Chemical companies focus their investment on important areas
In the past, a great idea was enough to put a chemical company on the road to success. Leadership teams can place big bets on breakthrough ideas, and when best-selling products like nylon, Kevlar fiber, and Gore Tex come to market, they usually get companies – and executives who support these new ideas.
Now, the nature of innovation has changed, with fewer and fewer chemicals and compounds making breakthroughs. Innovation is still important, but it is increasingly used to enhance functionality, customize existing products or adapt products to new market opportunities.
This change has a significant impact on the way chemical companies manage their R & D functions. Most people are aware of the shift, but Bain’s study found that while two-thirds of executives think innovation is the top priority, less than 25% think their company is a successful innovator. Many companies do not integrate innovative technologies from other industries, such as agile methods and digital technologies. The development cycle is too long, the team is difficult to determine the priority of the project, many senior managers regard R & D as a black box, and do not understand why the return of innovation is not high.
We have conducted innovation performance studies with hundreds of Companies in chemicals and other industries, providing insights into achieving the top quarter of performance in chemicals based on best practices of the most innovative companies in technology, healthcare, financial services and other industries. From this extensive experience, chemical companies have three top priorities.
Clear strategic direction. chemical companies must closely link R & D focus with enterprise strategy, and determine core products, regions, end markets and customers. Although the temptation to pursue lucrative or high growth markets is tempting, focusing R & D on a few advantageous areas can maximize returns.
Focus on customer needs. chemical companies need to improve how to bring customers’ views into the R & D process. Leading innovators gain insight into customers’ strategies and product roadmaps, and then customize their materials to meet customers’ needs.
Adopt innovative business model. Innovation requires effective interaction among R & D, strategy, marketing, sales, supply chain and support functions. Operation mode is the blueprint of organizing and managing resources, including organizational structure, decision-making responsibility, work style and governance.
As growth slows in developed markets and demand slows in some key developing countries, executives in the chemical industry face the challenge of achieving growth targets. More importantly, research on new product launches found that half of the products failed to meet expectations. The right innovation can help narrow the growth gap, but most of the time, executives either decide to spend money to solve the problem or hope that the stage gate process can provide “good enough” products.
But innovation is too important to rely on luck. In order to uncover its mystery and improve it, executives need to better understand the elements of success and their relationship with them.