interview interview

with Thomas Rabe

Mr. Rabe, let’s talk about Bertelsmann’s transformation. How far has the Group progressed in this respect?

Very far. In recent years, Bertelsmann has made great progress in all areas and at all levels. This is demonstrated not least by the fact that we are now in a position to shift from growth driven by acquisitions to ever-stronger organic growth. We are once again growing significantly on our own steam.

Can you explain this in a bit more detail?

Our growth businesses now account for more than one-third of our total revenues, compared with just one-fifth in 2011. By contrast, we reduced the proportion of revenues attributable to structurally declining business from 16 percent to 4 percent in the same period. This has played a key role in ensuring that our organic growth has kept increasing every year since 2015. Last year we achieved 2.7 percent; our medium-term target is 3.0 percent. Our growth platforms – in particular, Fremantle, the digital activities of RTL Group and G+J, and the logistics and financial services businesses of Arvato, BMG and the Bertelsmann Education Group – will continue to play a decisive role. In 2018, they generated organic growth of 10 percent.

Beyond this, Bertelsmann also wants to become more digital, more international and more diversified. How are you doing with these targets?

Here, too, we have made great progress, especially with regard to the revenue contribution of our digital activities. Our goal is to eventually generate more than 50 percent of revenues digitally. In 2018, we were at 49 percent. So the goal has been as good as achieved – and earlier than originally expected.

The share of revenues from outside Europe was 28 percent last year – a significant improvement on the 20 percent of 2011. One reason is that we are investing heavily, particularly in the United States. In the medium term, we aim to generate 30 percent of our revenues there, and a further 10 percent in other regions of the world.

As far as diversification is concerned, in recent years we have opened up entirely new lines of business, such as education. But a lot has also happened within the individual divisions. Take Arvato: In 2011, we offered the outsourcing of entire business processes and print services there. Today, these are activities in the clearly defined areas of CRM, SCM, Financial Solutions and IT.

What role does technology play in the transformation you’ve just described?

An increasingly important one. Although Bertelsmann is not a tech company, the use of tech solutions is essential for the future of our businesses, especially in the areas of cloud, data and AI. In many cases, exciting approaches already exist within the Group, which we will be spreading even further. The expansion of our capabilities in these fields is a priority in the near future. This also includes equipping our employees with the necessary tech expertise. This is done, for example, through courses at Udacity, an online learning provider platform for the tech sector in which we own a stake.

We have every reason to trust in our strengths.”

Is the development of tech competence also necessary because the major tech platforms are often your competitors?

Indeed, we are seeing a new dimension of competition with major US tech platforms such as Amazon, Facebook, Google and Netflix. But we have every reason to trust in our strengths and have formulated clear strategic answers to this challenge.

What are these answers?

First, investments in premium content – this amounts to around €6 billion per year. Second, the guarantee of secure advertising environments and large reach; both are essential for brands. Third, the expansion of our own digital businesses and digital competencies. Fourth, the establishment of strategic alliances internally and with external partners, such as the Ad Alliance, the Bertelsmann Content Alliance and the netID initiative. Fifth, and especially importantly, customer relationships and cooperation with the platforms mentioned: Fremantle produces formats for Netflix; Arvato is a service provider for almost all major tech groups. Sixth, a commitment to greater equality of competition – a modern, fair regulatory framework is needed that does not put the creative industry at a disadvantage vis-à-vis the tech platforms. And last but never least, the strengthening of our corporate culture, in particular creativity and entrepreneurship.

What significance do creativity and entrepreneurship have for Bertelsmann?

They are of central significance – they are the core of our company and its culture.

The diversity and reach of our creative offerings are unique in the world.”

Can you elaborate on that?

Creativity is at the heart of our value creation. Video, books, magazines, music: The diversity and reach of our creative offerings are unique in the world. This great strength of ours needs to be cultivated. In Germany, for example, this is done through the aforementioned Bertelsmann Content Alliance, which pools the expertise of our content businesses and enables us to offer creative people new marketing opportunities across all media genres. Creativity is also a driving factor in our services and education businesses.

And entrepreneurship?

It’s the second key to our success. The local management of our businesses, which has a long tradition with us, is more important than ever in the digital, fast-moving world. Together, creativity and entrepreneurship are what drives us.

How can creativity and entrepreneurship be encouraged?

A supportive working environment is essential for both. This includes a willingness to take risks, a willingness to experiment, perseverance and a culture where mistakes are allowed.

You mentioned taking risks. What do you see as bold decisions in recent years?

In the media sector, RTL Group’s early entry into the online video and ad-tech sectors, and the combination of Penguin and Random House to form the world’s largest trade book publishing group. And after having sold off nearly all of our activities in the music area in 2008, BMG, with its business model completely tailored to the digital world, is once again number four in the market today.

And in the other divisions?

Arvato’s realignment: The latest financials show how profitably all four Solution Groups are now growing. Arvato had an excellent year in 2018; the group has potential for further growth. Also, our partnership with the Saham Group in the field of CRM commenced at the beginning of 2019. The cooperation has created a market leader that is well placed to successfully develop this business further.

Another milestone for me is the expansion of our education business, which has become a third mainstay of business alongside media and services. And lastly, our fund businesses fall into this category: Bertelsmann Asia Investments is one of the most successful funds of its kind. We have built up this business over the years and are now reaping the rewards.

What all these steps have in common is that we didn’t just fine-tune established business models, but ventured into entirely new lines of businesses and geographical regions. This is entrepreneurship in the best sense of the word.

The motto of this Annual Report is “What drives us.” So in closing: What drives you personally?

The privilege of managing this creative and entrepreneurial company and being able to continue developing it a bit more every day. As a marathon runner, I know that the last few kilometers just before the finish line are the most challenging, but also the most satisfying!