The Corporation: STRATEGIES
A NEW PAINT JOB AT PPG
Blue glass. Throughout the 1980s, researchers at PPG Industries Inc. worked long hours to develop bluish windshields that would let in filtered sunlight but block out the heat. PPG's scientists were bubbling about this new engineered glass loaded with added value. And the market? Well, how about every car company in the world?
There was only one problem. When PPG finally unveiled the blue windshields in 1991, the auto makers wouldn't have any of it. They didn't like the color, or the price. "We developed a great mousetrap," laughs Gary W. Weber, vice-president for science and technology. "But there were no mice."
Blue glass was just a hiccup for PPG, certainly nothing to disrupt the steady profits at the 112-year-old glass, paint, and chemical company, originally known as Pittsburgh Plate Glass Co. But as Jerry E. Dempsey saw it, the chasm between PPG's labs and its customers pointed to a weakness at the $6.3 billion company. When Dempsey, the first outsider ever hired to run PPG, took up residence two years ago in the turreted black-glass headquarters known as the Ice Palace, he took a couple of months to acquaint himself with the businesses and then delivered his verdict: To overcome flat sales growth, PPG needed a crash course in marketing.
Now the 63-year-old Dempsey, who was originally viewed as a transitional CEO, is out to pump up PPG with marketing muscle. To do that, the former CEO of WMX Technologies Inc.'s Chemical Waste Management subsidiary is quietly reshaping the company, pouring investment into higher growth niches, many of which demand heavy marketing skills. He's building factories to make Transitions sunglasses and advertising them on TV. He's inviting companies such as Nike Inc. into the labs, hoping to sell it not only the bouncy innards for its shoes but also color-changing decorations. To revamp PPG's old-line commodity culture, Dempsey has even reached across town to H.J. Heinz Co., where he hired a former ketchup man as PPG's first-ever marketing director. "I felt there was a lot we could do to grow the products," Dempsey says.
Dempsey's goal is to reignite PPG's sales, which have hovered at around $6 billion through the 1990s. To do so, he's continuing PPG's push abroad, opening glass plants in China and buying paint businesses in South America. Dempsey is also tripling investment in faster- growing sectors, such as specialty chemicals and powder-based paints, that now account for 40% of sales but 60% of earnings. The bet is that PPG's meticulous managers can thrive in new markets, many of them far from the commodities they now master. And he's hoping that he can imbue these managers with marketing chutzpah without disrupting the company's stolid, dependable culture.
"ONLY 98% SURE." But change is a tough sell at a company whose stock has returned 600% in the past decade, including 13% this year, and where third-quarter earnings just reached a record $170.4 million on $1.72 billion in sales. Indeed, PPG routinely delivers higher margins than its top competitors, Sherwin-Williams, Dow Chemical, and Owens-Corning Fiberglas. Dean Witter Reynolds Inc. analyst Harvey S. Stober calls it "one of the best-managed companies in America." Chemicals Vice-President Peter R. Heinze says PPG executives are so careful and precise that their notion of winging it is enshrined in an unofficial company motto: "Just do it--even if you're only 98% sure."
Small wonder, then, that getting PPG managers to plunge into risky new markets is a challenge. Dempsey is leading the way by taking some risks of his own, such as naming former Heinz Vice-President Benjamin Fisher to the new marketing position. It took Dempsey a full two years to wedge open a space at the company for his marketing maven. And to avoid rattling the top executives, he had to insert Fisher below a host of vice-presidents.
Dempsey demonstrated his push into market niches soon after arriving at the company. He found PPG's new Florida-based Transitions plastic-lens unit at a crossroads. It had a promising technology for lenses that lighten or darken automatically in response to light levels, but a first generation flopped in the marketplace. The lenses changed too slowly and came in unpopular colors. Many expected PPG to write off Transitions as a failed experiment. Instead, Dempsey poured money into second and third generations and built lens factories with French partner Essilor International in Ireland and Australia. Now a $100 million business growing at 40% a year, Transitions has become a showcase for Dempsey's niche-market vision for PPG and a model for other startups. Already, Dempsey is pressing researchers to perfect the next generation of Transitions, which will come with a button for manual adjustment.
RECESSION-PROOF? Dempsey is also looking to take more creative approaches to PPG's existing commodity markets. At Chrysler Corp.'s Belvedere (Ill.) Neon plant, PPG has taken over the entire paint shop. The idea is that PPG can sell every single coating for the cars and oversee their application. "We save the customer money and split the difference," says E. Kears Pollock, vice-president for coatings and resins. The move has boosted PPG's sales to the plant by 20%, and most of the growth is in higher-margined specialty coatings. But it also turns PPG into a service provider, a new business with risks of its own. Still, Dempsey is pushing similar contracts in North America and Europe. In another service venture, he's pushing PPG into insurance-claims processing. The idea: to funnel broken-window repairs straight to PPG suppliers.
Dempsey, a grandfatherly South Carolinian, was brought in two years ago largely to manage the succession at PPG, where the hard-driving Vincent A. Sarni had prepared no heirs. Dempsey promptly began grooming two executive vice-presidents for 1997, dividing the company between them as co-chief operating officers. Dempsey's hope is that they'll inherit a company that has been buffered against the next recession thanks to global expansion and niche marketing.
There are signs that PPG marketers are making headway in new niches. A couple of miles east of the Ice Palace, a group of architects at Carnegie Mellon University are putting together an office of the future. It features a host of the latest environmental gadgets and building materials. The windows at this "Intelligent Workplace" are a new thermal product from PPG. It's an engineered glass with a bluish hue.By Stephen Baker in Pittsburgh