Walking The Talk: A fast-revving DuPont nears completion of its cellulosic biorefinery in Iowa

September 7, 2014 |

DuPont-smSustainable development ready to take a major step forward – but what does sustainable mean, in the larger context?

And why is it critical, even beyond environmental and economic concerns?

Back in 2002, DuPont CEO Chad Holliday, collaborating with Stephan Schmidheiny (then board chair of AVINA foundation) and Sir Philip Watts (then board chairman at Shell), penned a book called “Walking the Talk” arguing that “sustainability is not only compatible with but crucial to business success”.

Drawing on nearly 70 case histories of companies around the world, the three authors argued that the “three pillars of sustainable development — economic growth, ecological balance, and social progress — work to improve the bottom line even as they create a better world.”

DuPont's Nevada cellulosic biofuels plant, as of August.  The core technology and fermenter units can be seen at center; at left center, biomass intake; at left, storage and distillation

DuPont’s Nevada cellulosic biofuels plant, as of August 2014. The core technology and fermenter units can be seen at center; at left center, biomass intake; at left, storage and distillation

DuPont shifting to life sciences

DupontNot long after Holliday assumed the CEO slot at DuPont in 1998, the company stepped up in a quest to build what he then called a “strong balanced portfolio, which includes many of our traditional business but more of a focus on our life sciences where we use our strength in 10 years of research in biotechnology.”

chad-holliday1-1024x576He announced a divestiture of Conoco, then the nation’s 9th largest petroleum company and a DuPont subsidiary, and acquired the 80% of Pioneer Hi-Bred that DuPont didn’t already own. Then, he tapped Ellen Kullman to start up a new industrial biotechnology unit, which has subsequently become one of DuPont’s fastest-growing business units — the success of which played a role when DuPont’s directors chose Kullman to succeed Holliday as CEO in late 2008.

Ellen_Kullman_hirezKullman and her team, in turn, acquired Genencor in 2010 as a centerpiece of its acquisition of enzyme and food ingredients giant Danisco. In 2011, though she cautioned in a chapter of “How I Did It,” an essay collection on transformative business deals published by the Harvard Business Review that “You can’t fall in love with a deal; you have to fall in love with what it does for your company. And even then it has to be at the right price.”

It’s been a good stretch for the company. As Kullman observed at the Sanford Bernstein conference this past May in New York, “At the end of 2013, $100 invested in our stock at the end of 2008 would have been worth $314 versus $217 for the Dow, $228 for the S&P 500, and that includes accumulated dividends. Still, we have more work to do to deliver even greater shareholder value.”

DuPont’s growth strategy

There are three prongs in the company’s growth strategy.

1. High-value science-driven segments of the agriculture-to-food value chain, and leveraging the linkages across these segments. Specifically, more abundant, and safer, foods.

2. Differentiated, high-value advanced materials through science-based solutions — the historic strength of DuPont. One example? The extension of Kevlar umbilical hoses used in deep-water oil exploration.

3. Industrial biosciences, “to create potentially transformational businesses in areas such as biofuels and biomaterials.”

In this last one, Kullman outlines the assets DuPont is leveraging: “we’ll achieve this goal by leveraging our world-class capabilities in critical enabling technologies such as microbial pathway engineering. We will also capitalize on the synergistic advantages arising from application development capability and market access of our advanced materials businesses, together with value chain relationships and feed stock knowledge of our ag and nutrition businesses.”

So, in many ways the success of the third initiative is based on the success in the first two. And for that reason, it would be hard to find a project in the company’s portfolio more representative of the company’s assets and goals than its first commercial cellulosic biorefinery in Nevada, Iowa, which is expected to begin making product by the end of 2014.

Why industrial biotech is at the heart of it

DuPont-1

The fleet of construction workers on site in Nevada, with the plant at right in the distance.

You see, there’s Pioneer in there with the relationships that help turn growers into suppliers of corn stover. There’s Genencor in there with the bacteria and enzymes technology. And there’s DuPont engineering in there in terms of the expertise to design and build a plant. And there’s the knowledge of advanced materials which may well open frontiers in biomaterials.

It’s no accident that the project is located in Nevada. It’s just miles from the epicenter of Iowa agricultural research at Iowa State University in Ames, 40 miles from DuPont Pioneers’ HQ in Johnston. and in the Iowan heartland of corn stover and biorefining. A place where agriculture is so central to the culture that DuPont Pioneer advertising dominates the concourse advertising at the Des Moines airport — just as you find software touted at SFO and lobbying messages at DCA.

Sustainable development in the broader corporate context

D&BBut to return to this idea of sustainable development for a moment, let’s look beyond the concerns of DuPont and think about sustainable development. We usually think about it in terms of, say, the developing world.

But take the town of Nevada as an example.

A few years back, a different corporate behemoth beginning with a D was the big employer in town. Dun & Bradstreet. It had a business called Donnelley Marketing that had a big data processing center in Nevada – if you remember the old Carol Wright mailings of years ago, filled with cents-off coupon offers — that was Donnelley Marketing.

Nevada, once at the forefront of the digital revolution

CW_001Donnelley Marketing did a lot back into the 1990s to introduce a generation of marketing and content specialists to the world of digital. For many content executives, long before they were learning about the intricacies of HTML, they were learning how to build databases in Unix-based languages — languages which formed the basis for hypertext markup language when Tim Berners-Lee got around to developing it.

Donnelley Marketing made its own lasting contribution to the redefining of the American economy, because I can’t think of another business unit at the time that did more to introduce the idea of using sophisticated relational databases to tie together and power consumer marketing efforts. In a way, it laid the foundation for the Facebook business model.

And database publishing and marketing would take another substantial step forward with the development of the PHP programming language, and WordPress and other content management systems. They are so pervasive today, we hardly know they are there — but they power every major website including The Digest. When Facebook or Google pops up an ad that relates back to our clicking history, that’s the database revolution. That’s, in part, Nevada, IA.

Why did the digital frontier move on?

So, what happened to these transformative businesses — why did Nevada not somehow become the center of the universe for the new digital economy?

Then, D&B had a long corporate think about volatility, and how that translates poorly with the analyst community. When times are good and prices are high, you rarely get a great valuation on Wall Street because analysts think bad times are just around the corner. And when times are bad and prices are low — well, my goodness.

Donnelley Marketing was associated with the volatile consumer cycle, and ultimately D&B put the  business on the sales rack, and it was sold to a group led by former CBS executives. More on that later. After doing well in a leveraged buyout, they sold to InfoUSA. Eventually under the pressure of the digital economy, the business unit moved away from Nevada.

CBSIt was a wake up call for the town, which founded an enhanced business development unit, when D&B started to move out, to bring new employers to the town.

Just as Iowa itself, and many of its farmers, had cried “enough!” in the years of Farm-Aid, and had determined to find a new course to profitability, eventually finding the ethanol, corn oil and distiller’s grains businesses — and now, corn stover. So too did Nevada look out for something more sustainable in the long term.

Finding more sustainable, high-growth sectors for Nevada

But really what they found were not commodity businesses like ethanol. They found science-driven, innovation-driven businesses that could cause a convergence between agriculture and energy, through high technology. But, in this case, tied culturally to Iowa through agriculture and the land — in ways that data processing businesses and call centers are hard to tie emotionally into the Midwest.

Remember call centers? A source of growth for the Midwest, why did they appear, why did they dwindle?

Way back when, a lot of call centers were in Nebraska. There was that reliable, easy-tun-understand western prairie accent, which became so prevalent in film & television that we don’t even think of it as an accent any more — it “just American”. Wages were low, too. Perhaps most importantly, with telephone trunk lines in the old days you paid a premium for longer-distance calls.

You see, way back then, signal strength was a worry. Signal used to die off — and carrying signals coast-to-coast required special, expensive technology. You might remember this is you were an employee in a corporate office back in the 1980s and you were more than about 80 feet from a server carrying inter-office email — sometimes, you literally “didn’t get the message” because the signal would carry to your desk. It paid — literally — to be near the chief’s office.

The same phenomenon led to an innovation in digital content that is so ubiquitous today, we hardly think about it — that’s the television news anchor.

Why do we have these people sitting at desks or in chairs in a comfortable main studio — instead of simply moving around from reporter to reporter? Yes, there’s a comfort factor there — but the digital content business discovered that quite accidentally. The real reason goes back to the days of translating digital content from coast-to-coast. The wires of the time couldn’t carry a transcon signal.

upiFor United Press International, all wire stories got dumped out at Kansas City. And the Kansas City editors would pick the hot stories, do quick rewrites, and assemble the material for a second, streamlined transmission either to the East Coast or the West Coast.

The czar of UPI’s Kansas City operation? Walter Cronkite, the long-time CBS news anchor, who said later that “I didn’t just work in the newsroom. I was the newsroom. In affect, I was making up the front pages of the small dailies.” Cronkite operated a similar service in Kansas City to the one he ran in later years at CBS, creating a national “front page” service for the evening news broadcast.

With the development of new technology and new pricing models, call centers no longer had to be located according to geographic considerations — didn’t have to be close to the customer. Price and language became a determining factor. And so, Nebraska lost some business to markets such as India. More importantly, it lost an engine that had created some phenomenal growth.

Other cities that tied themselves to unsustainable technologies, yet transformed

sst-boeingAnother example, it was a generation ago that, owing to economic and social factors, the US cancelled plans to develop a supersonic passenger jet — just as longer flights with conventional aircraft were becoming more common.

Both developments struck hard at Seattle, resulting in massive unemployment in the Seattle in the 1970s, but freeing a generation of engineers to switch over to software development later in the decade — with a slew of new companies like Microsoft, Real Networks, Amazon, Costco, Nintendo as beneficiaries.

So — the search for sustainability is linked, you see — to many businesses and many types of innovation. The search for higher margins, and more reliability through science and innovation, is an ongoing story.

And it can benefit cities and towns that understand how to position themselves around the factors that endure, rather than an ephemeral competitive edge that is powerful today and tomorrow gone with the wind. Just as it can hurt cities and towns that tie themselves to technologies or resources that do not last.

Developing opportunities in the land

So let’s look at one more thing.

That’s tying businesses to enduring factors rooted in the land itself.

Responding to the opportunities in the land. Such as becoming a commercial and financial hub for the Midwest and a gateway to the Great Lakes, as Chicago did. An emphasis on trade and finance that New York chose, too. Just as Silicon Valley was ultimately created through the proximity to Stanford and, in life sciences, also rooted via proximity to Berkeley and a constellation of national labs.

In this way, the current generation of business development in the Midwest could be less exposed to the kind of corporate volatility that affected Nevada in the past. There are strategic reasons to develop this new industrial bioscience business in central Iowa — not just the “we’d love to have you, wages are low, cost of living’s cheap, and no unions” factors that are of genuine appeal to companies — but pertain to Mumbai and Shenyang, too.

That’s not to say that there’s no competition for Nevada. There’s corn stover a-plenty in the Midwest — and many towns and industrial parks rail spurs, power, water, skilled labor and local growers. Blair (NE), Eddyville, Fort Dodge, Clinton, Hugoton (NE), just to name a few.

But once built, they’ll stay, so long as the economics of the product stay sound, And the more infrastructure you build, the more that is there for the next business to tap into. So — these little Metropoli have every reason to hope for growth — and for higher-skill, higher-wage positions to continue to appear, and not to disappear.

And that’s walking the talk.

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