New Life for Dupont
DuPont’s energetic chairman is reinventing the nearly 200-year-old chemical company, shifting its emphasis to biology-based materials and electronic displays.
Venerable DuPont is one of the United States’ oldest and most successful corporations. Founded in 1802 as a gunpowder and explosives maker, it became a household name by giving the world nylon, Lycra, Teflon, Kevlar and other materials, many of them based on revolutionary breakthroughs in polymer chemistry.
Indeed, for much of the 20th century, DuPont-and its fabled central R&D lab-has been viewed as ground zero of innovation in the chemical and materials industries: it currently spends nearly $2 billion a year on research and development. But some of these innovations have come at a cost. DuPont pioneered chlorofluorocarbons, which were phased out in the mid-1990s due to their role in the destruction of the atmosphere’s ozone layer. And the company’s various manufacturing processes, though perfectly legal, have made it one of the world’s largest industrial polluters.
At the same time, you don’t live to be a two-century-old firm without reinventing yourself several times, and the chemical giant is currently attempting another reinvention-recently shedding its energy and pharmaceuticals businesses to concentrate on new ventures in biotechnology, organic displays and even superconductivity.
In advance of the firm’s bicentennial anniversary, Technology Review editor at large Robert Buderi visited DuPont’s energetic chairman Charles O. “Chad” Holliday Jr. in his headquarters in Wilmington, DE. The two spoke in depth of DuPont’s technological future-especially the effort to combine traditional chemistry with biology to create new bio-based materials. They also examined DuPont’s environmental performance, the Kyoto protocol and the need to balance economic success with environmental responsibility and social progress-challenges reflected in Holliday’s position as cochair of the World Business Council for Sustainable Development. In short, they discussed where DuPont is headed in the next 200 years-well, at least in the next decade.
TR: DuPont is at once an old company, 200 years old, and a new company. You’re making some of the same products you did decades ago, and pioneering new things.
Holliday: The key in innovation is to keep taking old products, finding new uses for them, different adaptations, while you bring in new things. We are adding biotechnology, a major new platform, while we’re taking things like nylon, which has been around for 60-plus years, into new forms and uses. We just introduced a new form of nylon that has a very soft feel, and fantastic wear resistance. So as an example, if we can take nylon to a new level of performance and give you a reason to replace the carpet in your bedroomthat’s what it’s all about.
TR: The challenge of innovating in your existing businesses and growing new businesses isn’t really new, though. Are there other aspects of this that are?
Holliday: Historically, we liked to get everything done with a bow tied on it, and then go to customers and say, take it. You can’t do that anymore. You’ve got to get the end user working with you every step along the way. Take our new soy milk that we’re putting out with General Mills. We have a sweeter-tasting soybean, and some very good technology to process it. So we went to General Mills and said, we can sell it to you and everybody else as an ingredient, or we together will perfect the packaging, the distribution, the flavors, the process and make it a 50-50 joint venture. So we did it. It’s called 8th Continent soy milk, and in many parts of the United States you’ll find it on your supermarket shelf today.
We also have an MIT alliance that is really about understanding technology from the outside-and being sure we’re focused on customer needs. What MIT did was pick a major business/market arena to focus on and identify a leading industrial partner to work with. For example, they have a deal with Ford in automotive and Merck in human health. For bio-based materials, they chose DuPont. So we have now about 30 specific research programs ongoing through our relationship with MIT on bio-based materials. It’s a five-year process. We’re about a year and a half into it now. It’s a big commitment-$35 million on our part-but we like the way they bring in a lot of outside thinking, a lot of new ideas. And the business school-the Sloan School-is a part of this, so we look at the business model at the same time.
TR: Let’s talk more about bio-based materials. You once told me if you could pull off this “biotech thing” it would really be something special. Is this what you were talking about, the merger of biotech and chemicals?
Holliday: Yes. There’s tremendous focus now on genetically modified plants. We get $1 billion worth of revenue from genetically modified plants today. That’s going to be a very important business for us going forward. On the other hand, there’s human health-using the knowledge of genomics to make better medicines. That’s very important. But we’ve gotten out of pharmaceuticals. In between there’s this big space called bio-based materials. The key here is what’s being called bioengineering-putting basic chemical processing capability and fundamental engineering skills together with genetics to create new technology platforms, so we’re no longer just depending on the petrochemical route. I don’t know anybody in the world better equipped to do that than we are, because we started our first research in bio-based materials in about 1985. So if you’ve got a problem, it gives us the option to take either the traditional chemical route or the bio route, or some combination.
TR: Has it changed the kind of people you hire?
Holliday: Oh, sure. I can’t hire many people with bioengineering degrees yet, so we’ve been purposely placing our best process design people with our bio folks-putting them in the same building and saying, you guys talk to each other. I like to say we’re writing the handbook on bioengineering today.
TR: You have a new corn-based polymer ready for the market, don’t you? Is it DuPont’s first bio-based material?
Holliday: It’s called Sorona. It’s a bit different than polyester, but it’s in the polyester family. It has very good dyeability. It’s got stretch recovery. It’s not quite as good as Lycra, but if you’re wearing a jacket of it, it’s got a little more give, so it’s more comfortable all day. We’re also looking at it in carpets. Half the molecules are going to be made from corn through biotechnology. It’s our first new polymer platform in 30 years.
TR: What else excites you most about what’s coming down the pike?
Holliday: I can’t remember a time where there are more things that really have the potential of being really big-because they’re aimed at important problems. Nylon was kind of like that. It was the right product at the right time. It was wartime-you needed parachutes and you needed reinforcement for tires. I think what we have now is a different kind of war. It’s a war where environmental performance, market knowledge, intimate customer knowledge, pace and innovation are the “fronts” that will determine the sustainability of global business.
We have major superconductivity programs: nobody’s made a lot of money on superconductivity yet, but there’s a potential, and we’re making progress. We’ve got a new superconducting filter system for cell-phone base stations that is in trials now. We’ve got some key materials for fuel cell systems that might power a building, or in the long term, your automobile.
TR: Are displays, like those made of organic light-emitting diodes, another big potential growth area for DuPont?
Holliday: Major. It’s clear, people need better displays. They need less energy consumption. In addition, they need them made out of plastics so they won’t break. We work with Uniax, a little company we bought out on the West Coast from Alan Heeger, who won a Nobel Prize for chemistry last year. DuPont holds a majority stake in Polar Vision, an innovative optical components and lamination services provider serving the display industry. And we’ve ventured with RiTEK Display Technology in Taiwan to produce OLED [organic light-emitting diode] glass panels exclusively for DuPont Displays using proprietary technology from DuPont and Uniax. So we’re putting together a consortium of folks that we think can turn out a display that’s polymer based-far brighter, lighter, flexible, break resistant and much more energy efficient than the current technology. We showed prototypes at the last major technical show. We’ll have products in the marketplace next year.
I’ll never forget a meeting with Bill Gates three years ago, talking about what we could do together. Basically, what he said was, “I need a display people can read. Because even at Microsoft, if it’s two pages, we print.” And so if we could get a display that’s so good you would prefer it over paper and like it enough to even want to sit back and read it in bed, you can. That’s going to happen, and we can play a role in that gigantic market.
TR: So did you guys work out a deal?
Holliday: Well, he said, as soon as you get that display, bring it to me.
TR: It’s interesting, you’re talking about DuPont and Microsoft entering into the same turf, and that’s not what you think of with a chemical company and a software company.
Holliday: It’s a very good observation, because one of my bigger competitors in the displays market is Sony. They come at it from the user end, we come at it from the solution end. And so we’re both kind of crowding each other’s space. In the old days, I would just go sell Sony, or Sony’s supplier, a material. Now what I want is to sell a display or a component for a display. I think you’ll see us do more and more of that.
TR: So do you think that in 10 or 20 years, DuPont will be a much different company?
Holliday: Without a doubt, because every 10 or 20 years we are a much different company. We made a very strategic decision a couple of years ago to get out of the energy business. We made another key decision earlier this year to get out of the pharmaceutical business. Great business, great industry, but when you’re a billion-and-a-half-dollar pharmaceuticals player with a $500 million pharmaceuticals research budget and the other guy’s got $3 to $4 billion, how do you really make a difference? In this case, we weren’t willing to commit up to 25 percent of our total company research budget to a business that was no longer a strategic priority. We’ll focus where we’ll make a difference for our shareholders. So in plant science we will be a leader, in bio-based materials we will be a leader, and we will lead in electronic systems. We’re the third-largest company supplying materials to the electronic industry today. I’d like to be number one. These are areas where we can win, and so that’s our thrust.
TR: You talk a lot about the environment and sustainability. It doesn’t seem to fit the image of a big chemical company that’s one of the world’s largest polluters.
Holliday: About 12 years ago, we were labeled the largest industrial “polluter” in the U.S. based on EPA’s Toxics Release Inventory reporting. We were there because of our deep-well disposal of aqueous wastes. These were legal wastes, but we just put more stuff out there than anybody else. We decided that’s not where we wanted to be. And we concluded that if we put our engineering talent to it, we could clean up our processes and make money for our shareholders at the same time. It goes without saying that we went after the bad actors first-anything that posed a serious risk to human health and the environment.
TR: How does the energy picture figure into this for you?
Holliday: There are two ways. First, we set a goal that by 2010 we would cut global greenhouse gas emissions by 65 percent, using 1990 as the base year. We had some pretty good ideas how to do it, and we expect to be at 60 percent reduction this year, so we’re almost there. Second, we said we would get 10 percent of our energy from renewable resources by 2010. This was pretty gutsy. We could do it tomorrow if we just wanted to pay the price, but that’s not the idea. We want to do it in a way that makes money. We just had a review of this goal, and we’ve made a lot of progress.
TR: Not going to hit the target?
Holliday: We will. We’re at two percent for 2000, and we have several years left to go. We’re examining all our options. Right now one that appears to offer us the most is gas from landfills as a substitute for natural gas. We’ve got about seven sites where we’ve already found a landfill close enough to our plant that we can just run a pipe and use it. I can visualize where landfill gas could be a big part of the 10 percent and make us money doing it.
TR: Where do you stand on the Kyoto protocol?
Holliday: We believe that global warming is an issue, and we believe the world should start taking pertinent steps around that. Some aspects of the Kyoto protocol are a very good start, such as the emissions trading mechanisms. We think by getting a trading system set up where the lowest-cost company can do it and sell the credit to somebody else is a very positive step forward. Aspects to the Kyoto protocol are just not right, such as developing countries not having to get into the game early. It’s hard to get all these nations together to do something, so why don’t you start with the fundamentals of Kyoto and improve it, make it better?
TR: DuPont is one of the most global companies in the world and may be in a better position to see something about the economy than others. So I wanted to ask you for a bit of economic forecasting.
Holliday: Well, in September 2000, we were the first to come out and say, this economy is getting bad. And the initial responses were, what’s wrong with DuPont? But about five weeks later, you saw a lot of reports just like ours. If you’re selling materials, or making cars or electronics or clothes, the U.S. volume is off drastically. Europe has gone down-not nearly as drastically as the U.S., but it has turned down. Asia’s turning down, and South America’s down. I can’t recall a time when the volume was simultaneously dropping in all the major regions of the world.
Now, there are some signs that could say the U.S. is bottoming out right now, but we’re not banking on that. The dollar for us is at a 15-year high. And then I’ve got high energy prices. So when you put all those things together, it’s not a very pretty scenario. We don’t see the upturn yet in sight. I hope, in a few months, we will. But we’re not going to gear up our plants and start moving until we can see firm demand.