Jürgen Dormann

"Organizations in the 21st Century: Knowledge and Learning—the Basis for Growth" was held Nov. 16-17, 2001 at the Social Science Research Center (WZB) in Berlin, sponsored by the Gottlieb Daimler- and Karl Benz-Foundation.

Organizational learning and transformation: The role of visions

Jürgen Dormann

Chairman of the Board, Aventis SA, France

Good evening ladies and gentlemen,

First of all I would like to thank Professor Dierkes and Professor Antal for inviting me to attend and speak at this conference. It’s obvious that you and your research teams have done a tremendous amount of work to study and develop concepts of organizational learning and this conference is an excellent way for us to share in your findings.

I’m here to speak to you this evening about organizational learning and transformation and the role of visions. Knowing that you have studied the phenomenon of organizational learning from all possible angles and looked at countless aspects and approaches, I will not add anything to this subject. I would, however, like to tackle the second theme, the concept of visions. What do we mean when we are talking about visions? How do we define the word vision? And practically speaking, do successful management teams really rely on a single vision, hammered in stone for all eternity? Or what is it that really characterizes visionary management?

Trying to define the quite fuzzy term “vision”, first of all I see a basic semantic difference. I think our American and British colleagues use the term more frequently than we do in continental Europe. And they use it more often to refer to a concrete objective of an enterprise or organization. Success is often attributed to the so-called “vision thing” and visionary leaders, and I wouldn’t be surprised if there isn’t already a book on “management by vision” which makes this point. Yet I can hardly remember a large European company expressly referring to a vision 10 or 15 years ago. And those that did were not that satisfied with the strategic results. In any case, I would say that for me, a vision consists of more than just a concrete business objective or strategic goal.

Secondly, I think that the term vision also has to be seen against the social environment or functional system in which it is used. If we take modern western society as being differentiated into functional systems such as politics, religion, science, the arts and economics, we can see that the term vision plays a different role in each of these systems.

Political visions, for example, are formulated and addressed to wide audiences to support a party or a political movement. They constitute a promise. And they are often opportunistically adapted to what seems to be feasible and accepted by the majority. Popular opinion has it that former German Chancellor Helmut Schmidt once said, “When I have visions, I go see my doctor.” This pragmatic attitude might not be that bad if we look at some political or other visions and what they actually lead to.

There are religious visions, which are transcendent, presenting alternative worlds of utopia and paradise.

And there are visions in the scientific world that drive innovation and progress. By doing so, they pose a permanent challenge to think about the limits of what we could or should do, how far we could go, about long-term responsibility.

Last but not least, the artistic vision might be the purest form, just following an aesthetic purpose, creating a new experience. You will have the pleasure of listening to theater director and multi-artist Robert Wilson who will give the closing address tomorrow. He can tell you more about art and vision than I can. And I hope he will talk about his Watermill Center on Long Island, which is supported by the Aventis Foundation.

Ladies and gentlemen,

Getting back to my turf, in the business world, economic performance, not visions, rule. Businesses are under the relentless scrutiny of their owners and the international capital markets. They are permanently challenged by their customers and competitors. And rightly so, because a market economy is most effective for the allocation of resources and thus value-creating for society as a whole. Business accountability makes it much easier to verify the feasibility or sense of a vision than in other functional systems of society. In business, you may have a brilliant vision for a company but if your bottom line is bad, then your vision will be called into question very quickly and will not survive the next business year. So I am talking today clearly about the role of vision in the economic arena, in the world of market economics with private companies as the main players.

The reason why I have been invited to speak to you today is obviously that I represent a company – Aventis, created through the merger of Hoechst and Rhône-Poulenc – that is the result of a long and profound transformation process. There are not too many similar examples in Europe. However, in my view there is still an urgent need for consolidation in European industry, especially in the context of the European Union, the challenges of new technologies and globalization. But this is a different topic.

Some of you may already be familiar with the development of Hoechst. So I will try to be brief. At the beginning of the 1990s, the German company Hoechst AG based in Frankfurt was a traditional and very large chemical conglomerate. In terms of sales, it was the biggest producer of chemicals worldwide. We had nearly 180,000 people working in more than 120 business units allocated to 16 divisions. Activities ranged from cosmetics to copy machines and from petrochemicals to pharmaceuticals. Annual sales were more than DM 45 billion. R&D spending was close to DM 3 billion. Overall margins were low, however, especially during economic downturns, and this weak profitability led to an astonishingly low market capitalization of around DM 15 billion at that time.

It became quite clear that such a conglomerate could not survive for a number of reasons, the most important ones being increasing competition from specialized and focused companies, the speed of innovation, especially in biology and biochemistry, the globalization of business, and last but not least, the growing importance of shareholder value and the international capital markets.

This situation forced us to embark on a strategic realignment in 1994. We unbundled the Hoechst Group, giving individual businesses and the sites the structures needed to survive, to compete, and to grow sustainably. The industrial businesses were reshaped in accordance with their specific market requirements and divested through joint ventures, disposals and public offerings. At the same time, we began focusing on the fields where we had the greatest competitive advantage and the best potential for growth and value creation. We concentrated our resources on health and nutrition and expanded through acquisitions and alliances. In December 1999, this led to what has been the biggest step so far, the merger with Rhône-Poulenc of France to create Aventis.

Today, the core business of Aventis is just pharma. With around 65,000 employees, sales of nearly 20 billion euros and operating earnings of around 3 billion euros, we have achieved a market capitalization of around 65 billion euros or DM 130 billion. And we’re just getting started, we are set to expand and to grow further.

Ladies and gentlemen, that is, in brief, the strategic path we followed at Hoechst/Rhône-Poulenc/Aventis. Needless to say, there were numerous single actions and a huge degree of complexity behind this in terms of countries, markets, legal, accounting and tax systems and so forth. And let’s not forget, tens of thousands of people who had to change their attitude, their professional life, their personal life. I cannot expand on this today, but I think we should keep that in mind.

So how did we manage the transformation of Hoechst into Aventis, what kind of a learning process did we go through, what role did vision play, and what precisely was that vision?

A quite simple answer to this would be: You just formulate a vision. You just write down and communicate to everyone involved what the company should look like, what the corporate culture should be, and so forth. But it is by no means as simple as that. Such an approach is guaranteed to fail. I think the secret of successful change management is to always find the right balance, to move step-by-step, realizing how far you can challenge your people and can initiate change without overtaxing the organization.

The role of vision is thus far more complicated than just having an idea and communicating it. Of course you’ve got to have a vision in your mind of what a company should look like and how it should act. This vision must be clear and consistent, and all the single steps you take and decisions you make must be in line with this vision. But managing change also means managing the communication of your vision. By this I mean only disclosing at any point in time what the organization is able to understand and to realize. More simply stated, it’s the difference between evolution and revolution.

So getting back to Hoechst, the vision was developed in accordance with the transformation of the company. It started with some targets and criteria we formulated in 1994. We called it “Aufbruch” or Transition ‘94. Transition ‘94 was a statement of purpose and mapped out the new direction we were taking. The vision at that point was just to bring all our businesses into a leading position. Literally, it said that Hoechst would be a network of innovative and customer-oriented companies which are leading suppliers in the fields of chemicals, pharma and agro and achieve an above-average return on capital employed.

That was quite down to earth and pretty simple. But to achieve that, we had to change the entire company, its structure and processes, and – perhaps most important – its culture. The old, traditional company culture was based on a centralistic, hierarchical approach. Hoechst had become a self-sustaining, self-referring system. Company tradition, hierarchy, extensive planning processes, in-house careers, vested benefits – these were the main factors with which employees identified, not the outside world, customers or the marketplace. So what the organization had to learn was to act differently, to focus on a new set of criteria.

“Transition ´94” provided guidelines for this organizational and cultural change: dismantling the hierarchy and reducing bureaucracy, managing by objectives, incentives, promoting initiative and flexibility, and trust, creating market-oriented processes and structures. And it was about behavior and communication, about responsibility towards the public at large. All in all, it was a broad, integrated approach – call it a vision – to modernize, motivate and revitalize the company and to shift our focus toward the market and allow ourselves to be steered by market mechanisms. And it provided a basis for consistent planning decisions and ways to assess and control our actions and performance.

At that time, people were awaiting change, they were open to it and even enthusiastic about being able to act more freely and as entrepreneurs. By making appropriate decisions about company structures, for example the business has priority over regions and functions, and key personnel decisions, getting people from outside who embodied and fully supported the envisioned change, the process developed a strong dynamic of its own, the vision became alive.

Ladies and gentlemen,

The most important decisions in a change process are those about people, the personnel decisions. A company vision cannot be separated from the leader or the leadership team that stands for that vision. So as a leadership tool, a vision has to be seen in conjunction with the leadership team, the personalities. The team and its vision have to be able to attract the best people and to motivate them to work together towards the vision of a company.

I think an important element of managing change and fostering organizational learning is to get the mechanisms and dynamics going that make people take the initiative. In our case, it was market orientation, giving people the freedom to act and rewarding them according to their performance, assigning clear priority to the operating business, giving the people in the business the responsibility for their fate. That releases tremendous energy and creativity.

After a while it became clear that the vision of all our businesses ranking among the leading players in their respective markets could not be achieved under the same company roof. We had to focus our resources, to streamline our portfolio. The individual businesses were moving in different directions. As I said before: We relinquished control of the industrial businesses step by step, by divesting these assets through disposals, joint ventures and public offerings, giving them better strategic positions and development opportunities than they would have had as part of Hoechst. They developed their own visions in line with their markets and business prospects. We kept the health and nutrition activities because we saw strong growth potential in these innovative fields of the so-called life sciences.

Accordingly, we adjusted the scope of our vision towards “life sciences leadership”. While the elements of “Transition ’94” were still valid as far as corporate culture, behavior, structure and processes were concerned, our portfolio changed, it became more focused.

After the merger with Rhône-Poulenc, a company which had been pursuing a similar strategy, Aventis was indeed a leader in the life sciences in 1999 – in terms of sales. The idea behind the life sciences model was that new technologies in the biosciences would drive the agro sector strongly and transform this commodity-like business into a high-tech growth engine, that genetic engineering would lead to entirely new kind of products in nutrition, pharma and diagnostics. Synergies in research and development, similar growth rates and similar value creation potential were also expected.

However, the envisioned synergies between healthcare and nutrition did not materialize as strongly and as quickly as we had anticipated. We overestimated the pace of technological change in the agro sector. Instead of converging, the markets, technologies, and growth rates of pharma and agriculture drifted apart. We decided to divest the agro business and to focus solely on the health sector. Combining Aventis CropScience with the crop protection business of Bayer and creating the leading player in a consolidating market is a big advantage for the business and its people. So again, we acted in line with the Transition ‘94 concept, and the organization had already learned why and how this kind of transaction needed to happen. We just streamlined our portfolio again, this time focusing exclusively on pharma.

Ladies and gentlemen,

To wrap up, I would say that you need a vision to successfully transform and manage a business. It has to exist in your mind, it has to be consistent and clear. It should give you an idea of what your future company should look like – in all aspects – and it should present an integrated and connected picture. It has to reflect a realistic estimation of how your business, its markets and technologies might develop. However, it is first of all about the ability of a company and its people to work together efficiently and to be able to adapt to a changing environment. And the vision should be something you will never fully achieve, it should always be a projection that challenges you to do better. It should open up new horizons and inspire new visions. It should provide guidance about what to preserve and what to change, what to learn and what to forget about. And it has to be lived and practiced by the right people.

Now what about the Aventis vision? Is there a new one, now that we have achieved the status of a pure pharma company? It’s easier today than it was ten years ago. We have established a lot of the elements we were aiming for seven years ago. Aventis is truly an international company, the organization is flexible and open, there is a sense of urgency in all our processes, we are oriented towards the market and towards value creation. We have a high degree of diversity among our people, which helps us to develop our business in the different regions and cultures, to gain trust and maintain our license to operate. We feel comfortable now in focusing our vision on technology and the markets.

The Aventis vision today is to be a leader in pharma and to discover and develop innovative pharmaceutical products that will protect and improve human health. This vision indicates that we believe that the health sector will grow and we intend to share in that growth by helping people to live longer and healthier lives. We believe that there will be tremendous progress through new technologies which will lead to entirely new drugs, vaccines, diagnostics and methods to cure disease and – better yet – to prevent disease and to protect health. We are convinced that by supplying innovative products, we will make it easier to fight disease and contribute significantly to the sustainability of healthcare systems. To ensure our access to the technologies that will make this happen, we will look even stronger outside the company and expand our existing networks with innovative centers in biotech and research. We will move people even closer to the market, create network-centric structures within our company, and we will use IT to connect our people and to better serve our customers.

Will this vision last forever? Who knows?

Revised: 11/13/02. All contents copyright 2001 by Steve Barth, Wissenschaftszentrum Berlin für Sozialforschung (WZB), and individual authors. All rights reserved. For more information, please contact the Webmaster. Photographs by Peter Hinsel.