Ep 129 - Leadership, technology & the future of mass timber

Adam Jones (00:02):

Awesome man. Well thanks so much for coming on the podcast. Christophe, can you start by telling us a little bit about yourself, who you are and your journey through to has Slack and we can start the conversation there.

Christoph Kulterer (00:30):

Yeah, so my name's Christoph, obviously I was born fourth generation in a family business that was founded by my great-grandfather more than 120 years ago in 1901. And so yeah, wood and timber has played an important role all in my life. And so when I grew up it was of course business talks on the dinner table and everything, and I remember going to the forest with my dad and so when you grow up in a business like that, you have a natural hang for it. Then when I was still at university in Vienna, I decided to return to the business, and I started with a project that was back in 96 and from there it was quite that dynamic process because we had a very unfortunate fire in 1998 and that was the moment when our dad asked me and my brother whether we want to play a role in the business or not. And then we started to rebuild the sawmill business and then in 2002 and became a CEO of the business and that's when we also started the transformation from the business, from a sawmilling company to a more value-added business with engineered timber products and so on. From that on it has been quite a dynamic development.

Adam Jones (02:11):

That's a crazy story and fourth generation business, it's amazing. I would imagine there's some principles that have just shown the way through to actually keep the success going, but yeah, there's a lot of ways we can go from there. And timber at the very start, what was the thinking, and I guess it might've been a bit of a risk going towards engineered timber those days. Can you take us back to there and where the business was and what sort of decisions you made to make a leap into what you thought the future might be?

Christoph Kulterer (02:45):

Yeah, so our core business or was located in the southern part of Austria and that's a very mountainous area with very good lock quality, but logistic cost is very high because you have to build mountain roads and the cost of raw material was always very high and that triggered a way of thinking that we said, okay, we need to take the most what the tree gives us and the most value to it. And that's when we started first not to just produce timber and boards, but also to do something more valuable out of the boards. But then it also triggered, okay, what do we do with the sawdust? What do we do with the chips? And then that was the reason when we started in biomass co-generation first, so we're producing our energy ourselves, it's all renewable energy, electricity, and also thermal energy, then pellet production and so on. So the idea, the philosophy was to make the most value out of a tree,

Adam Jones (03:57):

To use that analogy. So you're picking fruit off a tree, say there's low hanging fruit where you actually get the most value out of it. Have we picked up all the fruit off this tree of optimizing what value you can get from the log or is there still some way to go in that process?

Christoph Kulterer (04:16):

I think that we do pretty much with our trees. Of course there's always another step you could go, but we see ourselves as a supplier for engineered timber, so we are supplying modern timber structures. So our typical customer will always be, I dunno, a building company, a general contractor. So we are not developers, but we are trying to bring a building solution to the construction side. So that's the philosophy, how far we want to go.

Adam Jones (04:54):

So you've been CEO for quite a time now, and what are some of the most challenging times you've had in that almost two decade period? I guess now it's coming close to what are the most challenging times, and from those challenging times, what are some of the lessons you had?

Christoph Kulterer (05:16):

Well, transformation is always something you need to manage. It doesn't come naturally. So first of all, yeah, you have to give your people a good reason why the transformation is necessary because people normally stick to do what they've always done best. So I think that's where the journey starts to have a clear vision and also get everyone aboard and tell them where the journey goes. I think that's a very important start. Then of course when you grow, it's always how to grow talent, how to transform the people. So I think that's what I found always the most challenging part, to develop the right people and also bringing new people into your team.

(06:15):

So in the end, it comes down to people management and especially when growth has a certain pace. But I must say we also have a very, very motivated team. So when I came to the business because everything was changing, my voice had the same value as others because everyone else said, okay, we've done this a certain way. But everyone knew okay, change was necessary. And at that time was also able to gather a very young team. So a lot of our management came from production and so on, so they have been growing the business or we have been growing the business together and that really helped in the transition process. So it's a family business that for me, that means that okay, there is a family behind the business that owns the business and decision making can be very, very fast, but it's also about feeling as a family, supporting each other and also through difficult times and good times, and that's very important, I guess.

Adam Jones (07:36):

I mean a sawmill business, and I imagine you've got a very successful business there and you've got the new engineered wood business. Is there a slightly different culture between the two or is it something similar, I guess one maybe two different problem sets and yeah, maybe just if you can tell us a little bit about that.

Christoph Kulterer (07:59):

Yeah, it's a different approach on how you do business. The sawmilling business is a pure commodity business, so it's about productivity, quality of the product, speedy service and so on. But the product itself is more simple and it's also easier to place it in the market. So most competition is about price. When you go into engineered timber products, it's a more sophisticated product. So from a certain level, you would need also give more service to the customer in terms of engineering and designing the projects. And that makes it more complicated. And you also need different people, you need more sales personnel with an engineering attitude than just with, okay, how do I get volume to the customer? And for that reason, we kept the different stages of the value chain. Also a bit separated. So there's a team that's managing the sawmilling business, then there's an engineering team that is doing the engineered timber products and so on. And the closer you get to the construction site, the more technical it gets. And these are typically, it's a bit different people, but that's also another challenge to keep everyone aligned along the whole value chain to make people understand even if you're an engineering company, it's also very important to have the raw material in our own hands and also to develop the sawmilling business.

Adam Jones (09:47):

And how are you integrated? So I believe you've got a design services team, and do you see vertical integration as critical going forward, or do you see a supplier specific and having just partnerships with developers and design teams, and where do you see the role of the manufacturer starting and stopping and handing over to the project?

Christoph Kulterer (10:18):

The business has transformed really from a commodity business to a supplier of engineered timber products. And for us that is really different. Also approach on how we do business. So maybe before we were looking from the forest to the customer, now we are looking from the customer backwards. And that's I think a different kind of integration. And when we talk about saw milling, it's most about raw material supply also for the own production. But of course a tree does not grow a certain type of bed or just one quality. You always have to use everything that the tree brings us and that's what it makes a more complicated business and that's another reason why we keep the value chains pretty separated.

Adam Jones (11:22):

Can you tell us a bit about the international supply chain? So you are based in Austria, and we could almost touch on how did so much of the world's the forestry end up in just one part of the world. Maybe we can start there, but then tell us about the international supply chain as well and where you see how you see that evolving.

Christoph Kulterer (11:46):

I mean, Austria is a small country, but we have lots of forests, but with the of roughly 9 million, we don't use so much ourselves and that's why we play such an important role in timber exports. And I think this thinking of adding value to the wood, that's something we always had to do in Austria and that's why engineered timber I think had played quite a successful role in the development of Austrian timber industry because we also have the universities aligned with the research facilities and so on. So the technical environment, the research environment that's very important for the development of the industry.

(12:35):

And in Austria we have these things really, really in place. And I think that is the reason why Austin companies, especially with the engineering capacity, are quite successful worldwide. And so that's right in Europe, the expansion of Austin companies has evolved in other countries as well, like Germany of course, but also now it's Scandinavia, the uk, Austin companies have developed quite well. I must say in terms of the future, I think what will be most important is the availability of raw material in the long run because I think it has become common sense that building with wood is a very sustainable way because wood also actively stores CO2. So it stores the carbon from the CO2 and releases the oxygen again. So we don't have to invent something new, all we have to do is build more trees on the planet. Question is where are these trees going to be? And it's very important that the forest we create are also sustainable managed. And I think that will be the crucial factor to the industry, the availability of the raw material. And I think there, especially timber industry and also the green movement is very much aligned. We all want more trees, but we want to use them and some people just want to keep them in the forest.

Adam Jones (14:14):

Yeah, totally. And yeah, that's amazing. And it is that alignment, which is clear, but sometimes I guess there's a different, the green movement has different viewpoints around the world, so whether it's plantation or native forestry and things like that. And there's different focuses and sometimes perception gets in the way of what reality is. I mean is that maybe Austria has got a further a viewpoint that is more nuanced.

Christoph Kulterer (14:45):

Mean Austria, we have had forest laws for 150 years. So with the industrial revolution, people then realized, okay, if we just use our forest and don't replant the trees, we will run out of our raw material. So this kind of thinking is really something that is inert in Austrian people for generations. And if you take a look at our forests, these are diverse forests. Ofcourse there's one species that is more heavily dominant like SPRs, which is a bit of a problem with climate change now because the forest, they need, I dunno, 200 years to adopt. We apparently don't have that time. So also the current forest are suffering. But if you go whenever people say, okay, you have these plantation forest and so on, then I ask them, when did you last walk in autumn through a forest? You see how colorful it is, and that means it is a adverse forest.

(15:48):

When we talk about plantations, that's more something we see in the southern hemisphere. And I dunno, especially South Africa, the that's wood eucalyptus for pulp production. That's really a forest where's just one species dominant. And I think it's really good to look after biodiversity and so on. But that does not mean that you cannot economically use a forest. It just need to know how to do it. And I think in that terms, Austria, but also central Europe is very much advanced and that's very important also to differentiate. There might be regions where the forests are gone because of mostly it's not because of the timber use, it's always because of agriculture or land use for cities and so on. But I think that's something we have really managed well over the past generations in Austria. So the timber stock, for instance, in the past 50 years has increased by 50%. Although we have all this industry and we are using a lot of wood, the amount of food in our forests has increased. So it is possible.

Adam Jones (17:05):

That's crazy. Yeah. So you've got by far the biggest production in the world, but you've still increasing just renewal and intelligent harvesting and management. So it's very promising for the rest of the world. Looking to grow an industry like you have in Austria. What do you see as the future or current state of technology, Christoph, whether it be inside the factory, robotics, manufacturing processes, anything there all the way through to digital design workflows, or what do you see as the opportunities here in general?

Christoph Kulterer (17:43):

Well, I think in terms of productivity, the timber industry is quite advanced also in terms of automation. I think if you go into a modern sawmill or also a engineered timber plant, there's a lot of information that's around. I always tell people, okay, when we know every board before it goes into production in whose house or in whose bedroom, it'll end. So the production process I think is very, very, very optimized, very sophisticated. Maybe in the end we talk about following the parts from the production side to the construction side with some technologies like RFID chips to take the elements, bring them to the, there is also some development going on there, but I think these process are pretty much or developed at a very modern state. I think it's more the construction site itself that needs more maybe development or more routines.

(19:01):

So it starts from the engineering, engineering and the design and the development of the building. I think that is more important. And where we also need to develop more sophisticated building systems or building solutions because there's also one trend that you find less and less people that have the capability to actually build a building on the construction side. Also skilled workers that will be a bottleneck in the future as well. And therefore the solutions that you can prefabricate must be more sophisticated. And so in Europe, I dunno if you have this, I think it's the same term, it's the BIM system, the building information modeling. I think that's where the development is and where the energy must go.

Adam Jones (19:57):

Gotcha. That's awesome. In a similar question as we get towards the end of the podcast, what do you see as the future of timber construction? I mean, what gets you excited going into the future in the decades that are unfolding?

Christoph Kulterer (20:12):

So I really think that the sustainability movement and sustainability thinking is now really on track. A couple of years ago everyone said, okay, it's nice to have timber where it looks great, but I won't spend more money on it than a conventional building. Today, very often, big international companies come to us and say, okay, we want a sustainable building. We want to be carbon free, we understand the best solution is wood, so please give me the best solution in wood. And that's really starting to change that people become much more aware that we have to take care of our environment.

(20:59):

Being a renewable resource is just the best solution, and you can use it in so many ways, not just for construction, but with the residuals in the production, you can generate your own energy, which makes it even more sufficient. And that's something that's a trend that's not going to stop. And at the same time, we have become much more economical because wood is being used on a larger scale, technology is more advanced. So it's not true that a wouldn't building cost more than a standard building made off of concrete or steel. But it's very important to have the know-how and how to design and how to construct such a buildings. So where we need to invest is the development of the know-how of architects that they embrace wood, it's a bit more complicated because you need to consider maybe more things you have to plan in advance. It's not so easy to change things once one construction is underway. But that's something that's very important to have the engineers and the architects that understand and know how to build with timber.

Adam Jones (22:19):

That's amazing. And no doubt getting in touch with Hasco and Hess team is a good way of doing it. So if people want to find out more about you, the company, get in touch with your team about a project, anything like that, where should people be going?

Christoph Kulterer (22:37):

Well, I mean, I think when you go to our website, all the references are there. So Hasler is the manufacturing part of the business, whereas has timber, which is a hundred percent part of has group is the construction side of the business where we do this. Yeah, also big international projects. I mean the international house in Sydney is one example, or the convention center in Casey, near Melbourne, banal place. So we've done nice projects in Australia. I personally really think that Australia is in a very good way on developing sustainable business with timber structures. You're also investing actively in the industry. That is very important. And I think, yeah, Australia will have a bright future in terms of timber construction and we are happy to be a part of it.

Adam Jones (23:36):

Yeah, amazing. I think I had Tyson, your rep, well, the sales lead in Australia on the podcast before, I forget which might've been, I think he did an aquatic center. It was like the longest, it was crazy. It was like the longest glue lamb. It was like a 30 or 40 meter, I forget how long it was. It was just

Christoph Kulterer (23:55):

Probably more than 40 meters.

Adam Jones (23:56):

It's ridiculous.

Christoph Kulterer (23:57):

It crazy. We shoot it all the way from Austria to Australia, but it went quite well.

Adam Jones (24:04):

It did. It went beautifully and it looks amazing. I forgot what, but anyway, it was speaking to Tyson, the logistics of getting it here was just crazy. 40 meters is unbelievable. So just shows the capacity that you've got to be able to do that and it's amazing. Yeah, so it's great. And thank you for doing such iconic projects in Australia and around the world. So thank you for coming on the podcast, Kristol, it's been amazing to chat to you and you've been incredible guest and yeah, appreciate your time.

Christoph Kulterer (24:36):

Yeah, no, you're welcome. Thank you very much. It was really exciting talking to you. And yeah, hope to hear more from you

Adam Jones (24:44):

A hundred percent.