Customers and Innovation at Eastman

I have not had a chance to listen to the lecture yet but feel that my last couple of days have played right into the topics we have been studying.   Tuesday on my way home from work I received a call from by boss inviting me to a company dinner with only the suggestion that I would not want to miss it.  It turned out to be dinner with the president of Eastman Chemical.  I was a great evening.   Eastman also has had a two day increase in stock price of 9% based off of 2 quarter performance.

I had the opportunity to ask questions and all the answers were in terms of costumers, markets, competitors and innovation.  I would say more than ever that Eastman is costumer focused.  Eastman actual has three primary focuses, customers, innovation, and operational excellence.  The president explained that one of the key metrics that he uses is a vitality index.  This is a measure of % contribution to margin of the company’s new offerings.  This measures both innovation and customer value. 

We also discussed our customer behaviors and importance of understanding the customer buying process.  It almost sounded like he had read Lehmann and Winer.  We have very few consumer offerings, only  aftermarket window films.  Most of our business is to other companies.  The president explained that one challenge that faces us is that our customers tend to only be interested in cost reductions.  We often have to go beyond our direct customer to the end user of their product to look for new value positions.  In some cases we will sell our customer’s customer on the new product and have them pressure our customer to use it.  I found the entire conversation about the customer relationships throughout the entire supply chain interesting. 

We also talked about ways to maintain market differentiation, quality and innovation are better than price.  Eastman focuses of innovation because there is significant competition in our markets.   In both China and South Korea there is excess chemical manufacturing capacity and the companies in those countries do not respect intellectual property.  Once our products are copied, they become commodities and if we have not innovated we lose our margin.   Eastman is using cross function teams to drive innovation.  These teams also cross business segments to create intersection as discussed in the decision making class’ read the Medici Affect .