Dow’s Sustainability Strategy

The March 19, 2012 issue of Fortune featured an interview between Geoff Colvin and Andrew Liveris, Chairman and CEO of The Dow Chemical Company (NYSE: DOW).

Entitled “Dow’s New Direction” I found several snipets of the interview to be interesting.

What’s Dow’s strategy now? This is the third great transformation of the company. It started out as an inorganic chemistry company 115 years ago. It became a petrochemical and plastics company. The transformation of the past seven or eight years is to a science-based company that takes feedstocks and adds value to them. So less commodities. We’re bringing in biological science, physics, chemistry, material science.

Basically, Liveris is offering a real-time narrative that makes sense of Dow’s past legacies while seeking to insure Dow’s future relevance. Later, Liveris connects these “great transformations” with Dow’s sustainability journey.

I think we’ve really elevated our position, representing ourselves not as Dow Chemical but as Dow, a company based on sustainable business… “Sustainable” is no longer an option, it’s an adjective — sustainable business, sustainable science, sustainable solutions.

Finally, an interesting comment that I don’t believe has received much attention: sustainability as a recruiting strategy.

Our recruiting strategies have changed with our advertising strategy, rebranding the company around the human element and sustainability, presenting a company that is innovation-centric vs. the notion that it was a legacy company in commodity chemicals.

Wine Consumption Circa 1934

Fortune has re-published an article on “The Wines of the U.S.” originally written in 1934, shortly after the December 1933 repeal of prohibition.

Source: http://features.blogs.fortune.cnn.com/2012/03/25/american-wine-fortune-1934/

The article reported that:

In 1918 U.S. wine consumption was 51,000,000 gallons. During prohibition it trebled. Mr. Garrett was one of the few people who realized that amazing fact — that by 1928 the annual consumption of wine had become about 160,000,000 gallons a year. During those years liquor consumption increased only 50 percent — by gallons, 60,000,000. Yet the liquor business was organized and aggressive, and the wine industry had been disrupted.

The statistics told Mr. Garrett more. In 1918 some 3,000,000 gallons of wine were imported to fill the slippers of chorus girls and the gullets of the rich. Most of the 51,000,000 gallons produced domestically was sold in bulk and drunk by the foreign-born people of the cities. Of the 159,000,000 gallons consumed in 1928 only a few thousand were imported and only 5,000,000 produced legally and domestically for refreshment while communing with the Lord.

That left 154,000,000 gallons which were made illegally in cellars and legally in homes. Since the foreign-born population has not increased since 1918, it seems logical to conclude that much of the 100,000,000-gallon increase in those years was due to new habits contracted by the rank and file of the population. In other words, prohibition has done something very startling to the taste of this nation.

What a potentially fascinating setting for exploring organizational processes. In particular, the distributed, interactive and sociomaterial organization of (il)legal practices, and the role of such practices in (re)shaping the regulatory landscape.

One potentially sympathetic jumping off point that comes to mind: Lauren B. Edelman, Christopher Uggen and Howard S. Erlanger, 1999, The Endogeneity of Legal Regulation: Grievance Procedures as Rational MythAmerican Journal of Sociology, Vol. 105, No. 2, pp. 406-454.

Of Markets, Regulated and Deregulated

I’ve been studying the history of nuclear power for some time now. With that in mind, I found Fortune’s November story on “Southern’s Big Nuke Bet,” in which Geoff Colvin interviewed Tom Fanning, CEO of Southern Company, to be quite interesting. In the article, Fanning responds to the following question from Colvin:

[Geoff Colvin:] A couple of other utilities have decided to get out of nuclear. Constellation got out of plant development earlier this year, and NRG pulled out of its nuclear project in Texas. Is this just a case of differing business judgments, or is there something else?

[Tom Fanning:] It goes back to scale, credit quality, and credibility. When you think about the challenges that a small company will face building a $14 billion deal, that gets rather daunting.

The U.S. really is divided into two electricity markets. Some years ago many states deregulated, and they have what’s called merchant markets, where the price for electricity is largely set a day ahead or week ahead or month ahead. Remember this is going to take 10 years to build, and it’s going to be the largest capital asset in your portfolio, and you’re going to need to run it 30 to 50 years to earn that money back. Putting that magnitude of capital in a deregulated merchant market is exceedingly risky. Thankfully, Georgia Power operates in a vertically integrated regulated market where legislation and regulation are stable and constructive and will support this over time.

In other words, the major reason Southern Power is able to undertake the construction of a new nuclear power plant is because it operates in what looks a lot like a planned market. This is a point that some in the U.S. seem to ignore. For instance, in an article for the Heritage Foundation, Jack Spencer claimed that federal loan guarantees were not essential to the continued development of nuclear power in the United States, but that instead, free markets could be counted on to intervene in the government’s place.

But rather than being driven by “market” forces, history reveals time and again that the construction of nuclear power plants depends almost exclusively on state intervention. For instance, in recent years, EDF, Rosatom and China have been three of the most active developers of nuclear power projects worldwide. All are essentially state entities. As of January 2010, the French government owned 84.48% of EDF. While Rosatom and the Chinese nuclear industry are entirely owned by their respective governments.

Meanwhile, in the US, the nuclear “renaissance” is now essentially limited to Southern Company’s planned Waynesboro, GA facility. Of the other approximately two dozen applications submitted over the past few years, none are being actively being pursued at this time. By comparison, not only has Southern Company received $8.2 billion in loan guarantees from the federal government, as the interview above makes plain, the economic viability of the project additionally hinges on the fact that Georgia remains a regulated energy market, meaning that the ultimate costs of the project (whether the currently projected $14 billion, or more) will ultimately be borne by Georgia electricity ratepayers. This effectively offers the company a state-level guarantee on top of its federal loan guarantee.

In short, the preponderance of the evidence from both the US and the rest of the world suggests that heavy governmental subsidies, loan guarantees and/or liability exemptions — either explicitly or de facto — are essential to the development of nuclear power. By comparison, all of the literature I have read on the topic suggests that the market has yet to build a single nuclear plant.

Teaching Naked

Today one of my colleagues mentioned an article in the Chronicle of Higher Education on “teaching naked.”

In essence, the article argues that technology — especially PowerPoint — inhibits the learning process by promoting boredom and passivity, rather than interest and engagement. As a practical matter, anything that’s on a slide can be read asynchronously, so why waste valuable class time going over it? By comparison a real-time interactive discussion and debate about weighty issues is something that’s much harder to replicate outside the classroom, and that’s likely to be much more memorable 10 or 20 years later.

Of course, the problems with PowerPoint are well documented. One of my favorites is Edward Tufte’s essay “The Cognitive Style of PowerPoint: Pitching Out Corrupts Within.” He shows through numerous examples that PowerPoint is simply the wrong tool for conveying all sorts of information. And while he agrees that some small part of the blame can be placed on poor presenters, he asserts:

“PowerPoint has a distinctive, definite, well-enforced, and widely-practiced cognitive style that is contrary to serious thinking” (p. 26).

Somewhat more humorously, some years ago Fortune published a much shorter primer on what-not-to-do entitled “Ban It Now! Friends Don’t Let Friends Use PowerPoint.” Unfortunately the online version lacks the visual punch of the print edition, in which the article’s major points were made as a series of PowerPoint bullets. It went something like this as I recall:

Slide 1: WHY BAN POWERPOINT?

  • It’s a monopoly.

Slide 2: WHY BAN POWERPOINT?

  • It’s a monopoly.
  • It’s inescapable.

Slide 3: WHY BAN POWERPOINT?

  • It’s a monopoly.
  • It’s inescapable.
  • It’s monotonous.

Slide 4: WHY BAN POWERPOINT? (cont.)

I think you get the idea… Indeed, since trading in my corporate career for an academic career, I have found that PowerPoint is as universal in this world as the former — both in classrooms and at academic conferences. The question is: How to overcome the curse of PowerPoint?