Interview Dr. Wolfgruber

Interview with Dr. Matthias L. Wolfgruber

CEO ALTANA AG

What part do so-called "soft factors" play in innovation?

Just as important as the innovation strategy and formal innovation processes, as far as we are concerned, is the innovation culture. This means that we are fast, flexible, and creative, while at the same we also work in a disciplined way. There appears to be a contradiction here: On the one hand, we give our researchers fairly free rein, while, on the other, those involved in the innovation process must work with predefined structures and processes. We are able to reconcile these different objectives, though, because we aren't an inflexible group of companies, but rather an organization with flat hierarchies that promotes communication beyond functional barriers and is extremely open to change. The ALTANA Innovation Conference also helps to ensure that researchers and application specialists within the ALTANA Group are motivated to exchange views and ideas across countries and divisions and to develop their own personal network.

How long will it be at ALTANA before you can reap the rewards from greater research expenditure?

Whenever we change the properties of specialty chemicals but slightly, it is often only a matter of months from the product idea to the market launch. With very new processes, by contrast, say, with new polymerization technologies or new product platforms, this development can take much longer, in individual cases even five to ten years. Then there is the fact that the consumers of our products, in particular the coatings industry, are for the most part very conservative; formulations involving new additives, for example, need to go through very time-consuming test procedures. To speed up the new product launch, we reproduce the processes and applications of our customers as they are in practice and re-enact their workflows.

In economically fraught times like these, companies are inclined to cut back on research expenditure...

Yes, the temptation is surely great because the income from research does not usually accrue until years later, whereas the costs are immediate. Since developments extend over a longer period of time, and the know-how and technology need to be built up steadily and with a view to sustainability, you cannot simply turn the money supply off and then on again. In specialty chemicals there is, most clearly, a connection between R&D expenditure on theone hand and commercial success on the other. We hold fast to the belief that research expenditure is an investment in the future. As market leaders in growing and changing markets we also need to be innovation leaders, not imitators. We regard the optimum target value for R&D expenditure as being in the region of five to six percent of sales.

So ALTANA is producing an adequate amount of successful innovations. Will this help to maintain its competitiveness in the future?

Yes, and everyone is playing their part in this. Innovation, after all, is not only the province of R&D, but rather of the entire organization. Top management itself is intensively involved. At the start is the marketing strategy, the question: Where is the company meant to be going? From this we derive the platform strategy: Which technologies do we require to achieve our market objectives? Next to be derived is the innovation strategy: Which projects should we work on? The driving forces that give rise to innovations can basically be triggered by the market, the consumer, or the customer, of course, but also by technological change, scientific principles, or social norms or demands such as sustainability and environmental compatibility.

The challenge is, though, that often unspoken problems have to be translated into product requirements and the customers themselves don't yet know what new capabilities and innovations our knowledge could bring them in five or ten years' time. Our staff are in close contact with the technology drivers, regardless of whether they are to be found in the universities, with the suppliers, or at the customers.

How innovative is ALTANA? How much does the company invest in research and development?

The area of research and development (R&D) is rated extremely highly at ALTANA. At the end of 2008 around 750 of the 4,800 employees worldwide were working in our company in the area of R&D - that's around 16 % of the workforce. We spent over 72 million €uro on R&D in 2008. This corresponds to a share of around 5.5 percent of sales. Measured against the sector average, that is a very high value. The chemical industry normally invests three to four percent of its sales in R&D. Among our R&D achievements are new products that offer new functionalities, new application possibilities, an improved property profile or greater environmental compatibility, all of which allow our customers to stand out from the competition. These products include innovative additives for all kinds of surface finishing or surface protection.

Here's another figure that shows how innovative ALTANA is: In the past financial year, we filed new applications for 27 patent families, whereby one patent family can consist of several patents. What's more, we support our customers worldwide with 46 application and research laboratory sites as the interface between development and customer. These labs enable tests under practical conditions to be made at short notice and in close proximity to the market. We therefore offer distinct advantages over our competitors.

Is ALTANA well placed in the matter of innovation?

Yes, ALTANA is well placed. We are pursuing a clear strategy: focusing on continually growing and demanding global niche markets where we lay claim to a leading position and can bring our innovative power and problem-solving competence effectively to bear. Last year we created the conditions personnel-wise for expanding this core competence - and, hence, the future business of our company - even further. In every division, a chief technology officer (CTO) now oversees and coordinates the innovation process. In addition, the equivalent position of the CTO has been filled at group level. The CTOs make up the ALTANA Innovation Council. This body ensures that the issue of innovation is always top of the agenda, that the innovation process at ALTANA proceeds effectively and efficiently, that technical and commercial trends beyond the normal course of business are identified, and that knowledge that is available to us in the company and externally is not only accessible but actually deployed in the best possible way across the divisions.

ALTANA is also persevering in the current situation with the same business model of offering customers worldwide practical solutions in the form of sophisticated specialty chemicals products combined with an all-inclusive service. Thanks to our market proximity and innovation leadership, our flexibility and strong capital basis, we believe there is every chance of us emerging from the current situation as winners.