SNOWBIRD, Utah -- The New Economy can sometimes make for strange bedfellows.
That's the way it was at the
Chase H&Q plaNET.wall.street
conference, where a 15-year veteran of an industry with a Rust Belt profile -- chemicals -- found himself on a panel discussion with three leading venture capitalists, whose world is mostly light years apart from the likes of
Mark Klopp, who was perched next to
Hummer Winblad Venture Partners'
Mark Gorenberg and
Alex Nigg, was tapped to talk about
efforts in the B2B e-commerce and venture space.
Klopp at least has the right title at the Kingsport, Tenn.-based chemical company to carry out the job. As Eastman's director of digital business ventures, the affable, sandy-haired Klopp is not only charged with bringing the old-line manufacturer and former subsidiary of filmmaker
into the age of business-to-business commerce, but also with putting it in a position to profit handsomely from it.
Klopp's story and his push at Eastman underline how old-line manufacturers are scrambling to move into the B2B space, not only as participants, but as drivers of it.
Eastman's foray also points up the divergent pull of the Internet in the business world. Whereas traditional retailers were slow -- and often resistant -- to embrace business-to-consumer e-commerce, traditional industry has aggressively pursued market share in the quickly evolving business-to-business e-commerce arena.
Since May 1999, Klopp has led Eastman to partner with or take an equity stake in such new-world names as
Internet Capital Group
Klopp even relocated from the sleepy hollows that surround Eastman in the shadow of Tennessee's Smoky Mountains to the sizzling Silicon Valley scene so he could get plugged in to the venture capital world there.
"It's truly bizarre," he said about finding himself sitting next to the VCs on the dinner panel. "I'm running so fast that I'm not able to absorb it all. I call it the three E's: Exciting, Exhilarating and Exhausting."
Klopp's currently concentrating on two main areas for Eastman's business-to-business initiatives: customer solutions that help facilitate transactions between suppliers and buyers, and venture investments in emerging business-to-business companies in the chemical industry.
For example, Eastman's less-than-5% stake in ChemConnect, a private chemical-industry exchange, not only lets it benefit from increased efficiency in procurement, but could give the company a nice profit if ChemConnect goes public.
Perhaps more importantly, it gives Eastman a spot in the driver's seat in business-to-business e-commerce within the industry. That means it's not going to let dot-com start-ups race off toward Internet gold without it, as so many traditional retailers did online.
"Not only do we bring our industry expertise to these partners, but we also get to learn, participate and influence where things are going," says the 38-year-old Klopp, who has the oh-so-traditional background of a chemical industry exec, holding a degree in chemical engineering and an MBA. "That doesn't mean that manufacturing is going to go away. But there will be different ways to develop product."
Of course, Eastman is by no means alone in its initiatives.
Dupont has partnered with both Internet Capital Group and CMGI in the B2B space. And companies like
, formerly known as
, aren't likely to let some old-line Goliath walk away with the keys to the B2B kingdom.
But the chemical industry, like many traditional sectors, is incredibly large. Eastman alone takes in about $5 billion a year in revenue, and the spot chemical purchasing market -- that is, spontaneous buying for short-term needs, where much of B2B is focused -- is projected to grow to $200 billion to $250 billion in the next three to four years.
Still, Eastman had a poor 1999 because of low prices and high materials costs. Per-share profits were off 55%. The stock is also down sharply and was trading yesterday around 35 a share, almost half where it was at its 1999 peak.
But Eastman is quickly fashioning itself as an early mover in the B2B market. Industry groups like the
National Association of Manufacturers
point to the company as a leader in B2B e-commerce within the chemical industry, and Klopp points out that Eastman was the first chemical company to take an equity stake in ChemConnect.
On top of that, Eastman may profit from more than just increased efficiency and having a stake in start-up B2B firms. As Klopp's group forges forward, his independently structured team may be positioned to seek its own riches. Asked whether Eastman would ever spin his group off in the public markets, Klopp gave a very New Economy answer.
"I think we'll be looking at all those options if we can create additional value for shareholders," he says. "What we're trying to show is that there's a lot of value that a traditional company can bring to the New Economy, if we're nimble and move fast."
Translation: Eastman and Klopp are hoping for a chemical reaction between the Old Economy and the New that results in explosive profits. To the swift go the riches.