Innovation and Culture Clash: Koch Industries and Georgia Pacific

In a recent “interview” with Georgia Pacific’s new CEO Joe Moeller, (AJC February 23, 2006) he stated that a key transition challenge he is facing is the development of a culture of “principled entrepreneurship” at G-P. Having worked with both Koch Industries http://www.kochind.com/default.asp (recent acquirer of G-P) and Georgia Pacific on technology projects and having spent the past 15 years focused on corporate entrepreneurship and organic business growth, I can see tremendous opportunities and significant challenges for Mr. Moeller.

Mr. Moeller states he will instill “principled entrepreneurship” at G-P by leveraging these capabilities currently found within the Koch companies. As has been the experience of many M&A programs, the integration of core capabilities, particularly capabilities related to corporate entrepreneurship and innovation, are difficult at best and down right destructive at their worst. Remember the “Carly” adventures and the failed integration of the HP and Compac business operations and cultures.

Certainly Koch, being a privately held enterprise, has advantages. Decisiveness can be (and is at Koch) swift and focused. The “open collar” Koch culture Mr. Moeller mentions is not representative of a “laid back” West Coast culture. Quite the contrary, Koch is an “open your collar, roll up your sleeves and get to work” culture. Project teams I was associated with at Koch were akin to a Kansas posse with each “cowboy” clear on the objective, tuned into the directing leader and giving 100% of the energy and skills they possessed. Somehow the term “Git-er-done” (with principled entrepreneurial tactics) comes to mind.

Koch to me is the epitome of a company that values the ability of individuals within the company to be the source of significant business growth, what is sometimes called “organic” business growth. In fact, Koch rewards corporate entrepreneurs by paying them a portion of the long term value they create. You can get rich (and some have) by having valuable ideas as a Koch employee.

Georgia Pacific, on the other hand, suffers the malaise of many publicly traded companies; the demon of corporate inertia. While Koch leadership makes hard decisions with focus and speed, G-P’s culture is studied and slow, and this is counter to a culture that understands the need to deconstruct non-performing businesses to provide resources for new businesses. The debate at G-P related to its less-than-stellar Consumer Products business is a case in point and I assume quick action on this and other G-P assets will free resources to be applied to the development and commercialization of new business offerings.

It is in this ability to identify and create new business offerings where the cultural differences between Koch and GP will be most evident. Whereas Koch’s approach to innovation is guided by its Market Based Management and autonomy of leadership, GP’s more institutional approach (for instance, GP’s “Innovation Institute”) smacks of control and risk aversion while at the same time providing a channel for the company’s capabilities and knowledge to be brought to light and exploited.

And here lies the organic growth nugget available to Koch; G-P is a treasure chest of technical capabilities and market insight that, when combined with Koch’s capabilities and insight, will unveil significant growth opportunities. The key will be to combine the best G-P talent in the culture of Market Based Management and principled entrepreneurship by quickly engaging together to create the future; not by endlessly analyzing potential and giving in to the corporate inertia this engenders.

For Koch to be successful I suggest the following:

The mantra of the new G-P must be “Move quickly, show results”. By applying MBM and principled entrepreneurship, decisions will be made, leadership will emerge and the strong will survive.
Mine and converge the technical skills and capabilities of G-P with those of Koch where the best business opportunities lay. Koch’s approach to knowledge management and leverage will overcome the “siloed” knowledge of G-P where I have often heard the statement “if only G-P knew what G-P knows.”
Find synergies in the technology and product portfolios of the two companies AND identify market white space where new value can be created through focused innovation work.
Impugn the current G-P culture by ensuring accountability and rewards for ideas that source significant value for customers and Koch.

I for one am excited about the “new” G-P and look forward to its future growth.