Sunday, January 21, 2007

Air Products, Part 1: Creating Accountability for Thinking Ahead

I recently visited Air Products and Chemical Inc., in beautiful Allentown, Pennsylvania. Air Products is a gases and specialty company with about $8.8 Billion in revenues. 50% of the sales occur outside the U.S. The company is organized into its four main domains – electronics and performance materials, TGEE (Transportation Energy, Hydrocarbon Recovery, and Power Generation), Homecare, and Merchant Gases. For more details see Much of what we know today of how to extract, compress, and distribute gases has existed at some level since 1900. As noted by Jon Irven, some might argue that the only thing that changed in the delivery of gases was the color of the cylinder. Air Products has successfully and amazingly met the challenge of innovating in this highly mature, commoditized, and stagnant market. I walked away from the meeting with one major point – if Air Products can innovate, anyone can.

Consistent innovation requires leadership, and Air Products has met this challenge by forming a specific group of responsible individuals. Jeff Kramer heads up the Corporate Development Office (CDO) whose role is to (1) ensure that the company has a healthy business portfolio, (2) that the portfolio meets and exceeds investor’s profitability and growth expectations, (3) the company is well positioned to generate solid, and sustainable, returns for the foreseeable future, and (4) to critically examine performance based on internal and external comparisons.

The CDO group does not get involved in the day-to-day running of the various business units (e.g. Homecare or TGEE). Instead, the group looks to the future. The group studies new ideas that have high risks and high payoff, while of course trying balance the portfolio of opportunities. The CDO works with the Growth Board (a senior leadership team involving the COO, CFO, CTO, and VP of Corporate Development) to screen, fund, incubate, and develop future business opportunities. One of the major functions of the CDO is to engage the Senior Leaders of the organization with ideas that might be risky or radical – as was noted several times during the day, if you want senior executives to bet on risky concepts it is best to get them in the loop ahead of time.

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