Catalyst

Steeped in the management lore of California’s Silicon Valley, Professor Gary Hamel seems an unlikely guide for the chemical industry, but his EPCA speech this morning was truly provocative.

Hamel argued for changing today’s management paradigm of demanding conformity to get productivity gains to one of valuing diversity, allowing employees more freedom and flexibility to generate a constant stream of new ideas, some of which will be the winning ideas of the future.

He drew lessons from Google and W.L. Gore. Common threads were: horizontal as well as vertical reporting lines; employees with time allocated for thinking and crazy ideas; uninhibited information sharing; small, independent teams to generate ideas; and peer review to gauge performance and even salaries.

Can any of this make sense to chemical companies? The answer is that it better had. An industry enjoying the good times, characterized by sheer bigness, high capital intensity, and a drive to low costs, can feel itself unassailable from new ideas.

Unfortunately, that production-efficiency mentality also dislocates the industry from innovation in its processes, its marketing and its ability to respond to change. And it dislocates the industry from its future workforce, the emerging army of the peer reviewed, who care little for a life of conformity.

It is time to listen to the Hamels of the world and loosen the reins to our employees just a little. Challenge structures, challenge ways of working, challenge the way we reward performance and exult in a little creative anarchy. Above all, let’s stop being just the fat, dumb and happy proponents of low-cost production of today, and become the (slightly paranoid, slightly off-balance) innovators of tomorrow.

-JZP

The fact that our industry faces new challenges caused by persistently high feedstock prices has electrified many a conference for the past year or more. But there is another much smaller, but potentially potent challenge to achieving the forecast growth rates for some chemicals.
It comes from the demand side. Consumers, and local governments, are starting to stir environmental concerns into their buying choices. There are many examples of this phenomenon. Individually they are small, but they could add up into a phenomenon that would be significant in the industry’s image and prospects.
Whether you believe they are based on sound science, there are many examples of this burgeoning consumer awareness. European airline passengers are leading the way in buying offsets (translation: are arranging for trees to be planted) to counter the greenhouse gases their travel produces. Several cities and even some countries (Ireland, Australia) are cracking down on the use of the plastic grocery bag and either taxing its use or encouraging/requiring its replacement with cloth or paper bags. In the thought-leading San Francisco Bay Area, one of the best restaurants, Chez Panisse, has taken still bottled waters off its menu, citing as its reasons the transportation costs and greenhouse gas effects of moving a commodity like water from the source to the consumer, and the business of disposing of plastic bottles in landfills.
Are these the first heralds of an age of demand-driven substitution of plastics by paper, maybe to be accompanied by a replacement of man-made fibers by cotton and wool? The answer may lie in our own hands. It is noticeable that the pending San Francisco plastic grocery bag ban gives the retailers the option of switching to paper or corn-based plastics that degrade quickly. Substitution need not be plastics for other materials, but plastics for other plastics. The public’s love affair with the convenience of plastics is not at an end, but it may require much more communication with consumers and a concentration on the virtues and sustainability of the industry to keep that love alive.
Can an industry that is driven by production concerns and the drive to be the lowest cost producer respond to a concerted change in consumer behavior? That is a key question in the years ahead. It’s time for marketing to become as important as production in our large chemical companies.