Executive Word -- Experience Breeds Innovation

Applying knowledge from past positions, Herbert M. Baum leads The Dial Corp. to an innovative future -- at least for now.

Herbert M. Baum Chairman, CEO and president, The Dial Corp., Scottsdale, Ariz. Born: Dec. 6, 1936 Education: Bachelor of science in business administration from Drake University, Des Moines, Iowa. Career Highlights: 1958-1962: Worked for the ad agency Stern, Walters & Simmons in Chicago. 1962-1966: Worked for Doyle Dane Bernbach in Chicago. 1966-1978: Worked for Needham, Harper & Steers. 1978-1993: Held positions at Campbell Soup Co. including executive vice president and president of Campbell North and South America. 1993-1999: Chairman and CEO of Quaker State Corp. 1999-2000: President and COO of Hasbro Inc. 2000: Became chairman, president and CEO of Dial. Interests: Baum is director of several companies including The Dial Corp., Midas Inc. and PepsiAmericas Inc. His professional awards include the American Marketing Association's (AMA) 1992 Charles Coolidge Parlin Award and the AMA's Edison award. Baum was elected to the Sales and Marketing Executives International Hall of Fame in 1998. Family: Wife, Karen. Two children, two grandchildren.

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Herbert Baum has been around the block in terms of executive positions. His ideas for innovation have been harvested from those experiences. IndustryWeek spoke with Baum about his role in innovation at The Dial Corp. He is surprisingly candid on the state of the company when he took over, and how long a CEO should stay on board at one company for the sake of innovation. IW: How did you take Dial from a fast follower to "First, Fast and Fresh to Market" since becoming CEO of the company in 2000? Did the fact that you were on the board since 1997 help you run with the ball? Baum: I'll answer the last question first, which is no. The board was pretty much in the dark as to exactly what the issues were here. And the reason we embarked upon this strategy of being a first to market versus a fast follower is that if you are first to market you get higher pricing, higher margins and larger market share. And that's pretty much axiomatic in brand marketing. We knew we had to do that because the company at the time we took over had a lot of debt, could not be in the market for acquisitions -- we knew we had to develop products internally. So we decided we would go for the big hit -- products that would give us some advantage over our competitors. IW: You said the board was in the dark. Can you explain more about that? Baum: The reason the board made a change in CEOs was that they were not fully informed of some of the things that were going on in the company that were really hurting the progress of the company. What I learned when I was on the board was not of significant help to me in trying to manage the company out of its problems. IW: When did you realize how in the dark you really were? Baum: I realized when I became CEO that every rock that I turned over had a snake under it. IW: Any examples? Baum: No. IW: Dial is a company that conjures up a specific image. Do you find that to be a benefit or an obstacle in terms of innovation? Baum: Dial is our corporate name. It is not closely associated with our brands other than Dial soap. Purex is our largest brand, and that only carries the Dial name on the back of the package. And Renuzit, of course, carries the name on the back of the package as well as Armour Canned Meats. There is no question that when you say Dial to someone, they think soap. But it is certainly not a distraction that we have these other very strong brands that Dial makes. It certainly doesn't take away from those brands. IW: Talk about the requirements you've added to scientists' responsibilities and why you decided to add them. Baum: We have a building across the street from our headquarters office that was named the Dial Center for Research and Development. It occurred to me that the scientists that work there really didn't understand what we needed to do to get this company back on track. Although it appears to be a cosmetic move, we renamed the Dial R&D Center as the Dial Center for Innovation. That was meant so that as people walked through the doors and saw the sign "Dial Center for Innovation," they knew that their job was to innovate as opposed to research and develop. It was something that I believe took hold very quickly. At the same time we said to our scientists, in support of the Dial Center for Innovation, they must develop two new patentable ideas per year. Now that doesn't mean that they have to develop two new products per year. The patentable idea could be on a package or some kind of a label invention or a product formulation or an entire new product. We have gone from having four or five patent applications per year up to the 30- or 40-per-year range. IW: What are the challenges that the scientists now face with having to be responsible for two patents a year? Baum: Not really having walked in their shoes, I'm sure it put a little pressure on them to think more about ideas that would get products or packages to market. I believe it was good for the direction and the mission of the Center for Innovation to have that as a requirement. That kind of put teeth in it. IW: You said not walking in their shoes. Is that a barrier to you, or do you think that benefits you because you can think outside of the box? Baum: No, it certainly is not a barrier. What I meant by that is that I am not a scientist by trade. I can't exactly imagine what goes through their minds and what their joys and fears of their jobs are. I came out of a marketing background. I have an idea a minute, so they probably get tired of hearing from me. I'm always trying to challenge them to do new and different things. It is a process. This kind of cultural change probably takes anywhere from three to five years. So we're just getting our feet wet now where it becomes more of a rhythm as opposed to a one-on, one-off innovation session. IW: Is this a realistic goal? Too high? Too low? Baum: I think [the goals] are very realistic. I think it's a good way to measure the growth of the individuals in those jobs, and I'm not sure if we would raise the bar on that. IW: What are the results from the added responsibility? Baum: None, other than the fact that the number of patents out of there are significantly more in terms of number. And the time to market on development of new products is a pretty long process. If it's good, it's worth waiting for. Anytime you rush something to market you make mistakes, and then you are sorry for it. I think we've got a lot of nice ideas, we've got a lot of nice ideas in test. Whether they will be successful or not, we'll know after the test results. IW: What is Innovation Week and how did you come up with the idea for it? Baum: It's a way of taking the thought of innovation and saying it's not the job of any group of people in the company, it's the job of everyone who works here at Dial. We have an innovation day and an innovation week once a year in which we try to get our people involved in thinking about things that will help in the way of product ideas, package ideas, servicing ideas. It's just a day or week of training that gets everybody on the same page. IW: What is the Dial Thinkathon? It was said that the Thinkathon generated 3,500 ideas in one hour -- will any of those ideas will make it to fruition? Baum: Well it's possible. There are no right or wrong answers, there are no bad ideas. Any idea is an idea. So people just throw out anything that is top of mind. The ideas are recorded, and then they are given to our innovation group, which is a combination marketing and R&D group. They sort through them, and they choose which ones they want to go and develop going forward. So it's possible that one of those 3,500 may come to market. IW: Do you feel that your positions with big-name companies such as Hasbro, Quaker State and Campbell's have helped you see what Dial needs in terms of innovation? Baum: Absolutely. You never stop learning, and I find that it's no fun coming to work if you're not learning something new. I think a lot of the experience that I bring to this company I am able to take that experience and show it to the executives we have here. I think I am helping them grow in what they do, as well as learning from them what they've already done. IW: You have an impressive dossier. Do you feel that companies benefit from hiring on a new CEO with new ideas every so often to prevent stagnation. In other words, does it benefit innovation to clean house? Baum: This is a very controversial subject. I brought it up in a board meeting of another company's board that I sit on. I really believe that no CEO should stay in his job for more than five years. I believe what happens is you get a change, you get fresh thinking. That doesn't mean that the CEO couldn't go to another company. But I think the term should be about five years. IW: Are we going to see a new CEO for Dial in 2005? Baum: My contract goes up to January 2006, so I'm pretty much in line with that. E-mail nominations for Executive Word to Editor-in-Chief Patricia Panchak at [email protected].
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