Industrial Chemicals Company

1
Industrial Chemicals Company

• Pat Field
• Brian Dunbar
• Anthony Brinker
• Mike McGovern

2
STRATEGY

• To produce and innovate in the field of
  biotechnology by uniting complex inputs under one
  roof.
• To start producing in the agricultural and
  healthcare sectors
• Shift away from old strategy of producing
  commodity chemicals

3
Issues with the new Strategy

• Must be able to cover the costs of research and
  development
• Earnings are down
• Agricultural sector in a downturn
• How long can existing product lines carry ICC?

4
The Current Operating Unit Control

• Compensation incentive based on bottom line
  results within each unit
• Unit focuses on controlling own costs
• Fee-for-service cost basis for use of the central
  research laboratory for new innovations
• Each operating unit costs charged this
• Each unit is self-sufficient in
  maintaining/expanding existing business

5
Results of the Current Unit Control

• Mitigates the chance for ICC to meet its goals
• Does not unite the separate units
• Units focus on maintaining and expanding existing
  technologies and limit use of central lab
• Draws away from innovating new technologies

6
Where Problems Arise
Strategy Innovation Where this happens Class
III RD Who is in charge Biological Sciences
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Risks

• Lack of commitment
• Silo effect
• Reduces coordination
• Cost allocation
• Reduces great use of resource in Central Research
  Laboratory

8

• Who is responsible for class I, II, III

Biological Sciences
Other
Class I/II expenditures
X
X
Class III expenditures
9
Silo Effect
10
Cost Allocation
Use of Resource
Costs Charged
11
Current Organizational Hierarchy
Decision Rights Decentralized Performance
Standard bottom line Accountability/Incentives
Rewards
12
Recommended Organizational Hierarchy
Decision Rights Centralized Performance
Standard Level of effort devoted to
innovation Accountability/Incentives Punishment
13
EMC Recommendation

• Centralize Class III RD efforts
• Ensures long-term profit pressure
• Implement minimum threshold for RD efforts
• Take away decision rights of operating units
  involving Class III efforts
• Keep costs at the corporate level
• Improves coordination between operating units

14
EMC Conclusion

• Costs and decision rights at corporate level
• Measure performance on discovery efforts of the
  operating units
• Implement punishments if RD efforts of
  individual operating units falls below required
  level

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Questions?