DuPont's Kullman: Doing science as markets disappear
DuPont CEO Ellen Kullman spoke at Penn's Wharton School today, at a corporate leadership conference, on how to run a company when your markets are falling apart
DuPont CEO Ellen Kullman (spelling corrected) spoke at Penn's Wharton School today, at a corporate leadership conference, on how to run a company when your markets are falling apart. Excerpts:
"We've experienced 18 recessions sincer World War I and 33 recessions since 1854, which is the first year for which we can find the data. We're practiced at recessions...
"Through most of that time we've maintained basic research... In 1937, 40 percent of our revenues came from products that weren't in existence in 1929. So during the Depression we continued to innovate. During that time Wallace Carothers invented nylon... That didn't happen by accident. It took real leadership to maintain and increase our research funding in that time.
"Our research department has reminded me of that…I remind them our research staff did it on 2.5 percent of revenues. And I tell them we're spending 5 percent of our revenues on research ($1.4 billion a year), for that much we ought to have results. And they tell me their world has changed...
"Our roots came from making black gunpowder on the banks of the Brandywine River... We have had to transform ourselves several times over. Ten years ago we described ourselves as a modern chemical company. Today we describe ourselves as a market-driven science company... $10 billion of our $30 billion in (annual) revenues didn't exist five years ago," largely in new varieties of seeds, as well as industrial products.
"The world that will exist going forward will be very different from the world we knew and were comfortable with...The trends that wil carry us through this downturn and well into the future (include) increased food productivity; decreased dependence on fossil fuel; and protecting lives. Over 75 percent of our research dollars goes (into) basic science that directly impacts one of those three megatrends.
"I recently spent time in Brazil... touring sugarcane, corn and soy, understanding arable farmland, the rain forest... It is absolutely clear to me the amount of arable land in this world is not going to increase. We need to be more productive... We can double output in the next 20 years by working locally with farmers and bringing out new programs and activities... to feed an ever-increasing population (whose) protein requirements pops as they move up in socioeconomic class...
"We believe the need to lessen the dependence on fossil fuel transcends the cost of oil. We make 10 different materials in photovoltaic cells... We have demonstration units in cellulosic ethanol and in bio-butanol, like ethnall, doesn't absorb water, doesn't have the energy degradation...
"Responding to these megatrends… is challenging… They take resources, they take partnerships, they take dollars. There is no playbook for what we're experiencing today."
Leadership: "One, focus on what you can control. Two, adopt a new trajectory (path). Three, communication... Four, maintain pride around your mission.
"Last October, a lot of people looked scared. A lot of people were sitting in their office. They didn't know what to do. You call a (customer), they said 'We're still shipping, no problem.' The next day they call and cancel a month's production... So we could focus on 'Woe is me', or we could figure out the things we could do something about... We realized we had to protect, most, our financial stability... We had to focus on cash. We spent 207 years focused on earnings, and now it's 'earnings are nice, cash is more important.'"
So, new rules: "One, maximize your variable (cash) contribution (to the company). Two, drastically reduce spending. Three, zero capital (projects). Four, significantly reduce working capital.
"Volumes were off in some of our businesses as much as 50 percent... The first thing you think is 'I'll drop price.' But we say, 'Wait a minute, how can you drop price? There's no market at any price...
"We gave (salespeople) a tremendous amount of coaching and encouragement... reteaching... How to connect with a customer when they're in a really lousy mood because they're not sure what to tell you..."
China: "Theres nothing like a centrally planned economoy to get that stimulus package moving. And it's moving." DuPont instructed rail-service people at its units in India to focus on selling to China for its transportation upgrades. "We got our first China stimulus order -- $18 milion in rail polymers. Doesn't sound real sexy but $18M is $18M we'll take it...."
Turning manufacturing people into service people: "It's very difficult to get people who are very successful to think about that. But at a time like this when the markets are in great disarray... people are very willing to engage, to try to develop (new models)… It's important to use this time in a way that will create a stronger outcome in a few years."
Keeping people focused while cutting jobs: "You have to get out there. I had to visit plants in Ohio (and other states) and take the tough questions. I had to continue saying my message until I am so tired of saying it... There's nothing like a bad economy to make people confused about their mission... If I create products for a sustainable world, for protecting people, for reducing our carbon footprint... people have a lot of pride in that mission. They want to know from me that we're gonna stick to our mission. It's nice to be able to say yes. It fortifies them."
Fear and confidence: "People are very concerned about the future. So clear direction is critical. Nobody's going to follow anybody if they think we're more scared than they are...
The future: "I'm not a believer it'll come back fast. I think it'll come back slowly over time."