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Built for Change


MILTON HILL, U.K. – We have to make money, stressed Shaun Kennedy, Infineum UKs vice president for research and development, shortly after welcoming LubesnGreases here. Thats what its all about, finding ways of making money.

The fact that Kennedy started off the September interview so pointedly says a lot about the current focus in the highly competitive lubricant additives business. He added, Cost pressures are coming from everywhere and have forced us to think differently and to reject some traditional ways of doing things.

Kennedy seeks more than just innovation, however. I hate the word innovation. Every book you pick up now has the word innovation in it, and the word just means everything to everybody.

What innovation means for us is using ideas to make a profit, he went on. While our technology is the prerequisite for making money, its the actual business model you come up with that is going to deliver the money. Whatever we do here in technology, it still has to be carved into a business model that captures it.

That business model is a four-step process, said Kennedy. First, you listen to the issue. Next you get an issue decision maker, a leader, who then explains the logic of the issue so that everyone is on board. And finally, you execute the decision. The first phase – listening – is very important because then everyone has a chance to make his contribution up front, and no one can second-guess the decision later.

Teeming with Talent

With 80 Ph.D.s on the Milton Hill research & development staff (out of about 200 Technology employees in the U.K.), and with just about everyone holding a university degree of one sort or another, theres a mountain of technical talent on site. With personnel resources like this I am sitting on a problem-solving machine, and if we dont deliver new products that make money for us its my fault, Kennedy said. Chunks of our business are routine drudge-work, and its a matter of getting the balance right between routine work and the excitement of technical challenges, basically to keep the technical mentality directed to tough issues. And there sure is no shortage of tough problems.

One of these problems was the existing company culture, Kennedy noted. This is a conservative industry, and we have to continually challenge all aspects of it. Our new research building offered us an opportunity to change our culture to more effectively meet future challenges.

With that need in mind, the buildings creators revisited the edict that form follows function. That principle, associated with twentieth century architecture and industrial design, states that the shape of a building or object should be predicated on its intended purpose. Infineum wanted a facility that would turn this concept on its head: The new building (form) would come first and the function – a new research configuration – hopefully would follow.

Mixing It Up

Although young, Infineum has deep roots. It was formed in 1999 as a joint venture between ExxonMobil and Shell Chemical, combining their Paramins and Shell Additives divisions.

Original plans for the new research facility had been shelved in 2001, but construction work at last got underway in January 2004, with completion and dedication in September 2005.

Martin Dare-Edwards, Infineum UK site and country manager, described the results. Our old facility was completely cellular; that is, everyone had a separate office, labs had their own culture, and often they didnt mix. There was an existing hierarchy based on offices, titles and space which had been built up over decades. Our new building, however, is 100 percent different. Its completely egalitarian in space, openness, desk type and interior office setup. A senior technologist, or a technical leader who reports to Shaun has the same amenities as does a recently hired technologist or chemist.

Everyones office space, except the dozen or so students we employ part-time whose desks are a bit smaller, looks much the same, all are located in the center space of the building, and there are no floor-to-ceiling walls, just bank-type partitions about four feet high.

Weve carried though this openness concept to the perimeter space, too, where we have our laboratory modules, four on the second floor and six on the first, Dare-Edwards continued. For staff meetings, we have four large meeting rooms and 11 closed breakout rooms designed to allow technologists respectively to hold private large and small meetings and discussions.

A New Mentality

And how did this architectural sea-change affect the operation of the facility, and its mandate to make money?

A bunch of sharp scientists and engineers can always think up ways that a move of this sort could go wrong, Kennedy replied, but there was actually less space in the new building so it forced people to go out and meet others, to network within the company and share ideas. You couldnt hibernate or be insular, which was a problem in the old building. Its a different mentality, a culture that we want to become second nature in the whole enterprise, and serve as a template for the fundamental issue of how we relate outside of the walls of the building, with our external partners.

Its not easy and we recognize that. Two years ago we did a survey and found that technological deployment, the interface with customer, was the area where our employees felt the most pressure. We hope our new building design, which fosters openness, will help lessen the feelings of pressure.

There were adjustments to be made, of course. One of our guys had lived in the same office for 20 years, and the idea of moving into open space filled him with fear and dread, Kennedy recounted. However, anticipation of change is always worse than the actual act, and the guy who had a 20-year lease on an office has worked into the new setup. But this change is not something that happens all at once. Its a foundation, an ongoing process, a way to open up our minds to a different way of meeting our core responsibility: how we do research.

As for actual bottom-line improvement, Kennedy was closemouthed. This process is a journey. Changing our culture is not something that can be reflected in our bottom line yet. We are about 25 percent there. Come back in a few years and well talk more specifically then.

Using architecture to initiate cultural change is not exclusive to Infineum UK, of course. In October, The Economist reported on another example of using physical facilities to modify behavior: Over the next 15 years, half of Britains 3,500 state-run secondary schools are to be replaced or remodeled. The bidding process for this rebuilding favors schemes which shake up the educational establishment, the magazine said, and turns out to be a good way of forcing through changes in how the schools are run.

Costs and Risks

Companies such as Infineum cant stand still or they will be run over. Continuous cost pressures force any company in the petroleum industry to look hard at its options just to stay even with the competition. While crude prices have retreated over the past few months from a high of around $70 a barrel, they are still high compared with about $20 per barrel five years ago, and continue to look volatile.

In addition, Infineum buys a thousand different raw materials, and each of these supply streams has its own cost pressures, which often get passed on.

Then theres REACH (Registration, Evaluation and Authorisation of Chemicals), the sweeping legislation enacted by the European Union in December which requires manufacturers and importers to gather information on the properties of their chemical substances and register them in a central database. Infineum must adhere to all the provisions of REACH, which will add to cost pressure.

Meanwhile, engine oil formulating and testing costs are also skyrocketing. A first-time pass for a North American heavy-duty engine oil (API CI-4) cost $350,000 in 2003, for example, while a first-time pass for the new API CJ-4 oil today is $500,000 – a 40 percent increase. Now a new passenger car engine oil, ILSAC GF-5, is in development, diesel is expanding in North America, and ultra-low sulfur diesel fuel is challenging formulators. All add to cost pressures.

Technology is the key, Kennedy pointed out. All of our research is directed towards a goal that will make money for us. The key is separating out anecdotes from real trends, because theres always so much going on. We dont do random research; we do maintain relationships with some targeted universities, but we dont do as much blue sky research as we would perhaps like. Its all about making choices. Even with our university partners, the research is focused on a commercial issue.

Sharing Secrets

Developing deeper relationships with suppliers and customers will be part of Infineums future approach to research. Weve traditionally wanted to do all the research ourselves here or at other Infineum sites, but now we cant do that. Its no longer possible, there are just too many issues and the costs are so high, Kennedy said.

One of our changes is to be less arrogant and more open, and to look for win-win situations with our customers, mainly oil companies but also with our suppliers and OEMs. Weve tried many things, and have examples of some relationships that have worked and some that havent. But we have to get more systematic about developing relationships and networking. If were more open with our secrets, hopefully we can get access to others secrets. And then jointly we can create some real value.

Kennedy returns constantly to the concept of openness, networking and developing personal relationships, internally and with customers and suppliers. Weve got to build up our leverage with everyone and make sure the company, worldwide, buys into it. Were not looking for absolute genius, its a matter of relativeness. We want to do our research a little bit better than others.

He concedes that the downside to more openness might be losing focus. We have to make sure that once an issue is decided, the intent (and carrying out the intent) is focused. We cant waste time or money. We have to pick the points where we will get the maximum return and stay focused there.

When you get the processes, people and culture right, then a lot of problems are solved, Kennedy said in closing. Our new building has opened peoples minds and allowed them to transform themselves. Leaders arise spontaneously or they can be designated. Recently, weve cracked some problems that were 10 to 15 years old. Were constantly learning about our people, and weve had some pleasant surprises.

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