Perspectives: From the Editor

What's in Store for Innovation?

Chemical industry executives share perspectives on priorities and issues

By Mark Rosenzweig, Editor in Chief

Innovation always has played an important role in the chemical industry, both for developing new products and for addressing significant production and business challenges. Novel specialty chemicals, polymers and pharmaceuticals, among other products, testify to the inventiveness of our industry. Meanwhile, just as in the past, tackling critical issues remains a priority.

For instance, as I pointed last month (“Carbon Competition Names First Round Winners"), technology may yield productive uses for carbon dioxide, a greenhouse gas that many consider a prime culprit in global warming. In addition, efforts to improve the sustainability of chemical production continue to advance (see, for instance, “Sustainability Gets the Spotlight,”) as do developments that promise more-efficient manufacturing (e.g., “Isobutene Process Progresses."). CP even ran an article recently on the unusual approaches some chemical companies are taking to spur their employees’ creativity (“Dow Chemical, Eastman, Eli Lilly and AkzoNobel Incite Innovation”).

A report recently released by PricewaterhouseCoopers (PwC), New York City, provides an interesting, more-general perspective on innovation in the chemical industry. “Using Innovation to Drive Sustainable Growth in the Chemicals Industry” includes inputs from 41 corporate-level chemical industry executives in 12 countries.

More than half (51%) of these executives consider innovation “very important — a competitive necessity” to the success of their companies now, with 41% terming it “quite important.” Even more executives view it as crucial in five years time: 54% calling it very important and 44% quite important.

However, PwC reports that chemical companies are spending a smaller percentage of revenue on innovation than industry as a whole and significantly less than the top 20% of innovators. Moreover, under two-thirds (63%) of chemical industry respondents say their companies have a well-defined innovation strategy versus 79% of respondents from top innovators. Such a strategy should set out the balance a company seeks in its efforts on innovation, e.g., between incremental improvements and game-changers, notes PwC. It also should cover how to measure progress, motivate and retain talent, assess external collaboration and choose the right partners, adds the firm.

As far as the priority area for innovation over the next twelve months, more respondents (28%) cite products. However, services and technology also draw substantial support: 23% and 21%, respectively. Nevertheless, 95% of respondents say their firms will innovate in technology over the next three years versus 87% who point to products. In addition, when it comes to the significance of innovations over the next three years, respondents expect that more than half of technology debuts will be breakthrough or even more momentous while a majority of product launches will be incremental.

Innovation in business models over the next three years will strongly focus on the customer, notes the report: 88% of respondents expect their firms to enhance the customer experience and 84% foresee servicing un-served or under-served customers.

Much of the burden for innovation rests with individual business units, according to the respondents. Indeed, 76% say formal innovation structures exist in business units and 73% note that individual product areas or services are responsible for their own innovations.

The report cites some ambitious plans:

“In three areas — technology, customer experience, and the supply chain — more than 40% [of respondents] expect to see breakthrough or even radical innovation over the next three years. In all three areas, the sector is matching — or even surpassing — the expectations of the top 20% of innovators across all industries.

“For every other type of innovation we looked at, over 30% of chemicals respondents expect their company to make radical or breakthrough advances. Our experience shows that innovation portfolios have historically targeted more like 10–20% of innovation, so this reflects a profound shift happening in sector innovation.”

In assessing issues affecting innovation, a majority of respondents (56%) term “taking innovative ideas to market quickly and in a scalable way” very or somewhat challenging. Significant numbers also cite “finding and retaining the best talent to make innovation happen” (49%), “establishing an innovation culture internally” (49%), “finding the right external partners to collaborate with” (46%), and “having the right metrics to measure innovation progress and track return on investment” (39%).

The entire 30-page report can be downloaded at http://goo.gl/rq2caY.



MARK ROSENZWEIG, Editor in Chief of Chemical Processing, can be e-mailed at mrosenzweig@putman.net.

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