Prior to 2018, Dow and Dupont were both mired in the complexity of a mishmash of many product offerings In several different industries and as a result, were turning in mediocre business results. Specifically, each company, in varying degrees, had a variety of products in the areas of broad-use chemicals and materials, specialty chemicals and materials, and agricultural chemicals. Net, they were both in too many different businesses causing the managements to be struggling to do good things in any one of their businesses.
The broad-use chemicals and materials area included products such as ethylene, polyethylene, vinyl acetate, polyurethane, and various adhesives, sealants, and coatings. Specialty chemicals and materials included offerings in the areas of resins, substrates, and laminates for semiconductors, integrated circuits, photovoltaics, solar cells, light-emitting diodes, and printed circuits boards. The agriculture products area included chemicals for fertilizers and various nitrogen stabilizers, as well as chemicals to enhance resistance to various forms of weather, disease, and insects.
The CEO of Dupont at the time took the step to openly bring up the problem with the Dow CEO, and the two of them recognized they could create far more value by forming three new individuals, independent companies focused on a narrow set of business offerings.
- The Plan -After many discussions, what emerged was a plan to merge the Dow and Dupont into one company and then break it up into three new companies: a broad-use chemicals and materials company, a specialty chemicals and materials company and an agriculture chemicals company. The theme of the plan was focus on creating shareholder value. Employees in both companies needed to fully understand that the end result was three companies, each with a tight focus on a narrow set of product offerings.
- The Execution – A person was selected to be the project leader and a detailed plan was developed consisting of about 700 steps to be taken to merge the offerings of Dow and DuPont and then sort them into the three new groupings/companies focused on 1) broad-use chemicals and materials, 2) specialty chemicals and materials, and 3) agricultural chemicals, with the resulting new companies being called Dow, DuPont, and Corteva respectively. Implementation was begun and progressed quickly and efficiently, thanks to careful planning. All was completed in 2018.
- The Results – Looking at the past 24 months, during which each of the three new companies, Dow, DuPont, and Corteva, were up and operating, the share prices are up 32%, 17%, and 36% respectively.
This is a rare and powerful example of two CEOs, putting their egos aside, and understanding the power of narrow focus in creating value and chopping up their old companies, and reorganizing to achieve that focus.
There is nothing more frustrating than working on many things at the same time, and realizing you are getting nowhere. You fix that by facing reality and focusing on doing fewer things really well.