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Keynote Address: Key Success Factors for Value Creation
Markus Kramer, President Functional Polymers Division, BASF AG, Germany |
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Riker was followed to the speaker´s podium by Markus Kramer, President of BASF´s Functional Polymers Division, who gave the Keynote Address: Key Success Factors For Value Creation. In his presentation, which impressed many delegates with its openness regarding how BASF operates, Kramer began by pointing out that BASF is in good shape, with a net profit of Euro 3 billion in 2005, although the company´s paper-chemicals business did not contribute as much as other business areas did.
He said in the world of management, it is much easier to cut costs than to raise profits. He recognised that the paper industry is suffering, and that with paper industry site closures, BASF loses business, although he accepted that that is normal business practice. But cost cutting does not make for long-term success, he insisted. He argued that the paper industry is more asset-driven than customer-driven and more cost-orientated than value-orientated. He applauded the advanced technology and economies of scale practised by the paper industry, but expressed surprise at the low investment in research & development. How can you create value, he asked, how can you be different, if you do not invest in innovation?
He also noted that there is little co-operation between different links in the paper supply chain. He showed interest in complementary activities between, e.g. BASF and other links in the value chain, arguing that the players involved need to do more work on finding out what form co-operation could take. For example, he would promote discussions with the printing and distribution sectors about what the end-users really want and will want in the future, so that BASF might know how they can help and innovate.
He looked at an example of value creation in the paper industry, noting that what is important is what the end-user is prepared to pay for, so that management can focus not only on cost cutting, but on creating value at the front end of the business. In the Add Value To Paper concept, BASF worked with Omya, Voith, Axel Springer and the former BASF Printing Systems business and created a new paper quality to improve the efficiency of the printing process. As a result, BASF got additional business in terms of volume, as well as a better product portfolio, because the company had a new, innovative product (which gives the sales force a good story that can open doors), and it also expanded BASF´s expertise. Also, because it was not a commodity product, and because the end-user is prepared to pay for a superior product, BASF believes it is fair that it should receive its fair share of the added value that was created.
Within BASF itself, Kramer said the importance of customer interaction and the market-based value curve are being communicated right across the company, so that everyone right through to salespeople and laboratory technicians know what contribution they make to the company´s success. As part of BASF´s Value Based Management strategy, more than 6,000 employees from the shop floor are to attend workshops on Value Based Management, so that the company´s goals are not distant ideas that 80% of employees do not understand, but goals that everyone at BASF can live. |
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