Interview with Thomas Rabe

“We are already significantly closer to achieving our target portfolio.”

Bertelsmann is to become a faster-growing, more digital, more international and more diversified company. That seems very ambitious. Why four goals all at once?

These four objectives belong together, but their order is not random. When we developed our strategy five years ago, all of the Group’s bodies quickly agreed that growth should be the top priority. Growth is the foundation that enables us to invest in our businesses and to continue developing our employees.

How do the other objectives fit into this plan?

They feed into it directly. Take digitization, for example. It is perhaps the most important megatrend of our time, and growth rates in our digital businesses are accordingly high. The same is true of internationalization. Many market segments in China, India or South America are growing significantly faster than in Germany and the rest of Europe. Therefore, expanding our presence in these regions also means faster growth.

And what about the fourth point of becoming more diversified?

On the one hand that, too, is about growth – we want to expand our fast-growing lines of business. On the other hand, it is also about reducing dependence on specific revenue sources.

You just mentioned the strategy process began in 2012. What has Bertelsmann done in the past five years to achieve its goals?

Four strategic priorities have been established and remain decisive for us – strengthening our core, digital transformation, building and expanding growth platforms, and the regional expansion of our businesses. To achieve this, we have developed our core businesses, withdrawn from structurally declining ones and built new ones. For example, since 2011, we have invested more than €4 billion in digital and high-growth businesses.

What do you think of the progress that has been made to date?

Bertelsmann’s development has been gratifying in the past few years. Even as we undertook an extensive transformation of the Group, we were able to increase our operating result by an average of around €100 million per year – most recently to a record €2.6 billion. At the same time, we made great strategic strides – from the integration of Penguin and Random House and the full acquisition of BMG and Gruner + Jahr to the establishment of our education business, to name just a few.

How has this actually made Bertelsmann faster-growing, more digital, more international and more diversified?

We are already significantly closer to achieving our target portfolio. Our growth profile has improved noticeably over the past five years. In 2011, our high-growth businesses contributed just 20 percent to total revenues. By 2016, they had already increased to 30 percent. In the future, we want to increase our share to 40 percent. In addition, we have downscaled our structurally declining businesses over the past five years. They now represent less than 5 percent of Bertelsmann’s revenues; in 2011, they still accounted for 16 percent.

And what about the other goals?

We are rapidly becoming more digital. Many of our divisions are leaders in their respective markets. RTL Group is one of the biggest players in online video. Arvato is a service provider to the world’s top high-tech corporations, and the business models of BMG and our education providers benefit from digitization. These and other developments are reflected in our portfolio. Bertelsmann now generates 44 percent of its revenues from digital businesses. In 2011, it was just 30 percent.

What most demonstrates that Bertelsmann is becoming more international?

The fact that we have seen a significant increase in our revenues outside of Europe in recent years. In 2011, they accounted for 20 percent; in 2016, 28 percent. The expansion of our business in the United States, the world’s largest and most innovative media market, has contributed significantly to this development. In the medium term, we plan to generate 30 percent of our revenues there. But we have also strengthened our presence in the strategic growth regions of China, India and Brazil.

And where is Bertelsmann in terms of diversification?

Bertelsmann now has a broader portfolio than ever before – with eight divisions based on the three pillars of media, services and education.

So Bertelsmann intends to continue developing its portfolio in the years ahead. How will this affect your business performance?

In the medium term, we are aiming for revenues of €20 billion and operating EBITDA of €3 billion. If we continue the successful implementation of our strategy, I am confident we will achieve this in the next three to five years.