How Dow reinvented itself
CEO Andrew N. Liveris discusses his company’s evolution and how
engaging the customer chain and embracing technology drives growth and
innovation.
Dow has worked to rebuild itself as an agile, innovative organization with
a major focus on the customer value chain. In this interview, with McKinsey’s
Rik Kirkland, president, chairman, and chief executive officer Andrew N.
Liveris describes the company’s evolution, including how Dow has dramatically
reduced the average age of the organization’s workforce, fostered a culture
that resembles a start-up, and shifted its portfolio to value-added markets.
An edited transcript of Liveris’s
remarks follows.
Interview
transcript
Growing by changing
Growth comes and goes. Growth is not
ubiquitous. Growth is not even—it’s not peanut butter spread over a sandwich.
You’ve got to be agile, go to growth areas, and then stick with them. That
means different types of customer arrangements, different types of business
models at the market face. And the sorts of things we used to do, you know, “If
you build it, they will come,” are long gone.
It’s no longer just products. It’s
no longer just applications. It’s actually market creation, value-chain
creation, and then getting involved with technology, like an IT company.
Chemical companies have not been great at doing that. Our transformation has
moved us in that area. And I’m pretty proud to say the new Dow is a company
that has a portfolio 70 percent of which is now anchored very much in value-add
markets.
Addressing growth where growth is,
being a part of the customer value chain, and traveling at the speed of
live—that’s a new type of enterprise.
Innovating at the intersections
Markets are intersecting. Great
examples of that, where you’re at the nexus, are energy, food, and water. And
there are trade-offs being made by end-use customers, whether they are actually
governments or companies.
In my world, one of the most
exciting parts of our transformation and collaboration is the intersection of
sciences. There was a time when—if you take our metamorphosis—we were an
inorganic chemical company, a piece of chemistry. We became an organic chemical
company on top—another piece of chemistry. Then we became a petrochemical
company. Then we became a plastics company. All those were singular sectors.
Today, we have to be all of those. We have to have material science, biological
science, and physics. And it’s at those intersections where innovation is
occurring.
Where we’ve paid a lot of attention
to these intersections is our sustainability goals. When we set those goals,
one of the things we said was we wanted to identify half a dozen areas where we
could achieve breakthroughs—world-class breakthroughs to challenges the world
faces. Food is an example. We’ve really put good chemistry in place in terms of
genetically modifying seeds to produce a type of canola oil that has maximum
Omega-9s. And that actually has taken 1.5 billion pounds of fat out of
the American diet. All sorts of fast-food companies are using it. All sorts of
end users, including the consumer, now see Dow-brand Omega-9 oils as an example
of a product where we went all the way to the consumer.
Another example is BETAMATE structural
adhesives, which take out any need to weld metal to metal and then metal to
plastic. If you can use an adhesive, you literally take 30 to 40 pounds out of
every car manufactured and therefore reduce gasoline use, resulting in more
energy-efficient vehicles. We have now taken that to the next step, and are
working on carbon fiber technology.
Creating a start-up culture
It’s a long-cycle and short-cycle
world. I’ve got short-cycle growth cycles, but R&D is long cycle. So how do
I put those two cycles together and have the resiliency, the patience to
literally—to use baseball as my analogy—hit singles, and doubles, and
occasionally a home run? Hitting singles and doubles is not sexy. It doesn’t,
you know, have broad appeal. But Dow has been a prolific patent producer the
past many years: we’ve rebuilt ourselves as an agile commercialization,
innovation, and R&D machine. And that has been a cultural change.
People have asked me, “What’s the
hardest thing to do?” It’s that. I mean, we can buy and sell companies with the
best of them, integrate them, perhaps eventually sell them. But to change the culture
so you can be a fast, short-cycle innovation-centric company requires a
different type of R&D engine. The IT world showed us what type of R&D
engine you need. It’s literally hiring millennials: hiring the entrepreneurs
that normally would go to start-ups, and having a culture that resembles a
start-up inside your company.
More than half of the 22,000
employees Dow has added in the past five years are younger than 32. Overall,
the percentage of employees under the age of 30 in our professional workforce
has gone from 9 percent in 2004 to 15 percent today. It’s not that age is
always an indicator of entrepreneurship—I’d like to think I’m still an
entrepreneur. But I will tell you that having this new type of lifeblood in the
company has changed the company.
We’ve got programs that give some of
these 20-somethings and 30-somethings seriously large responsibilities early in
their careers, and really test their ability to be future leaders of this sort
of nimble enterprise. That’s just like it was done with me. I was tested when I
was in my 20s and 30s, but we have stifled a lot of that in the middle layers
of companies. That’s why big companies often fail. We put young people in the
office of the CEO. They write my speeches. They go around the world with me.
They are part of the agenda. And it’s not just around my office—our entire
executive wing has groups like that. We have bridged generations by actually
having young people in the room, making them part of the conversation. At our
global leader meetings, we invite our up-and-coming talent—that used to be a
job grade thing.
Changing as a leader
The first thing I’d say about my
role as CEO is I’m on my fourth reinvention of myself on the job: ten years
ago, five years ago, three years ago, and today. That means almost certainly
that three years from now, five years from now—it’s a continual evolution. It’s
an evolution that follows the enterprise. I’ve had to change my priorities as
the company has changed.
The one thing that I think is a
common to that change is how much overlapping circles are now becoming a new
reality for the CEO. Overlapping circle number one: strategy and operations.
I’d say ten years ago, that was 90 percent of the job. But overlapping circle
number two, the one that’s becoming more and more important, is the company’s
reputation. Now, one would always say that’s been part of the CEO’s tenure. But
now, the judge, the jury, the trial, the media, the speed of live, the world of
social media—everything you do is scrutinized. Every word you utter, every
place you go, what you do, how you do it. You have to have this ability to
pivot with the constituency that’s out there needing to know more about your
enterprise, whether that’s a government, whether it’s your communities. We’ve
got lots of customers: suppliers, value chains, and partners. We’ve got lots of
joint ventures. The CEO has to be ubiquitous and in person.
Drowning in data
I’m a student of technology. I’m a
student of digitization. I’ve embraced the whole IT world from very early on in
my career to its current form, and I am challenging our company to continually
embrace it, not so much as a data provider or an analytical tool but as a
knowledge provider. Because it’s moving so fast, we will soon see what
knowledge provision looks like in the areas of medicine, energy, and food—all
the key things that trouble humanity.
We are also getting lots of data and
lots of analytics. And we’re drowning. And then we’re getting everyone’s
opinion on everything. And we’re drowning. What companies need is to know how
to filter, how to put all of this information into a useful paradigm so it’s
not just information technology, but knowledge. Knowledge enterprise is not a
new thing. In fact, your physical assets are a manifestation of your knowledge:
you build a physical asset because you know how to build it. But the next lot
of physical assets, and the next lot, the next lot, the next lot—that’s all the
knowledge you gained as an enterprise.
So knowledge enterprise has to
embrace digitization that results in increased knowledge to beat your
competitors. Hopefully, you have the agility to outpace everyone else. And now
your competition’s coming from everywhere. So this cannibalization point,
short-cycle point, is the only response. Agility, knowledge—you put it in
place, get ready to cannibalize yourself, and do it again, do it again, do it
again.
Big companies aren’t very good at
doing that. And creating that sort of cultural change is the biggest challenge
of any enterprise. I never use this term at Dow because it’s just not
applicable, but I would say that while you’re never done transforming, you
better be done transforming. Because if you haven’t transformed, you are done.
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