises. inotec would have a significant problem if image recognition and possibly laser marking were not part of its own core competencies. The future of AutoID will be determined by vision technology.

Rapid growth of fully automated warehouses:

Technological advances and a focus on reducing human intervention are leading to a significant increase in fully automated warehouses. This will reduce the need for traditional labels in warehouse logistics, potentially affecting inotec's customer base.

Rise of alternative electronic tags:

New types of electronic tags using technologies such as Bluetooth are emerging as a compelling alternative to barcodes and RFID. This could potentially disrupt inotec's market and require the company to adapt and expand its product portfolio.

Low Probability

Rise of -marketplaces in the B2B sector:

Electronic marketplaces are becoming increasingly dominant in the B2B sector. This could place a marketplace between inotec and its customers, potentially affecting inotec's margins and customer relationships.

External Context Reference Scenario and Narrative

The above chapter lists all the scenarios which were developed and discussed by the Future Council. Some of the scenarios contradict each other; however, the most plausible and likely scenarios were selected during the discussion.

Reference Scenario

Summary of the reference scenario in terms of the 10 dimensions.

Situation in macro-economy (Dimension 1): Navigating Pressure and Uncertainty

The economic landscape is under increased pressure due to growing uncertainty and instability. Global conflicts are catalysing the formation of stronger but often more unstable and heterogeneous blocs, highlighting the need for strategic alliances and cooperations. As a result, strengthening the resilience of supply chains, through strategies such as regionalisation or sourcing diversification is becoming critical.

The importance of cybersecurity is also growing, as vulnerabilities and threats continue to evolve. The need for robust cybersecurity measures within organisations is becoming more acute.

Investment behaviour is shifting due to the prevailing uncertainties, a trend that is being exacerbated by the European Central Bank's interest rate policy and the resulting inflationary pressures.

In the midst of these challenges, there is a surge in digitalisation and automation efforts, driven by the need to optimise and innovate in response to global conflicts, increasing regulation, demographic shifts and climate change.

Situation in natural environment and climate change (Dimension 2): Accelerating Impact Across All Dimensions

Climate change is intensifying, affecting all aspects of life and increasing the likelihood of geopolitical conflicts and extreme weather events. The impact of these changes will vary significantly from region to region, requiring a localised approach to assessing the opportunities and challenges they present. Legislative requirements and societal expectations of business are expected to increase, leading to a shift in the market's product and service portfolio. For inotec, this scenario represents a mix of both positive implications and escalating challenges.

Societal and political (Dimension 3): The Political Landscape's Growing Impact on Business

The role of politics and societal influences on business is increasing. Despite having a stable democracy in Germany and Europe, we are witnessing the emergence of less powerful, multi-coalition systems where compromise prevails. This shift has led to increased social and economic discontent, along with rising populism and struggles over resource distribution. In the European context, situational and interest-driven influences are increasingly shaping action.

Education levels in Germany are on a downward trend. In addition, demographic change is exacerbating the shortage of skilled labour. The new generation is prioritising work-life balance more than ever and has high expectations of their employers and jobs, including meaningful work, opportunities for further training, and a commitment to sustainability. There is also a noticeable trend of a higher outflow of skilled workers moving abroad and an inflow of workers with comparatively lower skills. Immigration laws are currently a barrier to the inflow of skilled labour. As a result, digitalisation and automation are becoming increasingly important.

Socially, there is a widening gap in the distribution of wealth.

Regulatory (Dimension 4): Tightening Regulatory Requirements in Germany and the EU

Regulatory requirements in Germany and the European Union will become more stringent. Companies will have to comply with evolving legislation on artificial intelligence, digitalisation, supply chains, sustainability initiatives such as the Green Deal, and data privacy and security. The increasing complexity of these regulations poses significant challenges for companies in monitoring compliance, maintaining oversight and reconciling potentially conflicting objectives.

This tightening regulatory landscape may lead to further market consolidation, particularly affecting small and medium-sized enterprises (SMEs) which may struggle to find the necessary resources to meet these extensive requirements.

Technology (Dimension 5): A Gateway to Greater Opportunities Than Risks

Technological development is increasingly concentrated in clusters, leading to the emergence of different regional and international hubs. These technological advances are catalysing the creation of new business models, both product- and solution-based, to meet the growing demand for sustainable products and solutions. Data capture remains fundamental to these developments, ensuring the continued need for optically visible AutoID solutions.

Emerging technologies such as artificial intelligence, digital twins, and the industrial metaverse are not only enhance customer value but also offer significant potential for process optimisation and automation. These technologies make it easier for customers to generate leads and increase personalisation and the number of touchpoints throughout the customer journey. In addition, the increasing reliance on technology reinforces the need for robust cybersecurity measures and strict data protection protocols.

Suppliers and supply (Dimension 6): Managing Multiple Parameters: Towards Networked Supply Chains

The volatility of supply chains is forcing companies to increase their resilience, highlighting the growing importance of local and multi-sourcing strategies. Reducing dependence on individual suppliers, while concurrently strengthening relationships with existing partners, is critical to maintaining supply reliability for their own customers. The increasing focus on sustainability also requires companies to re-evaluate and potentially adjust their supplier base to meet these criteria.

While increased competition among service providers could potentially drive down prices, disruptions in the supply chain could increase their bargaining power. In addition, companies face the challenge of passing on increasing price pressure from customers to their suppliers.

Customers and demand (Dimension 7): AutoID Demand: Expanding and Evolving

The basic needs of customer groups and their demands remain unchanged, but there is a noticeable increase in demand. Driven by sustainability requirements and the need for efficient and reliable logistics solutions, the demand for labelling of more durable products and solutions is growing.

In addition, the transition to a circular economy is creating new customer groups in the B2B sector, such as construction, packaging, and vehicles, with a focus on reuse and repair. New applications are expected to emerge in the B2C market. In addition, new business models such as "as a service" are becoming feasible through innovative technologies and changing demands, such as direct-to-customer models and the expansion of e-commerce. There is also potential to integrate more deeply into customers’ value chains and create additional touchpoints along the customer journey, such as digital advisors and digital twins. However, implementing systematic price increases in the current environment may prove challenging.

Competitors going after the Company’s main customer groups (Dimension 8): Competitive Dynamics in the AutoID Market

The AutoID market is attractive but highly fragmented, resulting in intense competition. Barriers to entry are relatively low, inviting not only low-cost and new entrants, especially those focusing on sustainable products and solutions through new technologies, but also larger companies considering market entry through vertical integration. In addition, companies offering partial solutions can disrupt the market and erode the market share from established AutoID vendors. The proliferation of mid-sized companies is likely to decrease due to increased regulatory requirements and market pressures, leading to market consolidation.

Solutions for jobs similar to the Company’s, used outside the Company’s main customer groups (Dimension 9): Direct Marking

Over the next decade, as technological advances continue at a similar pace, the efficiency of automated warehouses, delivery services, and electronic marketplaces is expected to improve. At the same time, the item identification landscape is evolving with direct marking technologies such as lasers or ink jets, combined with advanced cameras, offering potential alternatives to traditional labels. While no customer wants to buy a label, they are looking for effective ways to identify items within their processes.

Substitution for the way we perform the job which the Company’s main customers want to have done (Dimension 10): Staying Vigilant in a Dynamic Market

As the AutoID market expands, vendors must remain alert to the potential for alternative solutions that could at least partially replace their existing portfolios. Withdrawing from the market or increasing investment in research and development (R&D) are possible strategies in response to these challenges. Nevertheless, the intrinsic strengths of today's AutoID vendors are significant and not fully replaceable.

Reference Development

Reference narrative on the evolution of the Reference Scenario:

In the present, the global economy is characterised by heightened instability and uncertainty, largely fuelled by ongoing global conflicts and shifts in economic power. These forces are catalysing the formation of new geopolitical blocs, underscoring the need for companies to form strategic alliances to mitigate the risks associated with global supply chain disruptions.

In response to evolving threats, the demand for robust cybersecurity measures is increasing significantly. Legislative changes are unfolding, particularly in the areas of digitalisation, artificial intelligence, and sustainability, setting the stage for more stringent regulatory environment. This is prompting companies to invest heavily in digital security to protect their operations and sensitive customer data.

As the effects of climate change become more pronounced and impact all aspects of life, there is a growing need for companies to innovate their product lines to meet new sustainability standards. This is particularly evident in sectors such as construction and packaging, which are central to the circular economy.

The political landscape is also evolving, with multi-coalition systems becoming the norm in Europe. This leads to frequent policy changes, which have an impact on business operations. Demographic changes are becoming apparent, with a noticeable skills gap exacerbated by the brain drain and tighter immigration laws. Companies are responding to these challenges by stepping up their efforts in automation and digital transformation, inorder to maintain productivity despite labour shortages.

Over time, technology is becoming a cornerstone of business operations across industries. Companies leverage artificial intelligence, digital twins, and elements of the industrial metaverse to improve operational efficiency and customer interaction, enabling personalised solutions and direct-to-customer services that increase their market share in the evolving digital marketplace.

As the decade progresses, the regulatory landscape continues to tighten, with a particular impact on small and medium-sized enterprises.

By the end of the decade, successful companies will have transformed themselves into more robust, flexible and technologically advanced organisations.

1. current INTERNAL CONTEXT

Assets (physical capital)

Each asset will be explained in a few words to ensure a common understanding of the actual situation:

Company History

The inotec group comprises three companies with a long history. As a result, the inotec group is well known in its key markets and there is a deep and comprehensive knowledge of customers and applications available within the inotec group. Such a combination of three companies is unique in the market, and the fact that the inotec group has a local presence in neighbouring countries is also unique. All companies are well staffed and fully operational.

Company Reputation

The companies in the inotec group all have the reputation of being a competent partner who add value to their customers. The positioning is intentionally slightly different, as part of the brand strategy. inotec is positioned as the premium solution provider focused on high-end applications while identytag has a reputation of being more pragmatic and focused on mid-tier applications. Winckel’s reputation is still evolving. It is now seen as a solution provider for very specific niche applications.

Brand Equity

Each company has significant brand equity based on its reputation and history. The team agrees that ‘inotec’ has the highest brand equity and consequently the group is named after inotec. Potentially, Winckel has a higher brand equity than identytag, because identytag was founded as a spin-off a few years ago. Competing companies also have some brand equity, but the combination within the inotec group is still unique.

Physical Assets

Both inotec and identytag both have production facilities. The inotec equipment is more advanced and optimised for different batch sizes and a wide range of products. Identytag's production facilities are more focused on the large-scale production of RFID labels. Winckel has a unique application laboratory that enables it to develop customised solutions. While competitors may have some of the same assets, the group's real strength lies in the combination of assets. This combination is probably unique in the market. Some of the equipment is obsolete, some of the machines are single-source machines, and breakdowns have a direct impact on product realisation and delivery performance. Maintenance and service contracts and spare parts concepts are crucial and have not yet been sufficiently implemented. In addition, the inotec group has invested in laboratory equipment to develop RFID antennas in line with customer requirements.

Financial Resources

The inotec group has a strong investor behind it. Most of its competitors are owned by a family or an individual. While this financial stability has not been important for the group's customers so far, it may become very important for other companies in terms of growth through acquisitions..

Organization (human capital)

Capabilities

Managerial capabilities: Each organisational unit is headed by an experienced manager with several years of experience in the relevant AutoID market. The group is managed by two general managers to extend the management capabilities and mitigate any risks. In addition, the next level of management is actively involved in business decisions and gradually empowered to take on responsibility. The management team is deliberately complemented by highly experienced skills. This is the result of a culture of individual responsibility in the transformation phase in which the inotec group currently engaged. From Q3 2023, a dedicated team will be recruited to drive the project management, ESG activities and the strategic activities. Since mid 2023, the Future Council has been active, enriching the management capabilities with external expertise.

Functional capabilities:

Most core functions can be performed by internal resources. It has been decided to use external partners for some key functions: marketing is carried out in collaboration with an external agency which ensures that inotec can make full use its capabilities; the internal ERP system was developed by an external IT partner, who continues to support the solution; and tax and legal expertise is provided by external partners.

Organisational capabilities:

The inotec group consists of three main companies in Germany and sales offices in Europe. It is therefore not surprising that the organisational structure is more complex than in a single organisational unit. It was decided to keep the three companies in Germany in place and allow them to manage their own business to a certain extent. Sales, development, and marketing activities are coordinated through the group. Cross-production activities are in place and, of course, the strategy, budget and investment are managed at group level. While this is already working well, the team is constantly looking for ways to streamline and simplify the organisation while improving the brand value of each company.

Financial capabilities: Based on the information gathered from discussions with customers and market experts, the inotec group is likely to have higher margins than its competitors. In addition of Obermark as an investor behind should help inotec to have strong financial capabilities.

Processes

In line with its ISO 9001 certification, all key operations are detailed in process manuals for the three companies. Some key processes are outlined below:

Sales: This is the key value creation process and describes how new customers and new orders from existing customers are acquired. Direct interaction with leads and proximity to the customer are key success factors. In 2023, a new customer relationship management system has been implemented to further support the sales team and automate the transparency of the sales pipeline.

Order management: Once a new order has been won, order management takes over and coordinates the required details with the customer to prepare the order for production.

Production: The inotec group is able to handle high and low volume orders and offers a wide product portfolio. The production process is key to ensure that a large number of orders can be handled in parallel, optimising the use of the production resources and shipment dates requested by the customers. identytag and inotec use dedicated IT systems to manage and plan their production activities. This capability is probably unique in the market.

Quality: As a provider of premium solutions, the quality process is key for inotec. A sophisticated set of detailed processes is in place to ensure the quality of the products. At present, many activities are carried out manually and in parallel a programme is in place to automate a significant part of the quality control steps.

Development: The development of new products and services is key to the success of the business in both the short and long-term. identytag and inotec have dedicated development processes for their own solutions and there is alignment at group level, including Winckel.

Supporting processes: None of the above processes would work without the supporting processes. Details are not given here, but it is good to know that inotec has dedicated finance, HR, procurement, and IT processes. In addition to the customer-optimised business processes, the inotec group is moving towards standardised and lean support processes.

It should be mentioned at this point that some of the processes described in the management systems, especially at inotec, need to be revised and are part of the improvement roadmap. For more details, please refer to the chapter Q.

Formal and informal organisational structure

The formal organisation of the inotec can be captured in this top-level diagram:

![Ein Bild, das Text, Screenshot, Schrift, Design enthält.

Automatisch generierte Beschreibung](data:image/png;base64...)

Similar charts do exist for each legal entity and can be shared upon request. Each individual contributor is shown on the charts. These charts only show the hierarchical organisation of the inotec group. Cross-functional collaboration is important for the success and is embedded in the process descriptions and meeting structure of the inotec group.

Corporate culture

Starting from a classic top-down culture shaped by the former owner, significant steps have been taken towards personal empowerment and responsibility of individual contributors. A management team with clear roles has been formed and individual team members are responsible for their respective areas: making decisions, preparing the budget, etc. This idea is also implemented in the respective departments, so that the value contribution of each department is understood. This change represents a significant transformation for the inotec group in two ways: increasing the resilience and sustainability of processes and collaboration on the one hand and maintaining the agility, speed and effectiveness of business decisions on the other hand.

With more than 100 employees in seven locations, there are cultural differences and different approaches that need to be understood and leveraged for the success of the internal collaboration, as well as when the team interacts with customers or other stakeholders.

It is also important to create and maintain a one-team culture. Several initiatives have been launched to strengthen the cooperation between different functional areas, including finance, HR, procurement, production, marketing, and sales. It is also important to ensure good personal relationships within the team and to agree on the same corporate values summarised above. In addition to developing and sharing a common understanding of the company's values, it is particularly important to integrate them into everyone’s daily work. The Leadership Excellence Programme supports this cultural development by sharpening and operationalising the principles for cooperation and leadership, providing guidance and tools for leading the team accordingly, and by training the entire management team on specific topics, such as ‘How do I conduct a professional feedback discussion?’, ‘How do I resolve conflicts promptly and constructively?’, ‘What are the core elements of an annual review and how do I conduct it?’, and ‘How do I provide orientation through clear communication?’

1. CURRENT STRATEGY – IDENTIFICATION

The current strategy can be summarised as follows:

The inotec group focuses on organic growth, achieved through increased market penetration in existing countries and markets. This includes cautious and somewhat opportunistic investments in new applications to open up new markets, such as reusable tableware for the catering industry and consulting costumers on system solutions. The aim is to offer customers a comprehensive package of solutions, making inotec the single point of contact for AutoID issues.

Investments in new applications, products, and geographies are made prudently, with risk awareness and from inotec’s own cash flow. This approach may limit the growth rate if needed, but these new investments never jeopardise the existing business.

The acquisition of additional companies is an important element of our strategy, although it is not actively pursued. Suitable companies are those with a complementary product portfolio, access to new applications and markets, or new geographies. The search for such companies is not actively undertaken by an external advisor, but rather our own network, and is therefore opportunity-led.

In parallel with revenue growth, inotec invests in the organisation, optimising internal processes, and incorporating new aspects such as ESG (environmental, social and governance) issues.

As part of this strategy, the inotec inotec group is largely maintaining its current level of value creation. Although the group is open to new business models (e.g. pay per scan), it will not become a manufacturer of RFID inlays or an operator of container pools.

The inotec group is gradually moving away from the premium claim for durable labels and is also offering labels for disposable applications.

The following cause and effect diagrams illustrate the relationships behind the strategy:

cause-and-effect diagram, level 1: ![Ein Bild, das Text, Reihe, Diagramm, Schrift enthält.

Automatisch generierte Beschreibung](data:image/jpeg;base64...)

cause-and-effect diagram, level 2:

![Ein Bild, das Text, Diagramm, Karte enthält.

Automatisch generierte Beschreibung](data:image/jpeg;base64...)

cause-and-effect diagram, level 3:

![Ein Bild, das Text, Diagramm, Karte, Plan enthält.

Automatisch generierte Beschreibung](data:image/jpeg;base64...)

A new chosen strategy has been developed in collaboration with the Future Council. The corresponding chapter “LOGIC (AS PART OF THE CHOSEN STRATEGY)” further explains the rationale behind this strategy.

scope (as part of the business strategy)

Customers, markets, geographies

The inotec group serves a wide range of customers in different markets. Details are given in chapter G on dimension 7 and the main facts are summarised here.

The following customer groups can be identified: Injection moulders, shelf manufacturers for warehouses, industrial customers with a focus on process optimisation, large grocery chains ordering labels for their own RTI pools and system integrators & multipliers.

The inotec group focuses on the AutoID market in the broadest sense. The group is open to address new applications and market segments. The majority of the turnover is currently generated within the segments logistics, warehouse logistics, industrial applications, consultancy, implementation support, and distribution of AutoID components.

The majority of its turnover is generated in Europe and the UK. At the beginning of 2022, inotec started the project ‘China’, where a small team of 1.5 FTE in China opened an office for inotec in Chengdu, but so far, no new customer has been won in China. There are no specific activities in the United States or Asia. However, it should be mentioned that inotec Germany and inotec UK have some customer projects in the US.

Products and services, jobs, value

The products of the inotec group ensure that an object – be it a container, a shelf, a storage location, or any other object – can be uniquely identified, and not just any object but a specific object. This concept of one-to-one identification is the key element for linking physical objects to the digital world. The customers of the group use this basic functionality to run a range of applications, such as supply chain transparency, complex track and trace solutions and/or warehouse management.

The products offered by the inotec group use labels with optical AutoID elements (barcodes, 2D codes, etc.) and/or RFID technology. In addition, inotec offers consultancy services and implementation support to ensure a smooth integration on the customer side. This may also include the provision of additional hardware (readers, printers, etc.) or some software components to ensure connectivity with existing systems at the customer's site.

Customers are willing to invest because they can benefit significantly from the solutions implemented. The value created on the customer side depends on the application, and here are some examples:

• Increased process efficiency
• Better use of warehouse space
• Reduced loss/waste
• Compliance with regulatory requirements
• Increased productivity

Technologies used

Today, the technology used by the inotec group to create the AutoID solutions consists of a few main components. Advanced printing systems are required to produce optical AutoID elements, and RFID inlays are required for electronic AutoID solutions. As mentioned before, the right production equipment with the right technology is needed, and software solutions are important to ensure a link with the customer´s IT systems.

There are other technologies available for AutoID solutions that are not produced in-house (e.g., real-time location solutions). The inotec group trades in these components to create solutions for customers when needed.

Processes

The main processes are listed in the chapter ‘Internal Context’. They include sales, order management, production, quality, and development.

COMPETITIVE ADVANTAGE (as part of the business strategy)

The inotec group´s companies pursue a differentiation strategy to varying degrees. This differentiation can be seen in the product portfolio, the technical specification and the quality of the products, the level of service provided, and the consultancy skills offered. The companies within the inotec group align their offerings to optimise the overall service and solution portfolio for customers.

The core of the offering is the extensive product portfolio of labels, covering many specialised applications. Where promising gaps in the product portfolio are identified, suitable products are developed to meet customer needs. The product portfolio is complemented by high-quality services and continuous support from the inotec group's experts. Excellent quality is a prerequisite for the inotec group companies and continues to differentiate the group positively from the competition.

In order to enable customers to implement AutoID projects in a mature infrastructure, the group offers appropriate consulting services and suitable software solutions through Winckel. This capability has recently been strengthened by the acquisition of a small team of engineers from a competitor. As a result, the entire bridge from the real to the digital world can be built for the customer.

The combination of products, services and know-how is already unique in the market and cannot be matched by competitors.

The solutions offered by the inotec group are mission critical for the customers. A broken supply chain, unclear item information or a lost item can result in significant costs for the customer side. Customers are willing to pay a premium price for a premium solution (to a certain extent) to mitigate the risks of inaccurate identification.

Competitors are aggressively chasing the inotec group´s market share. ‘We can do the same, but for a lower price’ is a statement used by competitors. There are some cases where this might be true, but this is usually on the level of a single product. inotec takes this very seriously and uses the complete service offering to convince the customer. inotec also uses its know-how to optimise the product portfolio to come up with a ‘just right for you application’ solution to win the customer.

Over the last 24 months, inotec has invested in RFID development and is now able to create its own RFID antenna designs, resulting in its own RFID inlays. While most of the competitors use standard inlays, inotec is now able to offer customised solutions for specific applications.

long-term goals (as part of the CURRENT strategy)

The long-term goals are in line with the end goals and act as value drivers to achieve the end goals:

Technological leadership: inotec will continue to develop its existing product portfolio with focus on RFID and RFID inmould. Leadership also includes leading edge system and implementation know-how, enriched by software capabilities, to provide the best AutoID offering in the market.

Sales transformation: The inotec group will become more visible to customers, offering the best solution from all inotec group companies. IT solutions will drive a better customer experience, including customer relationship management and multi-channel offerings.

Automation, integration and operational excellence: The use of robotic systems and production equipment with a higher level of integration will replace manual work and ensure an increase in productivity, quality and reliability. Internal processes will also be automated through improved IT systems, helping to overcome the general FTE shortage.

Software and consulting: Additional revenue streams will be created through software sales and consultancy. Ultimately, inotec will gradually start to offer system solutions with the ambition to become one of the top system solution providers in Europe, offering one-stop-shopping answers to customers' questions on how to realise a transparent and traceable supply chain.

Acquisitions: inotec will enhance its performance by acquiring companies with a complementary product and service portfolios. This could also be a good opportunity to start new business models or enter new geographical markets.

1. ALTERNATIVE STRATEGIES WHICH WERE DEVELOPED, DISCUSSED, REVIEWED AND DISMISSED

Short description of the Alternative Strategies

In cooperation with the Future Council a wide range of different strategies were developed and discussed. A short summary of each alternative strategy is given below. The order of the strategies is not linked to any rating of the strategies.

Organic Growth & Occasional Acquisitions (current strategy)

The inotec group focuses on organic growth through increased market penetration in existing countries and markets. The group makes cautious and somewhat opportunistic investments in new applications to tap into new markets, such as reusable tableware for the hospitality industry and consulting costumers on system solutions. The aim is to offer customers with a comprehensive range of solutions, making inotec the single point of contact for AutoID issues.

Investments in new applications, products, and geographies are made cautiously and with risk awareness, financed through internal cash flow. This approach may limit the growth rate but ensures that new investments do not jeopardise the existing business.

Acquisitions of additional companies are a key element of the strategy but are not actively pursued. Suitable companies are characterized by a complementary product portfolio, access to new applications and markets, or geographical expansion. The search for such companies is not actively conducted through external consultants, but through the internal network and is thus driven by opportunities.

Under this strategy, the inotec group essentially maintains its current level of value creation. Although the group is open to new business models (e.g., pay per scan), it is not shift towards becoming a manufacturer of RFID inlays or an operator of container pools.

The inotec group is gradually moving away from its premium claim for durable labelling and now also offers labelling solutions for disposable applications.

Alternative 1: Aggressive Growth

The inotec group must grow significantly faster than allowed by the first strategy to secure the long-term survival of the company. Customers and competitors are becoming more international, and inotec must meet this challenge on a global scale.

In existing geographies, inotec must capture market shares from competitors. Since the technical requirements of customers for labelling are often already exceeded by inotec and its competitors, this can be achieved through an aggressive pricing strategy, additional services, and targeted acquisitions of competitors. Additionally, investments in R&D will open up new markets, such as sensor technology.

Acquisitions become the most crucial tool for growth in new countries. The goal is to first gain access to the new geography and then offer the group's entire product and service portfolio. Growth is intended to be rapid and achieved within a short timeframe. Therefore, additional financial resources will be required to triple the group's revenue in the next three years. Under this strategy, the inotec group will essentially maintain its current level of value creation. Although open to new business models (e.g., pay per scan), the group will not become a manufacturer of RFID inlays or an operator of container pools.

Alternative 2: Hedgehog, Pure

The inotec group will never become a system provider and will focus solely on the AutoID labelling business. The product portfolio will grow to include all forms of labelling, including low-margin applications in mass markets.

The strategy will involve the separation from Winckel and the merger of identytag and inotec. While there will remain a consulting capability regarding the application of labelling, there will be no system consultancy.

The product portfolio will continue to be deliberately expanded, and like the current strategy, growth will be cautious through new applications and geographical expansion, financed by internal cash flow. To support this, suitable acquisition targets will also be sought. Abandoning the systems approach allows for a better focus on core competencies, more credible cooperation with various partners, and internal process optimisations in line with lean management principles.

Alternative 3: Hedgehog, Extreme

Optical AutoID labelling is future-proof and is becoming increasingly attractive with new technologies such as "digital link" combined with very competitive prices. Evolving camera systems also allow for mass reading, opening up an attractive and growing market. RFID labelling is increasingly under focus from our suppliers (international corporations) and the price pressure is rising. Therefore, inotec decides to focus on the printing AutoID labels.

RFID-oriented business units will be sold profitably, leaving an inotec specialised in printing. The relative margin is likely to increase through this step, and the organization can be adjusted to be "lean and mean". The funds gained from the sale will be invested in aggressive growth in new geographies, particularly through acquisitions.

Alternative 4: Software!

To achieve significant growth rates, new application fields for AutoID labelling must be developed. In contrast to the displacement strategy of Strategy 1, this approach involves deliberate "market making" to generate new sales potential. Solid software competence, necessary to develop the required applications within the group combined with new business models, is thus essential. Applications could include decentralised process monitoring in home care, rapid scaling of inventory solutions, and opening new markets regarding documentation obligations, etc. Besides SAAS, the group should also introduce pay-per-scan.

To realise growth quickly, collaboration with partners or the acquisition of a suitable company (e.g., Convidera) should be considered.

Alongside this new element regarding software, the group will continue to follow the current strategy.

Alternative 5: become a Logistics Service Data provider (LSD

Idea:inotec becomes a major player in logistics, leveraging its extensive practical and process know-how. inotec has good access to logistics customers and a strong reputation among them. These components collectively predestine inotec to become a Logistics Service Data Provider (LSD). inotec aims to be the leading LSD in the future.

Market:The market is dominated by large logistics companies (like DHL, Dachser, etc.) that operate proprietary data infrastructures. However, there are also many large medium-sized and smaller specialised logistics firms lacking the know-how and resources to build their own logistics data infrastructures. inotec could serve these companies, offering added value through the networking of this diversity, that the larger companies cannot match.

Driving Assumption/Trends:As competition between systems (China, BRICS, etc.) increases, intra-European trade and trade with Western oriented partners will become more important (and grow). These partners use similar data systems and standards. Additionally, the number of blue-collar workers in logistics will decrease due to demographic changes, increasing the demand for automation and AI.

Strategy:inotec will sell any business that does not contribute to the goal of becoming a leading LSD. This includes small business (e.g., book labels, where a buyer is already known) as well as profitable large non-logistics businesses that require resources. Simultaneously, inotec will expand its competence in data handling. Starting points could be the previously discussed ideas around Digital Link, existing RFID IML circulating containers, both with the objective of data acquisition, known customers, and strong market knowledge. Invest boldly and focus on reading infrastructure, particularly on optical (camera systems) and RFID technologies. Funds from the divestment of non-logistics areas should finance the competencies in data distribution. The primary goal is to grow as a data provider to a size where intelligent value-added services, especially AI-supported, can be developed. Logistics processes are well-suited for AI implementation, due to clear objectives and the extensive describable influences and opportunities.

Size Matters:The premise is that the more data in the inotec system, the more valuable it becomes, as it enables more sophisticated AI and therefore services. Additionally, diverse business models to other sectors and trade are viable, as logistics connect these sectors, and they also need data.

Alternative 6: "inotec makes print label customers digital"

inotec will advise all future inquiries for barcode or QR code print labels that the GS1 Barcode 2027 will be discontinued, and that serialisation is a must in IoT, with the added value of digitalising these customers. The consultation itself serves as both a value-add and a customer retention strategy, further strengthening inotec's leadership in know-how. Additionally, a complimentary "inotec Resolver", which the EECC will provide based on GS1 standards, will open up endless communication possibilities with various users such as end customers, own employees, partner companies, trade and government. If the resolvers are used extensively, software services can be offered via the EECC, which can be charged on a recurring monthly basis and continuously expanded. Ideally, with each customer case, a proprietary software product evolves and inotec also transitions into being a digital entity.

Alternative 7: "inotec makes plastic parts digital"

inotec is targeting manufacturers of injection moulding machines for its inmould services via channels such as VDMA and with the help of allied services like R-Cycle. Mirroring the narrative "inotec Makes Print Label Customers Digital" through the use of Digital Link Resolvers, it is essential that every injection moulder understands that their moulded parts become intelligent, future proof and consequently more valuable with integrated inmould labels. Europooltray can serve as an example.

These parts become digitally more valuable and will comply with upcoming EU regulations and transparency directives, enabling their customers to explore numerous additional business cases in process automation, logistics, reuse & repair, ownership models, fraud management, etc.

Alternative 8: Focus on niche applications

inotec is recognised as the leading expert in inmould labels, specialising in both RFID and barcode technologies. The company exclusively provides sophisticated customer solutions within the inmould application sector. Its unique selling propositions are the resilience, design, durability and resistance of its labels. inotec envisions the future in developing pooling systems in the food sector, including items such as tableware and trays. This expertise extends to the customisation of individual customer applications that include both the hardware product and a competent consultancy service. Every project at inotec involves a considerable amount of customisation. Based in Germany, inotec is expanding this capability internationally across Europe, America, and Asia.

Alternative 9: Focus on one-stop store

inotec is also the number one expert for AutoID solutions, offering a complete portfolio of essential products needed for any AutoID project. This portfolio includes hardware such as barcode labels, RFID labels, laser markers, scanners, and cameras. On the software side, inotec offers connections to common ERP systems and proprietary software modules designed for the visualisation and evaluation of material flows and image recognition. Whenever possible, inotec uses its own labels, but also integrates third party products when applicable.

Alternative 10: Label as a service

inotec will focus on Asset Lite business models, including 'Label as a Service', which operates on a pay-per-scan basis. This approach involves collaboration with injection moulders and other necessary partners. inotec prides itself on providing high quality labels, particularly RFID and barcode labels, with a focus on the food sector. This service model also includes the capability to charge for items such as tableware, enhancing the efficiency and traceability for inotec's costumers.

Alternative 10: Global market leader in the labelling of reusable container pools

inotec aims to become the global market leader in the labelling of reusable container pools through a number of strategic initiatives. Key objectives include securing high-profile costumers like IFCO by replacing the existing label suppliers such as Schreiner or Plöckl, and acquiring innovative container pool systems like reCIRCLE and vytal. inotec also plans to secure large key accounts in the supermarket sector as well as with global industrial conglomerates and logistics companies.

To achieve these goals, inotec will focus on offering products that are technically or qualitatively superior for each application. Additionally, by establishing itself as a system integrator authority in this field, inotec will consistently sell its labels in conjunction with its services, enhancing the value proposition to costumers and strengthening its market position. This strategic approach is designed to not only attract significant new business, but also to consolidate inotec's presence as a leading supplier in the global market.

Alternative 11: Leader in Green AutoID Solutions

inotec positions itself as a leader in green AutoID solutions by committing to eco-friendly materials and processes in label production. The company develops labels that are recyclable, biodegradable, or made from sustainable materials, specifically targeting environmentally conscious costumers. Its unique selling proposition combines sustainability with the durability and quality for which inotec is renowned. inotec is expanding this eco-centric approach globally, positioning itself as a partner for companies with strong Corporate Social Responsibility (CSR) goals.

Alternative 12: inotec specializes in tailored integration services

inotec specialises in tailor-made integration services, offering full service integration of AutoID technologies into costumers´ existing systems. Its unique service is a bespoke integration that considers the unique infrastructure and business processes of each client. inotec's consultancy services include system analysis, design, implementation, and support, providing a comprehensive consultancy package that is marketed not only locally, but also internationally. This positions inotec as a global leader in both sustainability and customised integration solutions.

Alternative 13: innovator in smart labels by leveraging IoT technology

inotec positions itself as an innovator in smart labels by leveraging IoT technology to enhance traditional labelling solutions. The company creates smart labels with advanced tracking and analytics capabilities, integrating IoT with traditional labelling to provide data-rich solutions for advanced logistics. This approach is particularly targeted at industries like pharmaceuticals where tracking and condition monitoring are critical. inotec's strategy includes expansion through partnerships with IoT device manufacturers and data analytics companies.

Alternative 14: Authority in sector-specific labelling

inotec establishes itself as the authority in sector-specific labelling by developing labels tailored for high-demand sectors such as healthcare, where sterility and traceability are paramount. The unique selling point of these specialised labels is their ability to meet stringent industry regulations and requirements, including labels that can withstand extreme conditions, chemical exposure and sterilisation. The strategy also involves establishing inotec as a thought leader through whitepapers, industry specific trade shows and specialised sales teams, enhancing its visibility and expertise in the market.

Alternative 15: Global AutoID service provider

inotec is establishing itself as a global AutoID service provider by building a worldwide network of service centers to provide local support and maintenance to global costumers. The company's unique selling proposition is to provide consistent, reliable service anywhere in the world, leveraging inotec's reputation for quality. The roll-out strategy includes scaling service capabilities in key markets, starting with regions with high growth potential. To ensure seamless service delivery, inotec is actively pursuing partnerships with global logistics providers.

Alternative 16: Pioneering AI-driven labelling systems

inotec is pioneering AI-driven labelling systems by investing in AI technologies to enhance the functionality of its AutoID solutions. These solutions include smart labels that can adapt their data based on the context or environment. The use of AI enables inotec to offer predictive analytics, enhanced tracking accuracy, and automated inventory management through smart labels. This approach is targeted at industries with complex supply chains that require advanced data analysis for efficiency, such as the automotive and manufacturing sectors. The expansion strategy involves forming partnerships with AI research institutions and tech companies to co-develop next-generation AI applications for labelling.

Alternative 17: Facilitator of circular economy practices

inotec positions itself as a facilitator of circular economy practices, developing a product line that supports initiatives such as labels that are designed for easy removal and recycling, or that are made from recycled materials. This approach enables customers to achieve their sustainability goals through compliant labelling solutions that do not compromise on performance. inotec has a particular focus on sectors such as packaging, food and beverage, and consumer goods, which are under pressure to improve sustainability. The strategy also involves collaborations with environmental organisations to ensure compliance and to establish leadership in green labelling solutions.

Alternative 18: Blockchain technology for labelling solutions

inotec integrates blockchain technology into its labelling solutions to offer unparalleled supply chain transparency and security. This includes embedding blockchain tags into labels for verifiable tracking, making the system tamper-proof and decentralised. This capability is particularly valuable for high-value goods and sensitive products in markets such as luxury goods, pharmaceuticals, and the agri-food sector, where provenance and authenticity are critical. The global rollout strategy for this technology includes education campaigns and pilot projects with key industry players to demonstrate the value of blockchain-enabled labels.

Alternative 19: Developer of digital twin solutions for physical assets

inotec is positioning itself as a developer of digital twin solutions for physical assets, utilizing AutoID technologies to create digital twins that facilitate advanced monitoring, simulation and analysis. The unique selling proposition (USP) of inotec's technology is the creation of a virtual representation that updates in real-time, significantly enhancing asset management and predictive maintenance capabilities. This technology is particularly targeted at industries such as manufacturing, logistics, and infrastructure where asset efficiency and uptime are critical.

To extend its offerings, inotec is forming partnerships with software and cloud service providers to develop comprehensive digital twin platforms. These partnerships aim to integrate and enhance the capabilities of digital twins, providing customers with sophisticated tools to optimise the performance and management of their physical assets.

Alternative 20: Focus on US Market

North America is a key market for inmould labels, with significant growth driven by the automotive industry, rapid industrialisation and technological advances. inotec should therefore focus on the US American market in the respective areas Michigan and East Coast, and also glimpse at the Mexican market. At the same time, the inmould label market faces challenges such as the recent increase in raw material prices. Companies are addressing these challenges through mergers and acquisitions to expand their geographic reach, product offering and customer base – inotec should intensify its M&A ambitions or find partners.

How were the Alternative Strategies developed

The alternative strategies presented above represent the individual ideas of the members of the Future Council. They were developed based on the knowledge and insights of each team member. Some of the proposed alternatives could lead to fundamental changes in how inotec operates in the future. Others are more straightforward and have the characteristics of strategic initiatives that could be implemented in line with the existing strategy. All are listed above to illustrate the comprehensive approach taken to identify the best alternative strategy for inotec.

Why were the Alternative Strategies dismissed

Three steps were used to identify the best alternative strategy.

Step 1:

All of the alternative strategies were placed on a 3x3 matrix to illustrate the potential benefits versus the effort and risks associated with each alternative strategy. This task was carried out within the Future Council. Each member of the Future Council could highlight their favourite strategies. The results of this team approach are presented below:

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Step 1 results in 4+1 potential alternative strategies: Continue with the existing strategy (with some adjustments), adopt a hedgehog “pure” approach, focus on niche applications, or develop inotec into a one-stop shop. The alternative of transforming inotec into a pure logistics data service provider is rated as interesting but too risky. Consequently, this alternative will be handled separately and could potentially result in a spin-off activity.

Step 2:

A simplified financial model has been developed to estimate the theoretical value of the inotec group should one of the alternative strategies be implemented. This model adheres to the financial framework used by Obermark to calculate company value. However, it relies on significantly simplified assumptions to evaluate the alternative strategies. While the absolute values may not be precise, the differences between the alternatives serve as a reliable indicator of which strategy could result in a higher company value.

The key results are displayed below:

Remark: All the calculated enterprise values are based on a simplified model and do not reflect the real enterprise value.

Step 3:

The four alternative strategies have been evaluated in light of the reference scenario previously developed. The table below displays the ratings that were formulated in collaboration with the Future Council:

The points listed above were assigned through a vote by the members of the Future Council. The higher the sum of the individual score, the better the strategy fits the Reference Scenario and the lower the risk. The fit of each alternative strategy serves as a good indicator of the risk for the successful implementation of the strategy in relation to the Reference Scenario. Example: The highest possible score is 280 points, with a score of 224 points corresponding to an 80% probability of success or a 20% risk deduction. This rating is very abstract, but can be used in combination with the commercial rating to weight the expected company values calculated in step 2 with the risk:

This results in "focus on niche applications" as the new alternative strategy, which will henceforth be referred to as the selected strategy. It should be emphasised again that the company values presented above are derived from the mathematical model used for strategy selection. They do not in any way represent the actual company values of inotec. These values will continue to be calculated in detail, taking all available details into account, and will exceed the values mentioned above.

1. chosen (new) STRATEGY

Focus on niche applications

inotec is recognised as the leading expert in AutoID solutions and exclusively provides advanced solutions in this sector. The company's USPs are the resilience, design, durability and resistance of its labels. inotec envisions the future by serving niche markets, specifically customers requiring high quality and stable AutoID labelling solutions. This includes customising individual applications that include hardware products, expert consulting services, and software support to ensure smooth integration on the customer´s end. Every project at inotec involves extensive customisation. Based in Germany, inotec is expanding its capabilities internationally, reaching Europe, America, and Asia.

The chosen strategy does not significantly deviate from the previous strategy in all the following areas. However, for the sake of completeness, all aspects are summarised here once again.

scope (as part of the chosen strategy)

Customers, markets, geographies

inotec aspires to serve customers who require high quality and stable AutoID labelling solutions in niche markets across various sectors. When talking about niche markets, inotec has the following characteristics in mind:

• Premium products or solutions: inotec focuses on offering high quality, premium AutoID labelling solutions that are not available to the same extent from mainstream suppliers.
• Specific customer requirements and preferences: Adressing the unique and specific needs of customers, ensuring tailor-made and effective solutions that are not or not fully addressed by the mainstream market.
• Limited competition: Due to its specialised nature, there is often less competition, allowing inotec to establish a strong presence and build customer loyalty.
• Customers: The target customer base is smaller compared to the general market but, highly engaged and loyal.

The sectors inotec aims to serve include, but are not limited to, the following examples:

• Pool operators: Ensuring effective and durable labelling for pool equipment and maintenance.
• Logistics: Providing reliable labelling solutions for tracking and managing inventory and shipments.
• Industry (Automotive, Military): Offering robust labelling that withstands harsh conditions and rigorous usage.
• Gastronomy tableware: Supplying durable and resilient labels for commercial kitchen and dining environments.
• Food retail: Delivering robust labelling solutions for product tracking, compliance, and safety.
• Medical and Pharmaceutical: Ensuring high quality, accurate labelling for medical equipment, medicines and supplies.

The inotec group's existing companies in Germany, France, the Netherlands, the Czech Republic and the United Kingdom form the geographical basis for further growth in Europe and the USA.

Products and services, jobs, value

In this chapter, there are no significant deviations from the previous strategy. As described above, the focus is on specific niche applications. Therefore, here is the unchanged description once again:

The products of the inotec group ensure that an object – be it a container, a shelf, a storage location, or any other object – can be uniquely identified, and not just an object, but a specific object can be identified. This concept of one-to-one identification is the key to linking physical objects with the digital world. The customers of the group use this basic functionality to run a number of applications, e.g., to ensure supply chain transparency, create complex track and trace solutions, and/or manage warehouses.

The products offered by the inotec group use labels with optical AutoID elements (barcodes, 2D codes, etc.) and/or RFID technology. Additionally, inotec offers consultancy services and implementation support to ensure a smooth integration on the customer side. This may also include the set-up of additional hardware (reader, printer, etc.) or some software components to ensure connectivity with existing systems at the customer´s end.

Customers are willing to invest because they can benefit significantly from the implemented solutions. The created value on the customer side depends on the application, and here are some examples:

• Increased process efficiency
• Better use of warehouse space
• Reduced loss/waste
• Compliance with regulatory requirements
• Increased productivity

Technologies

With a greater focus on niche markets, the technology used by inotec to create specialised AutoID solutions continues to include several core components. Advanced printing systems are essential for producing high quality optical AutoID elements, and RFID inlays are crucial for electronic AutoID solutions. As previously mentioned, the right production equipment and technology are vital, and tailor-made software solutions ensure seamless integration with customers' IT systems.

Additionally, inotec leverages a variety of external technologies, such as real-time location solutions, to enhance its specialised offerings. By sourcing and integrating these advanced components, inotec provides comprehensive, customised solutions that meet the specific needs of niche markets.

A niche strategy allows inotec to become a pioneer in leveraging emerging technologies, such as AI, digital twins, and the industrial metaverse, to create highly specialised, innovative AutoID solutions. By focusing on these cutting-edge technologies, inotec can offer superior customisation, process optimisation and enhanced customer engagement, setting it apart from its competitors. This strategy ensures that inotec remains at the forefront of technological advances, driving sustain growth and customer satisfaction.

Processes

The key processes are listed in the chapter ‘Internal Context’. They include sales, order management, production, quality, development, and services. Although there is no need to change the key processes, it will be necessary to direct the sales process towards niche applications and to prepare the production and fulfilment processes to handle this type of orders.

COMPETITIVE ADVANTAGE (as part of the chosen strategy)

To become successful in profitable niches, the differentiation described below is essential. inotec must be able to offer successful solutions where other market participants lack the competence, speed of implementation, or understanding of customer needs.

The companies within the inotec group follow a highly focused differentiation strategy, which is evident in their specialised product portfolio, advanced technical specifications, superior product quality, exceptional service levels and expert consultancy skills. Each company aligns its offerings to optimise the overall service and solution portfolio for customers in niche markets.

At the core of inotec's offering is an extensive product portfolio of labels tailored to many specialised applications. When promising gaps are identified in the product portfolio, new products are developed to meet specific customer needs. This portfolio is enhanced by high quality services and ongoing support from the group's experts, ensuring excellent quality that sets inotec apart from the competition.

To support customers in implementing AutoID projects within existing infrastructures, the inotec group offers comprehensive consulting services and specialised software solutions through Winckel. This capability was recently strengthened by acquiring a small team of engineers from a competitor, enabling inotec to seamlessly bridge the gap between the physical and digital worlds for its customers.

The unique combination of specialised products, high quality services, and deep expertise is unmatched in the market. inotec's solutions are mission critical for customers as disruptions like a broken supply chain, unclear item information or lost items can result in significant costs. Customers recognise the value of inotec's premium solutions and are willing to invest in them to mitigate the risks associated with inaccurate identification.

long-term goals (as part of the chosen strategy)

The long-term goal of this niche strategy is to establish and maintain a dominant position in specialised markets by consistently delivering highly customised, high quality solutions that meet the unique needs of specific customer groups. This strategy aims to build deep customer loyalty, create significant barriers to entry for competitors, and achieve sustain growth by:

• Market leadership: Becoming the provider of choice for specialised AutoID solutions in targeted niche markets, recognised for superior quality and innovation.
• Customer Loyalty: Building strong, long-term relationships with customers by consistently exceeding their expectations and addressing their unique needs, resulting in high customer retention and repeat business.
• Innovation and customisation: Continuously investing in research and development to stay ahead of technological advances and emerging trends, ensuring that inotec's offerings remain cutting-edge and highly relevant to niche markets.
• Operational excellence: Streamlining operations and supply chains to deliver efficient, reliable, and high-quality products and services, enhancing overall customer satisfaction and operational resilience.
• Sustainable growth: Achieving steady, sustainable growth by expanding inotec's presence in existing niche markets and identifying new niche opportunities that align with its core competencies and strengths.
• Strong Brand Reputation: Building a strong brand reputation as a trusted, expert provider of specialized AutoID solutions, known for innovation, quality, and exceptional customer service.
• Barrier to entry: Creating significant barriers to entry for competitors through deep expertise, proprietary technologies, patents, strong customer relationships, and a deep understanding of niche market needs and dynamics.

Overall, the long-term goal of this niche strategy is to secure a leading position in specialised markets, ensuring long-term profitability and sustainability by delivering unparalleled value to customers through tailor-made solutions and expert services.

logic (as part of the chosen strategy)

Since inotec's business model is not fundamentally changing, the previously presented mind maps to illustrate cause and effect remain valid. Here, Level 1 of the mind map is presented again.

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For each of the 10 dimensions of the Reference Scenario, an explanation will be provided as to why "focus on niche applications" is a sensible choice.

Situation in macro-economy (Dimension 1):

Expected Reference Scenario: Navigating Pressure and Uncertainty

The economic landscape faces increasing pressure from global conflicts, resulting in unstable and heterogeneous blocs. Strengthening supply chain resilience through regionalisation or diversifying sourcing is critical. Cybersecurity is becoming more important and investment behaviours are shifting due to uncertainties and ECB policies. There is a push for digitalisation and automation to address global conflicts, regulations, demographic shifts and climate change.

The logic behind why the chosen strategy is a sensible choice:

The growing economic pressure necessitates focusing on large orders and competitive products. By adopting a niche strategy, we can avoid these pressures and benefit from the increasing demand for specialised solutions in a volatile, uncertain, complex, and ambiguous (VUCA) and brittle, anxious, non-linear and incomprehensive (BANI) world. This strategy is suitable because AutoID remains necessary and applicable despite market instability. To deal with VUCA / BANI effectively, companies need to adopt several strategic topics, one of which is around data and data analytics. Decision makers will leverage data analytics and artificial intelligence to make sense of complex and vast amounts of information. AutoID elements are critical and the enabler for generating and obtaining specific relevant digital data. Engaging in various niches minimizes dependency on any single industry or market, allowing inotec to provide specialised solutions that meet digitalisation needs and enhance resilience against disruptions. inotec’s broad portfolio supports further niche differentiation and reduces dependencies. By developing deep expertise and strong relationships within specialised sectors, inotec can navigate economic uncertainties effectively. Focusing on high-value, resilient AutoID solutions create a stable revenue stream and leverages inotec’s strength in delivering high quality, customised solutions during macro-economic instability.

Situation in natural environment and climate change (Dimension 2):

Expected Reference Scenario: Accelerating Impact Across All Dimensions

Climate change is intensifying, affecting all aspects of life and increasing geopolitical conflicts and extreme weather events. Regional impacts vary, necessitating localised approaches to opportunities and challenges. Legislative and societal expectations of business will grow, leading to shifts in market products and services. For inotec, this scenario presents both positive implications and escalating challenges.

The logic behind why the chosen strategy is a sensible choice:

Climate and other changes act as a filter on the usefulness of solutions, emphasising the importance of specialised applications. Niche applications exist because of their specific benefits, which must be continually discovered and adapted to. The strategy contributes significantly to sustainability through durable AutoID solutions, long-term reusability and waste reduction. As a niche supplier, inotec is not tied to a specific industry and can quickly adapt to diverse regulatory requirements. The demand for tailored solutions addressing climate change challenges will increase, allowing niche markets to position features with specific environmental impacts. Focusing on various niche markets enables inotec to assess exposure to extreme weather risks. A niche strategy positions inotec as a leader in sustainable AutoID solutions, aligning with environmental regulations and societal expectations. By specialising in environmentally friendly products, inotec can capitalise on market demand for sustainable solutions, reduce its ecological footprint, and gain a competitive edge. This strategy allows inotec to respond effectively to regional environmental impacts and regulatory requirements, ensuring long-term relevance and market leadership.

Societal and political (Dimension 3):

Expected Reference Scenario: The Political Landscape's Growing Impact on Business

The political landscape is increasingly influencing the economy, with increased social and economic dissatisfaction, rising populism and battles over resource distribution. Education levels in Germany are declining and demographic changes are exacerbating the shortage of skilled labour. The new generation prioritises work-life balance and meaningful work. Immigration laws hindering the inflow of skilled labour influx, wealth inequalities are widening. Digitalisation and automation are becoming critical.

The logic behind why the chosen strategy is a sensible choice:

Labelling ensures transparency, control, and enables automation, with rising demand in niches following commodities. The lack of skilled labour heightens the importance of digitisation and automation, increasing demand for inmould AutoID. inotec's focus on Europe and the US, regions with a lower risk of disruptive political and social impacts, enables system solutions requiring that require fewer skilled labour and automated production, reducing dependence on skilled labour and mitigating social impacts such as strikes. Niche applications can lead by example, showcasing solutions that significantly impact social and political aspects. A niche strategy allows inotec to adapt to the evolving social and political landscape by providing meaningful, high quality solutions that meet specific customer needs. Emphasising sustainability, work-life balanc, and meaningful work attracts and retains top talent despite skilled labour shortages. By focusing on specialised markets, inotec can navigate multi-coalition political systems and societal shifts, ensuring robust and responsive operations.

Regulatory (Dimension 4):

Expected Reference Scenario: Tightening Regulatory Requirements in Germany and the EU

Regulatory requirements in Germany and the EU are tightening, impacting artificial intelligence, digitalisation, supply chains, sustainability (Green Deal) and data privacy and security. This complex regulatory landscape challenges companies to monitor compliance and reconcile conflicting objectives, potentially leading to market consolidation, especially affecting small and medium-sized enterprises.

The logic behind why the chosen strategy is a sensible choice:

Labelling ensures transparency, control, and compliance with regulatory requirements, with the Green Deal creating new markets and niches. Regulation will push for more transparency in supply chains and sustainability, increasing demand for solutions like AutoID. As a niche supplier, inotec can quickly adapt to different regulatory requirements across various industries. inotec’s specialised expertise and solutions, combined with system integration and system consulting, help to meet specific regulatory requirements. A niche strategy allows inotec to focus resources on ensuring compliance with stringent regulatory requirements, while maintaining high standards for quality and sustainability. By specialising in niche markets, inotec can effectively monitor and adapt to regulatory changes, reducing the risk of non-compliance and position itself as a trusted provider of compliant, high quality AutoID solutions. This differentiates inotec from competitors who may struggle with the increased regulatory burden.

Technology (Dimension 5):

Expected Reference Scenario: A Gateway to Greater Opportunities Than Risks

Technological advances form regional and international clusters, creating new business models and solutions that meet the growing demand for sustainable products. Data collection remains essential, supporting technologies like artificial intelligence, digital twins and the industrial metaverse. These technologies enhance customer value, process optimisation and personalisation, while necessitating robust cybersecurity and data privacy measures.

The logic behind why the chosen strategy is a sensible choice:

The future is data-driven, with increasing demand for data collection, especially for AI applications and automation. The greatest potential lies in niches, where the highest number of experts and innovations are found. AutoID is critical for digital twins and process optimization, enabling new business models and operational improvements. As a niche-focused system and solution supplier, inotec can quickly identify and adopt new trends, linking the physical and digital worlds through AutoID solutions. This participation in technological developments, such as digitalisation and AI, strengthens inotec's market position. In a digitised, technology-driven world, physical labels are becoming commodities and system integrators like inotec are needed to meet customer needs. By building deep knowledge in specific niches, inotec enhances its market position and customer value. A niche strategy positions inotec as a pioneer in emerging technologies, offering superior customisation, process optimisation and customer engagement.

Suppliers and supply (Dimension 6):

Expected Reference Scenario: Towards Networked Supply Chains

Companies must enhance resilience in volatile supply chains by adopting local and multi-sourcing strategies, reducing dependence on single suppliers, and strengthening existing partnerships. Sustainability considerations equire reassessment of suppliers. Increased competition between service providers might lower prices, but their negotiating power is growing due to supply chain disruptions. Companies also face the challenge of passing on price pressure to suppliers.

The logic behind why the chosen strategy is a sensible choice:

In smaller niche markets, there are fewer suppliers and sourcing options, increasing supply chain risk. Effective transparency and real-time responsiveness can mitigate these risks. A niche strategy enables inotec to develop robust multi-sourcing strategies and strong supplier relationships, enhancing supply chain resilience. The niche strategy should be used to build strong relationships with key suppliers. Suppliers should be interested in cooperating with inotec to reach niches which are out of reach for other companies. By focusing on specialised, high quality solutions, inotec ensures consistent supply and maintains high standards even in the midst of disruptions.

Customers and demand (Dimension 7):

Expected Reference Scenario: Expanding and Evolving AutoID Demand

Customer needs remain unchanged, but demand is increasing, driven by sustainability requirements and efficient logistics solutions. The circular economy introduces new B2B customer groups (construction, packaging, vehicles) focused on reuse and repair, while new B2C applications emerge. Business models like "as a service" and "direct to customer" are growing due to innovative technologies and shifting demands, expanding integration into customers' value chains and creating more touch points. However, systematic price increases can be challenging.

The logic behind why the chosen strategy is a sensible choice:

The demand for automation, particularly in data collection, is growing due to fewer people in the workforce and the rise of digital services. The circular economy requires cross-industry data exchange for repair, reuse, and recycling. A niche strategy is ideal as the increasing demand from the circular economy, digital twins, and value chain transparency boosts potential customer use cases. The trend towards resilient supply chains drives the need for track and trace solutions in logistics. A niche strategy enables inotec to address the expanding and evolving demands for durable, sustainable AutoID solutions in both B2B and B2C markets. By focusing on niche markets, inotec can develop deep expertise and tailor offerings to meet specific customer needs, enhancing value and customer loyalty.

Competitors going after the Company’s main customer groups (Dimension 8):

Expected Reference Scenario: Competitive Dynamics in the Auto-ID Market

The AutoID market is attractive but fragmented, leading to intense competition with low entry barriers. New providers and larger companies considering vertical integration pose threats. Market consolidation is expected due to increased regulatory requirements and pressures, diminishing the proliferation of medium-sized companies.

The logic behind why the chosen strategy is a sensible choice:

Niche markets require specialised knowledge, making them less attractive to disruptive strategies from potential competitors. Deep integration of AutoID solutions into customer-specific use cases creates defensibility and resilience against competition. Serving small and medium-sized companies in niche markets results in high switching costs for customers. Providing complete solutions and consulting enhances customer loyalty towards inotec. A niche strategy offers a competitive advantage by focusing on specialized, high quality solutions that are difficult for low-cost providers and new entrants to replicate. By developing deep expertise and strong customer relationships, inotec can differentiate itself and maintain market share despite intense competition, effectively navigating market consolidation and leveraging its strengths in a competitive landscape.

Solutions for jobs similar to the Company’s, used outside the Company’s main customer groups (Dimension 9):

Expected Reference Scenario: Direct Marking

Item identification is evolving with direct marking technologies like lasers or ink jets combined with advanced cameras, presenting potential alternatives to traditional labels. Customers are looking for effective ways to identify items within their processes rather than purchasing labels per se.

The logic behind why the chosen strategy is a sensible choice:

Niche solutions offer higher value due to their specialised design, making them less likely to be replicated with other technologies. A niche strategy enables inotec to stay ahead of technological advances and integrate new technologies into specialised AutoID solutions. By focusing on niche markets, inotec can quickly adapt to evolving technologies and customer needs, maintaining a competitive edge and offering innovative solutions that meet the highest standards of quality and performance.

Substitution for the way we perform the job which the Company’s main customers want to have done (Dimension 10):

Expected Reference Scenario: Staying Vigilant in a Dynamic Market

As the Auto-ID market is expanding, providers must stay vigilant to potential alternative solutions that could partially substitute their portfolios. Responses include market withdrawal or increased R&D investment. Despite these challenges, the intrinsic strengths of today's Auto-ID providers remain significant and not fully replaceable.

The logic behind why the chosen strategy is a sensible choice:

Niche solutions require specialised knowledge, making them less attractive for substitution strategies. inotec must maintain its market-leading position in quality and technology for established labels and stay at the forefront of new technologies to remain non-substitutable. A niche strategy allows inotec to leverage its strengths and invest in R&D to develop specialised, innovative AutoID solutions that are difficult to substitute. By focusing on niche markets, inotec can create unique value propositions addressing specific customer needs, reducing substitution risk

1. aspired internal context in 3 – 5 YEARS

Assets (physical capital)

Company history

In 3-5 years, the inotec group will have further leveraged its long history and deep market knowledge to dominate niche applications in AutoID solutions. The group's unique combination of three companies, known for their extensive expertise, will be key in developing highly specialised solutions tailored to specific market needs.

Strengthening local presence in neighbouring countries will enhance inotec's ability to serve niche markets effectively, ensuring accessibility and responsiveness. Continuous investment in staff development will keep the inotec group well prepared to address the complexities of niche applications.

By focusing on niche markets, inotec will solidify its reputation as an innovative leader, driving sustained growth and customer loyalty through specialised, high quality AutoID solutions.

Company reputation

In 3-5 years, the inotec group's reputation will have been further consolidated and expanded within niche markets. inotec will be recognized as the leading premium solutions provider, consistently delivering high-end, specialised AutoID applications that meet the most demanding customer requirements. This will enhance its status as a trusted partner in the industry.

identytag will continue to be known for its pragmatic approach, offering reliable and efficient solutions for mid-tier applications. Its reputation for delivering cost-effective, practical solutions will strengthen, making it a go-to provider for businesses seeking a balance between quality and affordability.

Winckel's evolving reputation will become firmly established as an expert in extremely specific niche applications. By consistently delivering innovative and highly specialised solutions, Winckel will be seen as the specialist for unique and challenging AutoID needs.

Collectively, the distinct positioning of each company within the inotec group will contribute to a robust branding strategy, enhancing the group's overall reputation as a versatile and competent partner capable of addressing a wide range of customer needs across various market segments.

Brand equity

In 3-5 years, the brand equity of the inotec group will have strengthened significantly, driven by its strategic focus on niche applications. The inotec brand, already recognized for its premium, high-end AutoID solutions, will see its brand equity reach new heights as it continues to deliver exceptional value to its specialised markets.

Winckel's brand equity will also grow, solidifying its reputation as the expert in extremely specific niche applications. As Winckel consistently provides highly specialised and innovative solutions, its brand will gain greater recognition and trust within its target segments.

identytag, although younger and initially established as a spin-off, will continue to build its brand equity through its pragmatic and efficient approach to mid-tier applications. Its reputation for delivering practical, cost-effective solutions will attract a loyal customer base, enhancing its brand strength over time.

The unique combination of the inotec group's companies, each with its own distinct positioning and growing brand equity, will create a compelling and unrivalled market presence. This synergy will set the group apart from competitors, further solidifying its reputation as a versatile and reliable provider of specialised AutoID solutions.

Physical assets

In 3-5 years, the inotec group's physical assets will have been further optimised and expanded to support its strategic focus on niche applications. The inotec group's advanced production facilities will continue to be a key strength, enabling efficient handling of various batch sizes and a wide range of high quality products, reinforcing inotec's position as a leader in the premium AutoID market.

Investments will have been made to ensure all production equipment across the group is state-of-the-art, enhancing production efficiency and product quality and reducing the risk of machine downtime. This modernisation will support high volume production requirements while maintaining the flexibility to develop highly customised solutions.

The inotec group's unique application lab will remain a vital asset, fostering innovation and allowing the development of customer-specific solutions. Additionally, the investment in laboratory equipment for developing RFID antennas tailored to customer requirements will further strengthen the inotec group's ability to offer cutting-edge solutions.

The combination of these physical assets will create a formidable and unmatched market presence, enabling the inotec group to deliver unparalleled value and innovation. This synergy will solidify the inotec group's leadership in specialised AutoID solutions, driving sustain growth and customer satisfaction. Vertical integration is a possible option to gain efficiency and independence.

Financial resources

The inotec group has a strong investor in the background. Most competing companies are owned by a family or individual. While this financial stability is so far not important for the customers of the group, it can become very relevant for the growth by acquisitions for other companies.

Organization (human capital)

Capabilities

Managerial Capabilities:

In 3-5 years, the inotec group's management capabilities will have been further strengthened through continuous leadership development and strategic initiatives. The transformation process has made very good progress and the management team - despite different backgrounds and experiences - has been able to align itself very well with the jointly developed principles for collaboration and leadership and to integrate the developed corporate values into their daily work. The experienced managers heading each organisational entity will have deepened their expertise and adapted to emerging market trends. The two Managing Directors will continue to provide robust leadership, expanding management capabilities and mitigating risks. The next level of managers will have fully taken over their responsibilities, ensuring seamless leadership succession. The dedicated team driving project management, ESG activities, and strategic initiatives will have matured, delivering significant improvements across these areas. The Future Council will continue to enrich management capabilities with cutting-edge external expertise, keeping inotec at the forefront of industry innovation and strategic thinking.

Functional Capabilities:

Within 3-5 years, all core functions within the inotec group will be even more proficiently handled by internal resources, with strategic external partnerships continuing to provide specialised expertise. The collaboration with an external marketing agency will ensure cutting-edge marketing strategies and execution. A new ERP system will have been introduced, supported by a new external IT partner, ensuring robustness and adaptability to the inotec group's evolving needs. Tax and legal functions provided by external partners will ensure compliance and strategic financial planning, allowing inotec to focus on its core competencies while leveraging external expertise for specialised needs.

Organizational Capabilities:

In 3-5 years, the organisational structure of the inotec group will have been further optimised for efficiency and effectiveness. The three main companies in Germany will maintain their autonomy to a certain extent, allowing for agile and responsive management. Sales, development and marketing activities will be seamlessly aligned across the group, ensuring a unified market approach. Cross-production activities will be streamlined to enhance operational efficiency, and strategic decisions regarding budget and investments will continue to be managed at the group level. Ongoing efforts to streamline and simplify the organisation will result in improved operational efficiencies and stronger brand equity for each company.

Financial Capabilities:

In 3-5 years, the inotec group will have consolidated its financial strength, leveraging its higher margins and strategic investments. The backing of Obermark as an investor will provide additional financial stability and capacity for growth. Strategic financial planning and management will enable the inotec group to invest in innovative technologies and market expansion, ensuring sustained financial health and competitive advantage. The inotec group's financial capabilities will be a key enabler of its long-term strategic goals, driving growth and profitability while maintaining financial resilience.

Processes

In line with its ISO 9001 certification, all key business processes are detailed in process manuals for the three companies. Some of the key processes are outlined below:

Sales:

In 3-5 years, the sales process will continue to be a cornerstone of value creation. The team will be highly skilled in winning new customers and securing new orders from existing customers. The implemented Customer Relationship Management (CRM) system will further support the sales team by automating sales pipeline transparency and enhancing customer interactions. Direct interaction with opportunities and maintaining close customer proximity will remain key success factors.

Order Management:

Once a new order is won, the order management process will take over, aligning all required details with the customer to prepare the order for production. This process will be refined to ensure seamless transition and preparation, optimising customer satisfaction and operational efficiency.

Production:

The inotec group will continue to handle both high and low volume orders across a broad product portfolio. The production process will be key to managing a large number of orders in parallel, optimising the use of production resources, and meeting customer delivery deadlines. Advanced IT systems with a higher level of integration and less application and media breaks will manage and plan production activities, ensuring unmatched capabilities in the market.

Quality:

As a provider of premium solutions, maintaining high quality will remain a critical focus. In 3-5 years, the quality process will benefit from increased automation of quality control steps, ensuring consistent and superior product quality. A sophisticated set of detailed processes will continue to ensure that every product meets the highest standards. The quality management system of inotec meets the expectations of a modern, risk-based and easy-to-use system and the environmental management system in accordance with ISO 14001 has been integrated and certified.

Development:

The development of new products and services will be critical for future success. Dedicated development processes will be in place for each company, with alignment at the group level, including Winckel. This collaborative approach will foster innovation and ensure that the inotec group remains at the forefront of industry advancements.

Supporting Processes:

None of the above processes would function effectively without robust supporting processes. inotec will maintain dedicated financial, HR, procurement, and IT processes to ensure that all operational aspects are well supported and optimised for efficiency.

Formal and informal organizational structure

For the next 3-5 years, the organisation will continue to evolve to support niche applications and growth in new geographies. This evolution will focus on enhancing customer focus, deepening market understanding, and increasing productivity. Organisational development will ensure that inotec remains agile and responsive to market demands, driving sustained growth and success.

Culture

Starting from a classic top-down culture shaped by the former owner, significant steps have been taken to transform this culture into one of personal empowerment and responsibility of individual contributors. The top-down culture has been definitively changed. A management team with clear roles has been formed, and individual team members are now responsible for their respective areas, including decision making and budgeing. This approach is also implemented within the respective departments, ensuring that each department’s value contribution is understood. Furthermore the management team is fully committed to the company´s goals and success.

With more than 100 employees in seven locations, there are some cultural differences that need to be understood and leveraged, particularly when interacting with customers or other stakeholders.

For the next 3-5 years, the organisational culture will continue to evolve towards greater empowerment and cohesion. Efforts will focus on further strengthening the "one-team" culture, enhancing cooperation across different functional areas such as finance, HR, procurement, production, marketing and sales. Initiatives to promote good personal relationships within the team and reinforce shared corporate values will be expanded. These values summarised above, will be integrated into everyone’s daily business practices.

The Leadership Excellence Programme will play a critical role in this cultural development, sharpening and operationalising leadership principles, providing guidance and tools for effective team leadership, and training the entire leadership team on specific topics. The training will cover areas such as conducting professional feedback discussions, resolving conflicts promptly and constructively, conducting annual reviews, and providing direction through clear communication. The leadership principles and trainings will have sharpened the individual ownership to areas of responsibility and the overall commercial success.

1. VISION AND VISION STATEMENT

The vision of the inotec group has been updated in cooperation with the Future Council. Here is the updated version:

We are the partner of choice to give objects a digital identity in a connected world.

It should be emphasised that the current mission and vision include a significant mindset change for the inotec group. Historically, the inotec group has been focused on printing labels. Going forward, the focus will be on building the bridge between the physical and digital world, including all required elements, with the label being just one element among others.

1. activities to close the gap between current internal context and aspired internal context in 3 – 5 YEARS

Assets (physical capital)

Company history

The successful history of the inotec group will continue to flourish through the implementation of a carefully chosen strategy. This strategy leverages the company's long history and deep market knowledge, ensuring ongoing success. All the actions and initiatives described in this document will shape the future story of the inotec group.

Company reputation

By implementing the actions listed below, the inotec group can consolidate and expand the distinct reputations of its companies, contributing to a robust and versatile brand strategy that enhances the inotec group's overall reputation in the market.

Enhancing inotec's Premium Positioning

Regularly publish case studies, whitepapers, and customer testimonials that highlight successful high-end applications. Pursue industry awards and certifications to validate inotec’s premium status and innovative capabilities.

Strengthening identytag's Pragmatic Approach

Highlight pragmatic, cost-effective solutions through customer success stories and testimonials. Invest in process improvements that enhance efficiency and cost-effectiveness, reinforcing identytag’s reputation for practical solutions. Expand outreach to mid-tier market segments through targeted marketing campaigns and industry events. Actively search for niche but high-volume applications.

Establishing the inotec group as a Niche Expert

Invest in R&D to innovate and develop solutions for very specific niche applications while constantly trying to protect these developments through patent law. Publish research papers and articles in industry journals to establish Winckel as a thought leader in niche applications. Offer highly customised solutions and services that address unique customer challenges in niche markets.

Enhancing the inotec group's Overall Reputation

Maintain a consistent branding strategy that highlights the strengths and distinct positioning of each company within the inotec group. Increase customer engagement through regular communication, feedback loops, and customer satisfaction surveys to ensure continuous improvement.

Brand equity

By implementing the actions listed below, the inotec group can strengthen the brand equity of each company, contributing to a robust and versatile market presence that enhances the group's overall reputation and sets it apart from its competitors.

Enhancing inotec's Brand Equity

Regularly highlight inotec's premium solutions through high visibility marketing campaigns, showcasing case studies, whitepapers and customer testimonials that demonstrate exceptional value. Develop exclusive partnerships with leading technology providers to continuously enhance the premium offerings and maintain a competitive edge.

Growing Winckel's Brand Equity

Invest in research and development to ensure Winckel consistently delivers highly specialised and innovative solutions. Publish research papers and articles in respected industry journals to establish Winckel as a thought leader in niche applications. Offer tailored solutions and services that address unique customer challenges, reinforcing Winckel's reputation as the expert in specific niche markets.

Building identytag's Brand Equity

Leverage customer success stories and testimonials to highlight identytag’s practical, cost-effective solutions. Expand market reach through targeted marketing campaigns and participation in industry events to attract a loyal customer base and build brand strength.

Enhancing the inotec group's Overall Brand Equity

Maintain a consistent branding strategy that emphasises the distinct strengths and positioning of each company within the inotec group. Increase customer engagement through regular communication, feedback loops, and customer satisfaction surveys to ensure continuous improvement and customer loyalty. Implement Corporate Social Responsibility (CSR) initiatives that reflect the group’s commitment to quality, innovation and customer satisfaction, enhancing the overall brand reputation.

Physical assets

By implementing the actions listed below, the inotec group can optimize and expand its physical assets.

Optimizing and Expanding Production Equipment

Invest in the latest production technologies to ensure that all equipment across the group is state of the art. Upgrade identytag’s equipment to enhance production efficiency and product quality, supporting large-scale production needs while maintaining flexibility for customised solutions. Regularly assess and update inotec’s advanced production equipment to remain at the forefront of industry standards, enabling efficient handling of various batch sizes and a wide range of high quality products. It can be foreseen that a significant amount of the investments will be in RFID and RFID Inmould. Integrating further automation equipment, e.g. sensors, scanners, cameras, cobots, will increase efficiency and productivity and also supports the achievement of ambitious quality targets. The learnings from the first AI-based quality assurance initiative will lead to additional use cases to improve profitability. Taking the niche strategy into account, additional investments may be required to address specific niche applications.

Enhancing the Application Lab

Continue investing in Winckel’s unique Application Lab to foster innovation and the development of customised solutions. Expand the lab’s capabilities to include more advanced testing and development tools, enabling the creation of cutting-edge solutions tailored to niche market needs. Promote the lab’s capabilities to attract new customers and showcase the inotec group’s commitment to innovation and customised solutions.

Investing in Laboratory Equipment for RFID Antennas

Invest in advanced laboratory equipment to develop RFID antennas tailored to customer requirements. Stay ahead of technological advances in RFID to offer state-of-the-art solutions. Enhance collaboration between the lab and production teams to ensure seamless integration of new RFID technologies into the production process.

Strengthening Synergy Between Physical Assets

Develop a comprehensive strategy to leverage the combined strength of the inotec group’s physical assets. Establish cross-functional teams to optimise production processes and develop innovative solutions. Regularly review and adjust the strategy to ensure that the assets remain aligned with market demands and technological advances.

Continuous Monitoring and Improvement

Establish a continuous improvement program to monitor the performance of physical assets. Conduct regular audits and assessments to identify areas for improvement and investment, including comprehensive maintenance and service concepts. Ensure that all improvements and investments are aligned with the inotec group’s strategic goals and market needs.

Financial resources

No changes and no actions needed.

Organization (human capital)

Capabilities

Management skills:

To enhance management skills, the inotec group will implement continuous leadership development programmes, focusing on improving management skills and adapting to market trends. Training in emerging technologies, strategic thinking and innovation will be offered. Succession planning will be a priority, developing and executing a comprehensive programme to ensure seamless leadership transitions. The next level of leadership will be empowered with increased responsibilities and decision-making authority. The Future Council will be maintained and expanded to integrate external expertise and innovative thinking into management practices, encouraging regular interaction between the Council and internal management teams.

Functional Capabilities:

For functional capabilities, the inotec group will invest in the continuous development of internal resources to perform core functions more proficiently, offering specialised training programmes and career development opportunities. Strategic partnerships with external experts in marketing, IT, tax, and legal fields will be maintained and enhanced, regularly reviewed, and updated to ensure alignment with evolving business needs. A new, advanced ERP system, supported by a new external IT partner will be introduced to ensure robustness and adaptability, with internal teams trained to maximise the system’s capabilities.

Organisational Capabilities:

Organisational capabilities will be optimised by continuously evaluating and streamlining cross-production and operational processes to enhance efficiency. Best practices and lean management techniques will continue to be implemented. Sales, development, and marketing activities will be seamlessly aligned across the inotec group, fostering collaboration and communication between different entities. Initiatives to strengthen the brand equity of each company within the inotec group will be promoted, developing unified branding strategies that highlight the unique strengths of each entity.

Financial Capabilities:

For financial capabilities, robust financial planning and management practices will be implemented to ensure strategic investment and sustained financial health. The backing of Obermark will be leveraged for growth initiatives. Financial resources will be allocated to invest in innovative technologies and market expansion, prioritising investments that align with long-term strategic goals. Profit margins will be continuously monitored and optimised through cost management and efficiency improvements, benchmarking against competitors to maintain a competitive edge.

Processes

Sales:

Enhance the training programmes for the sales team to improve skills in winning new customers and securing orders from existing customers. Regularly update the CRM system to incorporate new features that support sales pipeline transparency and enhance customer interactions. Conduct regular workshops and training sessions to ensure that the sales team remains proficient in the use of the CRM system. Improve the customer feedback mechanism to continuously improve sales strategies and interactions. Evaluate and implement new sales channels where appropriate.

Order Management:

Refine the order management process. Integrate automated tools to ensure seamless transition and preparation of orders for production, evaluate if AI could support this process. Conduct regular training for the order management team to improve coordination and efficiency.

Production:

Enhance the production IT systems to manage and plan production activities more efficiently, ensuring the ability to handle a high number of orders in parallel. Implement lean manufacturing principles to optimise the use of production resources and meet customer delivery dates. Regularly review and update production processes to incorporate new technologies and best practices.

Quality:

Increase the automation of quality control steps by investing in advanced quality control technologies. AI could become an important tool for the automated inspection. Implement a continuous improvement programme to refine and enhance quality processes. Train quality assurance teams on new automated systems and ensure they are proficient in their use. Conduct regular quality audits and reviews to ensure that all products meet the highest standards.

Development:

Strengthen the development processes by fostering a collaborative approach across all companies in the inotec group. Invest in research and development to drive innovation and develop new products and services. Implement regular cross-company development meetings to ensure alignment and share best practices. Provide ongoing training and development for R&D teams to keep them updated on the latest industry trends and technologies.

Supporting Processes:

Optimise supporting processes such as financial, HR, procurement, and IT by implementing best practices and advanced IT systems. Conduct regular reviews and audits of supporting processes to identify areas for improvement. Provide continuous training for support teams to enhance their skills and efficiency. Ensure that all supporting processes are aligned with the overall strategic objectives of the inotec group and support the effective functioning of key business processes.

Formal and informal organizational structure

By focusing on both the formal and informal aspects of the organisational structure, the inotec group can ensure that it evolves to meet the demands of niche applications and new geographies. This will enhance customer focus, deepen market understanding, increase productivity and position the organisation for sustained growth and success.

To achieve the desired organisational structure, the formal structure will be regularly updated to reflect changes in roles, responsibilities, and reporting lines, ensuring that all employees can easily access and understand these changes. Cross-functional teams will be strengthened by formalising them with clear objectives and responsibilities; roles and responsibilities will be reviewed and refined regularly to ensure they are clear and aligned with the evolving needs of niche applications and new geographic markets.

In the informal structure, fostering a collaborative culture will be prioritised through regular team building activities, workshops, informal gatherings to promote open communication and knowledge sharing across different levels and functions. Robust communication channels, including town hall meetings, newsletters and an internal communication platform will be implemented and maintained to keep all employees informed about organisational changes and strategic directions. The development of informal networks and communities of practice within the organisation will be encouraged, providing platforms for employees to connect, share insights and collaborate on common interests and projects.

Culture

To achieve the desired cultural transformation, the organisation will focus on several key areas. The management team will undergo continuous development to ensure they are equipped to lead in an environment of personal empowerment and responsibility. This will involve regular training, workshops and leadership development programs to enhance their decision-making and strategic planning capabilities.

Within the departments, the approach of personal responsibility will be reinforced by developing clear and detailed job descriptions, performance metrics and accountability frameworks. Employees will be empowered to make decisions within their areas of responsibility, supported by the necessary resources and training to do so effectively.

Strengthening the "one-team" culture will involve expanding initiatives that promote cross-functional collaboration. Regular interdepartmental meetings, joint projects, and team-building activities will be organised to foster a sense of unity and common purpose. Communication channels will be enhanced to ensure transparency and open dialogue at all levels of the organisation.

Reinforcing shared company values will be achieved by integrating these values into daily business practices. This will involve regular communication from senior management about the importance of these values, recognition programmes that celebrate employees who exemplify these values, and continuous reinforcement through training and development programmes.

The Leadership Excellence Programme will continue to provide critical support for this cultural development. It will offer ongoing training on essential leadership topics such as conducting professional feedback discussions, resolving conflicts constructively and conducting annual reviews. Managers will also be trained to provide clear communication and direction, ensuring that all employees understand the organisation’s goals and their role in achieving them.

1. ACTIONS TO INFLUENCE THE EXTERNAL CONTEXT TO THE BENEFIT OF THE COMPANY

Currently, inotec participates in various standardisation groups, which is an important step in shaping industry standards and ensuring that inotec's solutions meet current requirements. By considering the options listed below, inotec can explore additional ways to enhance its influence on the external context.

Strengthening Industry Partnerships and Alliances:

inotec could consider strengthening its partnerships and alliances with key industry players, including suppliers, technology providers, and other stakeholders. By actively participating in industry associations and collaborative projects, inotec can influence industry trends, standards, and regulations. Engaging in joint research and development initiatives could lead to innovations that benefit the entire industry and position inotec as a leader in AutoID solutions.

Expanding Participation in Standardization Committee:

inotec could look into expanding its involvement in additional relevant committees and working groups. By taking a proactive role, inotec can help shape future standards and ensure that its solutions are at the forefront of technological advances.

Thought Leadership and Public Relations:

inotec could explore establishing itself as a thought leader in the AutoID industry to enhance its external influence. This could be achieved by publishing whitepapers, research articles and case studies that highlight inotec’s expertise and innovations. Participating in industry conferences, webinars and speaking engagements could elevate inotec’s profile and allow it to share insights on industry trends and challenges. A strong public relations strategy could further amplify inotec’s influence and reputation.

Leveraging Digital Platforms and Social Media:

inotec could explore how to further utilise digital platforms and social media to enhance its reach and influence. By sharing valuable content, engaging with industry peers, and participating in online discussions, inotec could build a stronger online presence and connect with a wider audience. Digital marketing campaigns could also help raise awareness of inotec’s products and services and attract potential customers and partners.

1. OBSTACLES, PERILS AND RISKS

inotec is aware of the points listed below and manages them with the actions currently in place. However, it is worth keeping these obstacles, perils, and risks on the radar to ensure continuous preparedness and proactive management.

Finding Qualified New Team Members:

One of the significant obstacles to driving growth and managing succession planning is the challenge of finding qualified new team members. The AutoID industry requires specialised skills and knowledge, making it difficult to attract and retain top talent. Competition for skilled professionals is intense and the talent pool can be limited, which can hinder the company's ability to expand its capabilities and sustain growth.

Succession Planning:

Effective succession planning is critical to ensuring leadership continuity and organisational stability. The risk lies in the potential lack of preparation for leadership transitions. If the next generation of leaders is not adequately developed and ready to take over, the company may face disruptions in strategic execution and operational efficiency.

General Market Instability:

The general instability within the Reference Scenario, including economic fluctuations, geopolitical uncertainties, and market volatility, poses a significant risk to the company's growth and stability. These external factors can affect customer demand, supply chain reliability, and overall market conditions. Navigating through such instability requires agile and responsive strategies to mitigate risks and capitalise on emerging opportunities.

Technological Advancements and Disruptions:

The rapid pace of technological advancement in the AutoID industry can be both an opportunity and a risk. Staying ahead of technological trends requires continuous investment in research and development. Failure to keep pace with technological change can result in obsolescence and loss of competitive advantage. Additionally, disruptive technologies introduced by competitors can challenge inotec's market position.

Regulatory and Compliance Risks:

Changes in regulations and compliance requirements can pose risks to the company's operations. Adapting to new legal standards, industry regulations, and environmental policies can result in additional costs and operational challenges. Ensuring compliance while maintaining operational efficiency is critical to avoiding legal repercussions and reputational repercussions.

Supply Chain Disruptions:

Global supply chain disruptions, whether due to natural disasters, geopolitical tensions, or pandemics, can significantly impact production and delivery schedules.

Competitive Pressures:

The AutoID industry is highly competitive, with numerous players striving for market share. Competitive pressures can lead to price wars, reduced profit margins, and the need for continuous innovation. Maintaining a competitive edge requires strategic differentiation, continuous improvement, and effective marketing.

Financial Risks:

Economic downturns and financial instability can affect the company's financial health. Fluctuations in currency exchange rates, interest rates, and credit availability can affect profitability and cash flow.

Cultural and Organizational Integration:

As the company grows and expands into new geographies, integrating diverse cultures and organisational practices can be challenging. Ensuring a cohesive organisational culture while respecting regional differences requires effective communication, leadership, and change management strategies.

1. Other Initiatives and Actions planned and underway to the benefit of the company

Ensure innovation

Efficiency innovation is mainly driven by a set of smaller initiatives and continuous improvement activities within the organisation. These include improvement in the way the organisation works, the update or exchange of production equipment, automation of processes, product innovation to improve the design for manufacturing, etc.

The efficiency innovation mentioned above is also part of sustaining innovation. Sustaining innovation also includes step-by-step improvement of existing products in line with customer needs. This is one of the key differentiation factors of inotec, and the team creates tailor-made solutions for specific customers. The newly launched design of RFID inlays is also an important part of sustainable innovation and will create unmatched RFID solutions for the customers.

Disruptive innovations in the sense of creating a completely new business model are not in the pipeline as of today. The intensified consultancy and software activities could be listed here, but are probably not disruptive enough as these kinds of business models already exist. The inotec group is in contact with some start-ups from time to time, and an early investment could trigger disruptive innovation for the inotec group.

It is important to mention that inotec follows a customer-centric approach to product and service development. This involves engaging with customers to understand their needs and pain points, incorporating their feedback into the development process, and co-creating solutions that address their specific challenges. Customer feedback loops and regular interactions are in place to ensure that the products and services developed are aligned with market needs.

Develop brand

Most of the activities are already mentioned in the other chapters: The inotec group has cooperated with a marketing agency for several years now to ensure professional brand building. Recently, the positioning of the brands Winckel, identytag and inotec has been sharpened and the websites updated. This is an ongoing task and will become more important as the inotec group will deliver ‘more than a label’.

internationalisation

This will become one of the focus points for the coming years. Details are mentioned within the chapter “tactics”. inotec will formulate a new strategic initiative to drive internationalisation.

Win customers via Sales and Marketing

The initiatives and actions are all mentioned in the other chapters.

Compliance with and value creation via ESG

The first ESG report for the group was submitted to Obermark in 2023. The newly hired ESG expert started at the end of last year and is actively working with the team to drive and implement the resulting initiatives. This is also reflected in the budget for 2024 and subsequent years.

Develop products and services

Many development-related topics have already been mentioned. Here is a brief summary of the most important aspects:

Strengthening R&D Efforts:

inotec invests significantly in research and development (R&D) in all companies within the inotec group. This includes allocating sufficient budget and resources to R&D activities, fostering a culture of innovation, and encouraging collaboration between different teams and entities within the group.

Collaborative Development Processes:

The development processes at Identytag, inotec, and Winckel will be aligned and coordinated at the inotec group level. Regular cross-company development meetings are held to share insights, best practices, and progress on ongoing projects.

Customer-Centric Approach:

inotec adopts a customer-centric approach to product and service development. This involves engaging with customers to understand their needs and pain points, incorporating their feedback into the development process, and co-creating solutions that address their specific challenges.

Leveraging External Expertise:

inotec collaborates with external partners, including academic institutions, research organisations, and industry experts.

Implementing Advanced Technologies:

To stay ahead of industry trends, inotec invests in advanced technologies and tools to support the development process. This includes adopting state-of-the-art software, hardware and methodologies that improve efficiency, reduce time-to-market and enhance the quality of products and services.

Improve productivity

The current and planned activities to improve productivity focus cost management, automation and digitisation, process optimisation and standardisation, organisational and employee development. The main aspects have already been outlined in the previous chapters and some details and clarifications are provided in the following sections.

Actions and initiatives to reduce costs to maximize RoOC

For the next planning cycle inotec will formulate a new strategic initiative to focus on cost reduction, efficiency and productivity. These activities will focus in particular on material and personnel costs and various productivity enhancements. Material cost improvements will be tackled by reducing the quantity of variants of specific part numbers, bundling requirements, long-term contracts, alternative procurement sources, material substitution and optimising the use of materials by avoiding waste.

Personnel costs will be reduced primarily through the use of enhanced equipment and automation technology, e.g. cobots, scanner and camera systems. In autumn 2024, the first cobot will be integrated into the series production process, offering the possibility of replacing 3 FTEs. Once this system runs stable the second Diobond production line can be upgraded accordingly. With a new machine for RFID inmould, that will start operating in Neumünster expected in October 2024, further productivity improvements will be realised. The output rate will increase, and the process costs will be reduced through integrated and automated quality assurance steps. The “scanner data” project, which aims to record 100% of the products produced in order to further reduce the risk of potential quality defects, is making steady progress and all primarily relevant machines at the site in Neumünster will have received this upgrade in 2024. Additionally, an initial AI pilot project entitled “Quality control and defect analysis using AI-based image processing systems” has been launched. The objectives of these activities are to increase the quality and stability of product realisation and to reduce quality control costs.

Besides the approach to material and personnel costs, another measure is worth mentioning. As a result of the energy audit carried out as part of the transformation concept, potentials to reduce energy costs have been identified. Therefore, the electricity consumers will be evaluated, particularly within the base load consumption, to determine whether their consumption can be reduced. These activities are included in and will be monitored within inotec’s ESG roadmap.

The evaluations of effects and the resulting quantification of these activities, in particular their P&L impact, will be part of the upcoming financial planning.

Optimise processes and resources

The key processes are listed in the chapters Internal Context. They include sales, order management, production, quality, and development. These processes are all included within the continuous improvement activities and some additional remarks are listed here.

The sales process will continue to benefit from the new Customer Relationship Management tool. This will help to improve productivity and standardise the way of working across all our sites in Germany. Going forward, the same tool can also be used for the sales units in Europe.

The development team is based in three different locations and cross-site cooperation can be improved further.

The inotec group companies certified to quality standards have extensive documentation as part of their Quality Management System (QMS). The QMS of inotec in accordance with ISO 9001 has grown over decades and does not entirely correspond to the intentions of the current regulations. A risk-based approach is not reflected, most of the documentation has not been updated for a long time, the content and guidelines are incomplete, partly misleading and do not fully reflect the current way of working, meanwhile established vocabulary, etc. Furthermore, the manner, structure, layout and visualisation are inefficient and there is no common thread focusing on quality aspects and risk mitigation. The most recent recertification audit was successfully passed in autumn 2023 without any findings, but the QMS does not meet the expectations of a modern, risk-based and easy-to-use system. In addition, the employees' level of for them relevant knowledge of the QMS and their handling of and compliance with its requirements varies widely. Both lead to inefficiencies and deviations. As part of the appointment of the new Quality and Process Manager, started on 1 April 2024, the following rough roadmap has been targeted for the coming months to ensure quality and process stability as a necessity for profitable growth.

• MS1: Reorganise quality assurance and implement it organisationally by end of Q2/2024
• MS2: Revise quality-relevant QMS processes by end of Q3/2024
• MS3: Revise remaining QMS processes by end of Q1/2025
• MS4: Integrated environmental management system according to ISO 14001:2015 Initial certification by the end of Q3/2025.

Digitisation initiatives that have already been implemented as well as ongoing and planned activities are replacing manual processes with software-based and software-driven processes and are having an important impact on the change mindset. This approach leads to noticeable increases in efficiency. Examples of significant process optimisation and workload reduction include: The implementation of the incoming invoice workflow in D3 and the personnel management services by CSS eGecko, e. g. holiday application workflow. With app services the work can be further automated and paper and manual work can be reduced.

In regard to resources, human capital is critical and have the right people on board is important for the company’s success to. In the last 2 financial years 2022 and 2023, the inotec group has recorded 51 new and departing employees. With a total workforce of 134 employees, this is significant. At the Neumünster site, as of May 2024, there have even been 49 people have joined and left in the last 29 months with a current workforce of 85 employees, leading to noticeable changes. On the one hand, valuable knowledge is being lost, and on the other, new expertise is coming on board. The new colleagues need time to become productive, bring a breath of fresh air, a neutral perspective, a lot of valuable experience from other companies, that they want to contribute to the inotec group. The inotec group has deliberately invested in structural costs to ensure sustainable growth, efficiency, quality and customer satisfaction. They help to improve scalability, retain and develop employees, minimise risks and increase resilience. By making targeted investments in the areas of programme and project management, ESG, compliance, supply chain management, IT, quality and others, it is possible to tackle the necessary improvements in people, organisation, processes, equipment and infrastructure. In addition to strengthening competitiveness, this also enables the company's value to be successfully developed in the long-term.

With the exception of a few vacancies due to new appointments and replacements (e.g. strategy management, production management, IT Security), resources have been built up and the major change process is in full swing. The motto for the coming years is “Growth without growth” and the initiatives and measures already described must deliver the necessary efficiency and productivity effects.

In addition to human capital, there are various other resources that are necessary for the success of the inotec group. Many have already been reported on. Some resources show catch-up demand and require action. Some of the machinery, IT and production infrastructure are outdated, out of service, unstable and risky. Service and maintenance routines are barely in place to date. The investments shown in the financial plan reflect the consistent implementation of the technology and sustainability strategy. These investments, which are relatively high compared to the past, create the basis for achieving the aspired targets.

In general, it should be mentioned that the improvements already implemented, and the ongoing optimisation activities show that some of the employees struggle with change. As a result, topics such as change management, communication, cultural development and principles for leadership and cooperation are additionally essential. The more team members are involved in the improvement activities the more they adapt to the change and digitisation culture.

The use of analytical and generative AI will mean an even greater change for many. The results from the specific launched pilot project are intended to address the feelings of the workforce in order to see AI as an opportunity rather than a risk.

Optimize NWC to maximize RoOC

inotec strives continuously to extend the terms of payments within the supply chain and shorten the terms of payment with the customers, but, overall, leverage is limited as generally suppliers and customers are much bigger than inotec and have a bigger bargaining power regarding their general terms and conditions. Furthermore, increasing internationalisation will lead to in tendency higher accounts receivables, as payment terms are generally shorter in Germany than in other countries.

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Inventories are expected to increase for to several reasons:

• Low margin trading good business is planned to be substituted by higher margin in-house produced businesses. This leads to increased inventories of production and raw materials.
• RFID business will become more important. Raw materials (e.g. inlays) have a higher value and are critical to delivery and require a certain safety stock.
• Upcoming business (e.g. EPT) is planned to deliver from finished goods and to have a safety stock level of finished goods continuously to ensure delivery security.

In general, the focus of the last 2-3 years with supply shortages and internal challenges (such as quality and supply security) was on ensuring production and delivery. This led to consciously having production- and raw material on stock. The focus continuous to be on stabilising production and delivery performance rather than inventory reduction. By increasing customer satisfaction and productivity this approach currently has a more positive impact on RoOC than reducing net working capital.

Ensure correctness and transparency of data

Different IT and reporting systems are in use within the inotec group. Companies with their own production use specific ERP and production planning systems. Important KPIs like throughput time, utilisation rates, profitability per order, etc., are tracked at the company level. The main focus of improvements in this context concerns inotec in Neumünster. Further dashboards (PowerBI) have been deployed beginning of 2024 and the management team has started to work with them. Resulting discrepancies are becoming visible.

![Ein Bild, das Text, Screenshot, Diagramm, Schrift enthält.

Automatisch generierte Beschreibung](data:image/png;base64...)To get an impression, the following screenshots are excerpts from the new dashboards that have been integrated into the in 2023 established SharePoint intranet.

At the end of 2023 an initial concept discussion took place with an external partner focusing on system-independent consulting services for Enterprise Resource Planning (ERP) initiatives. The analysis and the following internal evaluation showed that the greenfield approach (make everything new and adapting the company to common standard ERP processes) has a high implementation risk. The ability to adapt such standard processes to the inotec operational processes is not high enough to support this change. Furthermore, the high integration level of the system into the machinery does not facilitate the greenfield approach. The brownfield approach (adapting the future ERP to todays inotec processes) will at the end lead to the same situation as today. Current thinking is moving in the direction of a mixed approach: On the one hand, the aim is to use as many existing ERP system standards as possible. This will be a huge change, but has to be enforced, especially regarding generic requirements (e.g. finance, procurement). On the other hand, it is mandatory to keep and to enhance the existing competitive advantages and the associated specific performance indicators, which require customised solutions.

The project to evaluate and possibly replace the ERP system has not yet started due to the current project pipeline and available resources.

We plan to proceed as follows:

1. Process analysis (target state in line with the QMS approach mentioned above) at a low level of granularity in order to identify future product and implementation partners on the market.

2. Deciding on a new ERP system or the reengineering of the existing InoSys ERP.

3. Create functional specifications based on the more detailed target processes, create internal responsibilities for future processes and create the foundations of change management.

4. Development and implementation of the new ERP system

The detailed project plan has not yet been drawn up. The timeframe for the implementation of a new ERP-System is estimated at 2–3 years from the start. With regard to the procedure described, modification have already been made in the handling and management of the submitted InoSys change requests and only the most necessary and reasonable developments will be contracted.

Protect against cyber attacks

IT security to protect inotec´s IPs, data and documents is currently and will continue to be the focus of IT activities. The fresh evaluation of the IT security assets, including the NIST framework results, shows a deviation from the assessment of the previous IT team. The current IT infrastructure in Neumünster is partly outdated, unstable and insecure. Therefore, some matters are particulary urgent and important. These IT essential projects at inotec started in 2024 to stabilise and secure the IT operations with the concentration on:

• data protection
• segmented network
• server infrastructure

The digitisation approach for the company's growth plans as well as cloud and AI solutions that will be connected in the future, place new security and resilience requirements on the IT team and the current IT architecture. All IT initiatives for the next 18 months have been consolidated into a project plan. The creation of the business continuity plan and the setup and testing of a recovery plan are part of these activities. In addition, the development and implementation of an Information Security Management System (ISMS) is one of the fundamentals for all other protection mechanisms and part of this roadmap.

The majority of the questions posed in the book IT Sicherheit für KMU (IT Security for SMEs) by Nicolas Mayencourt and Marc Peter (pp. 150–152) can be clearly answered with a yes. The following table shows the questions that cannot be answered with a clear yes within the referenced categories of organization, awareness, data protection, network, communication and identity management.

The details of the measures as well as the tracking of the implementation and the effectiveness of the measures from the IT Essential Programme will continue to be carried out in the quarterly report in the future in line with the NIST framework.

1. PRE-MORTEM AND PRE-CELEBRATION

Pre-Mortem

Holsteiner Courier, December 2028

inotec, a renowned local manufacturer of AutoID solutions, is set to undergo significant restructuring, resulting in the layoff of half its workforce by the end of the year. Despite a strategic shift to focus on niche markets, the company has been unable to sustain its overall business value and competitiveness.

For more than 50 years, inotec thrived in Neumünster, reinvesting earnings to expand its core business and explore new models. In the early 2020s, inotec was well positioned in the market, having acquired additional AutoID companies and established a strong presence in southern Germany and neighbouring European countries. The future seemed promising, with plans for global expansion and innovative applications.

However, economic shifts and changes in the local business environment began to take their toll. Customers became increasingly cost-conscious, showing less interest in high-end solutions. In response, inotec implemented a "Focus in Niches" strategy, targeting specialised markets where it could leverage its expertise and reputation for quality.

While these niche markets proved profitable, they were insufficient in scale to sustain or grow the company’s overall value. The narrow focus led to inotec being marginalized within the broader industry, unable to compete with larger players offering more comprehensive solutions at competitive prices. The expected benefits of the niche strategy failed to materialise, leaving the company vulnerable and unable to adapt to broader market demands.

Now, the management is forced to restructure, simplifying the product portfolio, and reducing the workforce across all key functions, including production, sales, development, and management. This drastic measure aims to stabilise the company and provide a foundation for a potential restart, albeit on a smaller scale.

Despite these challenges, there remains hope that inotec can rebuild its position, leveraging its expertise and focusing on sustainable growth within a more manageable scope.

Pre-Celebration

Holsteiner Courier, December 2028:

inotec, a well-known local manufacturer of AutoID solutions, celebrated its 50th anniversary with record results. Despite a challenging global environment in recent years, the inotec group has successfully increased its market share and company value year after year.

For half a century, inotec has been at the forefront of AutoID solutions. Although the company has established a presence in various locations within and outside Europe, it has always maintained its headquarters and key functions in Neumünster. The key to inotec's success has been the consistent reinvestment of generated cash. The supportive approach of inotec’s investor, who continually fuelled key growth ideas, set the company apart from others.

At the start of the decade, the global economy cooled, creating a bumpier road ahead. While other companies reduced their growth plans, inotec maintained its course and formed a group of AutoID companies with a wide product and service portfolio.

The recent implementation of a niche strategy has proven highly effective. inotec is now a sought-after supplier for challenging AutoID applications in Europe, the USA, and globally. This strategy enabled inotec to cater to specific market needs with tailored solutions, enhancing its reputation and demand.

inotec’s strategy focused on high-end solutions for customers with demanding applications. This approach was bolstered by a successful buy-and-build strategy, with the group acquiring five additional companies in recent years, each specialising in specific AutoID solutions.

Timely investment in RFID capabilities and the decision to insource part of the RFID inlay production proved critical. This move decoupled inotec from volatile supply chains, ensuring reliable product availability.

Management is proud that inotec is a preferred employer locally. It is one of the few SMEs offering career prospects across various companies and roles. Employees appreciate the open atmosphere, the opportunity to assume responsibilities early and a flexible work model. Key employees often stay with the company for ten years or more.

This milestone anniversary highlights inotec’s resilience and strategic foresight, ensuring continued success and growth for the years to come.

1. tactics

The key tactics to realize the chosen strategy are summarised in the strategic initiatives which are summarised below.

Win new key customers:

inotec has always maintained a robust base of key customers. To ensure continuous revenue streams, it is critical to acquire new customers and strengthen this base. Over the next 12 months, inotec will focus on a select group of target customers to secure key projects. Examples include EuroPlantTray, WBG Pooling, Vytal, among others. Sales and Marketing teams will prioritise and allocate resources specifically to engage and win these potential new customers. Of course, inotec will continue to fully support and engage with all existing customers.

Regional Expansion:

The key revenue streams for the inotec group are generated by customers located in Europe, including the UK. The attempt in China was not successful, but the goal of establishing stable and profitable business in new countries remains a priority. Supported by the Future Council, a working group has been established to investigate potential countries for regional expansion. Currently, the US is the preferred new destination. While the working group fine-tunes its recommendations and plans to establish a foothold in the US, the inotec team has already started efforts by presenting at one of the key trade shows in the US.

It is important to note that this is not a "US only" approach. Whenever there is an opportunity to grow in another country, inotec should seize it. Currently, inotec is in contact with a customer in Italy who may act as a local representative in the future.

New Applications / New Verticals

inotec is strong in the main market segments mentioned in chapter “D.” To ensure long-term growth, it is essential to win new applications or verticals. With its "Business Innovation" function and the Future Council, inotec has the unique ability to investigate and select new applications and verticals through a systematic approach. In recent months, inotec has entered the market for gastronomy (to-go) tableware applications.

Currently, the following applications are under investigation:

1. a) Military Logistics & Services:

inotec is exploring logistics labelling of boxes and packaging in the military sector. This includes the development of service and maintenance labels that can withstand high levels of contamination.

2. Toys:

In the toy industry, inotec is investigating the use of invisible, secure activation of learning or play materials on consoles or pens. This also includes verification of originality and the level of clearance.

3. Cosmetics:

In the cosmetics sector, reusable product packaging, circular logistics, and direct communication with end consumers are key drivers for inotec.

4. Automotive:

In the automotive industry, the number of electronic and sensor units in modern vehicles is increasing. inotec is working on tamper-proof labelling of high quality and safety sensitive plastic series components.

5. Retail (Food):

In the food retail sector, inotec is developing an end-to-end chain for seamless labelling from the farm to fork. This involves tracking products from the field in plastic crates through cleaning and packaging, through the retail chain to the store and finally to the end consumer.

The decision on which application inotec should focus on will be made in cooperation with the Future Council and implementation will follow.

Lean Management:

inotec has invested significantly in its team and continues to do so. Additionally, inotec is improving its processes, IT systems, and installed production equipment. The primary goal of these activities is to enhance efficiency and reduce costs per unit.

Automation is key to achieving this goal, and the Future Council supports this by incorporating AI competencies. A specific work group has been established to investigate how AI can be used to automate and improve quality inspection. If the proof of concept is successful, the AI-based approach will be rolled out company-wide.

Another important element in reducing costs is focusing on the bill of materials. By negotiating with existing suppliers and qualifying new suppliers or materials, the bill of materials can be significantly reduced.

Mergers & Acquisitions:

Acquisitions can be an excellent tool to advance some of the initiatives inotec has outlined above. Acquiring an established company in a specific country can significantly reduce the risk of failure, as the existing company already has an established business presence, eliminating the need to form a new entity. Additionally, acquiring companies with an established customer base in applications or verticals where inotec aims to create new business can be highly beneficial. Furthermore, acquisitions can be advantageous for gaining key knowledge that inotec currently lacks in-house, such as software development skills or comprehensive system solution expertise.

1. Milestones, KPI, Objectives and Key RESULTS

The new strategic initiatives are currently in the planning phase and will be reviewed during the 2025 budget process. Similar to other significant projects, these initiatives will be managed by our Project Management Office (PMO) and it is planned to use our preferred management tool, SmartSheet. Detailed planning is not yet complete, but the following structure is anticipated. Please note that this is an initial draft plan and will be updated regularly:

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inotec uses the milestones of the strategic initiatives to steer strategy implementation. All of the more tactical and operational tasks are managed through a dedicated set of operational key performance indicators, and operational to-do lists are in place. SmartSheet is also used to ensure close cooperation among the group’s companies and the weekly review includes sales, marketing, operations, quality, finance, and HR.

This is a screen shot of the actual KPI board for inotec GmbH:

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A simplified set of KPIs is used to steer the activities of inotec´s national subsidiaries; the focus is on order book (domestic/ intercompany/ foreign), book-to-bill ratio, backlog (domestic/ intercompany/ foreign), sales (domestic/ intercompany/ foreign), intercompany cost of sales (COS), third-party COS and total COS.

In line with the smaller size of the companies in Bad Berleburg, a reduced set of KPIs is in continuous operational use. Order intake, sales, equipment utilisation and EBIT are in focus.