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How to balance the innovation strategy in technology driven specialty chemical companies

13 April 2018

By Wolfgang Hoepfl, Innovation Driver at Omya, IDCP* participant 2017-2018

 

Problem

In the chemical process industry as well as in related fields many of the key players in Europe and North America date back to the second half of the 19th century. In the past they have been enormously successful by developing new molecules or compounds and finding more and more applications where these products might be applied. This is especially true for the wide domain of inorganic fillers as function or non-functional additive to products. Although this technology driven approach has ensured the survival and growth of these companies in the past it might become a thread for the future if they do not adapt to the new challenges of today’s ecosystems. With globalization not only opportunities have increased, but also competition is much fiercer, and customers have more choices from where to buy products. Offering a product which does not fulfil specific customer needs and add value to the customer products is difficult to sell, easy to replace and can ultimately only be sold by cutting the price. This is a downward spiral and leads to reduced profitability. While some successful frontrunners have realized the issue already a decade ago and adapted their strategy accordingly, many companies still struggle in being successful.

 

Solution

The solution seems easy: Innovation! And for sure many companies have come to this conclusion and try to come up with new products. But it is not so easy just to change the direction of a research & development department and decide to become innovation oriented. Especially if the system has worked fine for decades it might not be clear for the management and employees why this notion of innovation should be different from the work done in the past. Many companies have fallen in to this trap called success syndrome, one of most cited example is Eastman-Kodak and its failure to adapt to the changes of digital photography, although the technology was available.
Together with innovation the second buzz word coming up with successful companies is ambidexterity, meaning the capability of the company to exploit the existing business while at the same time explore new technologies or business models to create the success for the future. This requires adaption not only for. the people directly involved with product development. The whole organisation needs to be re-invented to be fit for the future and the company culture needs to be considered to define the right strategy and steps for implementation.

  • First, not everything done in the past was bad. And pure and extreme customer orientation is not the right medicine for all companies. Customer pull is necessary and especially important for the continuous improvement of the product portfolio and specially to realize incremental and to some extend horizon 2 developments. However, for horizon 3 and sometimes also horizon 2 innovation technology push is an important source. Not every customer can foresee what new technology inventions could help them in the future. Ambidextrous idea generation, meaning the capability to generate incremental innovation from customer inputs and radical changes based on new technologies or disruptive business ideas have been proven to positively impact the success of new product development programs of a company. Every company needs to define its strategy to allow for the most suitable mix of technology driven and customer driven innovation and how much efforts they spend on each horizon. And it needs to be clear that ambidexterity in innovation requires different skill sets for incremental product development or radical new technologies or businesses. Thus, a part of the strategy needs to consider that this means for the organization of the product development departments.
  • Secondly, moving away from technology driven mind-set is very difficult for scientists, who normally aim for scientific solutions. Changing this into an approach with customer-centricity requires much more interaction with customers and information from outside than the historic innovation model. For incremental product development the continuous communication with sales forces and customers becomes much more important than it is in traditional companies. This needs to be installed in the organisation without creating a competition between sales, technical services and product development. To reach this the entire research & development structure needs to be adapted including e.g. incentive models, personal development plans and hiring processes, job profiles.
  • But not only the customer pull requires adaption to the product development. Also, the horizon 3 radical innovation needs to be handled differently from the past. A culture of learning is required to accept “failure” as a natural part of innovation and turn this into a learning experience to start a new development project or adapt an existing program based on these insights. And this does not only mean failure of the technology, but also missing customer acceptance. Therefore, scientists involved in radical innovation cannot just stay in their labs but need to test their ideas constantly with potential customers.
  • Research & Development departments are not the sole units to adapt. Sales and Marketing groups need to become much more active in the ideation and innovation process of a company. In a technology driven environment sales and marketing are mainly focussing on convincing customers to buy the product based on its technical features. For a customer-centric approach it is much more important to really understand the issues of the customer and condense this information to the input of the solution. This requires problem-solving capabilities at the face to the customer. In many cases the customer might not even be aware that the real problem is. Typically, they might describe symptoms of a problem, but not the root cause of it. Here the art is to develop an understanding with customers to define the real pain points and combine a diversified team to find solutions. In this solution process it is extremely important to have a team at hand which can empathy with the customer to really establish a relationship and to recognize the critical elements, but at the other hand be sufficiently detached and not to jump at conclusions provided but analyse the best fit solution. And solutions should not only be seen as new products, but more often service offers or digital solutions. This might require additionally new operating or logistics structures in traditional companies.
  • Collaboration with partners in this industry is traditionally limited to a rather small number of selected universities, research facilities and customers. All work is done within the framework of confidentiality or joint development agreements and any new development is used for IP or considered company secret. In order to speed up the innovation work one possibility is the utilization of open innovation platforms to allow outside participation to the problem solution process, without losing complete control over the intellectual property. However, the input from outside contributors puts a double challenge to the organisation. First the culture needs to be created to embrace these ideas and avoid the “not invented here” syndrome and on the other side the governance and processes need to be created to allow for such a collaboration without bureaucratic hurdles. Again, the right balance between internal development and external collaboration has shown to have the most impact on the creation of new business ideas.
  • From a social aspect, to create an innovative atmosphere and entrepreneurial behaviour teams need to be empowered to take decisions and talk to customers to test problem hypothesis as well as potential solutions. This can be very difficult in traditional hierarchical companies where information was shared only on a need to know base and contacts were a matter of personal authority. Creating empowered teams does not mean necessarily to change completely the structure and organization of a company in a short but it requires the willingness to work on the company culture and create a sufficient framework within the teams can act independently. And this means also that the management function within these boundaries need to move away from control mechanisms and act mainly as mentors and supporters of the teams to overcome hurdles and barriers. In the end this might lead to a complete transformation of the company culture where it should be assured that the company does not lose its heritage nor DNA.

 

Clearly there is no silver bullet for a company to become more innovative nor does a one-size-fits-all solution exist for how the organization should look like. Even in a confined area like the technology driven specialty chemical companies many different tinges exist. Each company needs to find the most suitable mix of the above-mentioned aspects to reach its own strategic goals and ensure its long-term survival. But one certainty remains, doing the same of the old ways will not reach that goal.

 

Background information

This opinion piece is one of the deliverables of participants of the *Innovation Driver Certification Programme (IDCP). 

Author: Wolfgang Hoepfl, Innovation Driver at Omya, IDCP participant 2017-2018

Also published onhttp://innovationroundtable.ning.com/forum/topics/how-to-balance-the-innovation-strategy-in-technology-driven

 

Disclaimer: This is a personal opinion piece. Any views represented in this post are personal and belong solely to the author and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity.

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