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Dialogue: Innovating the Future

Posted By Paul Tate, November 18, 2010 at 1:57 PM, in Category: The Innovation Enterprise

The Celanese  brand first found fame in the fashionable years between the Roaring ’20s  and World War II, not so much for its emerging industrial chemical  business as for revolutionary innovations in man-made fiber spun into  heart-racing, silky lingerie. Having started life in Basel, Switzerland,  in 1912 and later operating as an aircraft paint specialist in Britain  during World War I, the company eventually opened its first U.S. factory  in 1918 as the American Cellulose & Chemical Manufacturing Co.  Today, a flurry of mergers and owners later, Celanese is a $5 billion,  publicly listed corporation with hundreds of innovative patents to its  name and a reputation for developing leading-edge industrial chemicals  and consumer products in more than 20 countries around the world.

Celanese COO Doug Madden talks to Executive  Editor Paul Tate about driving success by thinking ahead, investing in  R&D, and innovating with customers.

Q: What is your role as chief operating officer?

photoMadden.jpgA: Celanese truly is an  international corporation. We have 30 production facilities around the  globe in each of the major operating regions. I have responsibility for  all of our operating businesses across the company — P&Ls,  operations, manufacturing, sales. Our business organizations are  responsible for operating these assets and meeting expectations from a  performance standpoint, and also driving the strategy of each business  and making sure it remains aligned with the corporate vision. I’ve had  the good fortune to work through most operating units in the course of  my career. It’s given me a pretty good view of what success can look  like.

Q: What excites you about your role

A: It’s how we drive these  businesses to the next level and the next stage of higher performance.  We spend a significant amount of our time purely on what our strategy  looks like — not just where we are today, but where we want to be and  where we think we can be. That’s the most exciting part. You lay a  direction. You lay a path. You put your strategic plans in place and  then execute them. There’s nothing more satisfying than working with a  collective group of business leaders to make things happen in order to  realize the promise of the strategy.

Q: How do you drive these strategic plans?

A: We look at our strategies  in four dimensions. We call them operating levers. Number one is  continual productivity year over year. That goal has to be part of the  DNA of an organization. It’s in all the things that you do, sometimes  with the goal to offset inflation, particularly in the chemical  industry, where inflation can be fairly significant.

The second lever is growth, specifically  regional growth — how we look geographically across the world, how we  follow our customers to Asia, creating a footprint that is balanced  across the globe, and balanced in terms of our businesses, our cost  structure, our strategic positioning of where our customers are, so that  we can realize the benefits of growth.

The third lever is in the area of innovation.  You can be a good technology-based company by doing some of your  technology well, but we think great companies do everything well.  Innovation is critical on the shop floor. But it is also critical in how  we use our cash and our capital. It is critical in how we look at our  markets and how we are able to use technology to differentiate our  products in a way that gives us sustainable competitive advantage.

The last lever is to look out across the  competitive landscape to spot acquisition opportunities, portfolio  expansions, and understanding what we can add to the portfolio that’s  going to further strengthen our competitive advantage.

Q: What keeps you awake at night?

A: Generally, I sleep well.  But the things I think about, first and foremost, are making sure that  we continue to attract, retain, and develop the right talent. You’ve got  to have great leaders, whether they’re manufacturing, engineering, or  scientists. You’ve got to have the very best people in order to be  successful.

Having organizational agility is absolutely  critical for us, not only how you structure the company, but also the  talent that you’ve got that allows you to go off and think about things  strategically five or 10 years ahead. We want folks who want to lead  businesses, who want to be premier manufacturing executives, and they’ve  got to be very agile globally. They’ve got to understand different  cultures and how you draw the best out of those cultures within each of  the major regions, and yet be bound by a single Celanese culture.

The second thing is complacency. We  constantly try to drive and improve standards. It’s the notion that you  can never really be satisfied. How do we keep organizations around the  world continuing to drive for improvements to set standards higher?  Those are the kinds of things we must engage in.

Q: How do you maintain these standards and drive leadership across such a diverse organization?

A: It gets down to where you  ask your organizational leaders to spend their time. You are going to  spend 30% of the time on those things that you must do in the near term  over the next one to two years. Then you want to spend about 40% of your  time on forward plans, things that you’re working on beyond the next  couple of years to strengthen the company and the organization  strategically. These are concrete concepts that we put plans and actions  to. Whatever time is left, you’re really thinking even further out  there. You’re thinking about long-term concepts and ideas. They don’t  necessarily have plans put to them yet, but you need to ask the  question, “Ultimately, where do I want my company to be in five to seven  years?”

Q: That makes forward planning a central part of the role.

A: It’s a constant search,  and we’re always in self-discovery, but it’s absolutely critical that  you have a forward view and that we think about not just what is here  today, but what could be, and what our customers are thinking. If you’re  driving a car, you’ve got to be looking through the windshield, and not  through the rearview mirror to where you were, but at what lies ahead —  planning, anticipating, and understanding where you need to go.

You’ve also got to be capable, to some  extent, of taking what I call “managed risks” and understanding that not  all things are certain. But if you believe strongly that you’ve got  leading technology, if you work with your customers closely for what  they’re spending their time on, you tend to get a pretty good idea of  where you need to be.

Q: So how do you drive innovation across the company?

A: Innovation is essential.  But science projects by themselves don’t woo our shareholders.  Technology for the sake of technology is interesting, but you typically  don’t turn that into a source of differentiation or get paid for it.

Technology is the enabler. Let me again give  you an example. Through technology we are capable today of getting more  acetic acid — 1.5 million tons — out of a single reactor than anyone  else in the world. That has given us a significant advantage in our  operating costs, our raw material, our yields, the use of energy, and  obviously you get the benefit of capital as well. That’s how technology  enables us. But that didn’t just happen. That’s 30 years of developing  the technology, iteration after iteration, generation after generation,  and it reflects probably hundreds of patents. But it’s the continual  investment that we make to ensure that the technology can sit as the  centerpiece of any of the businesses that we operate.

Q: Do customers also help drive innovation?

A: We believe it is  necessary to be close to our customers because that’s usually where  ideas are created. We need to understand not just what they need now,  but what they’re thinking about five years out or even 10 years out.

For example, we’ve got leading market  technology in our Ticona engineering polymers business. We are  recognized worldwide for being able to take very small, but complex,  intricate parts for the auto industry or in electronics, and we work  with our customers to design and mold these out of high-performance  polymer materials. We work together to innovate. We also recently  announced the development of an innovative, high-impact POM material, a  plastic polymer compound, that now allows us to expand into what we  think is an available market that didn’t exist one year ago. There are a  lot of examples that bring us back to the criticality of innovation,  and those are things that are done in conjunction with the customers.

You can’t be a technology leader or a global  leader just based on size and scale. We envision competitive,  sustainable advantage as being where you either have market leadership  or you have technology leadership. That’s the only way to differentiate  yourself long term.

Q: So do you see R&D as fundamental in this process?

A: Technology and R&D  become absolutely critical. At times when the industry is cutting back  to lower investments, we’re actually increasing our investments because  we think it’s essential long term. It’s a tremendous opportunity today  if you can be successful and continue to develop and build, whether it’s  in products or processes. At some point, as we return to a more  normalized world market, companies that invest in R&D are going to  be better positioned.

Q: What drives your manufacturing strategy around the world?

A: Our manufacturing  strategy is really built on a number of fundamental principles. It  always begins with our focus on environmental health and safety and how  we operate our plants. We don’t think you can separate those from  strategy. You can’t be a reliable producer if you’re an unsafe producer.  Then we look across all of our manufacturing operations. We focus on  standardization, simplification, and digitization — how we can do more  through investments in processes and systems that take out  non-value-added work. You simplify and you standardize, and ultimately  it drives you to remain very productive.

We’re also upgrading our technology and we’re  always looking at our manufacturing footprint. We tend to look at  what’s happening in the world and make sure that we’re optimized in our  manufacturing. Our goal isn’t to have 25 or 30 sites around the world;  our goal is to have the most optimal footprint where we can employ that  capital productively.

Q: How has information technology helped change the corporate landscape?

A: I think the chemical  industry, in general, not just Celanese, is a long way from where it was  just a few years ago. Today, you can know, almost on a daily basis,  what your order patterns look like, what your volumes are. Your update  is less than 24 hours so you have real-time data and operate almost in a  virtual world. When you’re dealing 14 time zones away from some of your  leaders, you’ve got to have technology to link the world and to do it  in a real-time way.

Where we can get advantage, we’ll digitize.  As we simplify our work processes, digitization allows us to replace  manually intensive processes. It helps us run our units more efficiently  and optimally. When you’re in these chemical units, a small tweak in  your yields has a major impact on how well you can improve your  technology and convert those raw materials.

What’s scary is that technology changes so  quickly. People get smarter. They take work out; they take time out;  they add information. And that’s allowed this industry, especially with  globalization, which is probably the largest challenge it’s had over the  past 10 to 15 years, to be able to literally manage itself in a virtual  world.

Q: What next-level technologies are you looking at?

A: A lot around our use of  energy. We have set corporate sustainability goals, from 2005 to 2010,  to reduce 25% to 30% of our greenhouse gas emissions, our waste, and  other criteria. We’ve deployed technology that’s allowed us to reduce  the consumption of those materials. We’ve also begun to explore  alternative fuel technologies. At some sites in Europe, we already use  wind technology. Now we’re preparing to set our next standards for the  future. Technology and capital investment will play a critical part.

Q: Can new social networking technologies help your business?

A: We’re just discovering  the potential of things like social networking, and we’re still trying  to understand how you use them, particularly with our  customer-interfacing businesses. I’d say it’s a great way that you can  begin to enlist the public and potential consumers in helping to  co-create products and drive your service improvements. You can go into  the marketplace and you not only can inform potential consumers, but you  tend to get some pretty good insights into what they are looking for,  what works well, and what doesn’t.

Q: So how can global manufacturers better prepare for the future?

A: You’ve got to understand  your strategy, know where your key investments need to be, improve your  technologies, and understand what leading technologies you have. And use  this period to invest in technology and R&D because you’re going to  be better positioned when your normalized world volumes come back. It  will make you stronger and more capable globally.

In the end, if you stay close to your  customers, and you continue to look at where they’re going to be five,  seven, eight years from now, and then use that directionally coming out  of this period, I believe it can be a strong formula for future success.  Some of the best work will be done now. Stay close to your customers  and you’ll be stronger as a result.

Personal Profile
Doug Madden, Chief Operating Officer and Executive Vice President, Celanese Corp.
Nationality: American
Based: Dallas
Education: BSc, Business Administration, University of Illinois
Languages: English
Previous roles:

  • Executive VP, Acetyl Intermediates and Industrial Specialties, Celanese
  • President, AT Plastics and Emulsions, Celanese
  • President, Acetate Business, Celanese
  • Vice President and General Manager, Acrylates Business, Celanese
  • Head of Global Supply Chain, Celanese Chemicals
  • Manager Corporate Distribution, Celanese
  • Operations and Distribution Management, Warner-Lambert
  • Operations and Distribution Management, Johnson & Johnson

Fact File

Celanese Corp.
Headquarters: Dallas
Business sector: Chemicals
Rankings:

  • Fortune U.S. 500: Sector: 13th; Overall: 368th
  • Newsweek U.S. Green 500: 125th

2009 Revenue: $5.08 billion
2009 Operating Profit: $847 million
Key Product Sectors: Acetyl intermediates, advanced engineering materials, consumer and industrial products
People: 7,400 employees
Presence: 20 countries
Production: 30 manufacturing sites


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Written by Paul Tate

Paul Tate is Research Director and Executive Editor with Frost & Sullivan's Manufacturing Leadership Council. He also directs the Manufacturing Leadership Council's Board of Governors, the Council's annual Critical Issues Agenda, and the Manufacturing Leadership Research Panel. Follow us on Twitter: @MfgExecutive



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