#484 TRUMPF - Vom Maschinenbauer zum High-Tech-Unternehmen – CFO Dr. Lars Grünert im Interview

Yes, thank you for the invitation.

Well, I wish. I definitely wanted to make clear that such a development is only possible if you further develop side products, innovations, and the business model, and have a good control system that supports it. I think that's a good harmony, and there's a lot to it. We'll talk about that now.

So, TRUMPF – as you said, we come from machine building. We make machine tools for sheet metal processing, but over the last decades we have developed beyond that. Today we are a leader in laser technology for industrial manufacturing processes, and also active in electronics fields. Most recently, very successfully, we make CO2 lasers, gas lasers for semiconductor lithography, so a very essential element in microchip manufacturing, for manufacturing processes in microchip production. We have a turnover of four billion euros, 17,000 employees worldwide, but still focused here in Germany. We are a family-owned company headquartered here in Ditzingen near Stuttgart.

And I can also say we tried many things and did many things that didn't work. That is very important to include: to develop further, to open up new markets, to generate growth, you must have the willingness to fail, to not be successful with things. Here, for example, our corporate structure helps us: being a family-owned company, having shareholders who closely accompany this process and also support you through it. So I consider accepting failure to be a very essential element. I think a second element is that we are ambitious. We want to continue growing. We are not satisfied with being a good machine builder for sheet metal processing. Instead, we want to use the know-how and competencies we have in the company to find new applications, to enter new markets. And I think these were the decisive factors to then bring the company into new waters, while also transforming and developing it.

Yes, I also tried to make clear in my lecture that there are a few important points. One is that you need a strategic competence. It is completely clear to me: our strategic competence 10, 20, 30 years ago was different from today, but even then we already had a strategic competence. Today we do this very systematically, very thoroughly, strongly analytical. But it is important that you flank the development of the company with a further development of this strategic competence. I think that was crucial for the development of the company. The other thing, as I said, is that we utilize the competencies we have in the company. It is important that today we have a divisional organizational structure that does justice to the individual business areas, with management that is very closely connected to the business. Another point is making the right acquisitions that have brought us technological advances or new business areas.

Our senior boss always said: 'Fortunately, a little more succeeded than went wrong.' That's true. Something must succeed. There must be a good foundation where you are financially profitable and stable, which also makes such experiments possible. On the other hand, you mentioned cycles. Of course, we have phases where TRUMPF's business is weaker, where we have difficult times. The capital goods industry is very dependent on economic cycles. I think there are two sides of the same coin. One is that even in those phases we are financially stable, that our shareholders are willing to forgo financial performance or hold back. They understand our business and accept that in such phases we are not as financially successful. At the same time, as management, we are also required to react in these phases, and our flexibility helps us. So, quality on one side, flexibility on the other. At TRUMPF, we have always placed great value on having flexible structures, like working time accounts, and certain value creation structures that give us flexibility. So we can ensure a certain financial performance even in economically difficult times.

Yes, I think on the one hand, broad competence. Today, we have a much broader competence spectrum compared to when we were a machine manufacturer, when we mainly had mechanics and design competence. Software competence is much more important. I have to think in solutions, more comprehensive solutions. So a much broader competence spectrum. I think a second point, to come back to corporate culture, you have to delegate responsibility. You have to give managers and employees the trust to try out things, the courage to do something new. Here again, our shareholders, the family, strongly promote that, and we also accept setbacks and look at how it was done, not just what came out in the end.

Yes, it is very different with us, and maybe I was able to practice that. I have been in various commercial leadership positions for 20 years, and now for seven years as CFO, so I was able to prepare myself well for the role. I think what's important is that in our company, a family-owned high-tech company, of course I have to have my finances under control. I have a good structure, very good employees, good systems. I think we are very well set up there. My role is more that I engage very deeply with the business, I understand it very well, and then I can argue from a financial perspective. But I am not put in a corner like 'Mr. Grünert, if you report the numbers, thank you very much, we don't expect more from you.' That is very different with us, and you can see that throughout the finance department at different leadership levels. We are allowed and should have a say in the business and contribute. I think it is very important what you just said: you can only be a sparring partner for management in the broadest sense if you understand the business model in a differentiated way. Only then are you taken seriously.

Yes, that's right. I don't know where you heard that, but it probably fits. I typically leave the euphoria to others. But I also see it self-critically: if you are always the one who sees everything critically and only sees the pitfalls, that doesn't do you any good either. So you have to be careful and also be enthusiastic, and I am. I say, it's actually a great topic. I was given responsibility and was very happy to take charge of a new business area we acquired. And there I cannot stay in my classic CFO role; I have to act entrepreneurially. And that helped me put on a different hat back then.

Yes, that was important to us in recent years to meet the demands of the business from the finance organization. First, we set out to act as one finance function worldwide. We have a very decentralized structure in the various subsidiaries, each with its own finance organization, which is good. We didn't want to throw that overboard, but we wanted a common understanding: we act similarly, work with the same systems, etc. That is something we have changed in recent years and developed further. Then, regarding the roles: we say that a finance manager, even in a smaller subsidiary, cannot wear all three hats well: being a very good advisor to management and knowing the business well, perfectly mastering financial processes, and also handling governance topics. So we have now separated these roles. That is a significant change for individual employees, but we are now developing them each separately, and I believe this will make the finance function even stronger.

Yes, the value contribution is quite classic; we strongly oriented ourselves towards the typical definition. We take a profit figure, for us it's EBIT, and subtract the cost of capital: invested capital multiplied by the cost of capital. The result is the value contribution. Why did we do this? For two reasons. One: We always had a very strong profit orientation at TRUMPF. Results were always important: each fiscal year, what EBIT margin, or earlier, pre-tax profit as a percentage of revenue. That was very pronounced. But the invested capital—what do we have in machinery, fixed assets? What have we invested in machine tools and facilities and real estate? How large is the working capital? That was a bit neglected. We were also never short of cash, except maybe in the machine tool crisis of the '90s, but in recent years we have been very financially strong. So that topic was underemphasized. We said we want to change that. There, too, we want to be performant. And the value contribution via invested capital achieves that very well, because you can show what influence invested capital has on the value contribution. The second reason is that we are now more broadly set up. We have different business areas, each with different risks and possibly different capital requirements. This can be well expressed in the value contribution. So to manage a larger portfolio, the value contribution is very well suited.

Yes, thank you very much.