The Dow ICM Model

The Dow Chemical Company was a pioneer in the field of intellectual capital
management (ICM). Founded in 1897, the company followed an old economy
business model that was not best suited for the radical ICM revolution.

Dow had long since been a company that prided itself on innovations, the company
set up it first patent department in 1928 and also had an invention management group
as early as 1958. This positive attitude towards innovation that embodied Dow since
its early stages was most definitely an added advantage on the pathway to the
company’s ICM objectives.

Despite the obvious advantages, the rigid hierarchical structure was still a hindrance
to the intellectual asset management (IAM) and ICM. To negate these hurdles, Dow
underwent two major changes:
• The company de-layered its structure from frontline workers all the way to the
CEO

• The company adjusted its vision to realign itself with the new and strategically
important concept of intellectual capital (IC)

The company’s modified vision now included, “creating value from our intellectual
assets”. This new addition facilitated the company’s perception as “enablers of value
creation and maximisation”. Apart from this change, the company also needed the
following to make the transformation:
• Visionary leadership
• Strategic planning
• ICM champions
• Committed managers and employees
• Effective teams and programs

In the year 1998 DOW developed high growth strategy, and planned to do the
following:
• increase earnings per share by 10 percent
• have 15 percent of revenue from products introduced in the past five years by
2005

To Dow, ICM was now the new way of doing business and also the vehicle for
creating and sustaining future value.

The Knowledge Management Stage

Dow follows a matrix organisational structure, in which Knowledge management

(KM) initiatives are led by a corporate top level of management and, implementation,
and resources allocation initiatives are left to the vice president of each individual
business group.

Dow’s KM system is spearheaded by a knowledge management director, who reports

to Dow’s Chief Information Officer (CIO) and supervises a group of senior executives
who form Dow’s “KM Group”, comprises of eleven members, who are in charge of
management of knowledge of DOW’s 23 businesses, which provides support to
“information stewards”. These stewards report to the senior manager as well as vice
president of the business group, who in turn are supported by IT department KM
Program Office and KM resource center.

The whole process is represented in the diagram below.

CIO

KM Director

IT Department – KM Program Office

IT tools, technological
solutions Senior Manager

KM Resource Center Practices,

Methodologies,
Strategies

Information Stewards

Source: Comprehensive Intellectual Capital Management: Step-by-Step, Nermien Al-Ali, John Wiley & Sons, Inc
(2003)

Given the cultural and other changes that knowledge management initiatives require,
it seems prudent adopting KM is left to the business group, according to its state of
readiness and business needs. However, this places a certain degree of pressure on
stewards who must act as leaders of the initiative in the business unit and also as
agents of change for the organisation.

Structure

1) Communities of Practice and IAM Teams

KM systems at Dow evolved aligned with the Intellectual Asset Management (IAM)
teams, which operated like communities of practice (CoPs), to look after the strategic
business need of capitalising on Dow’s IC in a particular area of technology, right
from inception and development to the final step of commercialisation. Jim Allen,
KM director at Dow specifies, “The term knowledge management may fall out of
favour, but the practices and strategies of KM will remain part of the basic strategy
and culture of every successful business”.
2) A Culture of E-Learning

Dow's is committed to KM and knows well the value of employees' knowledge. Dow
professes that it wants its people to have the "freedom they need to succeed” and
hence fosters values of innovation, agility, and individuality. Dow provides its
employees with knowledge resources for them to learn by providing online education
system worldwide. This new e-learning system is extremely beneficial in addressing
employee’s knowledge needs, increasing morale and it also saved the company in
excess of $45 million in training costs.

3) The Knowledge Base and IT

While building a knowledge base, Dow understood three strategic components that
should incorporated. They are listed below.

• How do we work? – This relates to overall enterprise computing systems

including the common workstation and intranet

• How do we make decisions? – This relates to KM, building the knowledge

base, and connecting employees for knowledge-sharing purposes

• How do we connect to our customers? – This relates to e-business solutions

and systems and the ability to tap into customer capital

The creation of a corporate-wide standard workstation is the basis of DOW’s IT

architecture as it incorporates hardware, software, IT solutions and communication
tools and database management systems.

This knowledge base was adapted to provide information to employees relating to the
decisions they make and based on their knowledge needs. All this was done with a
primary focus of shifting from "reporting to prediction" in the use of information.
Dow provided for a number of information retrieval and visualisation tools that
included (but were not limited to) patent citation trees and KM tools.

The Innovation Management (IM) Stage

Dr. Herbert Dow founded Dow in 1897 and managed the innovation processes with
Edison's model. Dow's IM system has since evolved to accommodate the network-
based nature of innovation in the knowledge economy.

Structure

1) Labs as Competence Centers:

DOW managed to fit the skills and competence of its employees across all its
businesses and each employee skills is known to lab manager. A central department is
tasked with bringing together the right team, and assigned to do process ownership
and team allocation is done by leadership of business lab.
 2) The 42 Plus Alliances Portfolio:

DOW has 42 external alliance and R & D collaborations with various universities, and
other R&D organisations. DOW does not hesitate to collaborate even with
competitors if there is increased knowledge and speed to market.

3) Innovation Culture and a Central Idea Bank

DOW empowers it employees by fostering a culture of collaboration and creativity.

DOW established “central idea bank” in which the ideas are evaluated, filtered and
distributed to the various business units

The Intellectual Property (Asset) Management Stage

DOW has over 100 IAM teams to gain maximum leverage of patented technology
both inside and outside DOW. These policies add more strength to its competitive
advantage and to patent portfolio.

Structure

1) IAM Teams and the Tech Center

IAM teams are cross-functional teams formed to manage each business unit’s
formulated patent strategy as a part of its business strategy by using auditing tools and
absorb patent costs. It also includes frontline functional manager and key scientists for
reviewing patents and strategies for their management.

2) Patent Talk Equals Patent Friendly

The IP audit and the identification of patents immensely affected the IPM culture at
Dow. Determining their value to the business promoted debate among R&D,
manufacturing, business development, and IA managers, and a good understanding
and appreciation of the value of patents to business evolved.

3) Leveraging IP Internally and Externally - A Patent Investment Plan

Business units addressed how patents can be used for competitive positioning and
enhancing its core competitive advantage with the end goal of strengthening its
technological capability.
The second use relates to commercializing the patent through licensing or technology
transfer transactions offered to outside parties in cases in which that is not
competitively harmful.

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