Executive Interview Summary

1
XXXXX Executive Interview Summary
April 7, 1993
2
Agenda

• Logic
• Chemical Industry Perspective
• XXXXX, Inc. Objectives
• Perceived Strengths and Opportunities
• Emerging Themes and Initial Impressions
• April 21-22 Joint Working Session
• Next Steps

3
Logic

• April 21-22 Preparation Tasks
• Positioning Interviews
• Executive Interviews
• Surveys
• Business and functional strategy alignment probes
• Financial decomposition and analysis
• Information Systems assessment
• Key business process flows
• External view
• Business Case prioritization

• Mission XXXXX Inc.
• Provide high value products and services in the
  fields of chemistry and life sciences
• Grow and succeed by building profitable
  businesses that satisfy the evolving needs of our
  customers, challenge our employees, and establish
  us as a recognized and respected market leader
• Achieve step change customer service quality and
  business performance improvements through rapid
  transformation of our Information Systems

• Critical Success Factors
• Clearly defined and communicated business
  objectives and strategies
• Translation of business needs into I/S priorities
  and objectives
• On-going understanding of customer needs and
  expectations
• Clear understanding of management information
  requirements and elimination of non-value added
  reporting
• Key processes streamlined and re-engineered prior
  to I/S investment
• Rapid and cost effective upgrade of I/S
  infrastructure and capability skills,
  organization, processes

4
Industry Context
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Major Issues That Will Shape the Chemical
Industry over the Next Decade

• Environmental pressures
• Low operating profits requiring new levels of
  efficiency
• Emergence of worldwide competitors
• Technological changes
• Need to restructure at the corporate and business
  levels
• Misalignment between customer needs, operations,
  and channels
• Unreliable customer/product profitability
  information

6
Competitors Response to the Issues

• The top four Chemical firms have laid off in
  excess of 20,000 employees
• U.S. Chemical Industry profits have declined
  significantly since 1989
• Lower capacity utilization drained profits
• Globalization, integration and partnering with
  suppliers is improving quality and reducing cost
• Numerous Chemical firms have refocused on core
  businesses and de-emphasized other businesses
• The Chemical industry has become a true global
  market place
• Overseas capacity limits export opportunities and
  threaten to increase low-cost imports
• Latin America and Asia will account for most of
  new plant construction
• Companies are integrating customers and
  distributors as a natural extension of their
  supply chain and value chain
• Technology is being employed to add speed and
  responsiveness to service customers

7
Many Chemical Companies are Struggling with a
Proliferation of Initiatives
Globalization
Reliable product, customer profitability informati
on
Value-Based Management
Becoming market-focused
Safety / Environmental
New product Introduction
Quality / Continuous Improvements
Cost-cutting / Rightsizing
Strategic Intent and Core Competencies
Reengineering
Customer service / Customer satisfaction
How do we prioritize and allocate our strategic
resources?
8
The Chemical Industry Still Lags Other Industries
in Focusing on Customer Needs
Best-in-Class Practices

• Customer- and competitor- driven
• Emphasizing customer benefits
• Incremental profitability
• Matching benefits to customer needs
• Strategic partnerships and joint ventures

• Typical Chemical Company Focus
• Internally driven
• Emphasizing product features
• Pounds out the door at lowest price
• All things to all people
• Vertical integration across the value chain

A key challenge How to de-commoditize the
offering and not sell based on price alone.
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We are Witnessing the Death of the Sustainable
Competitive Advantage, and the Emergence of the
Nimbleness Advantage

• The name of the game used to be making the right
  call in terms of strategy organization design,
  cost structure, technology investment, or process
  design
• The assumption was that you could sustain the
  advantage you had created, therefore allowing you
  to protect the position you had gained
• Evidenced in terms such as sustainable
  competitive advantage, defendable, barrier,
  harvesting, cash cow
• There is increasing evidence that no competitive
  advantage is ever sustainable anymore, except for
  short periods of time
• We have witnessed the crumbling of scale,
  experience, technology, distribution, raw
  materials as sources of competitive barriers
• Our hypothesis is that the ability to reinvent
  yourself faster than your competitor is what will
  drive success in the 90s (nimbleness advantage)
• The ability to move fast is therefore as
  important as the direction of each movement

Creating growth through perpetual transformation
is, we think, what business is now about.
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Executive InterviewsFeedback
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Met with Key Executives in North America

• Palmer, George
• Perry, Barry
• Raymond, Maurice
• Rosenblatt, Raul
• Shomo, Rudy
• Stanford, Eric
• Tevebaugh, Dick
• Tomaso, Dennis
• Valla, Pierre
• Wheeler, Brian
• Wichtrich, John
• Ziemann, Ted
• Zirakparvar, M. Esmail

• Bausch, Jim
• Blackford, Don
• Boehner, Dick
• Briggs, Bob
• Busson, Jacques
• Cherva, Aldena
• Dille, Tom
• Eckert, Dave
• Farran, Bill
• Foster, Bob
• Galuskin, Myron
• Gugino, Tim
• Haddock, John

• Jongeward, Chuck
• Kennedy, Dick
• Kirk, Tom
• Knox, James
• Kranz, Bernie
• Lee, Ray
• Leech, Jeffery
• Machin, Bob
• Martinet, Jean-Pierre
• McNichol, John
• Neff, Peter
• Nelson, Bill
• Nichols, John
• OHea, Paul

12
External Factors You Believe will have the
Greatest Impact on XXXXXs Performance Over the
Next 5 Years

• Changing Customer Needs and Priorities
• Environmental and Regulatory Issues
• Increased Competitiveness
• Foreign Markets and Trade Agreements

13
What You Think It Takes To Be Best In Class

• Understanding Customer Needs and Being Responsive
  to those needs
• A Cohesive Organization (Teamwork)
• Technology and New Product Leadership
• Having the Flexibility to Respond to Market
• Capitalizing on Synergies and Common Elements
  within your Organization
• Ability to Clearly Define and implement Business
  and Supporting Functional Strategies
• Being able to quickly and successfully
  Consolidate and Assimilate Acquisitions
• Managing in a Multi-Cultural Global Matrix
  Organization and Environment

14
Business Goals Reflect Divisional Uniquenesses

• XXX
• 5B in sales by year 2000
• 15 / 15 / 15
• Operating income on sales / ROI / growth in
  earning per share
• Successful consolidation of Corporate and
  Divisions into a total XXXXX, Inc culture
• Become a total quality company
• Each business / division in top 10 of their
  industry

• Agricultural Chemicals
• Scale - move above 10 market share
• Reduce manufacturing costs
• Develop new and more profitable products
• Expand into new and mid-size markets - Corn
  Soybean
• Asset optimization

• Basic Chemicals
• Increase return on capital by 4
• Reduce costs 2-3 per year through work practices
  redesign using systems
• Become a truly Global Organization
• Industry leadership through high quality, low
  cost products
• Expand North America offerings
• Operating in a total quality culture in 3-4 years

• Specialty Chemicals
• Grow U.S. sales to 2B by year 2000
• Grow primarily through leveraging technological
  breadth
• Upgrade quality of product mix through technology
• Expand business portfolio through selective
  acquisition
• Bring value to customers (responsiveness,
  superior technology)

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PerceivedStrengths Opportunities
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Perceived Strengths

• Being part of a Global Company
• Capability and breadth of Technology
• Understanding of regulatory environment
• Building a common culture - TQM
• Proximity to customer - decentralized
• People

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Processes that Focus on Customers and Products
are Most Important to Growth and Profitability

• Please rate the importance of these processes
  relative to their impact to Revenue Growth and/or
  Profitability

Importance
n39
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Overall, We See Ourselves Falling Short of
Competition in All Areas

• Please tell us how well your organization
  performs relative to your main competitors

Importance
Effectiveness
Best in Class
n39
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I/S Support Perceived Ineffective by All Three
Divisions

• How effective has I.S. been to date in
  supporting your organization and in helping to
  achieve major goals and objectives

Very Effective
Not Effective
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What They Said About How I.S. Could Better
Support Them

• Give us systems which help us compete
• Provide timely and accurate information
• Understand our needs, help us decide what we
  need to have, and then deliver it
• Help us eliminate low value added activities
• Implement sales force automation, EDI and plant
  scheduling systems

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What They Said About What Users Could Do to
Increase the Effectiveness of I.S.

• Provide clear business direction and priorities
• Understand the processes that add value to their
  businesses
• Define what information is important for running
  their businesses
• Articulate their needs and their customers
  needs better
• Make I/S a part of the business team

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Top Barriers to Improved Performance

• Which issues represent most significant barriers
  to improved performance

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What They Said About Teamwork, Cooperation

• Lack of coordination getting in the way of doing
  it right the first time, on time
• Lets worry more about the results versus who
  has the power - sector - division - XXX
• Got a hodge podge - value in pulling this group
  into a unit or team
• Because of companys evolution, there are
  barriers to teamwork. Divisional structure
  inhibits cooperation
• Teamwork has never been fostered - there has
  never been an approach to developing teamwork
• We micro manage based on each unit or department
  striving to attain their own objectives
  independent of others and overall business
  performance
• Customer - plants - I/S critical link, if not
  correct, nothing happens

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What They Said About Information Systems

• We have an abundance of systems, but they dont
  communicate - customer order data in the AS/400,
  inventory data on another, forecast spreadsheet
  resides on a PC.
• Lack of resource capabilities and skills at this
  point in time
• View of past methods versus change, yields
  ineffective and inefficient direction for I/S and
  inability to build required systems
• Clearly the vehicle to allow us to profit from
  organization / structure, teamwork and division
  capabilities
• Do not have the information for effective and
  timely decisions
• I need basic factual information to run my
  business and right now for example, I have to
  call my suppliers to find out how much business I
  am doing with them

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What They Said About Skills and Training

• Training is a major gap
• Woefully inadequate skills in I/S across the
  board
• Dont invest sufficiently in our people we work
  them, but dont provide training to advance
• Cant achieve critical goals without investing
  in people
• Inadequate training in the sales and marketing
  area has resulted in missed sales and lost
  customers
• Need additional training to shift the focus to
  customer service

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74 Believe that Step Change is Possible
Possible Performance Improvement Cumulative
Overall
Step Change
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Performance was Defined as

• Step change in customer focus
• Improvement in profitability
• Increase in product line and market share
• Positive return on all of the acquisitions

28
94 Believe That the Climate is Right for Change
Now

• Is this the right time to start working on some
  of the opportunities you described?

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Climate is Right Because

• Need to do this, need to do it now and do it
  right
• We are at a critical junction
• Long Overdue
• Cannot afford to wait
• The weaknesses have been identified and we are
  currently spending an incredible amount of money
  treating the symptoms not the cause
• Need to take action to survive

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Outcomes of a Successful Project

• A report that tells me how much I am making by
  product and by customer
• Feeling that the money we spend on I/S is well
  spent
• A degree of standardization
• Our customers tell us how easy it is to do
  business with us
• I would not spend most of my time dealing with
  customer related crises

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We Need to Change the Way We Do Business

• Please select the adjectives which best describe
  your corporate culture

32
If You were Riding on the Elevator with Peter
Neff, What One Thing would You Tell Him to do to
Improve North American Operations

• Take a strong leadership position
• Force greater teamwork and remove barriers among
  Divisions, Sectors and XXX
• Create the vision what and where do we want to
  be by when
• Give us the I/S we need
• Take ownership of the reengineering process
• Define the role of XXX
• Increase I/S and Business Alignment

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Emerging Themesand Initial Impressions
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Common Themes

• We know I/S is broken dont need a lot of
  analysis to prove it
• Its a broader issues than just I/S
• Leadership
• Lack a robust pipeline of new products
• Matrix
• Diversity and commonality

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Geminis Initial Impressions

• The 15 / 15 / 15 objectives are seen to be
  beyond reach
• All businesses appear to have step level
  improvement opportunities I/S must become an
  enabler it is not one today
• An I/S Revolution is required now to support the
  Businesses in a timeframe relevant for achieving
  Vision / 2000
• TQM is beginning to create a common culture and
  enthusiasm for change

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Areas to Focus on

• How to dramatically improve customer service
  quality
• How to mobilize and channel resources towards
  achieving Vision / 2000
• How to have timely, accurate, relevant
  information to grow your business profitably
• How to quickly develop needed I/S capability
• How to discover how much the potential is worth

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April 21 22- Expectations- Strawmodel Agenda
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What You Told Us About April 21 - 22

• Objectives
• Set Expectations for the meeting up front
• Understand and agree on current status (Snapshot
  As-Is)
• Educate members of the Executive Committee on
  where we are
• Determine how Gemini can add value
• Define Vision / Scope
• Gain an External View - how XXXXX compares with
  industry
• Find out what are our competitors doing
• Agreement on how to analyze this issue
• Define Decision Criteria

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What You Told Us About April 21 - 22

• Objectives
• Set Expectations for the meeting up front
• Understand and agree on current status (Snapshot
  As-Is)
• Where are we now Gap
• Where are we going Gap
• How will we get there
• Educate members of the Executive Committee on
  where we are
• Need to figure out where we are
• Determine how Gemini can add value
• Other work efforts
• Added value
• Define Vision / Scope
• What could be (3-5 years)
• 1993 Action plans
• Gain an External View - how XXXXX compares with
  industry
• Find out what are our competitors doing
• Benchmarking
• Shareholder value
• Agreement on how to analyze this issue

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What You Told Us About April 21 - 22

• Outcomes
• Common understanding of where we are
• Clear direction - define where we want to go -
  specific goals
• Should come out with at least a common vision not
  necessarily a plan
• Agreement on what we have to do to get there
• A unifying message on the need to change behavior
• Show that each division and business unit needs
  to use some of the same analytics
• Recognition of the diversity and uniqueness of
  each business and its customers
• Realization that there are common elements among
  divisions and we can learn from each other
• Next Steps - Assignments
• Specific tasks and action items
• Define the way we could run the businesses from a
  corporate perspective
• A Plan to effectively spend money to upgrade
  systems

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What You Told Us About April 21 - 22

• Outcomes
• Common understanding of where we are
• XXX
• Divisions
• Clear direction - define where we want to go -
  specific goals
• Should come out with at least a common vision not
  necessarily a plan
• Agreement on what we have to do to get there
• Structured Path Forward
• Identify some Best Practices
• A unifying message on the need to change behavior
• Change the way we do business
• Drive toward a unified culture
• Show that each division and business unit needs
  to use some of the same analytics
• Financial Reporting
• Customer Information
• Part numbers
• I/S Base
• Recognition of the diversity and uniqueness of
  each business and its customers
• Realization that there are common elements among
  divisions and we can learn from each other

42
What You Told Us About April 21- 22

• Outcomes
• Specific tasks and action items
• Assigned responsibilities
• Check points
• Define the way we could run the businesses from a
  corporate perspective
• Leadership
• Added Value
• A Plan to effectively spend money to upgrade
  systems

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What You Told Us About April 21 - 22

• Thoughts Concerns
• Centralization vs. De-centralization
• Concepts
• Variations within these concepts
• This effort has to be business driven or it will
  fail
• TQM is too slow and will take forever
• We are over managed and underlead
• Do we have a viable I/S base
• Recognize that there has to be unique sub system
  to serve customers
• How do I best spend my money
• Capitalize on opportunities that span business
  groups and corp.
• Everyone will know where we are headed
• We have to get focused
• There is not a unique technical solution
• This is more that an I/S issue
• This has to be more than a top down driven
  activity

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Strawmodel Agenda for April 21 - 22 Work Session

• Set Expectations, Objectives and Ground Rules
• Level Set the Playing Field - As-Is
• Vision / Scope
• Define the Gap
• Determine Analysis and Decision Making Criteria
• Identify Major Challenges to Close the Gap
• Establishing a XXXXX and Gemini Partnership
• Lay Out Path Forward
• Where and How to Start
• Close

45
Strawmodel Agenda for April 21 - 22 Work Session

• Set Expectations, Objectives and Ground Rules
• Level Set the Playing Field - As-Is
• Where we are now
• How we got here
• Do we have a solid base on which to build
• Understanding / consensus
• Vision / Scope
• What could be (3-5 years)
• External view
• What competitors are doing
• Define the Gap
• What are common elements
• Determine Analysis and Decision Making Criteria
• Key elements of evaluation process
• Rationale in reaching consensus
• Weighting factors
• Ground rules

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Strawmodel Agenda for April 21 - 22 Work Session
(cont)

• Identify Major Challenges to Close the Gap
• Prioritize
• How to overcome
• Establishing a XXXXX and Gemini Partnership
• Examples of similar efforts
• Added value
• Lay Out Path Forward
• Objectives
• Action Plans - Next Steps
• Major mile stones
• Roles Responsibilities
• Measurement and Tracking
• Where and How to Start
• Close