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We cannot sit in the US and make decisions for India - Charles O. Holliday Jr

CEO & Chairman of DuPont, Charles O. Holliday Jr was in India recently to address issues of his employees and customers. He spoke to BT’s Anusha Subramanian in an exclusive interview.

Charles O. Holliday Jr, CEO and Chairman/ Dupont
Charles Holliday Jr,
Teflon and lycra are just two of the countless products DuPont is known for. The company that was founded in 1802 has earned its spurs for innovation in various sectors right from agriculture to electronics to transportation to apparel. Charles O. Holliday Jr, or Chad to those who know him, has been the CEO & Chairman of the $27.4 billion (Rs 1,09,600 crore) Goliath since 1999. The 59-year-old Holliday, who has been with the US’ largest chemical company for over three decades now, was responsible for driving growth in the Asia-Pacific in the ’90s. In fact, it’s his success in this region that played a decisive role in him being elevated to the top post. On a recent visit to India, Holliday met up with his employees and customers to understand their issues and also talk about the opportunities that they see. He also found time for an exclusive interview with Business Today’s Assistant Editor Anusha Subramanian. Excerpts:

Over the years, DuPont has gone through several transitions. More recently, it has moved from being a chemicals company to a science-based products and services company. What was the purpose behind the transition and how has it helped the company?
I meet with great companies around the world and they look at DuPont as a company that has been around for 205 years with the same name, same headquarters and they ask: How did you do it? Even after 200 years, how have you managed to be a strong global company? And I say to them we were able to lead to that new growth curve before it was obvious. And if we had waited until it became obvious that our old products are getting too old, then we would have just been left too far behind the competition. Ten years ago, we did the right planning and took the right decision of transitioning. We decided to move from pure chemistry into biotechnology and nanotechnology. We looked at environmental pressures, energy shortages, populations growing so fast as a result of which they will put pressure on food and water supply. We, therefore, looked at a whole new suite of products that we could come up with new technologies and aimed to solve these problems. We are feeling good about the steps we have taken but time will only tell if we have done the right thing.

What has been your company’s overall growth strategy?
 We have three strategies and these are our buzzwords: One, put science to work—listen to your customers and make what they want. We are focussed on the customer domain. Our emphasis is on understanding their unique challenges and providing science-based solutions that create more value for them. If customers win, so do we. It’s about creating sustainable solutions essential to a better, safer and healthier life for people everywhere. Two, we go where there is growth. And, three, (we believe in) the power of one DuPont.

Where does India fit in that strategy?

 
 “India is our 13th largest market, and it is among the top three growing markets for DuPont”
We are applying the same strategy to India as well. In India, we do have a knowledge centre that is focussed on basic research, application development and other knowledge services for global and local markets. This centre is consistent with our company strategy of going where the growth is. Our intent is to leverage Indian science and engineering talent for the benefit of DuPont customers and its shareholders.

The India subsidiary has been growing at 25 per cent annually for the last five years. How do the company’s future performance and prospects look?
In 2006, DuPont sales in India exceeded $360 million (Rs 1,620 crore). India is in a very good spot at this point in time and I am expecting DuPont India to grow faster than 25 per cent in the coming years. Agriculture is a big need in this country and our largest business platform is in the Agriculture and Nutrition segment, followed by Performance Materials, Coatings and Colour Technologies, Safety & Protection, and Electronics and Communication Technologies.

DuPont is now betting big on emerging markets (recently, it opened office in Serbia). How much do emerging markets on the whole contribute to DuPont’s overall revenues? And where does India rank in importance amongst emerging markets?
We figured out a long time ago that we cannot clearly define emerging markets by country. We, therefore, break down countries into different regions. There is an aspect about the Indian economy that is very developed and there are aspects that are not developed and we treat both these aspects differently. India, for us today, is the 13th largest market; and it is growing at a rate of 25 per cent year-on-year. From a growth perspective, it is among the top three growing markets for DuPont.

DuPont is betting big on R&D as a future centre of excellence in India.
There is an emergence of global R&D capabilities in India. We see centres of excellence emerging in longterm R&D related to the disciplines of Crop Biotechnology and Industrial Biotechnology that will focus on improving the country’s agricultural productivity for food, feed, fuel and other material needs. These centres will help in bringing solutions based on scientific inventions and innovations to the market so that we address the mega challenges of food, renewable energy and materials for our country and also of the world.

How much have you earmarked as investments for India? You have already invested Rs 100 crore in setting up a knowledge centre in India. What exactly would the knowledge centre do?
We make investments by projects. Our investments in India are largely in people than in assets. We have not been large investors in plants here but that is likely to increase. On the knowledge centre in India, we are going to spend at least Rs 200 crore. By mid-2008, it will be up and running. The India knowledge centre is one of the first in the world for DuPont. Initially, biotechnology research will be a big part of the knowledge centre. There will be enzyme development for bio-based materials. We will set up a large intellectual property (IP) team that will make sure we get patents for process and products to be successful. We hope that this knowledge centre would be a model for the future. India is very critical for us in our global growth mission because of its market dynamics, the knowledge centre and overall sourcing of materials and other processing capabilities. I can’t describe any other country, including China, that is more important to us. We cannot sit in the US and make decisions for India very effectively. Therefore, we need to give our local leaders, like Balvinder S. Kalsi, President and CEO, DuPont India, and his senior team, the freedom to take decisions effectively and also give them the necessary resources they need. What the local market needs might be totally different from what a Germany or Japan needs, so we need to allow local decision-making.

DuPont has always laid stress on innovation and building new products year after year across all its businesses. Can you sustain your rate of new product innovation and when will the revenues from new products accrue?
We believe in innovation and coming up with products that benefit our customers. Through 2006, we recorded 12 consecutive quarters of pricing gains, due in part to new products which, in many cases, are replacing older products but creating greater value for our customers and higher margins for DuPont. We believe we can sustain our current rate of new products, judging from leading indicators such as our number of new patent filings, which has doubled from 800 patent applications filed seven years ago to 1,800 patent applications filed in 2006 alone. Revenues are already accruing in our results now. In 2006, 34 per cent of our sales came from products introduced within the last five years. It often takes our new products three-tofive years to reach the steep part of their growth curve.

DuPont is now pursuing bio-based materials and biofuels. What are your commercialisation plans for these products?
If you look at energy in the world, there is fuel for transportation, power generation and there is processing. In power generation and processing, you can use alternatives like coal, you can use nuclear or you can use hydro. But when it comes to fuelling vehicles, there are not so many options—gasoline diesel or biofuels are the only options. So, we concluded that because there are fewer options, there just had to be a biofuel component. We believe that we have the technology to solve the ethanol problems. I think by 2012, these products will go commercial.

DuPont is keen to integrate biotechnology and chemistry to deliver biobased technologies. Can we have some examples of work happening in this field; can India play a role here?
One of our lead projects is Bio-derived PDO. Bio-PDO is also the key ingredient for Sorona, DuPont’s newest polymer family. Sorona offers a unique combination of attributes in a variety of applications, including apparel, residential carpet and a variety of other applications such as engineering and thermoplastic resins. With Bio-PDO, we are also working on products that are well suited for cosmetics, liquid detergents and industrial applications like anti-freeze. People use hair colour that has a lot of chemicals in it. We are developing a biotech-derived hair colour that will only treat the hair and not the skin. It is not commercial yet. We are working on medical applications from biotechnology. For instance, we are developing a medical application to treat cancer. It is an injection that is injected directly into the area where the cancer has been detected and it expands that area by 100 times its size in volume and what that does is it stops the flow of blood to that cancerous region and so the cancer dies. All these products will come from biotech. All these products will be commercially viable by 2012. India could be a candidate for a bio-derive PDO plant.

Does biotechnology fit with your objective to be a force for sustainability?
Yes, biotechnology fits into our objective of sustainability. Opportunities for biotechnology exist in agriculture, materials, energy, polymers, sensors, electronics and personal care and many of these applications are interrelated. In agriculture, biotechnology is probably the most powerful scientific tool at our disposal in this century to feed and clothe people around the world. We know biotechnology cannot be developed in a vacuum. To help DuPont consider and address important issues regarding biotechnology, we have an independent panel of external experts to guide and challenge us in the development, testing and commercialisation of new products based on biotechnology.

Could you explain the purpose behind launching the 2015 sustainability goals?
We have had long-range goals for the last 50 years. The launch of the sustainability goals is a direction statement to the 60,000 people that we have. We have set goals and these would be later taken forward to see how we can help our customers. Working in partnership with others, we are building sustainability into our products themselves as well as into the way we make them. Sustainability is central to our total value proposition, impacting not only our business, but every customer and every consumer we touch everywhere in the world.