IHS Chemical Week


Value-added Innovation Soars in the Chemical Industry

2:09 AM MST | January 16, 2012 | By ANDY TALKINGTON

by Andy Talkington, senior client partner,  Korn/Ferry International (Los Angeles)

The late Steve Jobs once said, “Innovation distinguishes between a leader and a follower.” Large, multinational chemical corporations such as DuPont, 3M and Dow personify this quote beautifully. For years, they have focused intently on strengthening their technology departments and making “value-added innovation” a top priority.
Now, with a market growing moderately, while becoming more competitive, smaller chemical companies are taking note. They are positioning themselves for growth and product differentiation by taking measures to broaden their service capabilities and product portfolios, advance their technology departments and develop stronger approaches to value-added innovation.
Categorically, “If we make it, they will buy it” no longer applies
To be a leader in the industry, you have to focus on innovation … period. You have to bring more benefit-oriented functionality to the table. This might mean creating a product that addresses a world challenge (i.e., how Dow is focusing on feeding and providing energy access to the world’s growing population.) Or, even more prevalent, it means following the lead of companies like 3M and Dow Corning. Both excel at asking customers about their trends and unique challenges, then transporting that information in-house to their R&D departments to develop products/processes/services that fulfill their customers’ current or future needs.
More chemical companies are making this “customer interface” shift to expand value-added innovations. The trend began in 2007, but took off in early 2010, with a growing portion of the industry now on board. In fact, Korn/Ferry is fulfilling increased global search demands for chief technology officers, as well as senior business development executives to assist with mergers and acquisitions.
Companies focused on value-added innovation are earning preferred status and higher margins. Their customers are more willing to pay premiums because they know they are getting innovative solutions to solve their unique challenges, as well as the needs of their customers. It’s a growth-oriented and win-win value proposition for everyone.
Getting Started
How are you focusing on value-added innovation? Here are some tips to help strengthen your efforts:
1. Assess yourself. Where do you excel? Where do you lag? Focus only on the areas where you can be “good” to “great.” Do you really have differentiated technology?
2. Examine your staff. How savvy are your technical employees? Do you have the brightest marketing people in place? Focus on the very best person for the job – the individual with experience, high-quality leadership and intellectual capability. You might have this person in-house and can promote from within, or you may need to look externally. Regardless, the candidate must possess the right skill set. Without it, failure is imminent. Then, once placed in the new role, invest the time and energy to lead this individual to success. A failed recruit is very expensive.
3. Study your culture. Does it support and reward high levels of innovation? Is the company culture tolerant of the investment of time and capital needed to innovate? Are you structured in a way that allows your R&D/technical staff to join your sales force in the field to interface with customers and better understand their challenges? Does everyone in your company have the opportunity to gain such “market-facing knowledge” in order to collectively solve customer challenges? Do you tolerate some dabbling?
Most importantly, remember that the innovation machine is dependent on many parts – beginning with people and culture, and later weaving in processes, investments, etc. It often occurs in certain divisions versus the company as a whole. Management support is critical. But, making the leap in this direction is one of the best moves you could ever make.

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