Labors of a Modern Hercules traces the evolution of the Hercules Corporation from its beginnings as as a small maker of explosives to its current status as a multimillion dollar, multinational chemical company. More than a business history, the Hercules story provides valuable insight into the dynamics of the chemical industry and the growth of individual firms throughout the 20th century. The chemical industry is more diversified, global, capital intensive, and technology driven than any other major industry. As a result, it has led the way in the development of modern corporate strategies and management techniques. Hercules' evolution can be seen as a paradigm for the development of the modern manufacturing corporation: growth through vertical integration and diversification; increased emphasis on research and development; gradual penetration of foreign markets; the move from a centralized to decentralized organization; formation of joint ventures with foreign-based producers; and heavy use of information technology to streamline management and operations. Labors of a Modern Hercules describes the succession of challenges the company faced throughout its history: the move from being a mixer of explosives to a maker of chemicals, the challenges and demands of two world wars, the postwar problems of growth and diversification, the oil crises of the 1970s, and the strategies it pursued in response to each challenge provide valuable lessons for business planners. In an ever-changing industry, companies must be flexible, fast-moving, and innovative to be able to adapt to new realities.
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The story of a typical US chemical company--birth to death,
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This review is from: Labors of a Modern Hercules: The Evolution of a Chemical Company (Hardcover)
"Labor of a Modern Hercules: Evolution of a Chemical Company," by Davis Dyer and David B. Sicilia, Harvard Business School Press, Boston, 1990. This 528 page hardback tells the story of the Hercules Powder Co., which was formed in 1912 when Dupont was broken up by an antitrust judgement. In the beginning Hercules was an explosives company making blasting powder and dynamite, black powder and smokeless powder. Hercules came of age in World War I, supplying large quantities of explosives and propellants to the Allies. Hercules made smokeless powder and TNT and operated a government plant at Nitro, WV.
Hercules supplied the British acetone requirement needed to make cordite propellant for naval guns. Acetone was a by-product of charcoal manufacture made by pyrolysis of calcium acetate. After efforts to make vinegar (as a source of calcium acetate) failed, Hercules set up to process kelp near San Diego, CA at Chula Vista. Chopped seaweed was fermented to produce calcium acetate (for conversion to acetone) and potassium chloride. Hercules supplied 857K lb of acetone to the British with this process, but the operation was unprofitable and was discontinued after the war. Meanwhile, the British revised their requirement to cordite RDB, which used ether alcohol, presumably Cellosolv, instead of acetone. In the 1920s, nitrocellulose made in surplus government smokeless powder plants grew as an ingredient of fast drying enamels for autos and furniture as well and coatings for artificial leather (then used on cloth-top automobiles). Scrap nitrocellulose partially hydrolyzed with sodium acetate gave a low viscosity product used in Dupont's Duco auto paint. After the war, Hercules used profits to diversify into the naval stores business with the purchase of Yarin Rosin and Turpentine (Brunswick, GA and Gulfport, MS), in the belief that harvesting the necessary pine stumps was a potential market for dynamite. Naval stores is a traditional agricultural business from colonial days. Pine tar was used to chink the bottoms of wooden ships. Turpentine was an inexpensive lamp fuel in the 1830s (until eventually displaced by kerosene from oil). By 1900, rosin became the major product for use as paper size, yellow soap, in varnish, and medicine. The book includes a detailed summary of the naval stores business. Naval stores provided many challenges. The plants acquired were run down and poorly designed. Engineering, investment, marketing, and product refinements were helpful. Hercules branded turpentine was offered in hardware stores to overcome adulteration and substitution problems. Refined pine oil was developed as a sweet smelling disinfectant. Better quality resulted in improved ore floatation reagents. Pine oil proved useful in textile dying to remove contaminants. Fractionation of pine oil and low color rosin followed. Pinene separated from turpentine became a major product used to make synthetic camphor. Paper size had been the largest consumer of rosin (followed by linoleum with Armstrong Cork the largest customer). Hercules acquired Paper Makers Chemical Corporation, the leading supplier of paper size, in 1931. A series of rosin derivatives followed. Eventually crude tall oil was processed. With the commercial success of nitrocellulose, in 1926, Hercules acquired Virginia Cellulose of Hopewell, VA, its supplier of cotton linters. The business expanded and became the leading supplier of cellulose for the chemical industry. As the industry began to shift to rayon and cellulose acetate, Hercules followed with a plant for cellulose acetate at Parlin, using licensed IG Farben technology. Production began in 1936. Hercules undertook production of synthetic ammonia from natural gas at Hercules Works in California using the L'Air Liquide process in 1939. The ammonia was needed for nitric acid and ammonium nitrate in explosives but could also be sold as fertilizer. As World War II approached, Hercules took on contracts to supply the Allies with powder. In 1940, the government authorized 60 Government Owned, Contractor Operated (GOCO) plants. Hercules operated one at Radford, VA. The plant made its own acids, nitrocellulose and finished smokeless powder beginning in April, 1941. Later Hercules contracted to operate five additional GOCO plants including New River, VA (bag loaded artillery ammunition), Volunteer Ordinance Works, Chattanooga, TN (TNT plant), Missouri Ordinance Plant, Louisiana, MO (ammonia plant), Badger Ordnance Works, Baraboo, WI (smokeless powder), and Sunflower Ordnance Works, KS (smokeless powder). In addition operations at Hopewell, Parlin, Kenvil, and Belvidere continued. In 1942, manufacture of propellants for small rockets (e.g. bazookas) began at Radford and later at Sunflower. Acetic anhydride was needed for the production of cellulose acetate. Initially supplies were purchased from Union Carbide, which added acetic acid to ketene made from propylene. In 1942, a plant was constructed at Parlin using Tennessee Eastman's acetic acid cracking process. Cellulose acetate production was expanded, but a shift to wood pulp threatened the cotton linter business. Meanwhile, use of rayon in tire cords grew to consume 40% of production by the end of the war. Management of the Navy's Allegany Ballistics Lab near Cumberland, MD was undertaken in 1946. Solid rocket propellants were developed for Nike, Honest John, Sparrow, Matador, Terrier, Talos and JATO booster rockets. Minuteman and Polaris followed. The explosives business changed dramatically with the development of ammonium nitrate explosives. Their utility became apparent after the Texas City disaster on April 16, 1947, when a ship loaded with 2500 tons of ammonium nitrate fertilizer exploded in the Texas City harbor killing over 500 and destroying 3400 residences. Ammonium nitrate/fuel oil blends could do the work of dynamites costing 20 times more. Hercules' two early plastics products were cellulose acetate and ethyl cellulose, but they soon lost market to petrochemical plastics like polystyrene and polyvinyl chloride. Production of CMC (carboxymethyl cellulose), a thickener, suspending agent, began in 1945, and grew rapidly. CMC became a major profit contributor. Hercules management took a conservative approach to petrochemical projects. They decided not to buy surplus government synthetic rubber plants after World War II that could produce monomers for plastics. The Naval Stores research department discovered the cumene hydroperoxide process for phenol and acetone in 1949. Production began at Gibbstown, NJ in 1955. The process was licensed to others. Dimethyl terephthalate (DMT) became a major product. Polyesters had been invented in the 1930s by Calico Printers Association in UK, who pursued a line of research rejected by Wallace Carothers at Dupont in the development of Nylon. Polyethylene glycol terephthalate (PET) was recognized and production began by Dupont in 1950 and by ICI in UK in 1951. Initially DMT was made from para-xylene by nitric acid oxidation and then extensive purification. Hercules entered the business in 1952 making DMT by Imhausen's air oxidation process at Burlington, NJ in a small semiworks facility. The process was licensed to Dupont. A plant was built at Burlington, NJ to a long term supply contract with ICI. Polypropylene was a second major petrochemical plastic venture. After working with Dr. Karl Zeigler for several years in the 1950s, Hercules obtained the right to manufacture and sell aluminum alkyl catalysts and, in 1954, low pressure, polyethylene. Hercules soon commercialized polyethylene and polypropylene, but numerous competitors entered the field, and prices fell. The result was a constant battle to develop improved products and reduce costs. Similarly, the DMT business was challenged by lower cost, purified terephthalic acid (PTA) when Amoco, a vertically integrated competitor, entered the business in 1956. Eventually, PTA began to dominate and Hercules began production of it, too. In the '60s, Hercules pursued the growth of polypropylene and terephthalates for polyesters. Plants were expanded, new plants were built, and international ventures were undertaken. Polypropylene was extended into films and fibers. Carpet fiber became a major application. The businesses grew, but margins were low due to intense competition. Hercules set out to reinvent itself with the creation of the New Enterprise Department in 1968. New businesses included modular housing, waste treatment, credit card readers, and photopolymer relief printing plates. In 1970, rosin, cellulose, phenol, and methanol were identified as cash cows; petrochemicals were stars. Efforts to diversify included the purchase of Polaks Frutal Works, a flavors and fragrances company, in 1973. In 1975, the DMT business changed as the energy crisis increased the cost of raw materials dramatically. Meanwhile, Dupont cancelled a major purchase agreement. The following summer, Hercules put DMT, TPA, para-xylene, and methanol into a joint venture with Petrofina with Hercules owning 75% of the venture; the remainder of Hercofina was sold to Petrofina in 1985. In 1982, polypropylene was determined to be not profitable enough. It was put into a global jv with Montedison under the name, Himont. In 1987, 22.6% of Himont stock was offered to the public in an IPO; later Hercules sold its remaining shares to Montedison. The last of the commercial explosives business was divested in 1985. For years CMC was a highly profitable business. In addition its food uses fit nicely with the flavors and fragrances business. However, the big volume was industrial, specifically... Read more ›
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