Dr. Duclos, you have been both CTO and COO since early July. Why is one individual filling the two jobs?
As part of my CTO role, I have been responsible for HSE and Quality as well as Technology and Innovation. The Safety and Quality aspects of the CTO role required me to become involved with operational issues. Therefore, my predecessor Dieter Schäfer and I worked together very closely and through this collaboration, I have become very familiar with the operational challenges facing the company. For me then, the combination of the two roles is less of one individual filling two roles but rather is a natural addition of responsibilities that are synergistic with my role as CTO.
Over the past three years, in my role as CTO, I was able to focus on improving our innovation processes and in the three years since I arrived, we have established a strong, cross functional innovation process that is improving the innovation commercialization process. At the same time, Dieter was establishing and improving our operational processes. Now that these innovation and operational processes have been established, it is the right time to combine the roles and integrate these processes even further to create cross functional approaches.
How are you managing to bring the full range of these tasks into one role?
My philosophy is to help employees become more active on their own. I am integrating the systems in such a way to continually empower employees to take ownership and act in more entrepreneurial ways. This is a cornerstone of the management philosophy of my GL colleagues and myself. We have extraordinarily capable employees in FST. My role is to lead in the development of systems that enable people to work in a cross functional manner in processes that enable the company to fufill its goals.
Maintaining our competitiveness and bringing technical solutions to the marketplace are two critical capabilities that we need to continually improve in order to remain a successful business. Methodologies such as lean manufacturing, kaizen culture, total quality management and innovation commercialization are all present in our company, but they are not always used together in a harmonious way.
Can you give us an example to illustrate this?
I am now working with the functional and operational groups to bring these things together into systems that complement each other and are focused on improving competitiveness and technical solutions through productivitiy improvements and innovation. One concrete example of this is that next year we will combine the Rapid Plant Assessment and Quality audits into one business systems measurement tool. It is aimed at identifying the areas where our manufacturing sites can make improvements that will improve their business results as a whole. In addition, we are streamlining the Customer Value First meeting process to make the discussion more focused on how the functional groups can work together to help individual businesses find solutions to their operational problems.
These systems are being developed with the affected people participating in the decisions and contributing to the deliberations on how our processes should operate. That was the core of what we addressed with the innovation alignment process: bringing all the relevant parties in the company together, setting priorities and, after joint discussions, teaming up to implement them as quickly as possible.
That fits with your oft-mentioned call for ideas to be discussed openly.Yes. Top leadership can never have all the answers. We can only make good decisions if we get first-class information. And that means discussing ideas – and then trying them out.
Continuous improvement is all about trying things, measuring the results and improving based on those results. The important part is the improvement part and this doesn’t work if you don’t really know what is happening. Therefore, it is critical to have a culture where everyone feels comfortable trying things, reporting results and then working together as a team to make improvements where they are needed. This requires a culture of trust and openness.
It also requires a culture of willingness to tackle difficult problems with the confidence that we can solve them. I often tell people to “run towards problems”. What does this mean? It means that when we have a problem we need to rally together to find solutions. It always surprises me whenever people do not want to work on a difficult project for fear that they may damage their career. In fact, it is the opposite. Whether successful or not, I always found that working on difficult problems and being willing to address difficult situations have helped me.
Another part of the culture of openness and trust is the willingness to share our dreams. I have asked people to dream, but do so with a purpose and that purpose needs to be for the improvement of the company. I know all of our employees have good ideas for improvements at work. I want people to be comfortable sharing those ideas.
Not every idea can be carried out – and certainly not at any time you choose. Isn’t that right?
The challenge is to identify the right ideas and focus on them. And that’s exactly what we plan to do. I want people to feel comfortable expressing their dreams. Yes, dreams…but dreams with a purpose. The alignment process involves that as well. Of course, we can’t do everything. We still have to see what’s feasible and whether there is economic value for us. And, in the end, the more difficult - technically or otherwise - the implementation, the greater the value of it must be to us. Otherwise we won’t do it.
“It is also important to understand that innovation is not just applicable to products and it is not just the job of the technical people. Innovation can be applied to all the things we do in administration areas and in operations.”
But the notion that some ideas will be unsuccessful is part of innovation?
Right. But not every idea that falls through is a failure as long as we have gained new knowledge from the experience. A while back, we developed a seal with a built-in leakage detector. It was a good idea – unfortunately, it didn’t reach the market. But then a customer told us, “I just want the leak detector function.” And now we are in the midst of developing a special leakage detector in the product line that sends out an alert when it discovers a leak somewhere. That’s exactly what I mean. We learned about leakage detectors from the first product. It was just a first step toward a potentially whole new set of products. Incidentally, the leakage detector was a “dream” of one of our employees. It still remains to be seen whether this will be successful, but I think it exemplifies how we build on our past experiences.
It is also important to understand that innovation is not just applicable to products and it is not just the job of the technical people. Innovation can be applied to all the things we do in administration areas and in operations. In fact, operations may be where we are most innovative today.
Can this concept be applied to the changes underway in the auto industry, which are opening up new opportunities for FST even though they represent a threat?
Absolutely. As an example, three years ago, the more we looked at e-mobility, the more we realized what we are already doing is applicable to it. We realized that although the change to e-mobility could have been seen as a threat, in reality we had a new opportunity. As we looked closer at the needs in e-mobility, we understood that there are many applications in this new area for our technologies. The big challenge that we are aggressively tackling now is applying those technologies to new products.
So do you see new opportunities instead?Yes. In the process of learning about the opportunities in e-mobility, we also found new opportunities in whole new business areas such as battery modules and fuel cells. While these new products use many of our current technologies, we understood very quickly that in order to really compete, we needed to acquire key capabilities and this is what led to the XALT Energy and Elcore investments and acquisition.
With these investments, we gained people with tremendous knowledge and capability in the areas of electrochemistry, system design, software, and electronic controls. Now that we’ve been able to get into the battery and fuel-cell businesses, we also see that there are synergies between them, and we may be able to develop a hybrid system. The innovations are building upon each other. And the story is far from over: We are now creating and optimizing the manufacturing processes that will enable us to commercialize these investments fully.
But many manufacturers still don’t consider fuel cells to be economically efficient.
Quite frankly, if anyone is currently well-positioned to build fuel cells in the near future at an economically viable price, it is FST. We already produce a great many of their components. The same applies to the battery business. The best part is that we can take advantage of the expertise of the Freudenberg Group since there are a number of potential synergies. We believe that we have the capability to make them commercially viable.
But doesn’t change always involve risk?
The real risk is when you don’t change. By embracing change and setting our course toward it, we minimize risks. If we aren’t willing to change then we lose the ability to create our own future and we will fall behind the competition. Freudenberg companies have continually and successfully changed over the course of our history. After all, we aren’t producing leather seals anymore, are we?
As an example, consider the Simmerring. In the 1990s, we might have said it had reached its pinnacle of development. But improvements were made and innovations like the energy saving seal and the gas-lubricated mechanical face seal, Levitex, emerged. Change is always occurring and in order to stay ahead of the competition, we need to be ready to change ourselves.
Does that mean challenging what we do at work each day?
Yes, it does, but we need to do this in a way that motivates the organization to improve and doesn’t instill fear. Sometimes people have a problem acknowledging they’ve found a better process. They think they could be accused of poor performance up until that point. I’m very happy to point out that FST has always done good work. We’re good at what we do. We have a coherent strategy. We’ve identified the right problems and are tackling them. We’ve launched initiatives to ensure that we won’t just survive but will continue to grow. But that doesn't mean that we can’t improve. Continuous improvement is the foundation for the success of any sustainable enterprise.
“Key metrics for me are safety, quality, our innovation rate, productivity and working capital.”
What metrics are important to you?
Key metrics for me are safety, quality, our innovation rate, productivity and working capital. Excellent results in these metrics will make us successful over the long term. That’s the straightforward answer, however, metrics are an interesting topic.
Can you explain that?
The real question about metrics is what should we measure and how should we react to those measures in order to achieve excellence in the four I listed? In my opinion, we compile far too many metrics and these metrics may have little value unless we understand what they are telling us and what courses of action might emerge from them in order to improve our results. I say this because when too many metrics are collected, there is a danger of the data being inaccurate and a danger of wasting a lot of time collecting them.
We need to turn the question around. We need to ask, what are the key inputs that lead to the company’s success, and what levels of these inputs need to be achieved to create the success? This can lead to completely different behaviors because once people understand the power of metrics that lead to success, they make sure the metrics are accurate and they will focus their efforts on those. Once you are forced to rely on the data, you will automatically make sure you are getting the right metrics, and you will no longer collect the metrics that you don't need. Of course there are always measures that we need to make for other purposes, but we should keep these to a minimum.
That sounds like an unusual approach in the age of “Big Data.”
“Big Data” doesn’t save us from the crucial issue. Are the metrics we collect the right ones? There is great potential in “Big Data,” but it is important to make sure we are looking at the right numbers. Otherwise, in the end, we won’t see anything at all.
For example, if a system is operating in a stable state, you can’t deduce anything from it even if you are collecting a lot of data. You have to shake the system with variations in the inputs or observe the system’s reaction to a change in inputs. Only then can you derive data-based system models and understand how to improve the systems. If you aren’t doing that, you can get surprised when a system that has been fully functional suddenly develops problems in response to unexpected changes.
Digitalization will help us immensely in this arena. We will be able to automate a lot of measurements and then use these data to understand our systems and make better decisions.
The new warehouse in Bischofsheim will soon begin operations. What benefits do you expect to result for our supply chain?
Logistics is an important part of operational excellence. Our warehouse inventory represents our investments. If we want to be efficient, if we want to be “lean,” then we should keep our inventories as low as possible. And that’s exactly what our new warehouse in Bischofsheim does with its modern logistical processes. The supply chain team has done an excellent job there.
Does this also have something to do with sustainability?
Sustainability is very important to me. We are still producing too much scrap in our manufacturing operations, including the so-called “engineered waste.” Reducing scrap and engineered waste is not just an environmental question. It helps us cut costs as well. We reduce our inventories. We manufacture more efficiently. That makes economic as well as environmental sense.
What priorities are you setting for the near future?
We need to stay focused on several things. As always, the safety of our people and the quality of our products are the priorities. Productivitiy improvements, having the right level of working capital, the commercial introduction of innovations, and the investment into our digital infrastructure are also very high on the priority list. Over the past several years we have championed the campaign to identify examples of best practices. We need to now put those practices into operation across the company to reap the benefits. Both our existing sealing businesses and our investments into e-mobility will benefit from this focus.
What about your personal plans? You’re active in half-Ironman triathlons. Is it true that you competed in half-Ironman Ironman events four times last year?
Yes, but there’s a good reason for the number of competitions. I had set the goal of making it into the Top 100 of American competitors in my age class. In order to get into the annual evaluation, I had to do at least three races. In one of them, I had a flat tire and everything went awry. So I added a fourth. This year I took it a little easier and only did the shorter length Olympic triathlons, and next year I’ll probably do the same, though I admit the idea of another half-Ironman event appeals to me. I like the challenge. I like the training – and not just the physical training. A triathlon has a mental component as well. Always driving yourself forward. Persevering. Being patient, since you won’t go the distance if you start out too quickly. And you have to pay attention to the details, such as the right nutrition. There are a great many parallels with life and the world of work.
So you have a positive view of the future.
It is an interesting time for our industry. Many positive, exciting things are happening at Freudenberg, and we are seeing a whole range of new opportunities along with challenges that go along with those opportunities. I think that’s a really important message to our employees and everyone out there who is looking at FST. The future looks fundamentally positive. Of course, there will be downturns, such as we are experiencing this year. Yes, there are changes in store for us, but they will work to our advantage. Yes, the way we manufacture and what we are producing will change. But electric mobility is presenting us with opportunities. All in all, I see it as another important reason to combine the areas of technology and operations together.