Speaker: David E. Kepler, Corporate Vice President, Electronic Business and Chief Information Officer
Event: Chemical Week's Best Practices for ROI
Location:
Date: 04/25/2002

Good morning! I'm glad to be here, and honored to be giving this keynote address. By posing the question, "What's new and what's next in implementing business solutions," the conference organizers are, in some way, suggesting that we are at a crossroads.

I would tend to agree that over the past few years we've come a long way, and there are now some very specific things that we must accomplish to fully tap the potential of eBusiness. I'd like to continue challenging each of us to use what we've learned, and to recognize that for many components of eBusiness, we can't "go it alone." We must act as an industry.

You'll hear it said more than once during this two-day event: eBusiness in the chemical industry is coming of age. eBusiness is making us more effective and competitive — it's making us rethink how we work with customers and each other.

But there's still a long way to go. And in many respects, the technology is the easy part.

eBusiness is just the latest chapter in the IT "revolution." And, like virtually every other field of technology in history, the full force of its impact will not be felt until the technology is used by ordinary people. Not the early adopters, not the experimenters, but the majority of people. And that's true with each generation of technology — from the printing press to the telegraph, to radio, to television and to the Internet.

It's up to us to make eBusiness both relevant and sensible to our colleagues, our employees, suppliers, customers and everyone else we do business with. Only then will we make the leap in perception. And we must make the leap to firmly engrain eBusiness into the production and sale of chemicals and plastics.

The collective mindset of our industry must change. eBusiness is not just a technology trend. Nor is it just a way to save money. In fact, it is a natural extension of the "technology" that is already integrated into the fabric of our everyday operations. We are, however, at an inflection point — the speed and impact of today's technology has the potential to change (forever) the very nature of our industry and society. Are we ready and aligned as an industry?

There are a few key points that I want to emphasize today:

1. The chemical industry is uniquely positioned to understand IT trends — their impact — and their potential to transform business.
2. There are areas that the Industry must work on together to gain efficiency, safety and scientific advancement.
3. Sharing standards and best practices will be key to further advancing our industry and society.

For IT professionals working in the chemical industry, these are truly remarkable times. As professionals who work across both "technology" industries, Chemical and IT, we can appreciate our rich history of "co-dependence." And we have a unique window in understanding the future.

Let me share an example: In 1947, William Shockley and a team of physicists at Bell Labs held a news conference to announce a new invention called the transistor. By then, the potential value of computers had become well understood, but there were some very real limitations with vacuum tubes.

Shockley's first transistor was about half an inch high. That was considered small — certainly it was small next to a vacuum tube — but it was giant compared to today's transistors. Bear in mind that today, as many as 7 million transistors are fit into a single computer chip.

Shockley's breakthrough was arguably the most important electronics event of the 20th century. It led to the integrated circuit and microprocessor, which created the foundation of modern electronics. But size isn't everything…the industry's ability to shrink this device while continuing to multiply its power has been truly remarkable...And much of that success can be credited to chemistry and material science.

That innovation continues to this day.

Dow's new SiLK* resin, which is an insulating material for semiconductor manufacturing, is helping IBM shrink the electronic circuitry that makes up the brains of a computer chip to dimensions of .013 microns. The result is a chip that is 35% smaller than the tiniest computer chip made today. That's more than 600 times thinner than a human hair — packing more computing power into smaller spaces — and that means lighter, more powerful phones, PDAs, computers — and devices we haven't even dreamed of yet.

I'm sure there are many more examples like this among the companies represented here today.

This is typical of our industry's innovation over the past hundred years. Chemicals and plastics are now being used to make more than 70,000 consumer and industrial products that surround us every day. They save lives in the healthcare industry. They enrich our lives in the consumer electronics industry. They give us shelter and style in the home and building products industry. And they entertain, educate and communicate through a broad range of high tech innovations, from optical networking to powerful new microprocessors.

If anything, the synergy between the chemical and IT industries will be even more important in the future. That's because the future evolution of the chemical industry is based on specialized fields such as nanotechnology, biotechnology and a new generation of electronics made from plastic, with high levels of end-user value that require extensive use of IT.

Contributing to these markets will require advanced capabilities in both materials science and IT. More than any other industry, we have an early look on how technology will transform the way we conduct business, simply because we are helping to create it.

So what have we learned from the past? Did we understand at the time of Shockley's transistor the potential it had for Computing, for Process Control for Enterprise Resource Planning – or connecting our world through eBusiness? Did we find the "window"? Understand the trend? Sometimes, but not always. But don't feel bad – over history, there has always been an obsession for predicting what tomorrow's technology will be, but many times, the people doing the predicting have been wrong…

There was Bill Gates who said, "…the network is not the medium to carry information."

And Tom Watson Sr. of IBM who said, "…there will only need to be five computers in the world."

And Ken Olsen of Digital who said, "…there will never be a computer in the home."

The point isn't that they were wrong. The point is that they — and we — have missed opportunities because we failed to truly understand that pervasive technologies — not proprietary ones — have been the ones to change society. Gates, Watson and Olsen all missed the mark (in some respect) because they failed to understand what would become pervasive technology.

So, what is pervasive technology? It's probably best explained by using an example of what it's not…It's not the Aerocar.

The 1936 film "Modern Times" predicted the airplane would replace the car as a personal form of transportation. Sure, it was just a movie. But just four years later in 1941, Henry Ford weighed in when he said, "A combination airplane and motorcar is coming. You may smile. But it will come." We're still smiling.

The reason that all these predictions were wrong is that they were framed in the reality of the past, not the reality of the future. It was very natural to expect that new technology in transportation would follow the past: cars followed wagons, why not personal airplanes following cars? Airplanes did not replace cars because the jet engine created a new reality — it was seen as a way to connect the world — not just a means of personal transportation. The reality was that the Aerocar didn't meet a pervasive society need, as measured by economics, ease of use, safety or results.

So, what does this mean to us…to you…gathered here today? If you agree with the premise that pervasive technology creates transformation; and if you agree that the Internet is a pervasive technology; then you need to start considering what the long-term implications and opportunities are for our industry.

In fact, I would tell you that the Internet is the jet engine of computing.

Do we understand the transformational nature of this technology? It's easiest for me to relate the transformational nature of information technology by explaining what we're doing at Dow today and how we're creating a strategic path for our future.

• In the 60's and 70's, Dow focused on using IT to streamline and automate our plant operations.
• In the 80's, we extended this capability to many plants — optimizing site operations.
• In the 90's, we applied IT globally on an enterprise level.

Each of these "step" changes was met with huge productivity gains. Today, we are taking the next step in the journey toward optimization — specifically — inter-company productivity. In other words, e-commerce.

But beyond e-commerce, this next phase involves applying IT to more complex processes in functions like marketing, research and product development. It's a way for people to collaborate so they can create and act on new concepts. In other words, it's computer technology that goes far beyond the automation of repetitive tasks. It's for the improvement of processes that allow people to make better decisions, to create and to manage knowledge.

I can tell you how we're focusing our investment on this next eBusiness phase at Dow today. We're concentrating on three primary areas: First, we're connecting with customers better and faster. Second, we're improving the way we work. And third, we're making better decisions through information and knowledge sharing. Let me say a bit about all three.

We are connecting with our customers better and faster through online hubs like Elemica, and through e-marketplaces like Omnexus and ChemConnect. We're also offering customers opportunities to serve themselves through dow.com and myaccount@dow — that's our primary e-tool for information sharing, collaboration and transactions with our customers.

Secondly, we're improving the way we work by using standardized technology, systems and work processes on a global basis to boost our productivity. This improves both communication and access to company resources.

At Dow, ERP has been the heart of our eBusiness transformation. It was in place by the mid-90's, and it has allowed us to integrate key aspects of our organization on a global basis, including procurement, manufacturing, logistics, sales, customer service, accounting and human resources.

Finally, we have extensive data warehousing and document storage systems. The tools we're using allow our people to efficiently harvest this information to make better decisions. And that means they can do a better job of serving customers and collaborating with each other and external parties.

We're in the process of implementing a global Voice over IP network in our company called DowNET with EDS and CISCO. DowNET will integrate all our sites and give all employees desktop access to Voice, Video and Data as well as collaboration and integration tools.

We are also using the Internet to enhance our learning. For our company, this creates a powerful incentive for even more training. In fact, Dow employees completed more than 380,000 e-learning courses last year. And by using e-learning instead of conventional training practices, we saved nearly $46 million dollars.

At Dow, we believe that truly great companies master the genius of the word "and." At Dow, we want to achieve financial AND environmental AND social excellence in all corners of the world where we do business.

Our guiding principles through Responsible Care help ensure that we will make continuous progress toward the vision of eliminating accidents, injuries or harm to the environment. And our principles ensure we will publicly report our global health, safety and environmental performance. We're committed to this, but the public must continue to see that we have this commitment, even in the context of this new wired world.

Let me make a clear point here. We must frame the implementation and use of new technologies not only in the context of economic impact, but also in the context of beneficial environmental and societal impact. Changes and new technology in our industry must be implemented in the context of sustainability.

Through interactions with customers and the industries they enable, a company can see opportunities to improve performance. However, there are some solutions and needs that simply go beyond one company — and need to be addressed industry-wide, especially when implementation can improve the environmental, safety or overall efficiency of the entire industry.

Security — while a very different issue than environmental — is another obvious area that the public will expect us to manage well. As an industry, we are best served to continue working together to improve our security capabilities — particularly in light of the new threats our nation is experiencing.

Our industry is rapidly embracing electronic technology for information and business transactions. In doing that, we need to develop and agree on best practices and standards that more strongly protect our industry against potential cyber attacks.

So, where can the industry work together? Our industry has been able to effectively use IT applications for functions like HR, finance and supply chain because these are common issues in many industries. Software makers have been able to create great solutions for the general marketplace.

But we haven't been able to attract the same quality of solutions when the issues are very specific to the chemical industry, in areas like EH&S, engineering and process control. And this will become a much bigger issue as we move forward.

To overcome this challenge, the chemical industry needs to ensure there are common standards in place so that software suppliers can provide the industry with cost effective solutions in an area they can be confident will continue to demand high performance.

So in summary, as we consider the present and future of eBusiness within our organizations and our industry, we need to think holistically about business results and areas that we can work together.

We must continually strive for ways to become more economically efficient.

We need to continue our environmental focus and remain safe and secure.

And we must be relevant to society by meeting their needs and addressing their concerns. To do this, we must continue to work together with industry associations and in consortiums, within the legal boundaries, to create capabilities and efficiencies in our industry that cannot be provided effectively by one company.

We also need to place greater expectations on both our suppliers and ourselves. For starters, we must both make a greater adherence to standards. These are absolutely critical to implement new technology. Standards have a tremendous impact on product quality. They relate directly to the security of product manufacturing and supply. And they contribute to productivity and less friction in business.

We need standards that make sense for the present and the future. Not necessarily standards that are simply based on a status quo, but standards based on how things will work in the future. Let's not make the same mistakes in our "predictions" as we have in the past. In other words, we need vision about the impact IT will have on our future. And we must set industry-wide strategies and standards that address these future needs, rather than all the variability and inefficiency that exists today.

This reminds me of a favorite story. And it has to do with an industry, like the Internet and eBusiness, that created a new way to connect and started a revolutionary change for business and society.

It's the railroad industry.

You know, the U.S. standard for railroad gauge — or the distance between rails — is 4 feet, 8 and 1/2 inches. Now that's an exceedingly odd number.

Why was that gauge used? Because that's the way they built them in England, and the first U.S. railroads were built by English expatriates.

Why did the English people build them like that? Because the first rail lines in Europe were designed and built by the same people who built the pre-railroad tramways, and that's the gauge they used.

But why did they use that gauge for tramways? Because the people who designed and built those tramways used the same jigs and tools that they used to build wagons, which used that same wheel spacing.

Okay, so why did the wagons use that odd wheel spacing? Well, when they tried to use any other spacing, the wagons would break down on some of the old, long-distance roads, because that's the spacing of the old wheel ruts.

So who built those old rutted roads? The first long-distance roads in Europe were built by Imperial Rome for the benefit of their legions. The roads have been used ever since.

And who made the original ruts? Those ruts, which everyone else had to match for fear of destroying their wagons, were first made for Roman war chariots. Since the chariots were all made by Imperial Rome, they were all alike in the matter of wheel spacing.

Thus, we have the answer to the original question. The United States standard railroad gauge of 4 feet, 8 1/2 inches derives from the original specification – military, as it were – for an Imperial Roman Army war chariot.

But one nagging question still remains. Why did the design of the Roman army war chariots incorporate that very odd wheel base? The answer is that the chariots were designed to be made just wide enough to accommodate the back ends of two war horses.

One word of caution: In the future, we can't build standards based on specifications built around some horse's rear end.

The fact that the railroads established and used standard specifications contributed greatly to their success. However, we're not the railroad industry, and it's the twenty-first century. We need common standards that lead to less variation in practice and are based on future needs rather than on the past.

A lack of industry standardization – from business processes to technology to security practices – will always be a barrier to successful eBusiness. And that's simply because establishing multiple ways of doing things is costly.

It is critical that the industry continue to stay committed to CIDX Chem eStandards. Not only are they supported by our industry's leaders, these XML-based standards are being adopted at a faster rate than in any other industry. We, as an industry, need to get behind CIDX and continue to grow support for industry standards. Senior leaders need to understand and engage.

From our suppliers, we need a commitment to these standards. We need a commitment to our needs for safety and security. And we need our suppliers to better appreciate our industry needs and work in concert with us to meet those needs.

At the same time, we must commit to standards ourselves, and leverage these standards in our work processes.

So let me summarize.

We must know, understand, and leverage eBusiness to improve our industry's triple bottom line and the continued progress of society. Therefore, we all need to understand the trends and impact this technology has on our industry and that our industry has a unique window to those trends.

We must work together to gain the efficiencies, improve safety, environmental performance and the continued scientific advancement that our society needs.

Sharing standards and best practices will be key to continue advancing our industry.

It requires each of us to anticipate the future and not wait and react when it comes; but rather work to create it.

Thank you.

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