A couple of years ago, I remember standing between the imposing marble pillars of a great room at ICI’s Millbank headquarters, which was hosting an analysts’ presentation on the sale of $3bn-worth of smoke-stack chemicals plant to the Mormon-principled Huntsman Corporation of the United States.
ICI was struggling to adjust to a new generation of chemicals markets. The Palladian surroundings reminded me of a young earl inheriting the family pile and wondering what on earth to do with it, like Charles Spencer re-decorating Althorp. The name said it all – Imperial Chemicals Industries, conjuring up images of wing-collared ex-pats patronising natives in outposts of empire. You can take ICI out of the empire, I thought, but you can’t take the empire out of ICI.
And here it was, a couple of years ago, announcing that it was to become a lean, trendy producer of speciality chemicals, abandoning the macho smoke-stacks for girlie pursuits like perfumes. It was like a mid-life crisis. It was like the toe-curling embarrassment felt by a teenager when Dad starts dancing to “a good beat”.
But there in the front row of the audience was Brendan O’Neill, at that time the chief executive-elect before the urbane and rock-solidly strong Charles Miller Smith was bumped up to chairman. Something that was said on the dais amused O’Neill and he slapped his thigh with laughter, genuinely enjoying himself, like a man with a pint in front of him, and very far from the imperial and imperious image that had been ICI for decades.
ICI has had colourful top management before. Trouble-shooting John Harvey-Jones liked to style himself as something of a maverick – some might say as a cavalier – when he was chairman in the Eighties. But long hair and a propensity to “go for a pint” didn’t make Harvey-Jones a humble or down-to-earth man. One was always left with the feeling that he held a pint, rather than a G&T, as an affectation, as an image statement. O’Neill, whom I know a bit, holds a pint as naturally as the brewer he used to be, when he led Guinness towards world-branding.
So here was a no-nonsense businessman, steeped in brand reputation and marketing, for whom the marbled halls of post-imperial Britain held no mystery and for whom the colonial classes held no aspiration. And it was his task to turn ICI into something that could play a real role in the new millennium, a far cry from the crumbling monument in the last decades of the old one.
I wished him well, but feared that the culture of ICI’s past would be too crushing for the future. Two years on, I’m delighted that those fears were unfounded. O’Neill, who must have had a tough time, has nevertheless cracked it.
As ICI reported third-quarter results last week, it was clear that the transformation from an old low-margin commodity chemicals business into a speciality producer is working, with divisions such as paints and “fragrance and flavours” contributing towards a pre-tax profits rise of 14 per cent to £122m on increased turnover of 4 per cent at £1.48bn.
A mark of the level of success that this represents is that when O’Neill announced that the dividend would be cut next year by a half – to liberate capital to relieve its £3bn debt slag-heap and for capital expenditure and acquisitions – the City applauded and the share-price rose 10p to 427p.
The last time ICI cut its dividend 20 years ago, Margaret Thatcher had only just embarked on her mission to dismantle the old imperial industrial structures and the UK was in recession. The shock of that dividend cut had grown asset managers weeping in the streets (I exaggerate, but not much) and coughing up bronchial phlegm as ICI sneezed. Today, a dividend cut at ICI is seen as a prudent and focused growth plan.
ICI has grown up, or rather grown down. It is what it should be at this juncture of industrial history. Small isn’t necessarily beautiful in the modern world (witness Microsoft) but there is a lesson for other monoliths in ICI’s three-year effort to identify what it’s good at and establish those functions as the core, while disposing of the rest.
As an ambitious young reporter, I once tried to usurp one of my seniors’ stories on the industrial circuit. The industrial editor told me: “Stick to what you’re good at, Pitcher – nothing.” Cruel and, I hope, untrue. But I’m afraid there are business relics of the old century to which that advice might justifiably be applied. I wrote a further critique of Marks & Spencer last week and I fear that it might be too late to identify a valuable core activity that it should concentrate on.
But other great British business institutions and icons may still have time. It would be good if British Telecoms gave up trying to rule the world and concentrated on selling telephones, cheaply and effectively, to its core markets. Another great British name, Boots, has spent too much time chasing leisure-sector moonbeams at the cost of its core pharmaceuticals and healthcare market.
The list goes on. It may be that ICI, as the grand old imperialist, has set an example for the rest of post-imperial British business by concentrating on a simple portfolio of strengths. And if ICI can do it, anyone can.
George Pitcher is a partner of issue management consultancy Luther Pendragon