The Japan News Andrew Liveris, chairman and chief executive officer of The Dow Chemical Company, has helmed the company for the past 14 years. Under his strong leadership, Dow has transformed its portfolio through several M&As, including a merger with DuPont that led to the creation of the nearly $80 billion holding company DowDuPont. After transitioning out of his role as DowDuPont executive chairman in April, Liveris will retire from Dow effective July 1.
He recently spoke exclusively to The Japan News about his more than 40 years at Dow, reflecting on his management style and the challenges he has faced.
Q: What are the most significant decisions you’ve made as the head of Dow? One of them must be the merger with DuPont.
Liveris: The most significant challenge that we undertook, by far, was the decision in early 2005 and 2006 to make a change to the company’s portfolio to not be a commodity company. The reason for that is most chemical companies were commoditized, and customers were getting bigger in scale, whether they be in pharmaceuticals, consumer products or any businesses that buy from us.
The suppliers of our raw materials were getting huge in scale — oil companies, gas companies, etc. We were in the middle of those two and we had no power to make money out of our businesses. Our company was very commodity-like, and our R&D was very poor.
So the decision we took to rebuild the company to become innovation-based, to look at ways to develop technology and to change our market positions was a decision that was significant. In a way it returned Dow to what made it great. Dow was always seen as a massive innovator through its history, but in the ’90s we got commoditized. So that was number one.
Number two, having made that decision, we also decided we could not do it just through investment in R&D and marketing — we had to buy our companies through M&A. These acquisitions led to a thorough analysis of what was the best fit, and we made decisions in 2008 to buy Rohm and Haas, in 2015 to buy Dow Corning, and then in 2015 to do the merger with DuPont.
The third decision is the deal with DuPont. When we first thought of it back in 2006, DuPont had a higher market capitalization than Dow. The ability for us to do a merger of equals was not there. But by investing in R&D and investing in our agricultural business, our market cap lifted. So by the time we got to 2015, they were the same. This enabled a merger of equals with the idea to split into three focused companies.
Throughout this whole period of time, what our company has been doing is recognizing that our shareholders do not like diversification. They want focus. So we have been slowly but surely, and now accelerating, to become more focused. Therefore we have three companies. Dow will become a materials company, to be called Dow. DuPont will become a specialty company, called DuPont. The ag company is the combination of the two, which is the true combination. The other two, we’ve just moved businesses. The ag one is combining a business. And that’ll be called Corteva Agriscience.
Now, upon the launch of the company, we have innovation, we have low-cost raw materials, we have a lot of new products in key markets, we are focused as a materials company, as Dow. From 2004 to today 70 percent of the portfolio would have been replaced. Not many companies can do that in the public market.
Myriad of burdens
Q: Were there obstacles to realizing this change?
A: Lots of obstacles. If you look at it today, it appears to have been a straight line, but it’s not like that, there was a lot of up and down. There are many reasons for that, one of the most important being culture. When you run a company of 50,000 to 60,000 people, the culture is commodity. But you’re trying to create a culture of innovation. Small companies you can change fast, large companies not so fast because of culture. We have rebuilt the types of people that work for us to a very different type of person — market-focused, technology driven — much more like a technology company. That’s the number one challenge.
Another challenge was the shareholder. The shareholder is now very impatient and wants returns immediately — they don’t want to wait five or 10 years, so you’ve got to find a way to deliver short-term while building for the long term. I can do one or the other, but to do both is extraordinarily difficult. That challenge for us is every 90 days. We’ve had 22 straight quarters of earnings growth, so we have been doing this for 5½ years. We are demonstrating to the shareholder that we are able to grow in the short-term and maintain it. It’s not very easy to do.
Third are factors out of your control. Overnight we see the government of Italy collapsing and the market share prices collapse [in May]. You can’t look at that and say I’m doing something wrong. You’ve got to believe in the fundamentals, and stick to the strategy despite short-term geopolitical disruption. That means you’ve also got to be present at the table in setting policies.
Q: What will be the new Dow’s business policy and which fields will it prioritize?
A: That company will be global, will have roughly $50 billion in revenue, will be highly profitable, with average margins of 22 to 25 percent. It’ll have a substantial R&D budget of $1 billion dollars a year, it’ll have a capex budget of $2.5 to $2.8 billion a year, and it’ll have its global headquarters in Michigan where we have always been for 127 years. But it’ll have two-thirds of its business outside the United States across the world, with a large presence in all the G-20 economies.
We are differentiated at Dow Materials in that in Japan we have mostly Japanese employees, in Saudi Arabia we have mostly Saudi employees, in Colombia we have mostly Colombian employees, so we are a very local international company. The consequence of that is that we have incredible feedback from the marketplace, from our people. The company’s business policies will be to stay very driven by the local economies and to grow with key markets.
The markets of focus will be packaging materials, including specialty plastics that go into preservation of food and consumer goods; infrastructure and industrial goods that feed industry; and consumer goods from consumer solutions like cosmetics and personal care to shaving to hair shampoos based on our silicons chemistry, to paints and coatings in general. We’ll be large in those three market pillars, and we’ll be large in raw materials, so we’ll have the raw materials, the technology and the market presence in all three.
Q: What is your motto in business?
A: I think “difference maker,” “game changer,” “leader and follower” — to enable people to succeed, you have to lead, to give them room to expand you have to follow. These are terms I’ve used all the time to describe my leadership philosophy.
Q: You used the phrase “reinvent” yourself.
A: Yes, reinvent and transformation I believe are not just abstract terms, it’s a personal term. I am a different CEO today than I was 14 years ago — I often say I’m on my fourth reinvention. That doesn’t mean good or bad, it means circumstances change and you’ve got to adapt. If you don’t change, your company doesn’t change, and frankly that could create a disaster, and I think we see that out there, where people like me don’t last long in their jobs because they don’t change. The reason you don’t get long-tenured CEOs in corporate America is the people themselves don’t change.
I’ve been willing to change, and not so much admit my mistakes but once I see a mistake, including ones I’ve made, correct them fast. Which is another characteristic, that of “resilience and persistence.” In other words, you know it’s right, you just didn’t get there the first time, so rather than moan and be negative and say what am I going to do, be positive. What did we learn? What do I need to do different as a CEO? What does my team need to do different? Let’s do it now. Let’s go push. Act like a small company, like it’s your own company, it’s you and your wife and your children. Act like it’s personal and be an optimist in making the correction. These characteristics mean you reinvent, and you reinvent to suit the circumstance.
People say they’ve never seen me lose my temper. Actually, I have — in private. It’s when that person leaves the room, but there’s no sign of it. Again, that’s control. This job is so stressful because you have a lot of self-control mechanisms that you can’t get from anywhere else, you have to get them from inside you. The minute I’m no longer in this job, I’m going to be very interested to see what happens to me because maybe I can be normal again, but maybe I’ll stay controlled, I don’t know [Laughs].
Glacial change in Japan
Q: In general, it is difficult for Japanese companies to change.
A: You raise a good point. I’ve been coming here a long time. [Recently] we had a large dinner with key stakeholders. You have some amazing CEOs here. The problem, or the opportunity you have — I’ll call it an opportunity but it’s going to take a long time — they can’t be individualists. It’s very hard to be an individualist in this society.
You have some examples, like the CEO and founder of SoftBank, who’s an individualist, is a good example. You don’t have many. The system here doesn’t allow the freedom to break away. Now, it’s less risky to stay in the normal pattern, and if everyone agrees that normal is good, then no change will happen. In a market-driven economy like the United States where it’s very competitive — we use the term dog-eat-dog. Everyone wants to better than the other person — maybe too much, maybe it’s gone too far the other way — but with that competitive spirit you can’t be of a system. You’ve got to be individualistic.
I want Dow to win, period. The other ones, I don’t wish them bad, but I want to win. That is not as apparent here. Because of that Japan is in a system that as a country it can work, but individual companies and CEOs find it very hard. You are in a post-industrial era. What got you here — METI [the Ministry of Economy, Trade and Industry] and the rebuilding of Japan after World War II — won’t take you forward. You are driving a car by looking at the rear-view mirror. You’re not looking through the front windshield. The forces that are coming — anti-globalization, digitalization, entrepreneurship and the invasion of capitalism on the shareholder and what’s happening with the shareholder — Japan as a country needs to adopt different practices. But you don’t have the leadership to get that done. ...
But maybe there’s something good about a culture that is homogenous and has an amazing quality of life. Maybe being here is a happy place, and if you’re happy maybe you don’t care about change. It’s a bit like my home country of Australia. They think I’m a madman because I work too hard. Maybe it’s not for everybody, but honestly I think Japan could do better.
Japan has shown us it can be a G-7 country, a G-5 country, a G-3 country, the world’s third-largest economy. It’s shown us it can do that through its people. I think you need to liberate the next generation, and give them a different system. [There has been change, but it is] glacial. Disruption is occurring so fast today, I’m not sure you have the luxury of changing slowly. Just the whole discussion on trade alone — the sentiments around China and what China’s doing as a top-down economy. All of that is here, now — there’s no time for taking your time.
Memory won’t go away
Q: Could you look back on your more than 40 years at Dow and discuss your most cherished memory during your time at the company?
A: Right now I’m meeting people that I knew from 30 to 35 years ago, that I grew up with. Whether it be in Japan, or tomorrow in China or the next day in Thailand, there are a lot of people I’ve grown up with in the system around the world that I’ve worked in — certainly here in Asia where I spend 20-odd years of my career. The relationships with people are the memories you cherish, and you maintain them because you are of the same genre and age, and some of them are also retiring or have retired.
But a thing I equally cherish is this: I was in Mexico City ... and Sao Paulo ... and Buenos Aires ..., and at each of those cities the young people in the room where we had the employee sessions — I could see their young faces — I knew they’re there because I created their jobs and gave them a new chance to work for an exciting, energetic company.
I can see now and I can touch a whole group of people that are part of our company because I created this new company. I think that is a memory that will never go away, because it’s an energy. We have a lot of people under the age of 32 right now in the company, and not that youth is everything, but if you think about it, it’s careers. They get careers at a company that will live now for a lot longer time. Many of our competitors disappeared ... you name them, they all went away. We are not only here, but we’re growing. The memories are the people that you impact along the way.
This interview was conducted by Japan News Assistant Editor Takeshi Nagata.
■ Andrew Liveris / Chairman and CEO of The Dow Chemical Company
Born in Darwin, Australia. After graduating with a degree in chemical engineering from the University of Queensland in Brisbane, Liveris joined Dow in 1976. He became president and CEO of the company in 2004, and chairman in 2006. From August 2017 to April 2018, Liveris was executive chairman of DowDuPont. He served as co-chair of U.S. President Barack Obama’s advanced manufacturing partnership steering committee and was a member of the president’s export council. Speech