Bayer AG CFO Wolfgang Nickl – Monsanto litigations, the pharma pipeline, and Dynamic Shared Ownership

[MUSIC] Leading Corporate Transformation, the podcast by VHAU AutoBysine School of Management, powered by PWC, on the transformation of companies and their culture, from decision makers for decision makers, or from entrepreneurs for entrepreneurs. [MUSIC] Dear listeners, welcome to a new edition of our VHAU Podcast Leading Corporate Transformation, powered by PWC. My name is Martin Glam, I'm a professor at VHAU AutoBysine School of Management. And as always, I'm here doing this podcast together with Gory von Hirschhausen from PWC. Gory. Thanks Martin, and a big hello to all our listeners from my side. My name is Gory von Hirschhausen, and I'm the co-host of our podcast. I'm the transformation consultant in this talk, and I'm leading our industry sector consulting at PWC Germany. And I'm also leading our PWC Finance Transformation Consulting in PWC Europe. So this is what gives me the background to help our clients to optimize and transform their corporate functions and especially their finance function. And so for me today, it's a very special honor to introduce our guest, Wolfgang Nikkel, the CFO of BIA AG. Wolfgang, thank you very much for giving us the opportunity today to speak with you about BIA, your job as a CFO, and about yourself. Many listeners will know BIA, and you, of course, but it would be cool if you could give us a quick intro on BIA and yourself. Wolfgang, over to you. Sure thing. First of all, I'm Martin Gory. Welcome to BIA. It's good to have you here. See people in person. I guess we'll talk a lot about BIA in myself in the next couple of minutes. But myself, I'm 54 years old, two kids, spent most of my career abroad, came to BIA almost six years ago. I love the job of CFOs, so I'm happy to talk about this. And we'll talk more about BIA, but BIA is a bit of a household name in Germany, 50 billion, or they're about in revenue. Streamlined over the years, we're basically in the health and nutrition business. We have on the health side a prescription drug business, and we have an over the counter business. And then in nutrition, we have an agricultural business. Overall, it's about 50-50 between health and nutrition and the mission of the company's pretty simple health for hunger for nine. Wolfgang, normally we start this podcast with the introduction about our introductory part about the strategy of the company. Today, I think we're caught up with a new events of the day, so to speak. Yesterday, you, yesterday, BIA announced that it would slash its dividend. And last year, you paid a dividend of two euro 40, and you announced that you would pay only the legally minimum required dividend for the next three years, which means this year I think 11 cents, basically, almost nothing so to speak. That saves you roughly two billion that is a lot of money, but normally reducing or slashing the dividend is kind of last resort decision for management for senior management. So how did you come into a situation where you did this and announced that yesterday? Yeah, so good question. I mean, you probably need to start with the situation of the company while our businesses are in a reasonable shape. We have a few topics to deal with right now. One of them is obviously litigation in the United States that came with the one-centoo acquisition. And I'm sure we'll talk a little bit about that. And number two, we have a farm our business is doing okay, but has a major loss of exclusivity to deal with, both of which results in low cash flows and both of it results in a high financial debt. Now, as we were going through our capital location strategy, we were focusing on what we control. And one of the things that we control is the dividend. And it's a very substantial dividend. I mean, dividend yields are six, seven percent. And like you said last year it was 2.4 billion. This year would have probably been under the normal policy close to two billion. And we said, listen, one of our top priorities, like we have done it in the past, is to get our leverage ratio in order. And the one thing in our control is the dividend. This is not an easy decision. We know that we have retail investors, we know we have yield investors, but we're absolutely convinced that it's the right thing to do. I think the market reaction from the equity market so far was okay. People expected it probably not to the degree. Certainly not that we would extend it to three years. But we have been always very clear in order to have our interest cost in order and over time build strategic flexibility. We got to have the debt in order. And that's why we said, we got to make a decisive move right now. And that's exactly what we decided upon yesterday and went at heart right away. Yeah, I mean, you mentioned that the markets seem to have expected that for a finance pro for a first of accounting and finance. It's interesting to watch that normally when companies do that, the market knows dives big minus normally today the share prices largely flat. So, you know, the market seems to have accepted that the rationale for what you were doing. Let's move to Monsanto. You know, when you talk about buyer, it's kind of the elephant in the room and therefore let's talk about where you stand with regard to these lawsuits. My understanding is that you've already settled with about 100,000 claimants roughly, but they're still that's what I read. 40,000 or thereabouts open cases and your success in the court is mixed the ones that make the headlines are the bad ones. You recently had to swallow the decision of a jury in Philadelphia that awarded a man more than two billion dollars as compensation. You know, for outsiders for Europeans, for me, I have to say frankly, it's sometimes difficult to understand. First of all, the dimension of this one decision or these decisions. And you know, against the background that the EPA, the organization and US that is responsible for these things has given Clifford's side, you know, the okay basically on the website one can still today read the agency concludes that Clifford's side is not likely to be carcinogenic to humans. So what's your take on all of this, you know, on this litigation wave or tsunami that goes over you? Let me give you a little bit of background because I mean, one Sunday, that's a pretty broad topic and pretty well discussed topic as well. Let me explain it to you as some saying and I get to the litigation in a context that nobody on the current board of management was in that role when the decision was made. So I'm not saying this because I said in the past bad decisions were made and now we only make good decisions but I'm saying it because I think we have an unbiased view on it. I have an unbiased view on it. I mean, I was not in the company when the decision was made. And the first thing I would always state is strategically the acquisition made sense in the past and make sense today. I mean, you know that in a consolidating market, you either are a consolidator or you're out. And we just saw too many consolidations going on and from a pure complementarity of the portfolio over seeds, crop protection and digital act, it was just a very, very good match full stop. Having said that two things happened. Number one, it was a pretty steep price that was paid. And this is a very objective observation because I'm the CFO who had to write off all the goodwill and the inangeables. So it's not even up for debate. We paid too much. Maybe for the listeners who were not part of it was a hostile situation at the time and it was bit up for a while. And you know, you like I said, I wasn't there. I was not an insider to the process. But at the end of the day, we bought the thing for 63 billion dollars. And it is what it is. But in hindsight, objectively looked at it as a finance profession who likes the balance sheet and looks at the cash loads and discounts. And I said, oops, the discounted value is less what we have on the balance sheet. So write it down. So that's the one side of the story, but we still have a business that is leading and that I'm excited about. So we'll talk later probably about some of the cool things about this company and we will do things in the crop science business that nobody else can do. The second thing is the litigation. If you have a whole bunch of Monday morning quarterbacks, could have should have would have the till you should have seen that and then what, why didn't you see that? And my view on that is very clear. But there were several legal assessments done like you rightfully say we're dealing with. was a fully approved product in the United States. And I'm not in the camp with it, somebody could have seen that and we should have never done the deal. But the reality today is that if I include Clifor, say, this will be between 15 and 20 billion in damages to the stakeholders of the company, be it settlements, be it defense cost that are in the hundreds of millions every year. And there you scratch your head, right? Like you said, you have the United States of America approving a product that is in very high demand by the farmers who ensure national security by providing food security. But it allows the states to allow cases into a courtroom that go against that product. And it even gets very, very bizarre where the United States of America says, it doesn't cost cancer, you can't put a warning on it because it's not factually correct. And the state of California says, you must put a warning on, by the way, the state of California just lost in the nine-circuit that particular case. And then it goes into a courtroom to a jury where an industry that benefits heavily from our losses is putting on a show. And that leads to verdicts by juries that are outrageous quite frankly. We saw verdicts like the one in Pittsburgh that you mentioned early on in 2018-19. - Yeah, also in California, I think. - There was one where we also talked about two billion. Those all got significantly cut by 96%. So we'll not pay that at the end of the day. But the public opinion, the press, juries to amplify the headline loss more than probably a critique on the US legal system. So how do we deal with it? We defend ourselves. And I think we had a very good streak. I think right now we're at 10-1-9 lost. So this is a battle in the courtroom. 19 cases over five years. And your numbers were directly right with 50,000 outstanding. You can imagine how long people left to wait for their day in court. So we'll have to see how this develops. I cannot go into all details of the strategy. But you have heard us talking about a five point plan before so we're defending ourselves in the courtroom. But you better believe that we use other avenues to resolve this issue for the company and its decals. You were saying it's such a dominating topic. It also has a direct impact, of course, on the market capitalization of buyer. So the question is, how can you speak about, and you were saying there is a broad future for the products of buyer for the different three divisions. But can you tell us a little bit, what is your strategy beside this monstros noises to give the right information to the capital market? How can we get the right market capitalization back for buyer? Yeah, this is a super good question. And we deal with this often, I'll give you my opinion. You can make the topic go away litigation. Now, I'll tell you in a second. So obviously in our communication, we focus on the benefits of this company, the impact on society, the impact, how we feed a growing population with less arable land. How do we make Parkinson's go away? How do we continue to invest heavily into innovation? Which by the way, the billions that we pay in settlements and legal fees are all billions that are not they are to invest in innovation and eradicate diseases, which is the real strategy in the thing. And I think we'll have a capital market stay coming up. And if you would just take the little legal thing out and listen to that, it's a super exciting story. It's a super exciting story. I mean, we can talk about some of the products later on, whether we short talk short sets, set your call or whether we talk digital farming or whether we talk about what we can do in oncology or Parkinson's and Zell and Jean. But you cannot just make it go away. And I wanna give you a very simple way how I look at this. And I don't think it's too far away from the reality. We have a billion shares outstanding. Every day, a few million get traded. And every day, you have a few people who say, I'm done with it, that litigation saying, so barrel without a bottom, I'm getting out. And on the other hand, side, you have very potent, super cool investors that are very long term oriented that I sit across the table from. They say, love the story. I really love the story. I would love to be engaged. But me, the equity analyst, if I go to the portfolio committee or to the investment committee, and say, let's buy buyer, they say, where are you on the litigation thing? And they say, oh, we love the story too, but call us when the litigation's done. So it's a little bit of a catch 22. So I don't wanna minimize that the litigation is a lack of an entry ticket, so to speak. So we got to solve it. We got to solve it. But at the same time, we got to put a few resources on that to be super focused on resolving that and focus all the rest on health for all hunger for none and making this company the best it can be. Capital market day, as you were saying, is about to come, is very close. So what are the maybe big stories you like to share with the capital market about what makes the company so amazing? Do you have some examples? Yeah, I mentioned a few of them. I mean, you would have to go category by category. I don't think I have to talk about consumer health, much it's super performant. When my colleague Haiko took it over, it was referred to by some investors as a train wreck in slow motion. And now for years, we're increasing profitability in a highly inflationary environment. And we're the number three position I believe in in the world with great iconic products and we keep developing them. And I think that story is well understood. We will amplify it again. In the crop business, we are out investing our nearest competitor by a large margin. I mean, we are talking two billion versus one billion kind of margin in R&D investments. And we have a pipeline that's simply exciting. We will talk about short-statechocorn. Short-statechocorn is by the way, corn that just instead to three meters grows to two meters. And you can plant it a bit denser. And I think everybody can imagine what happens if a tornado blasts over an open plane in some of the growing areas. Your yield will just be much bigger. So it's a unique selling proposition. That's one example. Our digital act will put us in a unique position to help with carbon farming because we can really see how certain agricultural practices translate into good things. We also have cover crops, for instance, to help with carbon sequestration, which are very unique. So we'll amplify those. And in farmer, we have a very unique situation. In farmer, we are now the victim of our success. We had two blockbuster products. We have about 18 billion revenue in farmer. And we have products of about 8 billion that get to the end of their exclusivity period. So the market gets spooked, right? The market gets really spooked because the probability of your next blockbuster being at the peak at the exact time when your existing blackbuster goes out of exclusivity is approximately zero. So there is a little bit of patience that needs to be demonstrated there. But we have very, very successful trucks that have been introduced or will be introduced to the market and in short, or whatever, I don't want to go into all of them. But New Becker and Brostate Cancer would be a great example. We have work to do on the pipeline. And I think we're showing some progress there. We've also made some very significant investment into the longer term pipeline in particular in cell and gene therapy. And we've got to amplify that. On top of that, I think we talked about Gory about the dividend. We are responsible allocators of capital. And then we are re-chuvenating the company. You are taking it to the next level by implementing DSO. And I think these are, I think the selling arguments that we're going to position very, very strongly at the capital market stand. Before we come to DSO, let me stay with farmer for just one second. Farmers, you mentioned that very much at the beginning, yourself is a little bit the trouble child at the moment. You suffered a major setback in November with one of the late stage studies for one of your drugs. And my understanding, I'm not an expert on the farm industry, but my understanding is that all big pharmaceutical companies struggle with the return of an investment on R&D and are reconsidering R&D generally, whether it's a good investment to have its in-house whether to buy it in and maybe to rely more on small firms and their more dynamic processes, my understanding there as a layman would be, it would be very, very difficult to spot the right one at the right time and buy them before they become too expensive. So what's your view on that? I read that you have basically pruned down your own pipeline by something like 40% looking at projects that are not worthwhile, focusing on fewer. So excellent question. As one of the topics that not only our shareholders, but also our employees and other stakeholders, obviously, grapple with, let me first correct you on the term problem-child. I don't view it that way. I invite you to look at companies like Eli Lilly and AstraZeneca. It's worth a history lesson to go back in the stock prices when they had their L.O.E.s and look at them now. Look at no one know this. I think it's the most valuable European company. Absolutely. And they just had a wonderful piece of innovation. Right? So L.O.E. is a normal thing. The job of Stefan and his team in Pharma is to develop as many candidates as possible to put into a phase and get into phase two and phase three. And guess what? It's a risky business. Absolutely. Some of you get through. And some of you don't get through. And are we super happy that Asun Dexian didn't make it? No. But we have brought New Becker through it. We are very good on current year. We just got Alia, 8 milli-crumb approved. And we're waiting for the final piece on Alian's unattent. So again, people love to amplify the one thing that goes wrong and not the four things that go right. That's maybe-- But it is a topic. But you can now put your head in the sand or you can focus on exactly what you said. How do we accelerate innovation? That's really the topic. I tell you first how you don't do it. And that's buying revenue in form of acquisitions. That's almost guaranteed to destroy value. And that is an statement that we also made yesterday with the dividend. That doesn't mean that you buy early stage innovation. But I don't think the trick-- and if you go back into history on the companies that I mentioned-- you don't find somebody going out buying 10 billion in revenue to pluck the hole, so to speak. So you do it with super-focused innovation. And I think you were exactly in the right direction. The one thing is that we did in Farmer and the number that you quoted is correct. It came from us. You can't be all things to all people. I mean, we have a pretty significant Farmer R&D in the low for about $3 billion. But you can invent everything. So you get to focus it. And we sit. Where do we have the highest probability of success? And about 40% of the programs didn't make the cut. Number one, number two. If you would look at the Farmer, I don't like the word budget. That's why I always call it envelope, because budget sounds like the government. But if you would look at it 10 years ago, it would be almost exclusively internal. And what Stefan and the team have done over the last couple of years, they combine the many capabilities that we have internally, like small molecule chemistry, we were amongst the best in the world I'm convinced. But supplement that with external innovation. Be it through partnerships, like with the Broad Institute, be it through clever acquisitions of small, what we call platform companies, that we finance, but we let them operate like if they would still be a startup. And that one we have posted very, very significantly. Vivitian asked by Blue Rock. They're all super examples. And we see the INDs coming out there. We see the success stories coming out there. So we got to have a little bit of patience. I think the year 25, 26, will be a transition of our colleagues call it sometimes a resilience phase. And this is very normal. We get to focus our investments. And I'm quite confident that growth will come out at the end of this period. So I'll ask another potentially provocative question. We talked about the three businesses. And the capital markets generally don't like these structures, these kind of conchlamored structures. Investors generally prefer a pure place. Because as you said yourself, you need to have a very differentiated look at all these businesses and concentrate on each one potentially separately. So there are voices that they split up the company. That would be a strategic solution. And I mean, it's-- again, you communicate that very openly in your-- also in the investor days-- that you look at potential splits. This one, that one, a three-way split, whatever. So what's your-- to the extent that you can talk about it? What's your current thinking of this? Yes, it's a good question. I mean, it's not provocative. I mean, we get it asked every day. It's a totally multiple times. And again, let me frame it for you. Also, somebody who has been for the most part of my career and observer of buyer and not a negative member of the management team. I've been doing this CFO job for 14 years now or so and at different companies. The investor primarily focuses on growth and returns. Right? I don't think Jeff Bezos gets challenged too often why he operates a cloud business and a bookstore. I mean, you could also view that as a conglomerate. Secondly, I'm not a big fan of the world conglomerate in relation to buyer. That was probably true 30 years ago when you could buy aqua film and paint and plastics. But today we're a life science business. I prefer the term multi business business. And the first job for us is to get the performance of the company up. That's the first job. And that's the most important thing to do investors. Number two, I never quite understood the criticism that buyer is really passive on portfolio management. I think quite the opposite is true. If you look at the three businesses we have today, they were less than 40% of our revenue 23 years ago, 24 years ago. So Lang says, "Covestro, animal health, you know the story." Having said that, we have the responsibility to look at the portfolio all the time. Are we still the best owner? Are we, do we have the potential? Do we have the financial, where was all to be the best owner? And we have very objectively looked at this, I guess, over the five years I'm here. And we've put an extra effort on it. Now that Bill joined us, because many investors ask him as well. We have very clear criteria. If you're interested, we can go into the detail and we've applied that criteria to the various opportunities over the last couple of months. We shared an initial outcome in November, where we basically ruled out an initial three ways. We shared our criteria, and we have a capital largest day where we go into further detail on that, but we're super open on structure. Company has demonstrated this for the last quarter century and beyond. We just got to take the emotions away on it and make very good economic decisions applying the criteria on it. So I think that's probably the status as of today. - Wolfgang, you mentioned Bill. So Bill Anderson is a new CEO of bias in summer last year. He is an American. He worked all over the world, very international CV. He came from Russia. So he's, let's say, the new boy on the block. Can you tell us a little bit about Bill and how it is to work with him and what makes him the right CEO at this unprecedented time? - First of all, this is the fifth CEO that I work with and work for. The first four picked me, which is de-risking the situation a little bit, and the fifth one came to us, which is always like getting to no phase. He's very different, as you said. He's, by the way, American by passport, but he spent a lot of time in Switzerland, in other European countries. He is a scientist, I'm saying MIT engineering agree. He is a very keen interest and very good understanding as far as I can judge that, but he's deading in a lot of time, understanding the science, how do we translate into grows? He is an excellent communicator in my viewpoint. He has, many people have said he's an American, he doesn't know how to do something with German code determination. I think now people are scratching their head how he's fostering a partnership with our employee representative. I think it's remarkable. He is a very critical analyst of the business, the organization, and he comes with ideas. I call him the Spock block. Whoever tells you after you know somebody or with an excellent relationship and a match made in heaven, but I can tell you this, I very strongly believe that the CEO, CEO of all relationships is a very special one. And I can tell you now, I mean, I've been talking to Bill even before he joined after the decision was made. I know him close to a year now and I'm very, very happy with the relationship and with the impulse as he brings to the company and he will be great. One of the impulse is to see highlights so much at the moment is this so called dynamic shared ownership. Can you tell us a little bit more about this concept and let me make this remark. It sounds like because it also is about efficiency of decision taking, something that gets the appreciation from a CFO. I guess. Well, I think the concepts behind DSO when I tell them to you are not like overwhelming a new, right? I mean, and oh, by the way, we are also not the only big company that could benefit from it. And companies have similar traits, right? Over time, you get too many hierarchy levels. Over time, you have too many people who coordinate and I'm not really directly involved with a customer or a product anymore. And it's just something that you constantly got to watch. Some observers categorized DSO as a efficiency cost-cutting program. And I would say in the first phase, that is what you also see to the outside. But it is much more than that. It basically has three priorities. And the three priorities is number one, empower the employees and focus them on the mission. And when we say mission, this is care intensively about the customer and the product, while not losing your license to operate, right? Oh, we don't want to be unlucky. So that's the first phase. Unleash the employees. Set up the organization in a way that they can live to their full potential. And that's where you see cost. So you could. But you don't do it just for the cost purpose. You do it for the second priority. And that is turbocharged innovation. Because if people focus more on products, you get better products faster. And you can sell them, you get a great mobile, you can sell them at higher prices, you sell them before your competitor, you get more share. And if you focus on the customer more than on your internal operations, you probably earn more share also from a go-to-market perspective. So that's the second priority. Gross. You don't see that tomorrow. You don't see that the day after tomorrow. But we already have some pretty good examples. How this can be in a relative short period of time, we call these teams mission teams. We just discussed a few days ago in the board of management, the case where a mission team reviewed the process on how to take a product from one of our factories into a contract manufacturers factory. And I can't give you the exact numbers, but the lead time was cut in half more than in half. And we had no consultants, we had no corporate oversight, we just had the people and let them do their job. So the third priority is world-class financials. So this is not charity. So this is not something where we say, I have a good things and at the end of the day. But if we have the best innovation, we also got the best financial outcomes. So it's a multifaceted approach. It starts with the people empowering them, we see objective to get more share and more innovation and then it naturally translates in superior results. I think we're well underway. We see early successes. It's by no means a slam dunk. By the way, the problem with pure cost-cutting measures is that they come at a high price. You have a lot of one-time cost in particular if it has to do with redundancies and then you cut cost and the one-time cost and inflation usually by the time you've cut the cost, you're almost caught up again. So the real deal is to translate the full creative chooses and energy of the people into innovation and growth. And that's what we're after. Let me just put up the challenge because I mean, I'm from transformation that is our business. We help companies like buyer in transformation. So I will always say we need to change the engine while we are flying, which of course sounds like a challenging task. But at the same time, that would be my question. I think with this program, how can you ensure that there's not this change fatigue in a big organization like buyer because there's so much going on at the same time for buyer? How can you make this program such a positive, having a positive impact and keeping the people up and making them feeling more ownership, being more about, as you say, customer orientation and product development fast and deeper? My view on this is, first of all, it would be unrealistic to assume that when you do one cost program after the other, that people don't get tired. Yep. I mean, I started in April 2018 and we almost immediately started with programs and we're still executing them. I mean, before the year so, we set up programs to take four billion in cost out of the company. So I'm not sitting here and telling you, everybody loves it and it is tiring. At the same time, we observe something that's remarkable. And that is that the engagement score of our employees that we, we, we, we, we, we, quiz them every once in a while is actually quite stable at the very high level. Yep. This is why I joined the company. I mean, people want to be associated with our mission. This is cool stuff. If you contribute to Parkinson's going away, if you contribute to feeding populations around the world, it keeps you going. Yep. But for only so long, right? So I, I, I really think that what is really key and that's why I mentioned is that people start seeing a light at the end of the tunnel and they see the gross aspect and innovation aspect beyond the pure cost cutting aspect. And this is why I mentioned the example of the contract manufacturer taking a product. I mean, hopefully in a year from now, we have a hundred examples like that. And, and, and if we tell people, oh, that was possible there, then people say, oh, why is it not possible here? And, and, and before you know it, this translates into something, oh, wow, we can really do this. And if you translate that into gross, then everything is going to be easier. So yes, we got to recognize that it's, it's really tough. But I, I think we have, we'll have a pretty good hand, let it. So DSO shared ownership, unleashing employees. Does that also apply to the finance function to your own team? Sure. Sure. Sure. Any examples of, you know, how you would or could, you know, show us how to empower people more in the organization and the finance function. Let me start with a little bit of context. I, I won't give you the exact head count numbers, but between 2018 and now, we're for the use, the number who walk in finance, controlling and related functions by, by about one cert, by about one cert. I mean, this is pretty remarkable. And we have done it, by the way, in a way, where number one, you haven't heard much about that on the outside. And I always tell people like in guarantee you a job for lifetime, but it is my job to work on everybody's employability. And I can tell you some of the jobs, the people who don't walk here anymore have landed outside are quite remarkable. And that makes me happy. Of course, with DSO, we're challenged to do much more. We're challenged to eliminate waste. Critically review, and not that's not me and my direct reports have the team's review, how we, how we do things, how, what, what really adds value and what doesn't add value. And I don't want to go public on too many details, but I give you an example. We did a mid-range forecast twice a year at a quite significant level of detail. Now sometimes with our time to forecast next year, I can tell you the precision on detail five years out, you know the answer to that question. So we're streamlining the planning and forecasting process, for instance, significantly. With a mission team on it, we review progress in 90 days cycles, we let the team run, and then we as leaders function more like as architects and roadblock removers. So I think we'll see significant simplification on the planning and forecasting. process. I want to get away from the world budget because it suggests some entitlement though, it suggests some something like it's guaranteed or fixed. But we are in a very dynamic business. So we go more into rolling plans and rolling forecasts at a much more aggregated level. You hear terms, we're not using bottoms up anymore. We do middle up or top down. Those are our efforts that we're already advanced on our turbocharged. The second area I would say is what we call record to decision. The whole management reporting, we're also very advanced there, but critically reviewing what reports do you create? What action is driven by these reports? What do you really need? How can you get even more to self service? That's an area that we're driving very heavily. And lastly, a lot of what we do in finance is happening in shared service and I think shared service and those are a prime opportunity for the application of whatever we want to call it, I call it AI for the time being. So I could envision a future where a very high percentage of all of our transactions are done in a no touch way. So I think we use DSO when it applies the principles to really contribute significantly from a finance function as well. Yeah, I mean, talking about the transactions with what is very interesting is you are running an SAP S4HANA program at the moment, which is called core customer oriented resilient enterprise. It doesn't even name your P. So can you talk a little bit about core and what makes core a business letter and summation? And because it's focusing on the transactions you're referring to, but at the same time, it really says we need to change the way how we operate. Very early on in my career, I was an SAP consultant for a short period of time. And that was in the early 90s. And I think you could then say that the ERP implementation was a competitive advantage. If you look at places like Dell, today an ERP is a commodity, right? I mean, there is no strategic advantage or competitive advantage if you have an AP process that's different for many but else. We like many companies, our size have bastardized the standard system and we have depending how you count actually 140 ERP systems. So the core program is super exciting because we're really, really trimming everybody to the standard we want to achieve an over 90% standard ratio. And PWC is one of our implementation partners. We're looking to you to help us on that along with others, including SAP. And I'm really excited about it. It is also not something that comes out of IT. It's a very big deal for us. It's business let and IT enabled. That doesn't mean that IT is not important. But it really needs to come out of the business. And we started it two years ago. I'm it's not going to be a walk in the park. It's a big deal. But I'm very, very hopeful. And the team was set up a long DSL principles, even without knowing it for instance, we have 90 day waves that we're operating there with empowered teams. But we could also refine there a bit. So yeah, the core program, it's never done until it's done. I just tell the people don't write all the articles about it, just deliver the goods. And I'm excited about it. Super excited about it. Well, guys, this couple of your topics is daunting. I mean, it's just mind-boggling. You have these large, you know, you have Monsanto, the lawsuits. And I'm sure as the CFO, you need to keep track on this. You have, you know, these big structural questions. And you're truly involved in the middle of it. And you have the DSO process oriented transformation. You have core. How do you monitor all this? What's your priority? When you come into the office, how do you prioritize? Well, it's it's not always super easy. I can tell you not sometimes I get something. It sounds very exciting. Sometimes people ask me, how does your day look? And I can tell you most days don't look like the other day. It's super important. But keep kidding aside, I mean, you got to sometimes lean, sit back and look at the jungle of things that in front, I think in front of you, one of our jobs as senior executives is to prioritize. Right. And I spent a good amount of time on that. But I tell you, it's actually not as brutal as it sounds. The the first thing that you really it's more important than prioritizing is to have the best team possible. I'm in a very lucky position that I am blessed with a superb team, both on the finance side, but I also have legal and IT and shared service and as a procurement and so on. And that's half of the equation. But my job is indeed to bring us back to the things that matter. And I think we have our priorities well in order right now DSO helps by the way, right? I mean, if you you yourself as the one who solves every problem and it's on top of every detail on every project, then you're dead on arrival. But if you're more looking at the road map of things and you put them into a little bit of what's the business impact versus ease of implementation and you go sometimes a bit sequential, it's actually very helpful. So I'm not overwhelmed. But I'm respectful of the job. I would like to come to one of these many pressing questions, which I'm sure is high on your agenda. And that's the cash flow question. And I'm sorry, we touched many, you know, things already, but I won't like to come back to a very CFO oriented question for just one moment. You talked about dead levels and can you explain to the listeners with a revenue of roughly 50 billion epida of well over 10 billion, how it is possible that you and it's announced or you forecast that yourself that the free cash flow of buyer will be roughly zero in that year. Yeah, for that. Yeah, sure. So I give you a two-pronged answer. And this is not critical of the past, but cash flow orientation is something that was not very developed by at least when I arrived. I mean, we talked about P&L all the time, but we cash flow was almost like an afterthought. And I'm not criticizing. It's actually the case in many companies. If you have a very successful face of a business with a farm, business as printing money, I come from a business that was almost bankrupt twice at Western Digital. And we had cash meetings every week and we had P&L meetings every four weeks or something like that. So it's a little bit of a DNA question. And we knew we had to solve it. By the way, we did it in a three-step approach. We said step number one, very untypical for buyer. Let's commit ourselves at the capital market stay in in 2018. We said free cash flow is important. And we will focus on it. Secondly, we put it in the incentive systems. And certainly we said, now we manage it. We have some very successful pieces developed already on the working capital side. We're critically reviewing capex with a totally different attention on it. You could always get better on it. So I'm very confident that we get this free cash flow mentality further ingrained over the next two, two, three years. Number two, if you look at our free cash flow and obviously don't know, you don't know what it was in 23. So I go 23 and then I go like a few years back, five years back or something like that. And you take the real free cash flow report it. And you take out what we paid on settlements, what we paid on defense cost and what we paid on restructuring cost. You see a very remarkable difference. And it's a reminder that we got to go to a state where we're not restructuring, where we're growing. And it's a reminder that we get litigation resolved. I want to spend one more time on something that I find personally very interesting. And this is something that's in my mind said quite remarkable. I've not seen it like that. But I think it's also something that many companies do with German companies. Like I worked at a company before that is super successful. And they said, well, you ask a or I for us that's it. And whatever the thing spits out at the end of the day, that's what we report. And if I have to explain and normally I do that. Companies like ours engage very heavily in cleaning and cooring and currency adjusting. And it's not bad because it normalizes certain things. So you get really good clues about the underlying performance. But it can also sometimes give an alternative reality. So if If you look at the clean EBDA and you get super excited about it, you know per definition that you excluded all the cost that are associated with the CAPEX decision you make. Taxes are pretty meaningful interest rates with 35 billion that is pretty meaningful. You exclude all special items. You can for feeling good, you can exclude the litigation cost and the restructuring cost. And if you have a positive cash conversion cycle, you exclude all the investments in working capital. And then you're surprised at the end of the day, internally I use a chart where the clean EBDA is like a stake dinner. And then the call net income is like a double-wobber or whatever they're called, like really nice. And then the net income is like, what is it? I'll just do a little bunse and a little piece of cheese and then the free cash flow is the vase upright. And it's also an educational task. Again, this cleaning serves a purpose, but you could never, it comes back to the free cash flow mentality. At the end of the day, the long-term investor is not interested in all this cleaning. I want to know what's the free cash flow potential of this company and if I discounted to it a day and I deduct the debt, how much can I pay for the equity? It's as simple as that. So free cash flow is super important. We understand it and we're heavily focused on it. And I think we're moving in the right direction. Actually, I'm happy about your words on EBDA and on the cleaning, the pre or company-defined special non-gap measures. It's very instructive. I'm sometimes mesmerized when people say, "Just take that clean EBDA and put a multiple on it and you know what the company's worth." I can't even fathom how you can come to that conclusion. But that's why we really have a strong free cash flow. But it really means we need strong finance competence. And I would say if we sum up what we discussed today, we can say you have one of the most challenging CFO jobs in the world at the moment and you are in management responsibility in the most historical times for buyer. I think we can say that. So looking back into your career, what would you say? How you got best prepared for this job? Probably for listeners. I had three major companies that I worked for. Western Digital is a leading storage provider. How this drives now more. So the state drives and storage systems. I spend a total of 18 years there. And that's important because it's 100,000 people at the time, but it is very few hierarchy levels. So I think the first thing that I would state is you grow by rotation. So you can't let John to a finance department and stay there for your whole career. You'll go into supply chain. You're going to business development. So that was the best training. That was like an 18 year MBA program. And I started basically as a supply chain manager and as a CFO there was pretty helpful. Would help me is a set of very good mentors. I was, I became a CFO at the young age at 41. And if I look back at what I know now and what I knew then, thankfully I had these mentors. Then I moved on to ASMR and the Netherlands, which most people don't know. I recognize most people I recognize. I do know. If you don't know about them, take a good look at them. By the way, they also exemplify a lot of the DSO principles. The fanatic about products and customers for instance. What's the market capitalization? I think it's 350 billion. Close to something. Definitely. Just absolutely. Fantastic. I'm a happy shareholder. Yeah. I made me head there. Good. But you, but first of all, I took on the IT responsibility there. I had several stations in my career where I was involved with IT, but the full responsibility that was a real good training ground. And I was really trained in business modeling. How do you take technical excellence into excellence in the numbers that come out at the end? I had a great partnership there with the CEO Peter Vanning as a good friend of mine. I learned a ton there. And then obviously I'm learning on the job. I'm really happy that I joined by her. I've never regretted it. I thrive on challenges. I was a little bit more challenged and advertised at the time when I took the job. But I love it. I think you just got to stay focused and hire the best team and get as much advice as you humanly can. So you mentioned that the 18 years at Western Digital were like a broad MBA education, but you did in fact also get an MBA. I did. One from USC Marshall School of Business, one of the very good institutions in the US. Now, MBAs are controversially discussed now with the East, right? With your view now, did the formal education that you got there help you also, not only the 18 years in practice? And would you still today advise young people to do that or younger people to do that, especially people who are on the finance CFO track and want to pursue a career in finance? So let me share a few thoughts. First of all, I say this upfront, the two years that I invested in my MBA were two of the most rewarding years in my life. I'm happy you say that. Right. You know, for me, being a business prof from the way it was a little bit risky to ask that. And then, and I have many aspects to do that, but I have two major aspects to that. Number one is you never know what you don't know. Half time of knowledge, it's remarkable. My son just did his undergrad in Rotterdam. And when I looked at the second semester, what he did in corporate finance, I was, we did that in the MBA. So everybody who sings, you know everything, check yourself. Because there is a lot of things that you don't know. By the way, my motivation was I was at a very young age and I was starting to get involved with things that were called investment bangles and stuff like that. And they were talking in a jargon that I couldn't quite get. And so I, one of the men just told me, you may want to put more tools into the box. And I got the MBA. But the second thing is some of my best friends in life come from that experience. I mean, I spent more time with them than with my family at the time. And that is super, super rewarding as well. I would say that two statements, if I could, I would never tell anybody don't invest in education. Yes, absolutely. So I mean, like I said, the half time of knowledge is getting shorter and shorter. If I look back at my class and the MBA, I'm a business undergrad. And I benefited greatly from it. But I almost felt like my friends who were lawyers or engineers or doctors, if you look at the absolute gain in knowledge, it was much more than the gain in knowledge I got, even though I may have ended at a higher level. So I find it in particular good if somebody is using that to beef up his toolbox that comes from an engineering background. So we could talk forever, Wolfgang. It's as we said, unprecedented times for BIF for yourself. It's also of course very interesting to learn how you got where you are now, what you brought you there. I think nevertheless we need to come to an end for now. And I should hand over the final question to Martin because Martin is so keen on another on your first, let's say, business division you run by. Oh, yeah. So we normally have a closing question and that also comes here. But, you know, the other one first, are you a football fan? If so, how about it? You know, and how about levercruzement? Buy your levercruzement at the moment in the Bundesliga. Would you tell our listeners anything about that? So if we would talk German, you could recognize that I'm from the southern part of Germany. Okay. Maybe I asked the wrong question. I crew offices, Stuttgart fan, five piece Stuttgart. And when I interview here with support of directors, I won't name the names. Two of the then Supervisor board members asked me, do you have any affinity with soccer? And I said, yes, I do. But I'm afraid it's the wrong club. And then they said, well, what is it? And I said, "Fall piece Stuttgart." And they looked at each other. One was a buyer levercruzement fan and one was a buyer Munich fan. And they looked at each other and they said, this is great news. He knows how to deal with pain. What I have converted in the meantime. I have converted in the meantime. This is something very special in the making. The job is never done until the job is done. We have a. few more days to play in the Bundesliga. Wow, it looks pretty good today. A good position in the cup and let's see what we can do in Europe. So very proud of the team. I go to as many games as I humanly can. Very good. Just for the listeners, by the levercourses and one, the last game again and is now leading by and meaning by eight points in the league. So we keep our fingers crossed, I think. And now the last question. The last question always is, do you have a book recommendation or potentially also a podcast recommendation, but maybe in the first instance a book recommendation for our listeners, we always ask that. If you would ask the many young talents that I work with, I always have one book that I recommend people to read and I read it probably 20 years ago. It's a very small book. I think it's only 90 pages and it is called Fish. And the author is Stephen London. And it deals with a fish market. I think it's in Seattle. And it describes a fun place to work. And it has four rules in there. I won't bore you with the synopsis, but you should read it. It is something that I try to practice every day. Wonderful. That's very interesting. Many thanks for this and many thanks. Generally for making this time available. This was very exciting. It was absolutely fun also I can say. It has been a pleasure. Many things also do you listeners for taking the interest in our podcast. We hope you stay with us and we'll have to look forward to seeing you in the next season very soon. Thank you so much. Thanks listeners and many thanks of course to Wolfkoreys. And was a pleasure like the fish market for us here in Leverkoreys. Thank you so much. See you later. Thanks a lot. Thanks bye bye. That was leading corporate transformation. The podcast by V. Cha'ou, Aurobysime School of Management, powered by PWC. Editorial team, Marvin Shunah, and Zimann Gerlach.