Reeling in the Change.

Earnest W. Deavenport Jr., chairman and CEO of Kingston, TN-based Eastman Chemical, doesn't like heights. So 11 years ago he joined an Outward Bound trip where he climbed up and rappelled down cliffs in the High Sierras. He attacked the task like the engineer that he is, learning the technical aspects to better reach his goals, in this case getting safely to the top and back down. While his fear of heights hasn't abated, he did prove it wouldn't stand in his way.

Navigating peaks and valleys is a necessary skill in the chemical business, where the cyclical ups and downs of global production and prices force constant refocusing or running the risk of stagnation. "Overall, the chemical and basic goods industry in the world has got to grow with GDP, but a good company can grow faster," says Deavenport, adding that as demand grows, companies build plants and increase supply. Supply eventually eclipses demand, prices drop, and the downward cycle begins.

Deavenport, whose e-mails bear the tag-line "Change is like risk; it's not optional," has guided Eastman Chemical through ups and downs since Eastman spun off from Eastman Kodak in 1994, when he was president of the Eastman Chemicals division. In 1994, revenue for the producer of plastics, chemicals, and fibers was $4.33 billion, with net income at $336 million. It rose to $5.04 billion on $559 million income in 1995. Then a downward decline in revenue and income began, from which Eastman has yet to recover.

Eastman was hit hard by a price drop in the PET resins used to make flexible plastic beverage containers and food packaging. Eastman is the largest PET producer in the world, and this segment of its business has historically represented approximately 40 percent of revenue. In 1998, it dropped to 24 percent. "Back in the late '70s and all through the '80s, quality was really a differentiator, but now the American revolution has reoccurred in manufacturing; quality is a given," says Deavenport, who plans to decrease revenues from PET to about 10 percent, while increasing Eastman's specialty chemical business. "It is part of our strategy in terms of our portfolio transformation. If a product like PET becomes commoditized, then you need to transition out of it into more specialty-like materials. It's a path that we're on but it's not done overnight. We are about 70 percent specialty and 30 percent commodity, but we are moving as rapidly as we can toward specialty."

Merely making the shift may not be enough, he adds. "You have to run fast because as you get into specialty businesses, other people jump in and then that too becomes commoditized."

While part of Kodak, the cyclicality of the Eastman Chemical's business didn't have as much impact as it does on a separate public company. Furthermore, overproduction became more pronounced as global players, including companies in Asia and Latin America - who don't need to address Wall Street concerns - attempt to gobble up market share.

In addition to getting a $4 billion company with 75-year-old roots to be fast on its feet through sell-offs, acquisitions, and partnerships, Deavenport is also focusing internally, making sure employees can keep up with the company's need to evolve. Much of this approach takes its cue from the high-tech sector. "The way you change is not to be too accommodating, but to say this piece of information - employee benefits or a newsletter - will come on the Web and that changes the whole culture of your company," says Deavenport. Employees begin "to think differently."

The approach extends to customers, who can now order through the Internet. "You have to change customer expectations too: they're just as mired in tradition as you are." He believes e-commerce convenience will ultimately win out over traditional customer service routes.

Described by Merrill Lynch's John Roberts as "one of the last roll-up-your-sleeves kind of guys who 'lives' with his employees," Deavenport is one of the last CEOs of a major chemical company whose office is actually on the site of a plant, which fits his hands-on management methodology: "Every so many years you need to reorganize the company to shake things up, to get some people out that probably shouldn't have been in certain positions and give people some new enthusiasm," he says. For a man who climbs mountains in spite of - or because of - a fear of heights, his drive for change carries considerable weight internally as well as on Wall Street.

EARNEST W. DEAVEPORT, JR.

Chairman and Chief Executive

East Chemical

"Every so many years you need to reorganized the company to shake things up."

Age: 61

Birthplace: Macon, MS

Family: Wife and golf partner Mary Ann; children: Lisa, Scott; one granddog, Zoe.

Education: Mississippi State University, B.S., Chemical Engineering, 1960; Massachusetts Institute of Technology, Sloan Fellow, Masters in Management, 1985.

Pastimes: Golf (favorite club: Biggest Big Bertha), fishing (type: "any kind you want to talk about," including deep sea where he landed 160-pound tarpon).

Summer Jobs: Lumberjack, cattle farmer

Underwater Experience: Nuclear submarines, U.S. Navy; 1960-67.

First Professional Job: Chemical engineer, Eastman Kodak Company.

Major Influences: Parents.