After nearly 40 years at Koenig & Bauer Banknote Solutions, its Technical Director Johannes Schaede is retiring. Or, rather, semi-retiring – since from January 2022 he will be taking up a new supervisory position with Orell Füssli AG.
Johannes is one of the most familiar faces in the banknote industry – not just for his longevity, but also for his passion for banknotes and his role in driving through many of the key innovations in security printing (not to mention his penchant for flamboyant bow ties).
Currency News spoke to him to find out where and how it all began, what he sees as the major changes, challenges and achievements during his career, and where next for banknotes.
Q: First of all, tell us a little about your background, and how you came to get into the banknote printing equipment business.
A: Starting out, I took part in a scientific competition which resulted in a scholarship, allowing me to go to the technical high school in Zurich. This was the start of my career, and as an apprentice mechanic, gave me a lot of insight into what machine building and machine design is.
This was in 1980. Whilst I was still studying, Hans-Bernhard Bolza-Schünemann of Koenig & Bauer, father of the long-time CEO, told me about a part of the business that was very interesting and very technically demanding – ie. the banknote machine business – and, as my predecessor was approaching retirement, offered me a position. The offer was made on two conditions – first, that I was able to demonstrate my ability and, second, that I would never leave with what I knew!
So I signed my working contract about 36 months before I finished my studies and went to Wurzburg in Germany, the main production facility. But I made a detour on the way, carrying out an apprenticeship of five months at Bundesdruckerei in Berlin to understand about banknote printing. So there I learnt the ropes of simultan, intaglio, numbering and finishing and that was my start.
Q: So this, as well as introducing you to banknote production, gave you your passion for the industry?
A: I would say so. For somebody who’s already working in the industry it’s nothing special, but when you're coming from the outside and the first time you hold a sheet of paper in your hand that represents a face value of, for example, a couple of thousand deutschmarks, then that’s special. As was the time I was allowed to handle the original engraving of the deutschmarks and discuss its technical issues.
This industry is not about just machines, it's about a piece of art and a very sophisticated network of technologies which is necessary to be able to produce that piece of art.
Q: There have been a lot of changes between you joining in 1982 and now, coming up to 2022? What stands out as a key milestone in banknote production.
A: There was, in my early days, a big debate about whether the future of banknote printing would be sheet or web - and that was one of the most interesting points in my career.
In the late 80s, one of our major customers announced that the future of banknote printing would be web. Despite the fact that Giori (as we were then) was well-positioned to build web-based machines, the order was given to a local supplier. They had very little experience in this area and the project started running behind, so the government decided it needed an interim solution for some sheet fed machines.
This was the first time that our customer issued a complete tender, all 400 pages of which landed on my desk. I sat there with my colleague and we said ‘OK how can we make sure that we get this order’.
There were two ways to ensure that we did. First was to propose a highly automated machine, and second, as per the tender rules the country’s domestic suppliers would be preferred, so we proposed partnering with a local affiliate to produce a custom-made machine. Much to the amazement of our competition, our management, and the customer itself, we were awarded the contract.
A consequence of this was that I had to move with my family to the affiliate of Koenig & Bauer in the country concerned to design, produce and commission the new machines based on German drawings with metric measurements in another environment that works with imperial measurements. What was intended as an intermediate solution ended up becoming the backbone of the customer’s production and we have over the course of the years built 24 of these machines.
Q: What persuaded them that web wasn't the way to go?
A: Mother Nature, because a web machine is not the ideal solution for banknote printing. A band of paper is very difficult to control the process conditions of the different printing steps, and the drying is very difficult and complicated. Mother Nature doesn’t give you the full freedom of controlling the registration between the printing processes, whereas with sheet machines you’re completely free.
It wasn’t the only one to reach this conclusion. One of our European customers at the start of the 90s was convinced that the future euro would be printed on web machines. Yet look around and see how many euros are printed on that today – zero!
"This industry is not about just machines, it's about a piece of art and a very sophisticated network of technologies which is necessary to be able to produce that piece of art. "
Q: Did the company ever seriously consider developing a web system for banknotes or was it just not appropriate?
A: Yes we did. We built a full workable web solution for banknotes, first installed in Würzburg and later in Lausanne. It successfully demonstrated, but for the Mother Nature part of it these machines were elephants. They were extremely complex and difficult to control. At the end of the day, nobody wanted to risk putting all of their production eggs into one basket (ie. one single machine). When you have several processes and you have divided these over several machines, then when you have a technical problem in your process you only stop one machine. But if you have a machine with all these units combined, any problem in any of these processes stops the whole machine).
The other thing is that when you start a sheet machine you need a few couple of feeds to get it to the right quality. But when you have a web machine with 250-300 metres of paper in it, it can take several hundred meters of paper before you can see if the quality is right.
So for practicality and risk reasons, and technical complexity, at the end of the day the web machine was not as successful as the sheet machine. Other European customers, who were strong supporters of the web process at that time, have also given up on web printing.
Q: What do you consider the most significant changes and developments in banknote production?
A: When I started out, we had just three processes – simultan, intaglio, numbering – and then finishing. In the early days of my career, automated finishing was added, and then automated inspection, foil application, screen, SPARK®, laser perforation, to name a few.
Put simply, banknote production has become a lot more complex. And the added value in banknote production has shifted from the printer towards the suppliers of materials.
I think that it’s time to think about the virtues of these processes, to simplify banknotes and to find ways to exploit fewer processes better. Take intaglio as an example. One of the designers of the Swiss banknotes said that a good security feature is not one which we as experts can appreciate. A good banknote is one that my grandmother can recognise on a dark evening in January without glasses or a microscope.
Intaglio is intuitive with recognition driven by habitual knowledge, but its virtues are not being fully exploited. We have been working on the detection of the authenticity of a banknote simply by the fact that it's intaglio. You can download an app, called ValiCash™, and verify whether you have a genuine banknote or not.
And with simultan, if you combine very good simultan printing with a specific origination and micro lenses you get a microscopic effect of colour changes or form changes. Combining the traditional simultan accuracy with the simple foil of micro lenses turns that into a feature that can easily be recognised by the public. That feature, by the way, is SUSI Optics™.
So a secure banknote is not necessarily the one that is the most complex. The secure banknote is the one which best positions the banknote to serve the public for exchange and recognition, and automated circulation. Those are the two roles the banknote has to fulfil.
It also has to be sufficiently distinct from commercially available simple counterfeit methods to avoid any problem for the central bank during the circulation time of the banknote itself.
Q: Do you ever see a time where there will be print on demand?
A: I think if you look at the banknote as being a state authority issue and at the same time as a socioeconomic agreement between people using it, the idea of print on demand is an illusion.
As long as we agree that a banknote is a banknote, we are trusting its value and we are exchanging it. I have difficulty in believing in the workability of a banknote on demand without the networking infrastructure of data transfer and without data control, because then the banknote becomes nothing other than a token.
The real advantage of banknotes is their ability to function under any circumstance, whether we have a phone or not, whether there is an infrastructure or not. The first thing that communities have to do when facing a catastrophe is roll in mobile ATM machines so people can retrieve cash, because otherwise they would face severe hardship.
My answer to the questions is I really don't know, but I don't expect print on demand banknotes to happen. It's a contradiction to the fundamentals of a banknote, which are that it is backed up, authorised and issued by the state, and it works under any circumstances.
"The drivers of innovation in our industry are the counterfeiters and the economists; without them we wouldn't make any new machines. "
Q: Following on from that, do you see a role for any of new technologies such as QR codes, IoT or RFID in the banknotes of the future?
A:When we look at technologies in our industry, sometimes we focus too much on the technology itself. For example, RFID. We have talking about RFIDs on the banknotes for almost 25 years. They have never come up, despite being very well established in other areas such as tickets or entry cards. I believe that the function of a banknote doesn't need that because how would an RFID give the banknote more than what the current technology offers? Assuming, of course, that it has the same function to be anonymous and exchangeable everywhere, and especially to be very robust.
Looking at the question of will we need technologies which facilitate the cash cycle – there I would absolutely agree. We will have to have technologies and services available which take away the burden of the lowest circuit of the cash cycle from the commercial banks because they don't want to be bothered. I think that in the next 3-5 years we will see evolving services and applications which allow a cash cycle without involving the commercial banks. For example, the validation of cash without a sorting machine or the issuing of cash by retailers without involving a commercial bank.
Q: Which was the invention that got away? Was there one invention that you didn't manage to realise?
A: Don’t hold this against me, but one of the challenges in our business is that these machines last much too long! I wanted to invent a transgene cast iron worm which sits in the frames of the machines and after 50 million sheets or 14 years, the machine falls apart within six months.
But that said, there is always demand for new machines. The drivers of innovation in our industry are the counterfeiters and the economists; without them we wouldn't make any new machines.
Q: What has been the most enjoyable aspect of your time at Koenig & Bauer?
A: The people, the colleagues and the customers. We have a fantastic customer base, it’s not very large because the industry isn’t that large, but if you go to a conference it's like a family reunion.
Every period in my career was enjoyable. In the beginning I had to learn, but I’m still learning every day. I was lucky in that I was able to pursue my passion to build machines or develop technologies with very good teams. These inventions are never the result of one single genius – no single individual has all the expertise. They are always the result of teams within the company and, especially in our industry, with partners. To be allowed to do that for a very long time with the only two (very natural) limitations – namely money and time - was a huge privilege.
Building up my own team has perhaps been the most enjoyable part of it. And I have to say I don't regret any of the overtime or any time I spent travelling, or any time I spent on machines sweating away to make it work.
Q: What is the next chapter in your career?
A: I'm going to retire from my position and from Koenig & Bauer Banknote Solutions. It’s time now; I've been working very hard and very long for this company but the young team is now in place and I don't want to be in their way. And I don’t want to be that guy who has to be dragged out, leaving behind the marks on his desk of his fingernails.
It was one of the very nice events in my career that I was asked to join the Advisory Board of Orell Füssli AG. It is not an operational position, it’s a supervisory one in a great company with very interesting traditions. It allows me to stay in the industry, to stay in contact with my colleagues, and to see, understand and manage things with a completely different perspective.
Q: Do you have any final thoughts to share with us?
A: I really appreciate the efforts of my company in letting me build up a team which now takes on my responsibilities – a process that has happened not in the past weeks but over the last few years.
As a fantastic farewell present the team gave me a cycle tour from Lausanne to Würzburg – six days and 630 km in September and was the most enjoyable and fantastic time. That is the essence of my career, to be embedded and to work with a brilliant team that shares the passion, and enjoys that beyond just the technology and the work.