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Dow-DuPont & the Innovation Runway

Posted on January 27th, 2016 by in Chemical R&D

runway

What does the merger of Dow and DuPont say about innovation in the chemical industry?

As I’m sure you all know, Dow and DuPont are merging and plan to spin into 3 separate companies. The implication of this move on the overall chemicals industry and specifically on innovation in the chemicals industry is not immediately clear. These two companies were powerhouses of innovation, ushering into the world an unprecedented era of growth in the polymers arena.  Without the innovation of these two companies we would be without such essential, and often taken-for-granted products such as building sealants, insulation, and adhesives, as well as more identifiable products such as Nylon, Teflon and Lycra (think stretchy-jeans).

The research headquarters of both DuPont and Dow have long been known as almost academic institutions, funded by corporate profits, but focused on science and innovation.  While the fate of Dow research and development has not been publically discusses as much, DuPont is significantly their Ph.D. level research scientists.  Clearly, development, let along research, are no longer core to who DuPont is and will be

The question is, as others before me have asked, is innovation better managed at small companies that can remain nimble and not get bogged down by the bureaucracy of a behemoth such as Dow or Dupont? As someone who is working at a small company trying to commercialize a disruptive technology in a very conservative industry, there are advantages to be gained from working within a Dow or DuPont. Capital is precious and limited in a small company like ours. We don’t have the luxury of trying very risky endeavors because, in most cases, if we don’t find a return relatively quickly, we’ll be out of business.  The risk is too great. In previous generations, at the heyday of industrial research, companies like DuPont could place long bets and know that they had the backing of the full organization. Without the presence of industrial research centers such as the Experimental Station, we’re relying on venture capital and to some extent government funding to produce those same results.

I’m not saying this won’t work. We’ve seen the demise of Bell Labs (where the transistor was invented) and the great downsizing of PARC, (the Xerox research center that gave us the  computer monitor, the mouse and ethernet), and yet, one could argue, we have not seen a slowdown in innovation in technology. However, much of that innovation has been in areas where the payoff is fast: social media, ride sharing apps, grocery delivery apps, etc. With a few glaring exceptions (e.g., google and its driverless cars), the venture capitalists have tipped the tech industry towards shorter and shorter timelines for bigger and bigger valuations.

So…back to our original question. What will happen to innovation in the chemicals industry? At the end of the day it will suffer. Dow and DuPont might have been slow moving behemoths, but they did give their researchers time and space to think about big problems. Whatever three companies will exist when the dusts settles, they will almost certainly be focused on the near term dollars, not the long bets. The activist investors at both companies have made sure of that. We as a society have to think about how we incentivize those long bets. Otherwise, we may get 10 or 15 years down the road and realize that all we have is a really good Twitter platform.

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