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Formula for Efficiency

Formula for Efficiency

Low-margin industries — such as chemicals — usually don't invest heavily in IT. But Dow does. Its CEO tells us why

I'll give you a specific example. Three years ago, we were looking to expand our operation in China. We were already approaching $US2 billion in revenue there, but we needed to increase our footprint and actually put some white-collar human resources there. Dave came up with a plan for how to integrate the IT needs of an Asia-Pacific presence with the corporate needs of being in China and actually build an IT centre based in China.

This wasn't labour-cost driven. It was knowledge driven. The notion was that because Chinese universities are training so many engineers, the IT world would be a great entry point into Dow. And in the two or three years they'd spend in IT supporting the Asia-Pacific operations, we would teach them the Dow culture and how to operate at Dow. In time, we'll leverage these people into other parts of Dow besides IT.

But you're the person responsible for the decisions that get made beneath you. How do you set limits for your IT group? How do you decide when to interject yourself into decisions?

You're speaking to ultimate sign-off. At the end of the day, it is the CEO's responsibility to increase the wealth and value of the enterprise and to balance short-term versus long-term decisions. Most of the decisions in the IT space are long term, and therefore you have to understand both the level of risk and the financials that support the project.

I spend lots of time on those questions; this includes presentations and white papers and how a project maps to our overall strategic direction. When I sign off there is also a process that allows Dave to understand the accountability that comes with that sign-off. For example, we are now working on designing our next enterprise architecture. We're going through the authorization process, which is being reviewed by my team. It's coming to me. And the conversations I'm having are about making sure we understand the risk-reward trade-off on value for the enterprise.

One of the ways that risk management for IT has changed is that the [business] cycles are so short. If you have installed systems that you can't get out of for 10 years, you're going to get blown by. So you've got to build in flexibility and adaptability. I think that's what we've built here. As we go to our next-generation activities, we're very excited because we can do them in modular ways. We aren't taking full frontal risks, so to speak. We're very comfortable with that approach. And I would say to you that, as a science-based enterprise, what we're ultimately selling is our human capital — our proprietary knowledge — and that goes hand in hand with how we manage IT. We have to be on the cutting edge of IT so that we can take the lead in managing that knowledge.

You've just described an organization that is very much in flux. How do you lead in this environment?

Leadership of this kind — transformational leadership — is all about change management. Change management requires clarity of vision and a team that can translate that vision into strategy. Then you empower your leaders to actually put their strategy into place. The IT space then becomes the enabler that allows us to execute better. (For more on change management, see "The New Science of Change". "The New Science of Change".) We didn't become productive by accident. This is a nearly $US50 billion company with 42,000 people. Ten years ago we had more people and half the revenue. There's no model out there for what we've done. I couldn't tell you how many companies come in here trying to figure out how we're doing that. It's change management from the top: a leadership model that absolutely, totally believes in the power of the people around you. You've got to communicate, you've got to engage, and you've got to have goals and metrics against the strategy. These sorts of things aren't specific to IT, but IT is central to many of them.

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