‘We Will Continue to Refine Our Strategy’
CEO Thomas Rabe sees Bertelsmann in excellent shape both operationally and financially. Today, the company is significantly faster-growing, more digital, more international, and more diversified. In an interview with BENET, he talks about the future strategy on the way to “Bertelsmann_next”.
Mr. Rabe, you took office as Bertelsmann CEO ten years ago with a clear strategic agenda - and then executed it step by step. What is your assessment of the situation today?
Thomas Rabe: The Executive Board, management, and employees have really achieved an enormous amount at and for Bertelsmann in this decade. Today, the company is exactly as we envisioned it could be back then: it now is significantly faster-growing, more digital, more international, and more diversified. Bertelsmann is in excellent shape, both operationally and financially. This is confirmed by the latest financial statements we are presenting in this Annual Report, with record results. All divisions contributed to this success story. Personally, I think the highlights of the past decade include the establishment of Penguin Random House as the world’s leading book-publishing group; the re-entry into the BMG music business; the realignment of the Arvato services division; the entry into the education business; the building of our fund activities with the Bertelsmann Investments division; and finally, the formation of important alliances and partnerships. We are using them to position ourselves together much more strongly than before in the competition with the global tech platforms.
So the current strategy remains in place, and Bertelsmann isn’t planning to change its strategy?
Thomas Rabe: Bertelsmann doesn’t need a change of strategy. After all, we’re on track with the course we’ve taken. Our successes and results speak for themselves. However, because challenges such as digitalization and the competitive situation I mentioned are increasing, rather than diminishing, we will continue to refine our strategy.
What is your goal in undertaking this refinement process?
Thomas Rabe: In the years ahead, everything at Bertelsmann will be guided by the major, overarching theme of growth. We want to grow organically wherever possible, but also through acquisitions where necessary. I expect Bertelsmann to enter a boost stage, a real growth spurt. To trigger it, we are pursuing five clear strategic growth priorities.
What are they?
Thomas Rabe: First, we want to build national cross-media champions wherever we have the potential to do so. In Germany, for example, this is the case with Mediengruppe RTL and Gruner + Jahr. So it only makes sense that the two companies recently decided to look into an even closer collaboration.. This is a real alliance of opportunities and a prime example of a national, cross-media champion.
Second, we will continue to invest massively in our global content businesses with their internationally attractive formats – that is, in Penguin Random House, Fremantle, and BMG.
… for which the acquisition of Simon & Schuster would be a prime example?
Thomas Rabe: That’s right. For me, the announcement of its acquisition in the fall of 2020 was one of the strategic highlights of the past year. Because this acquisition creates enormous value-add for our company. We enhance our position as a leading creative content company, especially in the U.S. We once again strengthen our oldest core business. The book business is a first-class content business, and part of our identity. At Bertelsmann, we have known and promoted this since 1835. Today, book sales are growing online with printed books, as well as digitally. Time and again, the industry keeps proving itself to be robust and resilient. The appeal of books is unbreakable.
What about strategic priorities three through five?
Thomas Rabe: They extend, on the one hand, to the expansion of our global services businesses with their large, often international customers, and, on the other hand, to our online education activities around the two anchor companies Relias and Alliant in the U.S. And finally, we will keep expanding the number of shareholdings in our global network of funds so that we can get a foot in the door to interesting young companies, as well as pursue attractive investment opportunities.
Let’s talk about coronavirus: What lessons has Bertelsmann learned from the pandemic?
Thomas Rabe: The most important lesson is that a company can protect its employees from this sort of pandemic if everyone pulls together and sets the right course at an early stage. We did this around the world with measures such as banning business trips and conferences and switching to working from home, as well as taking massive hygiene measures on site to protect employees in the plants/operations. All in all, we succeeded in reducing to a minimum the incidence of infections in the company.
… and on the business side?
Thomas Rabe: … the pandemic marked a watershed. In the second quarter, sales slumped massively - but after that we recovered quickly and, looking at the full year, we suffered only small revenue losses while achieving record results.
Why was that?
Thomas Rabe: As I see it, there are three main reasons for this: First, the broadly diversified positioning of our businesses, which were not all equally affected by the crisis.. Over the past few years, we have managed to build up two other major earnings pillars alongside RTL Group, namely Penguin Random House and Arvato. Second, the high revenue share of around 50 percent now generated by our digital businesses, some of which took a leap forward during the crisis. And third, the early and decisive countermeasures to secure Bertelsmann’s liquidity without jeopardizing the substance of the businesses.
Are there also positive lessons from the pandemic?
Thomas Rabe: Of course everyone is looking forward to the day when all of us can return to leading a normal life. But here in the company, we will definitely take with us the realization that the working world will become more flexible after Corona, and that we must not revert to the pre-pandemic era. At the moment, we are working across the Group on hybrid working models that reflect this.
Back to the opening question: After almost ten years at the helm of Bertelsmann, the Supervisory Board has extended your contract for the third time, for another five years from January 2021. How did or does that feel for you personally?
Thomas Rabe: I look forward to my third term as CEO of a company that still inspires me as much today as when I started. Together, we have really achieved a great deal. Now we have further exciting tasks ahead of us. And I am just as grateful to the Supervisory Board, which has been a valuable sounding board and source of inspiration to me for ten years, as I am to Bertelsmann’s shareholders for entrusting me with the leadership of the company for another five years. This is a sign of great continuity, but also of a strong will to continue to change Bertelsmann and create “Bertelsmann_next.”