Alexa Dembek is DuPont’s Chief Technology and Sustainability Officer, and she has been with the Delaware-based chemicals giant for more than three decades. In this interview from the new book Innovation Accounting, she talks with authors Dan Toma and Esther Gons about investing in innovation — and measuring progress in both financial and nonfinancial terms.
Innovation Accounting: What’s the biggest driver for innovation in your company?
Alexa Dembek: Every company has different drivers. For us at DuPont, innovation led growth is a really important driver to create value. Value delivers on the purpose of the company — “To empower the world with the essential innovations to thrive” — which aligns with sustainability.
This might not be the same for other companies. For example, some companies might be looking at innovation to achieve geographic expansion. Some might look at capital expansion.
DuPont has a legacy that stretches over two centuries and what worked for us in the past and what’s working for us, is innovation led growth. We’re constantly reinventing ourselves to be relevant for what’s coming and what the needs of the future are. Our fundamental strategy, therefore, is to align with market and technology trends. And then we look at how to adjust our internal capabilities for the problems we would like to tackle.
What matters for everyone are three things: top line growth, bottom line growth, and return on invested capital.
IA: What’s the biggest challenge when it comes to communicating growth through innovation to the other peers on the board? How do you interact with the CEO or the CFO for example?
AD: So what we have all agreed on is to drive both the speed to market and the impact of our growth investments. The challenge is always, how do we make sure that we can tie the investments that we’re making to top and bottom line growth. And that’s where we spend a lot of our effort, making sure that both the scale of the investment is right and then the speed to delivery is right too. And both of those vary depending on where we’re at in the market. Some markets have a very fast cycle. Some markets are the opposite – with very long cycles. Therefore the investment requirements as well as the speed is different. So we have to look at it very carefully when analyzing our performance. We never take a one-size-fits-all stance when measuring these things.
At the end of the day, what matters for everyone are three things: top line growth, bottom line growth, and return on invested capital. What will vary is the cycle time, how we look at speed, and also how we look at what the investment is or needs to be.
Our investments in innovation and R&D, at the enterprise level, have been steady at ~4 percent of sales. So the key indicators aren’t just the spend, but what is the outcome we get based on the investments we made. And these outcomes are both growth — as I said earlier — and keeping the company relevant by delivering on our purpose in the years to come.
IA: What kind of indicators do you use to show investors or other shareholders that the money spent on innovation is well spent? Is it just the final outcome, the top line growth, bottom line, or do you have anything else that justifies the investments?
AD: Each business has a strategy for how they’re going to achieve their objectives in their respective markets. A key element of our success is in aligning innovation investments with each one of those strategic priorities. So there are some questions that are always front of stage for us:
What are the important and invaluable problems in each of our opportunity areas we have identified?
What is it going to take to win and what are our investment profiles to be able to deliver in those areas?
So that’s what we spend all of our time, doing it with speed at scale.
And then the investments come from that discussion. This is not just a year over year, it’s part of our DNA, our culture if you want. We do this on an ongoing basis.
We always stay focused on the market and customer problem — not what others are doing. We look at what’s our unique and differentiated solution. What can we deliver to be able to help solve these important problems in the market. So we’re very market-focused, everything’s about market and customer focused.
IA: What are you doing when, in spite of proper investment and strategic clarity the return is just not there at the end?
AD: We always view every outcome, positive or negative, as learnings and we do our best to leverage what we learned as we develop the next strategy. To do that we encourage our colleagues to not fall in love with projects, but fall in love with growth. Projects will come and go but our quest for growth, our quest for solving important problems is what’s timeless. And that’s where we try to focus the conversation, win or lose. And once we’re aligned across the company and with all the businesses on what the problems that need to be solved are, it makes everybody really energetic and excited to go and work on important problems.
The real point for me is to make everyone fall in love with the outcome. Don’t fall in love with the process.
IA: Beyond the financial result indicators you mentioned, are you looking at other non-financial indicators? And if you do, how well are these received by the financial people in the company?
AD: Yes, for financial performance, the things that really matter are those three, top-line growth, bottom-line growth and return on capital for all investments. However, we have many non-financial measures as well, and I’d have to say that our CFO values them equally.
DuPont’s 2030 sustainability goals are nonfinancial. So, every year, there are many things that we have to improve beyond just the financials in order to drive a much broader impact.
Most of our non-financial metrics are ESG (Environmental, Social, and Governance) and culture relevant. DuPont’s 2030 sustainability goals are nonfinancial. So, every year, there are many things that we have to improve beyond just the financials in order to drive a much broader impact. How are we driving diversity, equity, and inclusion, of which culture is a dimension for example. Or our work in sustainability, our work in the community, our work on reducing greenhouse gases, or our work on water stewardship are things we constantly focus on, and they are all included to deliver our 2030 goals.
We have in total nine goals in our 2030 sustainability roadmap. And each of those is very quantifiable, including diversity, equality, inclusion, and representation. We have very quantifiable measures in areas which are traditionally difficult to quantify. For further reference, readers can look at our GRI report from 2022, where we outline everything we track around non-financial impact.
To conclude, I would say that for DuPont, it’s an “and” profit, “and” purpose. The measurement side is obviously much more quantifiable on the financial metrics. But the nonfinancial metrics are just as important, therefore we track them too.
IA: Given your experience measuring innovation-led growth, what are some guiding principles or “do’s” and “don’ts” that you would encourage other business leaders to follow? Are there any tips?
AD: Well, what’s been successful for DuPont is looking at innovation through two lenses. One is the retrospective view. So, looking back in time on what’s been delivered and the outcomes we had.
We host this annual Dead Project Day around Halloween, and this gives us a chance to be reflective in a fun and not a threatening environment…
The second is the forward view. This looks at anticipating progress. The measure is different here than in the retrospective view. Here, we focus more on uncertainty reduction and how we win. Are we learning fast enough in new markets? I think that’s been key for us and we overvalue our learnings from places we weren’t successful in. We host this annual Dead Project Day around Halloween, and this gives us a chance to be reflective in a fun and not a threatening environment where we can say, “what did we learn from things that we had to stop and pivot, and how do we use those learnings to be even faster in the future?”
The other thing that we’ve had to spend a lot of time on is the cultural dimensions of risk-taking and empowerment. And I think everyone these days knows those cultural dimensions are critical.
(Featured image by Markus Winkler on Unsplash.)