Building a growth engine by balancing soft and hard
ReD leadership perspectives
A conversation between Christoffer Lorenzen, CEO at Karo Pharma & Mads Holme, Partner at ReD Associates
Part 1
The CEO’s agenda for leading a company with Private Equity owner
ReD: Thank you for speaking with us today, Christoffer. Could you start by talking a bit about what kind of organization you encountered when you joined Karo in 2019?
Christoffer: EQT had a acquired the majority of Karo Pharma and was led by a group of ambitious partners who saw a lot of potential and wanted to see dramatic change. There was already an ambition and a burning platform – the need to change was already there. It was a company that was shaped by its past, having been through a very strong period of growth. As a result, it was an incredible execution organization, yet most of the core processes needed maturing.
Also, the people I met had been driven quite hard, so I had to be mindful when implementing changes. I don’t believe you need a tough, cutthroat atmosphere for people to do a good job. I think that control, follow up, micromanagement, are obsolete at best, negative and detrimental to happiness and results at work. Due to the high pressure, I encountered an organization challenged by a reluctance to try new things and voice opinions. You focused on your core tasks and didn’t want to mess any of the core ideas up, so you also got departmentalized people focused on their thing.
But I also saw a group of ambitious and hard-working individuals. I was impressed by what they had achieved. So, it was not about the level of talent and commitment of the people, it was more about the context and situation the company was in.
“It was important for me to take ownership and take up the challenge and ask ”why not be more ambitious?
ReD: What was on the top of your agenda after getting a sense of the company and the people in it?
Christoffer: Given the level of pressure in the company, I decided to respond a bit differently. EQT asked us to grow to x percentage, but it was important for me to take ownership and take up the challenge and ask ”why not be more ambitious?”. It was important to me that we were playful with it and shot for the stars and through this I hoped to create a sense of being in it together and of being able to create a uniquely strong position. A leader does not have to be immortal and infallible, but he or she has to demonstrate that there’s a path forward and that know what they’re doing. If you can radiate this sense of competence, this reduces fear, uncertainty and doubt for the entire organization.
After this, I knew I needed to start with people. I got the right advisors and expertise in and quickly set the top management team. I clarified the touch points between these leaders and the rest of the organization, and went on to the next piece of governance that needed to be clarified: the brand portfolio structure. Karo had over 80 brands and we needed to communicate a bit more simply. We did this by taking a piece of paper and putting all the brands on it, and splitting them into six categories that people could connect to and understand. That discussion then led to a discussion around purpose, which was the next step in the process. We defined a new purpose and values collectively by involving the entire organization in a series of workshops. Then the final step was to do a Full-Potential Plan.
Part 2
Building a human-centric Full-Potential Plan
ReD: You chose to do the Full-Potential Plan (FPP) differently than standard practice would suggest. Why did you choose to do that?
Christoffer: The Full-Potential Plan is a key part of the EQT toolbox. What was important for me, was how I could deliver on that, and at the same time create as much positive impact for the organization as possible. We knew we had to change several core systems and so forth. Two core components of the FPP were exploring future drivers and trends, and driving organic growth, and I knew ReD Associates could help us with that.
Firstly, I wanted to further explore the purpose and build a consumer-centric full-potential plan. In a way, we were putting our new purpose and values to the test with the FPP process. ReD could help us test our internal understanding of the markets we operate in, the consumers we serve, and how they think about decisions in everyday health. Through this process, I was hoping that the outcome would be putting structure and texture into the purpose and provide our employees with a shared mental map and heuristic of our customers.
The second thing ReD could help us with was to learn how to learn. The ability to learn via rapid cycles of experimentation and to meet fundamental problems with questioning is critical to creating a growth engine. Embedding a mindset that solving big problems is fun can absolve complexity and help us pivot. If we are able to do that across the entire organization, we have a really strong component for a growth engine.
“We wanted to go much deeper to understand how consumers approach their everyday health. What are the words they use, how do they feel, who do they trust, how do they make decisions?
Using an ethnographic research approach was something EQT was not used to. They usually pursue a conventional approach that is more linear and financially driven. We could have gone with this approach and had a group of traditional management consultants in for 2 months who would have told us we could grow 7% by doing x and y, but what would have changed? It wouldn’t have given us skis or shovels to plough through the snowstorm. With the ReD approach we were given tools and perspectives that we can use to make sense of our world for years to come.
ReD: So, what did you learn from the research?
Christoffer: Our starting point was that we had a lot of hypotheses and regurgitated information about key trends. We wanted to go much deeper to understand how consumers approach their everyday health. What are the words they use, how do they feel, who do they trust, how do they make decisions?
“With the ReD approach we were given tools and perspectives that we can use to make sense of our world for years to come.
I learned many things from the insights. A core learning was what we called ‘Project Self-Care’, which came out of a growing mistrust of the conventional pillars of trust in society. We saw a need for real, truthful information based on high integrity. We felt that we had an opportunity to provide information. I also understood that when people talk about their health, they most often described themselves as being in good health, even though they had many ailments, such as eczema, haemorrhoids, or foot fungus. And there was a surprising number of smaller things that most people dealt with. These backgrounded ailments are part of something we called “health minus”, which is often not top of mind when people think of their health.
Adding these things together, the absence of trust, the perspective of health, and health minus, I understood that there is a deeply emotional element in what we do. Our work should be to normalize issues, remind people that others have similar challenges, and convince them that it is okay to have them. We need to break down the barriers and stigmas that surround some of these things.
Helping people find better treatment means thinking about how to systematize things, such as the customer journey, phases of decision making, what we need to emphasize across different brands, and so on. We now believe that there is an opportunity in everyday health to do a lot better on supporting our customers with resolving these issues – especially when it involves stigma or shame.
The outcome of the work was that it helped us sharpen messaging on brands and products, it helped us develop the right types of tools and platforms to connect with our customers, and it helped us become more focused on when, where and how we bring value – for instance in relation to M&A and digital investments. In terms of the FPP, it has helped us raise our growth targets by more than 50%. And one of the things I’m especially proud of is that we are already now seeing that the new way of working is creating a stronger consumer orientation and entrepreneurial mindset among our employees.
PArt 3
Future perspectives on everyday healthcare and the organization needed to enable it
ReD: From your perspective, what does the future of everyday healthcare look like and what will characterize the winners?
Christoffer: I think that the online and offline journeys will increasingly merge. Seeking advice and getting to solutions will be made easier through digital channels. Within the next few years it will be common that you see a doctor via video conference. The lines between prescription drugs, OTC and cosmetics will also be increasingly blurred. So, consumers won’t really care if a medication is prescription or not, they’ll care about whether it gives the expected outcome or not.
The brands and retailers that will win will therefore be those that can support consumers through this new purchasing process. They need to be able to guide purchasing decisions with trustworthy information and address people’s concerns about safety and quality.
“ Dealing with ambiguity and uncertainty will also be a critical organizational capability. You have to build a mindset of “That sounds like a tough problem – I can’t wait, let’s get started!”
Dealing with ambiguity and uncertainty will also be a critical organizational capability. You have to build a mindset of “That sounds like a tough problem – I can’t wait, let’s get started!”. The way big corporates did it in the past, detailed planning of every step of the way towards a well-defined goal does not work anymore. Companies today need to get going by setting a general direction, iterate on the core hypothesis as you go, and make increasingly educated choices the closer you get to your constantly evolving target.
Christoffer’s advice for other leaders
1. Challenge your assumptions
First, work with your assumptions. You often sit far away from where value is added, which can be dangerous. When you dare to challenge your prejudices and hypotheses you see the market in new ways and discover new growth opportunities.
2. Create a learning culture
Create a learning culture by combining the hard and soft. Have the processes in place for constant learning and experimentation, but also nurture a culture based on curiosity and excitement around solving complex problems.
3. Build a consumer mindset
Finally, build a consumer mindset in the organization. Anything you do, whether it is sales, M&A, marketing or IT, needs to have the consumer as a starting point. Consumer orientation is a leadership discipline.
SITUATION
Coming into an organization to triple the revenue in 3-4 years, Christoffer Lorenzen was interviewed about his thoughts on how to lead as a new CEO, build a growth organization in a company largely owned by Private Equity, and the future of healthcare.
In 2019, private equity fund EQT acquired the majority shares of Karo Pharma with the ambition to build a leading OTC provider in Northern Europe. Later that year, Christoffer was brought in as CEO to lead that journey. Christoffer made the transition from Chr. Hansen, where he had been part of leading the company’s successful growth journey.
About Karo Pharma
Karo Pharma is a healthcare company based in Sweden. The company’s revenues in 2020 were SEK 2.9 billion and it has portfolio with over 80 brands across six categories, including in intimate care, foot care and dermatology.