David Simonnet (E93) leads the Axyntis Group, an independent company he created in 2007 and France’s market leader in fine chemicals thanks to its industrial capacity (6 factories, 3 R&D centers, 430 employees and more than €80M of turnover with 70% added value). He is currently finalizing the takeover of the active ingredient manufacturing activity from the American group 3M. His credo: a long-lasting vision for the company.
EA: How did you get into chemistry?
David Simonnet: After my first job in 1993 at the office of the Mayor of Paris and doing military service, I joined Mars&Co where I worked alongside the Treasury department for a strategic review of the aerospace industry and its affiliate company, Eurocopter. I wanted to pursue a career in this industry because of its mixed challenges, both public and private. In 1996, I joined the SNPE group (formerly the Société Nationale des Poudres et Explosifs) in M&A and strategy to support its repositioning in civil markets. I became convinced that chemistry was one of the most interesting industrial professions because it was so technical, risky, and widespread in its application markets. We often think manufacturing is static, especially compared to new information and communication technologies that are constantly changing. In reality, we see manufacturing time and time again at the heart of sustainable, economic and social transformation. That's why we have to stop its decline.
EA: You're quite hard on digital technologies. Why?
D. Simonnet: Yes, I am critical of them because I don’t think digital technologies can fill the gap left by the slow-down of growth and work productivity. NICTs don’t hold as much weight as people think. They only account for 4% of French GDP and 5% in Europe. And in the end, how many branches are we talking about? Google, Amazon, Facebook and Apple combined have fewer employees than La Poste! That doesn't mean that La Poste shouldn't have its digital revolution – on the contrary, it's already well underway. But we can't start a digital revolution without evaluating its social impact.
EA: Digital companies also provide jobs…
D. Simonnet: Especially new kinds of jobs that speed up the destruction of others. So is it creative or destructive destruction? Behind the “trendiness” of digital companies and their "cool" ambiance, there’s a contradiction: you expect your employee to be independent and take initiative to develop tools that will ultimately reduce the need for employees.
But my most radical criticism is of certain digital activities that remind me of the mafia. Take the example of online hotel booking sites. Compared with the classic hotelier, a platform has succeeded in making itself a necessary step for booking a room, and deducts a percentage on all transactions along the way. But it doesn’t own the property, nor is it responsible for its operation and employees. So we have someone making money whose economic and social liability is “outsourced” to the business owner, who has no choice but to accept this predatory logic. Not to mention tax optimization mechanisms that are similar to money laundering. Not all digital companies do this, but we should definitely question and regulate the model.
EA: In manufacturing there are very different profiles: we need researchers, engineers and factory workers, which we don't find in the digital sphere.
D. Simonnet: Yes, the profiles are different, but the main difference lies in the work contexts. A good chemical manufacturing operator has at least five years of experience, a good R&D engineer ten to fifteen years, so working in manufacturing is, above all, about finding value in the long-term. But it’s also about moving forward in a declining industry. There were 4.5 million employees in manufacturing when I entered ESSEC, and today there are 3 million. The manufacturer's challenge is to stop this decline. Over the last ten years, the emergence of China and India has also increased competition in European manufacturing.
EA: Is that where the pressure to innovate comes from, or more from technological innovation?
D. Simonnet: Both. You have to constantly be at the forefront of innovation if you want to escape cost competition, which is pretty much an economic war. But innovation is also inherent in the DNA of the company and its employees, and its suppliers or clients. For Axyntis, our identity as a manufacturing sub-contractor with primarily European markets is moving toward a strategic partnership model that can offer technical and technological support to our most demanding clients, while targeting markets where R&D remains intense: the United States or Japan for example.
EA: Are you facing similar transformation to that of the car industry?
D. Simonnet: Yes, the automotive and aeronautics industries give us food for thought, as sub-contractors have introduced an increasing part of their added value through their more cooperative relationships with key customers. But the similarities stop there, because the chemical industry targets application markets and a much larger and more diversified client portfolio. Axyntis' fine chemicals work with pharmaceuticals, animal health and agro chemistry, but also electronics or even cosmetics.
© Arnaud Calais
EA: In the book you’ve just written, Que sais-je ? Les 100 mots de l’entreprise (literally: 100 Words On Business), you said entrepreneurs have to deal with a growing realization. What do you mean?
D. Simonnet: This book is the fruit of my experience and reflection, nurtured over twenty years through publishing articles and teaching preparatory and university classes. I’m also convinced that businesses have more responsibility than before - it goes beyond the traditional limits of business. Today managers have to be aware of this change because business is definitely political.
EA: Does participating in the public debate mean returning to a more responsible model?
D. Simonnet: Yes. Due to their growing political role, businesses have to be transparent and accessible to the public. Managers also have to show they can teach about the company. Is this a new need? No! Two of Axyntis' plants, in Saint-Marcel and Grasse, were founded in the 19th century at a time when the public had limited social power; Christian employers consequently developed social policies on housing or child benefits. When we created the group by purchasing plants, I came across the word "boss" several times. We can't deny its historical meaning: in the 19th century the owner, or boss, led but also protected; we attach a social function but also certain moral values that the boss is supposed to guarantee. Now we also have safety and the environment to add to these challenges. For example, Axyntis has plants that are have mandatory technological risk prevention plans since the AZF accident, given that SNPE was next to this site.
EA: Is this specific to manufacturing?
D. Simonnet: It's particularly true for manufacturers since they can potentially have significant consequences on their economic and social environments – whether negative or positive. Let's take the issue of territorial dynamics. Unemployment has increased primarily because of deindustrialization. Industries that endure and have innovated have to be resistant. Compared to other sectors, manufacturing also offers relatively high salaries. Since the 2009 crisis we’ve developed our activities and employment in Calais and Montluçon, two of our sites where the average unemployment rate is, respectively, 15% and 13%.
EA: In the end, you say the boss must be present and participate in labor relations?
D. Simonnet: Absolutely! It's one of their priorities. First of all, we’re talking about physical presence: it’s crucial for stakeholders. Being physically present encourages decision-making. If the employee unions want direct exchanges, their low representation means we also have to consider other channels of labor relations, with or through management – or even directly with the employees of a unit exposed to a major challenge such as a divestment or takeover. To support these channels, the manager sometimes has to give up the objectivity he or she was trained to have. Being accountable in person implies accepting certain subjectivity – taking on a human, emotional dimension.
EA: Is this realization a deep-rooted trend or is it personal to you?
D. Simonnet: It’s a deep-rooted trend, judging by the obligation many businesses have to communicate information on a growing range of societal and environmental issues. But if it isn't inherent, exerting responsibilities is pointless. Jean Tirole's book Économie du bien commun, also published in the PUF in 2016, illustrates how the rational homo oeconomicus is a fantasy.
EA: Do you feel like a family business?
D. Simonnet: Yes, if family business means a long-term vision. But the question of heritage doesn't interest me as much as taking the right path to reach a business objective. My starting point was ESSEC, where I received a scholarship. I don’t ask myself whether my son or daughter can carry on the family business in twenty years. Right now, the question is more: which of my employees share my ambition for Axyntis and can demonstrate their entrepreneurial qualities?
EA: Do you think it’s important to speak out publicly?
D. Simonnet: It’s necessary to me, as I'm convinced businesses have a political dimension. But it's not enough. It shouldn't only be teachers and researchers who think about business and how it's taught, nor should management have the monopoly on talking about it to continue making Poujadist reflections on taxation, or the weight of regulation. The hard part is consistency in what the entrepreneur says, and consistency with their business objectives.
EA: It comes down to yielding to the company then.
D. Simonnet: Yes, the overall vision is the number one priority! It's simple, and it makes you think and then act, and then think again... I always worry about how weak the company approach is, including for students who are going into it. For the most part they’re looking for a short-term paying job, the start-up that will be sold a few years later for several million euros.
EA: That was the model a few years ago.
D. Simonnet: Yes, I mentioned it in an article published in Les Échos in 2000 called "The new feud between the ancients and moderns," but it's still doing damage. Doing business is not looking for a gamble in the digital world, but a question of vision and perseverance – as I was recently reminded by one of my former associates. Manufacturing is still an interesting business model because of its high societal value in terms of employment, innovation, land use, labor relations and cultural exchanges. Our business objective is to build a community with lasting interest, even if it is sometimes a tough path to take: finding a balance between the desire to move forward and to get out there, and the need for stability and protection. If you don't find that balance you can stress, even traumatize your employees.
EA: Which affects everything...
D. Simonnet: Yes, but even here the dangers of short-term tyranny and modernity for the group are not new. I remember being around when the idea of creating value was seen as a revolution. It was the famous Holy Grail of a 15% IRR, where in the end the outcome wasn’t seen as a result of good management, but a self-fulfilling prophecy. Obviously, I think the opposite: we develop a business and then we measure its economic value. If that’s not enough for the business to last, we reposition ourselves so as to increase it. But we can decide to go for a smaller profit because some of the business's causes – which have a cost – are fair. The real revolution is weighing up financial objectives with philanthropic ones, which, in the long-term, can create long-lasting value. For example, in the chemical manufacturing business I opted for permanent contracts for all employees.
EA: Does this go against the current debate on ending permanent contracts?
D. Simonnet: I’m against fixed-term contracts and for taxing insecure jobs on the “polluter pays” principle. Saying you're going to take on a business and then treat your own employees on a very ad hoc and flexible basis is a contradiction, whether you're in manufacturing or not. On the other hand we should be able to terminate permanent contracts, as their rigidity can lead to passive behavior in employees at the expense of new generations with limited access, or insecure jobs.
© Arnaud Calais
EA: What measures would help strengthen the manufacturing industry?
D. Simonnet: We need to apply all the recommendations from the 2012 Gallois Report. Everything is there! In my opinion, the current crisis is not the result of the difficulty in making a correct diagnosis, but a lack of political courage: public powers have trouble moving from observation to action. Business is a political model that’s sometimes more agile than our institutions. One of the main measures would be to establish loyal competition rules, particularly on key challenges such as respecting the environment, or the quality of consumer products. I think Europe has become ultra-liberalizing and that its competition policy has sped up the decline of its industries, although perhaps strategic in terms of its sovereignty.
EA: Will Brexit change anything?
D. Simonnet: The United Kingdom embodies the excesses of neo-liberalism and Euroscepticism. This goes back to 1979 and Thatcher's "I want my money back", six years after the UK joined. Let's strengthen Europe through Europe's founders. When Brexit was announced, my first reaction was: good news, we can now rebuild the Franco-German axis. Comparisons between France and Germany are useful for our economy. For example, I’ve thought for many years that the German Mittelstand, which is international and R&D-intensive, was an example to follow. In France there are only 5,000 middle-market companies, so two times fewer than in Germany. Though more agile than larger groups they have greater wherewithal, compared to SMEs, to be active internationally without sacrificing their local roots.
EA: You created a joint-venture with the Fuji Silysia group. Why a Japanese investor?
D. Simonnet: Why Japan? Because Japan remains one of the most industrialized and innovating countries there is, but for geographical and demographic reasons it still needs foreign partners. I made it a business priority in 2007 when I created Axyntis. When I wanted to take control of the group's capital last year, I needed a manufacturing partner to complement my investment, one that was able to make quick decisions while sharing Axyntis's long-term vision and values. On the other side of the world a Japanese manufacturer – the director of Fuji Silysia who I’ve worked with for many years despite our generational and cultural differences – was added as shareholder on the basis of this shared conviction. And Japan, to quote the title of a recent book, is modern without being Western.
EA: Will you eventually merge with the Japanese company?
D. Simonnet: No, we're not merging. As of last year I control 50% of the share capital and, through a shareholders' agreement I make the strategic and operational decisions. They will, however, help us enter the silica market by bringing the technology they developed in this area to Axyntis' plants. Their participation in the share capital allows them to control the know-how they’ll transfer.
EA: Let's talk a little about you – you were involved in teaching at a very young age.
D. Simonnet: After being admitted to ESSEC through the “concours”, I taught in preparatory courses for more than ten years. Former professors offered me the position and it helped pay for my studies. Also, I think my very first contact with ESSEC encouraged me to preserve some of my ideals through teaching. I remember being greeted on my class’ integration day in the auditorium by a young graduate who had found a new god to worship in the temple of laundry detergent! I thought, “What am I doing here?” Fortunately I had other revelatory moments such as Laurent Bibard's ethics course, where they put on a play. The play was Aristophane's Lysistrata, and I began to feel more at home!
EA: On that subject, how do young people see their professional lives in your opinion?
D. Simonnet: I think they have a hard time projecting themselves into the future professionally. There are currently 1.9 million unemployed people between 15 and 29 years old in France who are not studying or getting any training. The second reality is that when they do start in a company they want flexibility. Young people have a strong and growing mistrust for companies. At the same time – and it’s a contradiction – people aspire to set up businesses. The appearance of massive youth unemployment has led to creating businesses as a way to compensate for a broken social ladder.
EA: More than 70% of your turnover is in export. You must have employees experienced in that.
D. Simonnet: Yes, Axyntis was developed with new employees who were already experienced in business or in foreign markets. Today they cover regions as varied as Nagoya, with its family and traditional businesses, and the West Coast of the United States with its emerging pharma industries, or the Vapi region and its environmental risks to the north of Bombay. I try to strengthen open-mindedness and multiculturalism through geopolitical training. The sales teams took a course on relations between Japan, China and India.
EA: Do you think that’s something the new generation is looking for?
D. Simonnet: The new generations are looking for meaning because our points of reference are obsolete and therefore hard to convey. That's probably why geopolitical courses replaced history, geography, and economics in preparatory classes… The new generations have this fierce determination because they have to reinvent those points of reference. That's also what my wife believes; having graduated from HEC Business School, she finally chose to teach in a high school in a difficult area: that's also an enterprise! Put simply – and to borrow from French philosopher Bourdieu’s concept of "state nobility" – these generations are less about coagulation than irrigation.
EA: What do you think of your involvement in ESSEC Alumni?
D. Simonnet: I'm interested in two things. For one, the coaching I offer at the Paris Pôle Emploi (Employment Center). I'm also interested in making ESSEC Alumni a reference in the public debate on the role of business and societal challenges, getting perspectives from both former students and teachers of ESSEC. This could take the form of a think tank, centered on an annual conference and the monitoring of a given indicator or benchmark. On the initiative of Pascal Gauchon I'm one of the founding partners of the Grenoble Geopolitics Festival, which over time has become a major event.
EA: What would be an ESSEC indicator?
D. Simonnet: The idea is to find a regularly published indicator with cross commentaries from a professor and a practitioner. How young people see business is crucial for me.
EA: Finally, you're a sports buff. A marathon runner, triathlete… Is that important in business, too?
D. Simonnet: Yes, being an entrepreneur is physical. But certain situations require you to respond physically to establish mutual respect. It reminds me of the Calaire Chimie takeover in 2013, when 200 employees were involved in a tough, court-ordered liquidation process. We were only able to keep 80 people, but I had to answer to the 200 for the behavior of the previous company owners who hadn’t explained to them what was happening. The hours of heated debate in the rain, tires burning in the background, red flags waving and the sound of anarchist songs in the air will remain one of the most vivid memories of my professional life. That, too, is manufacturing.