Volume 87 Issue 18 | pp. 31-33
Issue Date: May 4, 2009

A Decade Of Change

DuPont Chairman Holliday reflects on transformation of his company and the industry
Department: Business
Holliday
Credit: DuPont
8718bus2_hollidaycxd
 
Holliday
Credit: DuPont

IN HIS 10 YEARS as chief executive officer of DuPont, Charles O. Holliday Jr. took a quintessential chemical innovator and brought in the next generation of transformative technologies. Holliday guided DuPont away from a past predicated on oil, petrochemicals, and textile fibers toward a future that relies increasingly on agricultural feedstocks and the tools of biology.

Starting when he became CEO in 1998, Holliday was the architect of a series of transactions valued at more than $60 billion. Among them was the 1999 spin-off of Conoco, which ended the company's 18-year romance with the oil business. In 1999, he oversaw the acquisition of seed producer Pioneer Hi-Bred. In 2004, he sold DuPont's Invista textile fibers subsidiary to Koch Industries. Holliday stepped down on Jan. 1, passing the CEO reins to Ellen J. Kullman.

As a young business leader, Holliday learned the value that technology can bring to business. He also learned how taking risks can bring huge rewards. Those early experiences led him to embrace the concept of sustainable development, believing, he says, that economic growth, social progress, and environmental balance are not mutually exclusive goals.

This week, the 60-year-old Holliday, now DuPont's chairman, receives the 2009 International Palladium Medal from the American Section of the Société de Chimie Industrielle at a dinner in his honor at the Roosevelt Hotel in New York City. Past DuPont recipients were Edward R. Kane, president and CEO from 1973 to 1980; and Edgar S. Woolard Jr., chairman and CEO from 1989 to 1995. Other chemical industry CEOs who have received the medal include Jeffrey M. Lipton of Nova Chemicals, Jürgen F. Strube of BASF, and William S. Stavropoulos of Dow Chemical.

Holliday has been a chemical industry leader during a transformational period, notes John Roberts, chairman of the award committee. The medal, he says, recognizes Holliday's efforts to globalize the industry and advance science through the integration of biology and chemistry. Sunil Kumar, president of the society's American section and head of specialty chemical maker International Specialty Products, notes, "Holliday is the best example in our industry of a CEO transforming his company from a portfolio of mostly mature products to one focused on high-growth sectors."

Holliday says he didn't set out to change the world, nor did he have any intention as a young man to even become involved in the chemical industry. While studying for his degree in industrial engineering at the University of Tennessee, Nashville, he fully expected to work for his father's industrial supply business. But the elder Holliday sold the business while his son was still in college. And a serendipitous summer job at the DuPont fiber plant in Nashville turned into a long-term attachment to the firm.

THINGS MIGHT have been different if Holliday had instead gone to work for package delivery giant UPS, which also offered him a summer internship. But DuPont dangled twice as much money and an air-conditioned office in front of him. Even so, he didn't intend to stay with DuPont because, he says, "I didn't think I'd like working for a big company. I thought it would be too confining."

Instead, he found the work at DuPont engaging and intellectually challenging. He joined the firm full-time as an engineer in Old Hickory, Tenn., assigned to improve the efficiency of the Dacron polyester fiber line. He would go on to work at three other fiber plants in the southeastern U.S. during his early career. But even in the 1970s, "the luster was coming off the fiber business," Holliday recalls. Ultimately, "I sold every textile plant I had worked in."

DuPont was unable to differentiate its textile fibers enough from those of its competitors to make the business worth keeping. "We could have put more money into those fibers," Holliday explains. "But that money was better spent in agriculture, biobased materials, or something else we could get a better return on."

It was in his first business assignment in 1986 as manager of the firm's Nomex m-aramid fire-resistant fibers that Holliday began to understand why differentiated products matter. As an industrial engineer, he took a keen interest in the technology behind the manufacture of Nomex. Back then, he says, DuPont's salesmen "didn't understand our technical advantage and how to link that advantage with customer needs."

That observation came in handy a year later when Holliday became global director for Kevlar, the firm's bullet-resistant p-aramid fiber. DuPont originally thought Kevlar was the ideal stuff for tire reinforcement belts, but steel proved to be a better option. DuPont had built capacity anticipating a huge market that never materialized. "I came in at a time when we had to create new applications," he says. Among them were uses that are still mainstays, such as protective apparel and fiber-optic cable reinforcements.

In 1990, Holliday went to Japan for six years to head DuPont's Asia-Pacific operations. Change, when it comes, comes slowly in Japan, and while he was assigned there, many up-and-coming Japanese executives were frustrated by their inability to get their firms to adapt to changing markets. At one particular dinner, Holliday recalls, an executive from a major Japanese corporation impressed upon him that DuPont, which had its own entrenched ways of doing things, needed to take risks in order to be successful.

TRIBUTE
The International Palladium Medal features a portrait of Antoine Laurent Lavoisier, father of modern chemistry.
Credit: Société De Chimie Industrielle
8718bus2_medal
 
TRIBUTE
The International Palladium Medal features a portrait of Antoine Laurent Lavoisier, father of modern chemistry.
Credit: Société De Chimie Industrielle

During the dinner, the Japanese executive asked Holliday why DuPont was investing in the production of nylon resins in Singapore. Holliday says he responded by citing the island nation's usual benefits: infrastructure, central location, and shipping access to customers. "He said to me, 'That's not right. You are only going there because you are comfortable there. And if DuPont only goes where it is comfortable in Asia, it will fail.' "

Holliday says he took that conversation to heart. "Thank goodness he told me that in the first week I was there and not in the last week. I think he was right," Holliday says. DuPont ultimately invested in places such as China and India, "where we were not very comfortable and where we made some mistakes," he says. "But if we tried to just build plants in very safe places like Japan and Singapore, I don't think we would have been nearly as successful as we have been." The first time Holliday visited Beijing, DuPont had eight employees there; today they number in the thousands.

During Holliday's tenure, DuPont invested in biology-based businesses and infused them with its chemistry know-how. And the firm hasn't been shy in looking for outside help. For instance, DuPont partnered with sugar processor Tate & Lyle to manufacture 1,3-propanediol, a polyester ingredient made by fermenting sugar. That venture led the company to think about applying its fermentation expertise to making fuels and chemicals in a biorefinery. Under the aegis of the Department of Energy, the firm has worked with several research partners to further the concept.

"I'm a big fan of university- and government-business research partnerships," Holliday says. In 2000, for instance, DuPont undertook a five-year, $35 million alliance with Massachusetts Institute of Technology to fund research at the interface of chemistry, materials science, and biology. In 2005, the firm extended the effort for another five years.

For the most part, Holliday says, "we should spend as much time assessing customer and market needs as we spend in the lab. The trap we generally fall into is that it is a lot more fun to work in a lab than it is to go listen to a customer." As he sees it, "R&D is successful if you have an external focus and an orderly process to evaluate it." These tactics have allowed DuPont to increase revenues from products that are less than five years old from 24% of its sales in 2001 to 35% in 2008.

Although the emphasis at DuPont is on short-term development to satisfy customer needs, Holliday says, there is a place for long-term research at the firm. "What we do," he says, "is we set aside about $200 million for long-range research and leave it up to Uma Chowdhry, chief science and technology officer, and her team to decide how to spend it."

As chairman of a science-based company, Holliday says he has seen evidence of climate change and has committed the firm to reducing emissions of greenhouse gases. On an Arctic expedition he took last summer with climate scientists, political leaders, and environmental group leaders, he heard from naturalists about the changes they have seen over the past 30 years. "You came away with the impression there is a problem here," he says.

The notion that environmental change is going to cause the world to fall apart tomorrow is unrealistic, Holliday says. But he thinks the buildup of carbon dioxide and other heat-trapping gases will eventually cause flooding in some places and drought in others.

By restricting emissions now, businesses can ward off those changes, he says. That is the reason DuPont supports government action to cap emissions and install a trading system by which companies that are able to cost-effectively reduce their emissions can sell emission allowances to others that can't. "If we start doing it soon enough with a nice phased-in approach, I think it will be a net positive for the U.S.," Holliday says.

CHEMICAL COMPANY executives don't all favor the new European system for the Registration, Evaluation, Authorization & Restriction of Chemicals, but Holliday says the law does have some benefits. In its favor, he notes, REACH offers a harmonized regulatory system across a large number of countries. "Every country shouldn't have its own system to regulate chemicals. It adds a tremendous amount of cost but not value," he says.

What is really needed, Holliday says, is a global regulatory system that allows for consumer safety and environmental protection without great complexity and cost. REACH is not ideal, he says, but it will be improved over time.

Looking into the future, Holliday says he sees many business opportunities—even in a world where energy costs will be high and the developing world will demand a greater share of resources. Opportunities will exist for firms that can supply materials for the smaller, lighter, and safer cars that motorists will demand. New homes will benefit from energy-saving insulation and from solar heating systems enabled by the chemical industry's products.

Companies that embrace change will survive, Holliday says. DuPont, he notes, has adapted to the times throughout its more than 200 years in business. The firm sold gunpowder for its first 80 years in a new country expanding westward. As technology changed, "we went into dynamite in a big way," Holliday says. In the early 1900s, the firm got into chemicals to take advantage of opportunities in a rapidly industrializing nation.

Using lessons he learned as a young executive about the value of technology, Holliday led DuPont through another transformation—the blending of chemistry with new advances in biology. He has built on the firm's long tradition of technology advances and has shown how a for-profit enterprise can prosper in a world wrestling with economic, social, and environmental change.

 
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