1、 CENTER FOR INFORMATION SYSTEMS RESEARCH Sloan School of Management Dow Corning Corporation: Case Studies A, B and C Jeanne Ross June 1999 CISR WP No. 305 1999 Massachusetts Institute of Technology. All rights reserved. null Research Article: a completed research article drawing on one or more CISR
2、research projects that presents management frameworks, findings and recommendations. null Research Summary: a summary of a research project with preliminary findings. null Research Briefings: a collection of short executive summaries of key findings from research projects. null Case Study: an in-dep
3、th description of a firms approach to an IT management issue (intended for MBA and executive education). null Technical Research Report: a traditional academically rigorous research paper with detailed methodology, analysis, findings and references. Massachusetts Institute ofTechnologyCambridgeMassa
4、chusettsThis case was prepared by Jeanne Ross at the MIT Center for Information Systems Research. The author would liketo thank Chuck Gibson for his helpful direction and comments, and Charlie Lacefield, Marian Cimbalik, and theother Dow Corning employees who contributed insights, cooperation, and s
5、upport.1997 Massachusetts Institute of TechnologyCenter for Information Systems ResearchSloan School of ManagementMassachusetts Institute of TechnologyDow Corning Corporation (A): Business Processes and Information TechnologyIntroductionIn October 1994, Dick Hazleton, CEO of Dow Corning Corporation,
6、 was considering actions thatcould significantly affect the organization, staffing, and role of the Information Technology (IT) functionin the company. Hazleton and other senior managers had agreed it was imperative to introduce majorimprovements in operational efficiency through a process-centered
7、organization, not only to increasecash flow but to best position the company for long-term competitiveness. They knew instinctively thatIT could play a major role in enabling operational changes, but were uncertain of just how that wouldoccur or how it should be organized and managed. Hazleton wante
8、d to move quickly, but knew thesuccess of radical operational and work changes depended on the full support of his OperatingCommittee of sixteen senior managers and the support of every employee.BackgroundDow Corning Corporation was founded in 1943 as a jointly owned enterprise by The Dow ChemicalCo
9、mpany and Corning Incorporated to develop the potential of silicone materials. Dow Corningsprincipal businesses were silicone materials and polycrystalline silicon. Silicones are chemicalcompounds based on silicon, an element refined from quartz. Silicone products vary from fluids used forantifoams
10、and lubricants; elastomers used as building sealants, gaskets, and pacemaker leads; and resinsapplied as protective coatings. The corporation also manufactured high purity polycrystalline silicon, theprincipal intermediate material for semiconductor chips.In 1994 Dow Corning had sales of $2.2 billio
11、n, approximately 8,300 employees and approximately45,000 customers worldwide (see Exhibit A-1). It operated out of 29 manufacturing facilities on fivecontinents, with greater than 50% of its sales generated outside the United States. The company washeadquartered in Midland, Michigan, USA, with regio
12、nal headquarters in LaHulpe, Belgium and Tokyo,Japan. The firm emphasized eight core values: integrity, customers, employees, safety, technology,quality, environment, and profit (see Exhibit A-2). Each year an internal publication reported keymetrics on the status of each of these values.Dow Corning
13、 developed, manufactured, and marketed almost 5,000 silicone products and relatedspecialty chemical materials. Seven to eight percent of sales revenues were regularly devoted toresearch and development, and in 1994, twenty percent of revenues were from products2introduced in the last five years.1 Do
14、w Corning had long competed with large regional and globalcompanies, such as Shin-Etsu in Asia, Rhone Poulenc and Wacker in Europe and the U.S., and GEglobally, but newer niche players were increasing the pressure on both quality and price. At the sametime, Dow Cornings customers were demanding fast
15、er cycle times and greater responsiveness tounique needs. Management perceived both economies of scale and customer responsiveness would beessential in order to remain competitive in the global marketplace.In 1976 top management introduced a unique multidimensional organizational structure that reco
16、gnizedthe diverse demands of business, geographical area, and function. Dow Corning successfully used thisstructure, which gave most professionals multiple bosses, while other firms were failing in their efforts toestablish matrixed reporting relationships. Industry experts credited this structure w
17、ith providing a majorcompetitive advantage.The matrix structure allowed Dow Corning to view itself by business group, geographical area, orspecific function. It had two business groups: the Core Products Business Group (CPBG) and theAdvanced Materials Business Group (AMBG). While the two groups had
18、some overlap, they weredistinguished by the CPBGs emphasis on products with established operational excellence and globalreach in contrast to the AMBGs product innovation orientation and focus on local and regionalcustomer relationships. Geographically, Dow Corning had three areas: Europe, Asia, and
19、 the Americas.Functionally, the firm had four key units: Manufacturing and Engineering, Science and Technology,Marketing and Sales, and Administration. The heads of the two business groups, three geographicalareas, and eight functions were all company officers.In its value statement, Dow Corning art
20、iculated its commitment to an open and creative culture thatrecognized employees as the primary source of ideas, actions, and delivery of performance. DowCornings consistent growth performance had resulted in a stable work environment that reinforced theloyalty of its employees. Recognizing the valu
21、e of this stability, the management team was determined toavoid reengineering initiatives driven solely by the need to downsize the organization.The Breast Implant CrisisIn 1992, arguing that manufacturers had not sufficiently demonstrated the safety of breast implants, theFood and Drug Administrati
22、on (FDA) restricted the sale of silicone gel-filled breast implants. By thattime, Dow Corning, which had been manufacturing implants for almost 30 years, already haddiscontinued production partly in response to a trickle of lawsuits that attributed various autoimmunediseases to the implants. The FDA
23、 action led to a torrent of product liability lawsuits. While the linkbetween silicone implants and connective tissue disease or other illnesses was not supported byscientific evidence, sympathetic juries made multi-million dollar awards to plaintiffs. By early 1994, over9,000 lawsuits had been file
24、d against Dow Corning, which had been the largest manufacturer of breastimplants. Both to reduce uncertainty and to place some limit on the total payout, the majormanufacturers in April 1994 agreed to set aside $4.23 billion for women with breast implants, of whichDow Corning committed $2 billion.1
25、Through 1996 Dow Cornings performance, as characterized by the meters and measures defined in the case, waspositively sustained. Dow Cornings targeted performance through the turn of the century reflects the continuationof these results.3Intensifying competition and increasing customer requirements,
26、 coupled with breast implant litigation,created a need to meet changing customer expectations and to optimize cash flow. In 1992 and 1993,the firm recorded net operating losses as a result of breast implant-related charges. While breastimplants had been a very small part of the firms revenues (less
27、than one percent), the litigation andpublicity were consuming significant human and financial resources. In June 1993, when RichardHazleton became CEO in addition to his role as president of Dow Corning, he took on a challengingleadership assignment.Hazleton promised employees and shareholders he wo
28、uld continue an environment of opencommunication concerning both the breast implant crisis and Dow Corning management. Employeesresponded to this openness and rallied around Hazleton and the rest of the top management team. Theyeven voluntarily bought six pages of advertising, costing $5,170 in the
29、local Midland Daily News. Onthese six pages, 2,068 employees signed their names to a statement of support. The message stated:To: Dow Corning Executive ManagementYour Employees are Behind You 100%Hazletons continuing commitment to openness extended to the management culture. Charlie Lacefield,Vice P
30、resident and Executive Director, Manufacturing and Engineering, described the environment:The culture of the corporation is that it is okay to disagree. Management is comfortablesaying “I dont know.”The IT Function at Dow CorningIn 1994, Dow Cornings core IT unit, Systems and Information Management
31、(SIM), had a staff of 120headed by a director, who reported to the Vice President of Science and Technology (see Exhibit A-3).SIM oversaw mainframe transaction processing, which was centralized in Midland, and the globalnetwork that enabled it. The unit was also responsible for telecommunications, m
32、ainframe e-mail (IBMsPROFS), end-user training, and global systems supporting financial reporting, procurement and processcontrol. The SIM budget had grown from $10 million to $20 million between 1984 and 1994, but as apercentage of sales, the budget had shrunk, representing less than one percent of
33、 sales in 1994.In 1992 SIM management had issued Dow Corning Information Network Principles in recognitionof the changing business environment and the growth of end-user computing. The principles describedhow the company would “tend to do computing in the future.”Key principles included: increasingl
34、y decentralized IS decision making; faster cycle times; greater empowerment; working closely through standing committees to develop plans, strategies,policies, priorities, and controls.4Several of the standing committees were comprised of corporate and regional senior managers. Theseincluded the Sys
35、tems Management Board (SMB), European Competitive Computing Board (CCB),Japan-Pacific SMB, and Dow Corning Inter-America (DCIA) SMB. Others were comprised of localIS staff and power users, such as Dow Corning Information Network (DCIN) Leadership Council,DCIN User Council, Science (2) focus on globa
36、l shared resources andcapability; and (3) provide tools and information to support empowerment. While he understood hisgoals, he was not sure how to provide the environment for achieving them:Ive been reading on IT but Im terrified. Its the one area where I dont feel competent.I sense that were not
37、getting good value for the money.Prior to October 1994, Dow Corning had spent considerable time and resources on identifying thebusiness processes for the corporation. But implementation was only marginally successful due to aginginformation systems that were aligned with the more traditional functi
38、onal organization. Informationsystems capabilities that transcended organizational boundaries and linked the activities of a process-centered organization were an important part of the changes envisioned by Hazleton and hismanagement team.6Action Steps for Top ManagementTo address the issues facing
39、SIM and the entire IT function, the Operating Committee had appointedfour of its members as a subcommittee. The “gang of four”, as they came to be called, included the threeVice President/Executive Directors for Science and Technology, Manufacturing and Engineering, andHuman Resources, and the Presi
40、dent for the Inter-American Area. With the Operating Committees fullsupport, the committee sponsored an assessment of IT and sought recommendations from consultantson the role and organization of the entire function. They particularly were interested in how IT fit into thepotential for process chang
41、e and the impending implementation of SAP.Dick Hazleton awaited the consultants report, but was already thinking of options for how the ITfunction should be organized and what kind of manager should lead it. It seemed to him the time wasright for a new era of IT support in the business to begin.Exhi
42、bit A-1The Notes to Consolidated Financial Statements are an integralpart of these financial statements7DOW CORNING CORPORATIONCONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS(in millions of dollars except share data)Year ended December 31,1993 1992 1991NET SALES $2,043.7 $1,955.7 $1,845.4
43、OPERATING COSTS AND EXPENSES:Manufacturing cost of sales 1,403.9 1,343.2 1,195.5Marketing and administrative expenses 403.9 410.4 397.3Implant costs 640.0 69.0 25.0Special items - 40.0 29.02,447.8 1,862.6 1,646.8OPERATING INCOME (LOSS) (404.1) 93.1 198.6OTHER INCOME (EXPENSE):Interest income, curren
44、cy gains (losses) and other, net 15.4 (20.6) 31.9Interest expense (33.3) (22.5) (21.5)INCOME (LOSS) BEFORE INCOME TAXES (422.0) 50.0 209.0Income Tax provision (benefit) (150.9) 10.1 58.3Minority interests share in income 15.9 11.5 14.1INCOME (LOSS) BEFORE CUMULATIVE EFFECTS OFCHANGES IN ACCOUNTING P
45、RINCIPLES (1993 - $(114.80)per share; 1992 - $11.36 per share; 1991 - $54.64 per share)(287.0) 28.4 136.6Cumulative effect of adopting Statement of Financial Accounting Standards No. 106 - EmployersAccounting for Post-retirement Benefits Other ThanPensions, net of applicable income taxes ($(46.72) p
46、ershare)Cumulative effect of adopting Statement of FinancialAccounting Standards No. 109 - Accounting forIncome Taxes ($6.56 per share)Cumulative effect of a change in accounting forfixed costs recorded in inventory, net of applicableincome taxes ($6.52 per share)- - - - - - -(116.8)16.4- - - - - -
47、-16.3NET INCOME (LOSS) (1993 - $(114.80) per share;1992 - $(28.80) per share; 1991 - $61.16 per share) (287.0) (72.0) 152.9Retained earnings at beginning of year 891.3 1,028.8 953.4Cash Dividends (1992 - $26.20 per share; 1991 - $31.00 pershare) - - - (65.5) (77.5)Retained earnings at end of year $
48、604.3 $ 891.3 $1,028.8Exhibit A-28OUR VALUESIntegrityOur integrity is demonstrated in our ethical conduct and in our respect for the valuescherished by the society of which we are a part.EmployeesOur employees are the source from which our ideas, actions and performance flow. The fullpotential of ou
49、r people is best realized in an environment that breeds fairness, self-fulfillment, teamwork and dedication to excellence.CustomersOur relationship with each customer is entered in the spirit of a long-term partnership andis predicated on making the customers interests our interests.QualityOur never-ending quest for quality performance is based on our understanding of ourcustomers needs and our willingness and capability to fulfill those needs.TechnologyOur advancement of chemistry and related sciences in our chosen fields is the Value thatmost differentia
