“Never Leave Out the People Aspect”
Philipp is the CFO of SAP’s business activities in Central Eastern Europe, supporting 16 legal entities in 11 countries. After graduating in Business Administration at the University of Mannheim, Philipp joined SAP in 2004 as Executive Assistant to SAP’s former Group CFO, Werner Brandt. Later on, he joined SAP’s Corporate Development organization, specializing in supporting and executing mergers and acquisitions for the SAP group. Philipp gained his first experiences as CFO during his assignment as group CFO of SAF AG, a software company headquartered in Switzerland, followed by his appointment as CFO of SAP Austria. Before taking on his current position back in 2015, Philipp was heading a global post-merger integration project for two keystone acquisitions, SAP Ariba and SAP SuccessFactors. I was looking forward to interviewing Philipp, as I was told that he has a great sense of humor and did not succumb to the stereotype of an introvert number cruncher. Philipp started his presentation with a joke (making fun of Germans while being German himself) and ended up with the plea to “never leave out the people aspect in the transformation journey”. Welcome to the future of finance!
One of the topics of the SAP NOW Week conference is the future of finance in times of digital transformation. In your keynote speech, you actually mentioned that the future of finance is already here.
The trends of this everlasting challenge are already visible. In particular, there are two driving forces related to digitization with regards to the CFO function. The first aspect deals with the operational part of finance work, which is becoming more automated, and with the help of new technologies like machine learning and digital networks, the process of automatization will continue to increase. As a consequence, we will be able to use the freed-up capacities for value-added services. Each finance function carries three different hats: a steward who is taking care of the compliance part of the role, a business partner who is supporting the business and providing the services needed, and a transformation agent who helps the organization become an intelligent enterprise. For us at SAP, we have maintained and stressed for a long time that digitization is a topic for the whole management board, not only the IT department. The primary task is not to define the company strategy for digitization but to define the strategy for the digital age, as this touches every function in the company.
I really appreciated that you shared the transformation journey SAP has taken. From processes to people and then systems, from one business model to multi-business models. You have also mentioned several phases of the transformation. Which one do you consider to be the most challenging one?
For SAP, the journey started several years ago and since then we have been going through a continuous transformation and innovation process. The crucial message is to take it step by step, from the process side, then streamlining, harmonizing, standardizing, digitizing to pairing it with new technologies and innovations. Each phase brings its own challenges. I see quite frequently that the mindset challenge is breaking with the past, as there is often the tendency for autoresistance in terms of thinking “we have always been doing it like this” or “we are so unique and therefore special”. Therefore, standardizing and harmonizing across the whole company presents a challenge. One cannot stress enough the people aspect, to develop people to be able to cope with new challenges and to truly help them to evolve to the next level, so they can start performing in the role of the transformational agent.
Speaking of employees, the most admired innovative companies share all relevant data with their employees, so they know how the company is doing in financial terms, how their particular team is contributing, and so on. How does the SAP system and Digital Boardroom enable this?
We have to be careful, as a New York and Frankfurt Stock Exchange listed company, about sharing the corporate key performance indicators in real-time. We share these after the results have been published, but then on all different levels, countries, market units and regions. Of course, the leadership teams receive all information that is relevant for them in real-time. In addition, the most important figures to steer the business have already been gamified. As regular reports show “end of the race” comparisons, you see how you are doing compared to your targets but also how your peers are performing. The transparency often provides some extra needed motivation towards the end of the quarter to not only meet the budget but also to come first!
What a change to the times when I started my corporate career. I remember how only few privileged ones had access to several printed excel sheets at their hands that they kept debating for long hours behind closed doors.
This has totally changed. From hidden links on the sheets shared on a corporate portal to info shared via emails handed from generation of controllers to the next ones, we have created a huge analytical layer and an organization being responsible not only for defining KPIs (key performance indicators) but also for providing all the reports necessary for steering the company. These reports are stored at what we call the enterprise analytical store, in one place that every employee has access to and can look via a search for the reports he needs. Of course, you have to have the authorization to see what you are supposed to see but the analytical assets are available to everyone.
You have already mentioned gamification, motivation and the end of quarter adrenalin race. How can spreadsheets be fun for someone outside the finance department?
I might be biased on this issue, as I truly enjoyed building complex financial models, designing these and making sure that everything was linked, it reminds me of an art piece. This being said, I also understand those who do not understand it. Spreadsheets are still powerful tools, providing flexibility in manipulating or simulating data. On the other hand, we see the tendency of moving away from spreadsheets. In former times, if you were preparing a presentation for the management team, you took several reports from the system, combined and compared them in Excel, enriched them and finally you exported the view you wanted to present to the management to be included in a PowerPoint presentation. We are moving away from these and towards our Digital Boardroom, which provides real-time insight into all company performance elements, so we can look at the online reports according to our needs in real-time, not as of several days ago when the presentation was being prepared. The days when every piece of management information and data had to go through Excel and PowerPoint are definitely over! Furthermore, the use of the SAP Digital Boardroom presents additional advantages. It stimulates live collaboration between board members, as participants all see the same data regarded as one single source of truth for all with no data duplication needed, no separate Excel or PowerPoint files. Total transparency is increased by the fact that standard-based reporting on key functions such as financials, operations, marketing and sales and the analytics is no longer done by stakeholders (who might be biased individuals), but by an independent system. Digital Boardroom is simple to use, has intuitive user interface and – as the next generation is said to be a visual one – rich visualizations of live data eliminate static presentations. Last but not least, Digital Boardroom can be used not only for reporting, but also for fast, flexible, precise decision-making using pattern recognition, simulation and predictions which again brings the transformational agent function that we have discussed already.
We are reflecting on 10 years since the Lehmann Brothers crash this September. Speaking not only about data, but also about the ability to use them, how was SAP prepared for the crisis? What have CFOs learned since then? Can you predict the next crisis coming?
I was with SAP and living in the United States in the Bay area, so I truly had first hand experience. I would not say the crisis came out of nowhere but for sure the fall of such a large bank was a shock. I do remember when the news started and suddenly the whole financial industry was affected. I think no one was prepared for that crisis and it caught us by surprise. Not overnight but over a few weeks, roughly 50 % of our pipeline had disappeared in certain markets. Everyone was stopping IT projects and investments. SAP got through the crisis not only managing costs but also having a stable backbone thanks to the reoccurring maintenance revenue scheme. The lesson that CFOs had learned was to build more robust, more predictable and more flexible business models. The transition of SAP to become a cloud company was accommodating this ambitions. By 2020, we expect up to 75% of our revenue from the cloud and maintenance services. I believe that many companies have done a similar thing reinventing their business models and moving towards subscription-based consumption models. I also must mention cost flexibility. The topic of contingent labor is highly sensitive and political, but from the financial side a reasonable one. Last but not least, I believe the crisis was a point of awakening. Opportunities come with risk. Mitigating the risks has the same relevance as managing the opportunities.
In 2020, another crisis is being predicted. Are companies in better shape to face the potential upcoming financial crisis?
Although economically we are in a slightly better shape, a crisis is a crisis. We have seen certain economical and financial crises in the past and each of them brought some learning effect with regards to a run for profitability and opportunities to make money. The next financial crisis will be different, the fire is likely to start somewhere else, but in this globalized world spill over is quite easy not only geographically but also industry-wise. There are plenty of potential contentious sparks, such as a US-China trade war or China and its booming economy with its lending, and the Euro crisis has not been solved either. Plenty potential candidates but if I were to name the one and when, I would be running my own hedge fund and would have missed the opportunity to work for SAP and do this interview for the Czech and Slovak Leaders Magazine.
Does it make you nervous somehow to be an expert, to know that we are approaching the top and from the top you can only go down?
That is a very good question. I look at it from a “circle of life” perspective: It is in our nature to push for growth and profits, to run for the opportunity and money. But this comes very often with a self-fulfilling side-effect that risks are being under- and market values are being overestimated combined with the hope or believe that the rally will not end. Although our outlook might be more optimistic, the history shows many crises, such as the great depression which started in 1929, that one could not have been fully avoided. Getting nervous does not help. You need to prepare yourself as best as you can and then take every crisis as a new challenge and learning opportunity, question your performance and turn the crisis into advantage.
You were heading a global post-merger integration project for two keystone acquisitions, SAP Ariba and SAP SuccessFactors, being responsible for the financial aspect. Each merger is said to have three phases – analysis, implementation and then post- implementation phase. What have you learned? Is one phase more important than the other?
As I was supporting the merger and acquisition execution for more than three years earlier in my career, it was an interesting learning experience to also be responsible for the back-side of it, namely the post-merger integration. While the first part mainly deals with the identification of financial targets, followed by financial models to the final contract negotiations and decision to acquire the company, the post-merger integration is all about realizing the expected synergies while merging process and organizations – in my humble opinion the for sure more challenging part and where you can win and lose a lot. My take-away from the post-merge can be summarized in the following statement: “One size does not fit all”.The post-merger and acquisition phase is more about careful hand-tailoring of the integration to the corporate strategy, to the challenges of the market and most of all, to the purpose of the acquisition and to the acquired company itself. With regards to SAP SuccessFactors and SAP Ariba, we had two goals: becoming a cloud company and therefore we wanted not only to protect their agility in the market, the knowledge about cloud and the business thinking connected to cloud solutions, but we also wanted to take all these components and infuse them within the SAP environment as such, to become a true cloud company in our DNA. The focus of integration is definitely centered around people. Do not underestimate the topic of change management, talent management, clear communication, all these are important, as the value of the company comes with the people.
Philipp, in your surroundings, you are known to be a CFO with a great sense of humor. Are you aware of that? Why are CFOs often labeled as boring, pessimistic and introvert managers?
Are they? I would agree with the introvert dimension, but that does not mean lacking a sense of humor. I am a forced extrovert during presentations and I always make sure to include jokes, as you could see. I find humor truly essential, particular in the work place. You cannot have just business facts and reports without a chance to laugh with your colleagues. I laugh a lot, sometimes with tears. How do you manage to keep your optimism, even when looking at “bad numbers”? I take not-so-good results as a challenge for improvement. I get a lot of energy from the people I work with. SAP has a truly wonderful work culture, combining a high degree of professionalism with a lot of personal touches. I also love sports. Cycling, playing golf and I am already looking forward to skiing in the winter.
By Linda Štucbartová