On this episode of The Chemical Show, host Victoria Meyer is joined by Peter Hanik, President and Founder of Pretium Innovation. Victoria and Pete discuss the importance of innovation in the chemical industry, as well as strategies for problem-solving and understanding customer needs.
Learn more about the following in this episode:
- Innovation in the chemical industry
- Crafting a long-term career in chemicals
- “Type Three” Problems and Solutions
- Adapting to cultural differences in a global career
Sharing his 50+ years experience in the chemical industry, Pete offers valuable insights into problem-solving and innovation in the chemical industry, as well as strategies for understanding and addressing customer needs in a sustainable way.
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Check out Peter Hanik’s book, Type 3 Solutions: Problem Solving for Competitive Advantage: https://amzn.to/440uirc
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Thinking Outside the Box in Creative Problem Solving with Pete Hanik
Hi. This is Victoria Meyer. Welcome back to the Chemical Show. This week I am speaking with Peter Hanik. Pete is the president and founder of Prettium Innovation, which specializes in intellectual property and team based innovation systems to create sustainable value. Pete’s got a long and deep history in the chemical industry. He was as President of Technology at Reliance Industries in Mumbai. He’s also held a number of technical and senior management positions at Millennium Chemical. And Pete and I actually we’ve been a little bit like two ships passing in the night. Our paths have crossed from a company perspective. We’re both graduates of Illinois Institute of Technology. Pete’s a bit of a cross town rival with his MBA. He did his at University of Chicago. I did mine at Kellogg. But nonetheless, we actually have a lot of similarity in our background. So anyway, Pete, I am really glad to have you here and welcome to The Chemical Show.
It’s a pleasure to be here. Thank you.
Excellent. And let’s just start with what’s your origin story? What got you interested in the chemical industry and what led you on your path?
Well, right out of high school I went to IIT as you mentioned, I was majoring in physics. Second semester in school, my father passed away. I had to drop out for a while and go to work. It seemed like the only jobs I could get were in the chemical industry, so I sort of naturally gravitated over to that. A number of my employers would sponsor my education as long as it related to chemicals. So I switched to chemical engineering, and then I had a number of jobs while I was in school. When I got out of school, I went to work for Northern Natural Gas in Omaha and then I went to Northern Petrochemical, their petrochemical division. That became Enron Chemical, which became US Industrial Chemicals and that became Quantum Chemical and that became Millennium Chemical.
That business sure went through a lot of ownership changes.
It did. So I worked with the same company for 30 years, and I think there were six different company names on my business card.
The whole time was an interesting transition because when I first started, it’s kind of like the industry was all about new products and new processes and there were lots of new things going on. In the 90s, it seemed like the focus shifted to cost reduction. We were trying to lay people off, headcount reduction, it felt like we were trying to save our way to prosperity, which wasn’t as much fun as innovating and doing new things. In 2003, Lyondell bought Millennium Chemical Company, and I was the chief technology officer at the time. So along with all the other executive staff, I left. I decided, rather than try and find another industry job, I’d like to help companies recapture the ability to innovate and come up with new intellectual property. That’s when I started Prettium Innovation.
That’s interesting. So I’m going to jump in here because I think your point that somewhere, the chemical industry was very innovative in its early days and somewhere around the 90s, we lost our will to innovate. I certainly saw that and it took a couple of decades before companies got back into it. Would you agree?
Yes. And I think we’re back into it today. We’ve kind of been beaten into it by the need for sustainability and energy reduction and green energy and so forth. So I think that the world has sort of reinvigorated the idea of innovation because that’s what people seem to be talking about and focusing on. So that’s great.
Yeah. So you left Millennium and you decided that you were going to add value to the industry at large and then you decided to join Reliance. Or maybe it wasn’t that simple of a step?
Well, I had been running my own consulting software business for almost ten years, and I had some conversations with Reliance about doing some work with them. The fellow I was talking to said, you know, what you really ought to do is just come work here. And I said, India, I don’t know. So I went there and talked to him, and it seemed like a really exciting opportunity to take my industry experience and what I learned about creative problem solving and apply it. So that’s how I became president of technology there. When you look at my career and the jobs I’ve had being CEO of a chemical company and CTO and so forth, some people might say, wow, you’ve had a pretty successful career. I’d say, well, yeah, certainly in one measure. And I’m happy to tell you the secret to that success.
I’d love to hear that. I know others would as well.
Always surround yourself with people who are smarter and more creative than you are, it’s guaranteed to work. When I left Millennium, I had worked with a lot of creative and smart people. Some of these guys could come up with really creative problem solutions, and I started talking to them and asked, how did you think of that? I concluded that in a lot of cases, they would look at a previous problem they solved or one they read about, and they could think about that solution abstractly. Then they would take that abstract solution and consider how they could combine that with resources in the current system that contains the problem they’re working on. The synthesis of that abstract problem solution and resources they have available leads to an idea and then the ideas get tested and the good ones can be potentially implemented. By doing that in a structured way, I developed a process that models that and people would come up with ten times more ideas using the structured approach than just sitting around a table and brainstorming.
Linus Pauling, the chemist who won the Nobel Prize, once said, if you want to have a good idea, have a lot of ideas and figure out which ones to throw away. So that’s kind of what I’ve tried to do.
And that’s what brings you to type three solutions, is that right? Is that how you categorize that? I know you’ve written a book Type Three Solutions. And you applied this.
Right, and I’ve said there are three basic kinds of problems. A type one problem is solved by inspection. I see the problem, I know the answer, I just go do it. A type two problem is an engineering problem. I understand the problem, I don’t know the solution, but I know how to get it. A type three problem is one where I may or may not fully understand the problem. There may be some solutions that are insufficient, or there may be no solutions at all. The problems that we face tend to be mostly type one and two. The number of type three problems are small, but solutions to the type three problems often lead to breakthroughs in performance. So that’s what I focused on. And how the people I knew come up with these solutions to those kinds of problems.
If you look around us today, at the business environment that we’re in today, what would be a type three problem in need of a type three solution?
Well, it might be easier to give you an example of one in the past.
Sure, bring it on.
When I worked in the polyethylene industry, as I know you did, when you make bottles for things like detergent, for high density polyethylene bottles, they need to have a combination of properties. One property is stiffness. The bottles have to be strong enough to be stacked up. The other is stress crack resistance. The detergent tends to crack the polymer. The way you get stiffness is with higher molecular weight, and the way you get stress crack resistance is with lower molecular weight.
That’s a dilemma.
Yeah. So the solution was one of these innovative abstract principles. One of the principles is separation. Can you form a separation such that in one case you get the good thing, and in the other case you counteract the bad thing? So two reactor systems are used today to make these resins for detergent bottles. The first reactor produces a high molecular weight polymer, and then that polymer is transferred to the second reactor. In that reactor, you produce a low molecular weight copolymer that provides a stress crack resistance. You can get the proper balance of the two. You can do it in one reactor, and some companies have developed bimodal catalyst systems to do that. But that was an early example of an innovation that was a transformative one for many companies.
Yeah, it sure is. And I know that bimodal has become a really big deal in high density polyethylene to solve a lot of these problems. Where I thought you were going to go with this, Pete, was around multilayer products, which of course is another approach to that solution. So you have an inner layer that reacts in one way and an outer layer that provides different properties, which we certainly see a lot in film in particular.
At one point in my career, I was director of Applied Research and Technical Service at Quantum Chemical. We decided that we wanted to participate in the multilayer high performance barrier packaging industry. And we made polypropylene polyethylene to the base resins. We also developed tie-layer resins, adhesives, extrudable adhesives. And we formed a joint venture with Kuraray to make EVOH barrier resins. In my department, the Applied Research Group, we did a lot of work building structures that could provide oxygen barriers and other kinds of performance. That was kind of a strategic innovation to do that. Most companies focus on the product they’re selling, but the customers don’t care about your product.
I completely agree.
I’ll give you a simple example. When I was a kid, I played music on a phonograph. The value engineers for over 60 years have done function analysis and they say a function is a verb and a noun. So the primary function of a phonograph is to play music. But then after phonographs, we had tape players. Primary function, play music. Then we had CD players. Primary function, play music. And then iPods and iPhones. Primary function there, play music. The difference is that each of those successive technology advances eliminated some of the harmful functions that delivered the primary function. When a new design or technology comes along, and it eliminates some very big harmful functions that limit functionality. A paradigm shift occurs. So nobody plays music on phonographs today, but the reason they buy an iPod or a CD player is so they can play music. They care about the function, not the product.
That’s basically the same, whether it’s a process or a product. So one thing that I think chemical companies should consider is, do I want to just sell the product or can I sell more in terms of functionality? A story about this, when I was director of Applied Research, Phillips produced high density polyethylene for milk and water bottles. The number one product character there was organaleptics, taste and odor. The resin shouldn’t impart any taste or odor to the milk or water.
We wanted to get more of that market because it had pretty good margins and it was growing. So we set out to develop a resin with the best taste and odor properties in the industry. And we did it. We had taste and odor panels and data. We could share that. We sent our marketing and sales guys out to say, here we got the best product and we couldn’t get people to buy it. Very little. I was scratching my head saying, “Well, why wouldn’t somebody want to buy the best product?” We even offered a discount, so they wouldn’t buy the best product at a lower price. Well, as I mentioned, Phillips had the largest market share in that market. And what we came to learn was that when you blow mold a bottle, as you run that blow molding machine faster and faster, the polymer will melt fracture. It’s like little wrinkles as it goes through the extruder. When that happens, you have to slow down.
Everybody knew about that. And if you tried to find a way to change the polymer to reduce that melt fracture, it tended to affect the taste and odor properties negatively. Well, Phillips found a way to design a dye for a blow molding machine and that dye had a longer land length basically. It allowed time for the Rheological stresses to settle out in the polymer and you could run faster with any polymer using the Phillips dye design. They have several patents on that dye design from back in the 80’s and if you were a customer of Phillips, for a dollar or something you got to use their dye design, which meant a lot to the customer because it helped them get more productivity from their business. It was so significant that you couldn’t buy volume away from Phillips. So their offering was not just the polymer, it was the polymer plus the extrusion technology. Didn’t have the best taste and odor, but it was good enough.
Good enough, and that’s right. I talk to companies and customers about this regularly, that your customer doesn’t really care about your product and your price. They do, it needs to be good enough. The price needs to be good enough. But there are other reasons why they’re making buying decisions and use decisions. And you have to figure out the why behind it. In this example, it’s about the use of the dye and the fact that they could run steady. In fact, especially with polymer customers, the ability to be able to run without having to change the machinery and make adjustments on the machinery is significant.
And that’s true across the way. So you have to be able to, as a company, as a salesperson, as a product person, as an innovator, go a little bit deeper. Understand what’s really important, why they do what they do today, and how you can overcome that so that they buy from you. Because again, the best product and the best price alone is not the reason. If it was best price, we would all be flying Spirit Airways and we’re not.
When I was CEO of Millennium Petrochemical Company, we made acetic acid and vinyl acetate, commodity chemicals, and we increased our market share against our competition every year for almost five years running. We did that by providing better customer service. We really empowered our customer service people to do more for the customer and that built some loyalty with them and with our customers. And there was no price difference because it was really a commodity chemical. But the Phillips example is different in that it’s based more on innovation and therefore more sustainable. Phillips had patents. Patents are good for 20 years, so they could carry that on for quite a while.
Now today there are lots of opportunities like that in the chemical industry, but one in particular, I think relates to sustainability. As a chemical company, we have sustainability issues and our customers do, just like Phillips understood how the customer got functionality from their high density polyethylene. If you understand how your customer gets functionality from your product and what the limitations are on that, what the harmful functions are that limit that functionality, you may be able to come up with offerings that will give you a sustainable advantage. As I said, they could be things like cost in the Philips case or they could be sustainability or environmental, which today are kind of hot buttons.
Yeah, absolutely. I think the whole aspect of understanding that some of your customers decisions are driven around sustainability in particular and ESG and circularity. In the plastics world in particular, this is a tremendous driver and the quantities of circular plastics, for instance, that are being produced today are nominal compared to the rest of the volumes being used. However, figuring out how to create that circular material, or the sustainable material, if you want to call it that, and bundle it in with the rest of your purchasing creates pull through, it creates opportunities, it creates a different dynamic and a different reason for people to buy from you.
Yeah, the big thing on that today is recycling. My wife and I recycle, we put everything and separate it out and it’s all well and good, it makes some contribution. But I look at recycling from the standpoint of entropy. So when you start out, you’ve got pure materials, you’ve got polyethylene, polypropylene, and when you make them into a product and people throw them away, they’re a whole bunch of things mixed together in the recycle bin. Entropy is a measure of the degree of disorder in a system and that recycling can with all those recyclable materials, different plastics, metals, cardboard, paper, the entropy is very high compared to what it was when they were all separate and organized. So the real problem with recycling is that you’re fighting entropy and fighting entropy is almost always a losing battle. So there needs to be new ways to look at circularity and sustainability in polymers particularly, and in chemicals more broadly.
We started out talking about the type three solution framework. Does that provide an approach to solving that problem of entropy, to helping with the circularity and recycling challenges that we’re having?
Yes, in general, I think when I designed this, you could use it as an individual. But what I really wanted to do was to make it a team activity. The approach of first defining the system that contains your problem and understanding the cause and effect in the system that contains the problem. Otherwise all you can do is guess. So function modeling helps us understand cause and effect because function models show how, why, and when things happen. Then when you’ve identified, and typically you’d identify a number of problems in a system. You pick the high value ones and then use the structured brainstorming method of how the natural creative person does. You take an abstract principle, combine it with resources to come up with ideas. And if you do this in a team, as I said, I did one project with a refinery here in Houston about a hydrotreater catalyst and they came up with over 200 ideas how to increase catalyst life.
Some of them were not practical, but in that there were a couple of “Ahas”.
Exactly, so I think it does apply very broadly to these kinds of problems. As I said, it’s a type three problem where there may not be any satisfactory solutions.
I’m going to turn the conversation a little bit. I know that you spent a number of years working in Mumbai. How did the problems, or the approach to strategic and type three problems differ? Did you see a very dramatic difference in, number one, the type of problems that you were facing, or two, just how teams inherently approach those problems?
Well, I think the problems were very similar because Reliance is both a refiner and a petrochemical company, among a lot of other things. I was president of technology, so I had the R&D groups under me. Well, there are cultural differences between the US and India. In the US, if you try to be the autocratic dictatorial manager, you know, “I know best, I’ll give you the answer, you just go do it.” That doesn’t work. The team members are just not going to put up with that. They’ll leave or whatever. But there’s more of a hierarchical culture in India. In meetings, people will tend not to challenge a manager. And the higher up the food chain the guy is, the less likely they are to say anything.
I used to joke that if a manager there said, “I want you to go outside before sunrise, set up a table looking to the west and look to the west and when you see the sun come up write down the time.” Now, you might know the sun comes up in the east, and you might say, “Sir, I think you just misspoke, I’m sure, you know, the sun comes up in the east, and I should face the east.” People wouldn’t say that. They would go and look to the west, and they’d record that they didn’t see the sun come up.
Their philosophy or their thinking is, as long as I do exactly what I’m told, I can’t get in trouble. Now, that’s obviously not everybody, but there is a bit of a cultural inclination toward that. I found Indian companies were much more hierarchical in the way they manage. But that’s changing. The younger people that I found working at Reliance want to work more like they do in the US and Europe. They want to be part of a team. They want to be more open. They want to have challenging discussions. So when they find a manager that’s open to that, they just leap right on it and participate. So I think that there’s a lot of change in India that’s happening, and it’s to a large extent based on that, and it’s becoming more open from a team standpoint.
That’s a good perspective, because we face the same challenges around the world and we have different approaches to them. I mean, and that can apply for everything. And it sounds like it’s a function of culture as much as it is education and experience.
One of the board members at Reliance is Raghanath Mashelkar, and he was head of the CSIR, Council of Scientific Industrial Research in India. He’s a very well known guy, written a lot of articles. He wrote an article about research in India. I wish I could remember the name, but the gist of the article is that in Indian education, the bachelor’s level is the best in the world. They do the best job producing bachelors in chemical engineering and science. In his article, he said, but there isn’t one Indian university ranked in the top ten in the world at the PhD. Level. And he thinks the reason for that is that in the universities, the professor is the font of all knowledge, and the students tend not to challenge them. When you’re an undergraduate, they’re teaching you type two problems. It’s all well known. But at the PhD, you’re trying to develop new solutions, new technologies. So the professor can’t be the authoritarian, he has to be open to working with students. And again, I think over time, that’s changing, IIT Mumbai and other universities in India are improving their ability to turn out really creative PhDs.
That’s really interesting. Well, Pete, this has been really a great conversation, and I’ve really enjoyed it. If people want to learn more about type three solutions and your problem solving framework, how do they do that?
Well, the easiest way is for me to be crassly commercial and say that I’ve written a book about this topic called Type Three Solutions. It’s available on Amazon.
I’ll actually include the link for you, Pete. I’m okay with that.
Haha, that’s great. I wrote the book last year and the reason I wrote it was not so much to be a John Grisham number one bestseller, because it’s a pretty narrow audience, but I wanted to document the things I had learned over 50 years in the chemical industry about problem solving. Part of that would be a legacy. Part of it was some opportunity to help people in that regard. The first part of the book talks about the general approach to solving type three problems. Looking at the system, the functionality, abstract solutions, resources, generating ideas. How do you do that in general? The following chapters in the book talk about specific applications like manufacturing improvement, product development, product offerings, intellectual property development, business strategy, business processes.
So you can read the first part of the book, which is three chapters I think, and then just cherry pick after that the subjects you’re interested in. Whether or not you follow the exact method, you’ll get some ideas about how to approach the problem. Another interesting thing I found is when people use that approach, it actually increases their ability to think creatively. I’ll give you a personal story. I was watching television one day and I saw an ad for the topsy turvy tomato plant. And so they show a tomato plant growing in a garden, and the tomatoes get big and the plant falls over and bugs are crawling on it, and the guy has to go out and stake the tomato up. And the topsy turvy tomato plant, you buy it, it’s in a pot, and it’s got a hanger and it hangs upside down.
I’ve seen these, I’ve never tried it.
It grows upside down, and you never have to deal with all those problems. I saw that and I thought, one of the innovation principles we use is in there. That principle is inversion. Inversion says, can you do something upside down, backwards, inside out, and would that make a difference? So I thought, wow. I never would have thought of that in those terms of this is an example of inversion. And maybe one more example. I had an Apple computer, and when I first converted over from PC to Apple my daughter, who’s a teacher, said, “I knew you couldn’t turn away from the dark side father.” Anyway, I was working, and I get a message. It said “You should plug the computer in to avoid losing data.” I had it plugged in, and then I looked and I noticed it wasn’t charging the battery. So I ran out to Best Buy. I bought a generic brand charger for my computer, plugged it in, and then a message popped up, said your computer might not run at optimum performance. Well, what does that mean? After a while, I noticed that the Brand X charger was not charging the battery.
Right, it’s a lovely Apple conundrum.
The underlying principle, one of the principles is mismatching. It says, to counteract harm can you mismatch components in a system? And I thought, ah that’s what Apple did. They mismatched the Brand X power adapter and their laptop. So the thing I find is, when I see products or problem solutions, I tend to think of them in terms of what are the underlying abstract principles. The better you get at doing that, the more creative you can be at solving new problems. So that’s the big message about how I look at type three problems and solving them, you can teach yourself to be more creative and innovative if you learn to think this way.
That’s awesome. Well, Pete, thank you so much for joining us today. I really appreciate taking your time and getting your insights here on the chemical show.
Thank you very much and I’m happy to share this. As I said, at this point in my career, I’m primarily trying to do a little education, leave a legacy. But I’m happy to talk to anybody that has any questions or would like to discuss it.
Absolutely. Well, we’ll get people connected to you on LinkedIn and with the book, and I’m certain you’ll have a few follow ups. So thank you for joining us today.
Thank you so much.
Absolutely. And thank you, everyone, for reading. Keep reading, following, sharing the blog, and we will talk to you again next week.
About Peter Hanik:
Pete is President and founder of Pretium Innovation specializing in intellectual property and team-based innovation systems to create sustainable value. Pete was also President, Technology at Reliance Industries, Mumbai, where he led research and development programs in refining, petrochemicals and polymers with a staff of about 300 professionals. Pete has held a number of technical and senior management positions at Millennium Chemical including CEO Millennium Petrochemical, Chief Technology Officer, Vice President Chemicals Business and more. Pete holds a B.S. in Chemical Engineering from Illinois Institute of Technology and an MBA from the University of Chicago.