Strategy Development of R&I · PDF fileMentor’s Edge Ravi Kikan, ... (M&A) • Increased importance of financial community ... Pharma# Fine#/#Specialty# chemicals#

Strategy Development of R&I

Dr. Volker Trautz

1"Dr."Volker"Trautz"

Outline

•  Innovation in perspective

•  Chemical industry life cycle

•  Evolution of R&I over the industry life cycle

–  Consequences for innovation management

•  Outlook

•  Conclusion: a personal perspective


Innovation from a company perspective


Examples of significant innovation (>$10B) Innovation When

Aminoacids 1805 Lead-Acid Battery 1854 Azo-Dyes (e.g. Indigo) 1861 Liquid Crystals 1888 Haber-Bosch process 1910 Nylon (polyamide) 1935 Teflon (PTFE) 1938 Polypropylene 1953 Carbon Fiber 1958 Spandex (Polyesther) 1959 Time-released medication 1960’s


The majority of innovations in the past 150 years needed >20 years for significant business

5"

""

1800" Today"1850" 1900" 1950"

Daniell"Element"

Teflon"

OLED"

Fischer<Tropsch"

Polymers"

Lotus"effect"

TNT"

Viagra"Pill"

Fracking"

Natural""rubber"

Haber<Bosch"

Aspirin"FerIlizer"Electrolysis"

Air"separaIon"

<"5"years"""" 5<10"years"""" 10<20"years"""" >"20"years""""Source:"Evonik"Industries"


How can you describe innovation in one word?

1. Creativity

2. Change

3. Transformational

4. Different

5. New

“A true innovation can never be described in one word, because it is best described by the moment of silence created when all the people who said it will never work realize they are dead wrong”

Mentor’s Edge Ravi Kikan, India


Transformational innovation needs patience and stamina!

7"

Product-line extensions into new markets Success rate: 30-40% Time to commercialization: 2-7 years (average 5)

New Product launches into new markets Success rate: 15-20% Time to commercialization: 8-19 years (average 14)

Product-line extensions into existing markets Success rate: 40-50% Time to commercialization: 2-5 years (average 4)

New Product launches in existing markets Success rate: 30-40% Time to commercialization: 6-15 years (average 11)

Low

High Low"

Deg

ree

of m

arke

t fam

iliar

ity

Degree of technology familiarity Source:"McKinsey"on"Chemicals,"2013"Dr."Volker"Trautz"

Evolution of R&I over the life cycle of the chemical industry

1850" 1900" 1950" 2000"

1"

2"

3"

3. Creation of individual segments Focus, new champions 2. Race to diversity to grow and dominate 1. Creation of champions


1. Creation of champions

1850" 1900" 1950" 2000"

1"

Characteristics R&I: •  Strong centralized R&I / critical mass •  Strong links between universities and

industrial R&I •  Positive attitude towards innovation •  Company leaders often former scientists •  Business generally less risk

averse


Companies diversified and starting to focus on their strengths Characteristics for R&I: •  Central R&I location, but separate specialized labs •  Increased competition forces cost awareness •  New raw materials (coal oil) •  Increasing industry globalization leads to

more global R&I activity •  New tools allow faster and more effective

R&I

1920" 1950"

2"

2. Race to diversify, grow and dominate


3. Segmentation and focus, new champions

1950" 2000"

3"

Industry characteristics •  Globalization •  Focus on competitive strengths, segments for

competitive edge •  Transformational portfolio changes (M&A) •  Increased importance of financial

community •  New champions from new regions •  Sustainability more and more important


Consequences of 3rd phase for R&I

1950" 2000"

3"

Different industry segments need different R&I approach: •  Petrochemicals / base chemicals

–  Focus on cost and efficiency –  Economy of scale –  Process and catalysts continuous improvement

•  Fine / Specialty chemicals –  Focus on few segments of strength –  Life science –  Industrial bio-tech –  Services


Consequences of 3rd phase for R&I (Cont’d)

1950" 2000"

3"

Company focus needs different R&I approach •  Globalization of R&I •  Society looks very critical at Industry (e.g. genetic

modification in Europe) •  Sustainability •  Renewable raw materials •  From chemical to biochemical syntheses

(e.g. Vitamin C) •  New tools save cost and create new opportunities

–  micro plants –  computer simulation –  screening


Typical innovation spending by segment

0%#

2%#

4%#

6%#

8%#

10%#

12%#

Pharma# Fine#/#Specialty#chemicals#

Polymers# Petrochemicals#/#Base#chemicals#

Typical#R

&I#inten

sity#

7A12%#

7A12%#

3A8%#

1A4%#0.5A2%#


R&D intensity, % of sales (2013) 14.1%%

0.0%$

2.0%$

4.0%$

6.0%$

8.0%$

10.0%$

Merck$Group$

Syngenta$

Givaudan$

DuPont$

DSM$

Bayer$

Teljin$

WackerCC

hemie$

Mitsubish

i$Chemica

l$

Persian$Gu

lf$Petrochem$Ind$Co$

ShinCEtsu$

Clariant$

PPG$Industrie

s$Lonza$

Evonik$

Dow$Chemica

l$Toray$

AkzoNo

bel$

BASF$

Solvay$

Arkema$

Ashland$

LANX

ESS$

Mitsui$Chemica

ls$

Eastman$Chemica

l$Air$Liquide$

Tosoh$

Mom

enTve$Specialty$Chemica

ls$Borealis$ ICL$

Air$P

roducts$

Celanese$

Huntsm

an$

NOVA

$Chemica

ls$

Hanw

ha$Chemica

l$Praxair$

Linde$Group$

SherwinCW

illiams$

K+S$

LyondellBasell$

Braskem$

Lo[e

$Chemica

l$

Yara$InternaTonal$

Sumito

mo$Chem

ical$

R&D$Intensity

,$%$


Gross expenditures on R&D (2014)

Asia%Americas% Europe% ROW%

39.1%%33.9%%

21.7%%

5.3%%

US 465 China 284 Japan 165 Germany 92 South Korea 63 India 44 Russia 40 Brazil 33

Leading countries Total US$ 1,62 trillion


Sustainability creates added value

Balance between all aspects of sustainability

Society(

Ecology( Economy(


Outlook

•  Strong influence of ambition of individual companies •  Need to balance short term financial objectives versus longer

term strategic vision •  Trends:

–  Open innovation –  New and more extensive collaboration models –  Partnerships

•  From petro-based to bio-based •  Increasing role of Venture Capital investment


Conclusion: a personal perspective

•  Companies have to create and maintain an innovation friendly environment

•  Patience and stamina are critical!


Documents

Strategy Development of R&I · PDF fileMentor’s Edge Ravi Kikan, ... (M&A) • Increased importance of financial community ... Pharma# Fine#/#Specialty# chemicals#