A converted skeptic on growing a pharma business with an entrepreneurial culture

STADA CEO Peter Goldschmidt on instilling an entrepreneurial ethos to help STADA outperform its peers and making growth mindset a strategic priority.

Peter Goldschmidt, CEO of pharmaceuticals company STADA, admits that he used to be skeptical of the role culture played in giving organizations a competitive edge.

“I was scared to death to explain to someone that culture drives performance 20 years ago. Actually, if I’m really honest, I didn’t really believe it,” he said in a recent interview.

Yet since running Central and Eastern Europe and North America for Sandoz, and when taking over the helm of the pharmaceuticals company in 2018, Goldschmidt has made building a growth culture one of the five strategic pillars aimed at transforming STADA into a consumer health, global generics, and specialty pharma player that outperforms the rest of the industry.

STADA’s sales have doubled since Goldschmidt took over, and his ambition is to continue that pace and increase its revenues of EUR 3.8 billion in 2022 by outgrowing the competition, launching new products, and optimizing internal processes. A major lever in achieving this vision is the company’s four core values that define its culture: agility, entrepreneurship, integrity and “one STADA”.

STADA traces its roots back to 1895 when a group of German pharmacists came together with a vision to standardize medicinal products to ensure effective and economical access to healthcare for everyone.

The company Goldschmidt inherited almost 125 years later was made up of largely de-centralized country organizations that to a large extent ran their own product development, manufacturing, and commercial marketing. The fragmented nature of the business meant different parts of STADA would sometimes sign more than a dozen separate contracts with the same supplier.

Goldschmidt recognized the need for an ambitious transformation that would improve collaboration to leverage learning, talent, and technology, while centralizing some processes and reducing duplication and waste.

“The key task from a growth culture perspective was to move from something very loose, not coordinated, and at the same time, very central, very hierarchical, to a company which is run by strong values. And these values build the culture which then drives performance,” said Goldschmidt.

Culture and strategy, then structure and talent

Once the strategy and values were defined, Goldschmidt set to work making sure STADA had the right structure towards it, and crucially, the right people in place to achieve its vision.

“What we did is we mapped out the structure and then we tried to fill as fast as we could with the best people in the industry. Not the right people for the task today, but people who can go where we want it to go in the next 5-10 years for their specific role,” he said.

STADA identified 140 leadership roles – equivalent to roughly 1% of the whole organization – that would be pivotal in spreading these values and made sure they found the best people in the industry to hire them. The opportunity to work in an entrepreneurial environment where fast decisions were valued was a major draw for many industry veterans who had grown weary of momentum-clogging bureaucracy at their own organizations – and for STADA insiders who welcomed the change.

Entrepreneurialism and accountability go hand in hand

So, how did Goldschmidt manage to ensure that STADA’s free-wheeling, can-do spirit wouldn’t get crushed by the controls and processes that are essential to operate in the highly regulated pharmaceutical industry and in a big company of about 14,000 people?

“Our industry is more regulated than a lot of other industries, but, you’re still responsible for how fast you take decisions and how fast people can move themselves from having an idea to execution of an action,” he said. “And how far do you have to escalate when you need additional investments for your business cases? That’s something we try to address when we talk with our leadership team about entrepreneurialism.”

Another way the firm encouraged an entrepreneurial ethos was by asking employees around the world to submit business cases – and not just ideas which competed for funding, said Goldschmidt. Known as “STADA Plus”, the program enables participants to come up with cases that the company could implement in existing and new markets, and which would help to drive growth.

While not all cases will work out, the aim is to foster a venture-capital like mindset that recognizes that the wins will outweigh the losses. “You have to live with the fact that something fails. But big picture, the great successes compensate by far the areas where we fail,” he said.

So how does STADA encourage its almost 14,000 employees to strike the right balance between risk-taking and achieving clear targets?

“Entrepreneurship is something which is really related to being creative, but at the same time being fully accountable,” explained Goldschmidt. “If you as an entrepreneur open something up, a start-up, you convince people to give you money. You invest your own money. You want to be pretty sure that it’s bold, but at the same time, you’re sure and convinced and have a clear plan that it will fly.”

At STADA this means that executives across all functions are encouraged to take ownership and accountability of their business decisions, he added.

Pick up the phone to your colleagues

Another challenge was to balance STADA’s local, on-the-ground agility with the need to implement global structures and share knowledge across country borders to drive productivity. The company needed to be both local and global as embodied by its One STADA value.

“One STADA means if you are an individual, one of the 14,000, you have access to 14,000 other people,” said Goldschmidt. “That means if you see or hear that something happened well in China, or happened well in Vietnam, or in Portugal and the UK, pick up the phone and make a virtual meeting with people who have similar products who are working on the same problems or opportunities.”

The other side of One STADA is building out economies of scale by centralizing some of the purchasing functions and making sure that suppliers and customers only speak to one negotiator rather than several parts of the company. However, Goldschmidt insists that the bias remains towards keeping it local, unless it clearly adds value to centralize.

To foster and strengthen connections between employees working in different countries, Goldschmidt says its crucial to bring them together regularly. All STADA’s country and site heads meet at least two times a year, and normally take part in a monthly call. In addition, STADA lets employees know from the moment they are onboarded that there is a culture of asking questions across the organization. Finally, Goldschmidt presents awards to individuals who have showcased exemplary behavior in upholding STADA’s values every six months.

Growth mindset as a strategic priority

Goldschmidt is a leader with big ambitions and dreams. In his five years at the helm of STADA he has built a platform that should allow the business to scale to five times its current size. His approach, he says, is to focus on the long-term vision and how to get there while fixing the problem at hand better than others.

He compared it to building a house. If you start with small foundations, but three to five years later you realize you need a bigger house, you may have to start all over again. “But if you build the house in a way that it can be a house with whatever, 50 floors instead of three, and you start with that foundation, this is possible, then you can get there.”

This growth mindset is one he demands not only of himself but also others. In fact, in an unusual move, Goldschmidt made a growth mindset one of STADA’s five strategic pillars.

When hiring people, he says it’s important to understand what motivates them and make sure those in important positions really believe in the dream. “We want to have people on board who love what they are doing, who see opportunities others don’t, who are more glass half full than half empty, and are very positive about what they think is possible in life (not only business),” he said.

But how does he track progress on something that many analysts or executives might argue is soft or secondary? One way, says Goldschmidt, is to measure engagement levels through employee surveys. “Engagement levels are a very good predictor of future performance. And I think we have very good proof points where we can demonstrate the high correlation we have between engagement levels and the performance they have achieved in the next couple of months,” he said.

With all the stresses and strains of being a global CEO, how does Goldschmidt manage to keep his own engagement and energy levels up?

“I wake up in the morning and think about what great things can happen today – in life and in business, and I like to go to bed thinking about what was great and what gave me energy,” he enthused. “I’m not a big fan of work-life balance because for me, they’re intertwined – but you have to make sure that you spend quality time with what you think is important in your life.”