VideoAt first glance, one might wonder why Wilmington, Delaware-based DuPont Co.'s Kurt Landgraf was put in charge of a new business unit earlier this year that's expected to boost long-term revenue growth. After all, analysts such as Jeffrey Cianci of Bear, Stearns & Co. credit the 51-year-old former CFO for aggressive cost cutting. Cianci goes so far as to call Landgraf "Commando Kurt" for his efforts on that front.
But now the commando has been charged not with cost-cutting, but with growing revenues, as he is the first to acknowledge. "Life sciences is the growth engine for what DuPont wants to do in the next century," he says.
Landgraf isn't alone. For decades now, CFOs have had to prove themselves adept at troubleshooting by exercising ample ability to cut costs. But as Russell Kersh's failure at Sunbeam shows, finance executives must now show they are capable of doing much more to manage the transition. In fact, cost cutting has taken a backseat to revenue growth as an area in which CFOs must prove they have the most to offer. And that presents an entirely new set of challenges.
In Landgraf's case, his background prior to becoming DuPont's CFO should stand him in good stead in the role of growth engineer. Long before taking the company's top finance spot in 1996, he was focused on producing revenue. In his first corporate job, at Johnson & Johnson Inc., he left an analyst's desk in finance to become a sales representative, and later moved into production scheduling, where he coordinated marketing, manufacturing, and sales efforts. Eventually, he was promoted to what he considers to have been his most important position at J&J--that of a consumer- brand manager--where he says he was "totally customer-oriented at the most basic level."
In 1974, Landgraf left to take a position in pharmaceutical marketing services at The Upjohn Co., where he analyzed market research that he says was far more sophisticated and data-intensive than that produced for consumer products, which is typically based on focus groups. But he says his most important job at Upjohn was head of new-product planning, where, as he puts it, he had to make decisions on "where to spend money, how to spend money, and when to stop spending money."
That experience was not wasted when he moved to DuPont's pharmaceuticals division in 1990. A year later, he headed up its drug joint venture with Merck & Co. The widely heralded venture provided DuPont with a low-risk way of marketing the drugs it was developing. The joint venture was so successful that DuPont recently bought out Merck's stake for $2.6 billion.
Surmounting Skepticism
Nor did Landgraf's evident top-line talent languish when he became CFO in 1996, as he quickly embarked on acquisitions to develop the life-sciences business, leveraging the firm's debt-free balance sheet to do so. When investors still remained skeptical about DuPont's commitment to faster growth, Landgraf helped convince its board to shed Conoco Inc., an oil firm valued at $20 billion to $25 billion that DuPont bought for $7.3 billion in 1981.
Although he notes that the board included financially sophisticated members and that DuPont's CEO, Chad Holliday, agreed with his thinking, Landgraf says the task of convincing the board was difficult, simply because of the amount of money involved. The issue, Landgraf says, wasn't whether to sell Conoco to fund the life-sciences business, but when. And in the end, Landgraf was able to convince the board that "now was the time to IPO an oil company."
As all of this illustrates, Landgraf's approach to growth isn't simply about bringing in additional revenues, but also reflects a savvy understanding of what types of acquisitions, divestitures, and other moves can promise growth in both the bottom and top lines. And that's an area where financial acumen, as well as marketing skill, is needed.
Ticket to the Top
Since DuPont announced it would shed Conoco, the stock has climbed from about 60 to 80, and analysts expect the stock's price/earnings multiple to expand as DuPont's business becomes less cyclical. That, in turn, has positioned Landgraf to succeed CEO Holliday.
First, however, he must get DuPont's new engine started. The matter has assumed even greater urgency in light of the disappointing earnings that the company announced for the second quarter of this year. Yet achieving success in his new role requires a perspective that Landgraf says is much different from "the traditional CFO mindset of cost controls as an earnings-growth driver."
Other CFOs who have moved out of finance and into the more strategic role of generating top- line growth include Alan Lacy at Sears, Roebuck & Co. and Thomas Deloach at Mobil Corp., who are trying to turn around existing business instead of heading new ones. And still others are doing so via the more traditional route of taking the reins of other companies.
Among the latest to take their perspective to the helm of another company is Frank Weise III, former CFO of Campbell Soup Co., who recently took over as president and CEO of Cott Corp., a troubled beverage-maker based in Toronto. Weise played much the same role in April 1995 at Campbell, when he moved out of the CFO slot he had held for three years to head up its struggling bakery and confectionery division. Like Landgraf's, Weise's marketing skills were honed in a series of operating stints that preceded his ascendance to a CFO's spot. Weise first developed his nose for revenue during a 25- year career at Procter & Gamble Co. By the time he left in 1992, his time there had included some 15 assignments, all of which called for him "to go in and fix a problem." These ranged from troubles plaguing product areas such as food and over-the-counter drugs to difficulties in foreign markets.
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