This PwC report explains why innovation in the chemicals industry is so important because it helps chemicals companies address their customers’ challenges and creates competitive advantage.
For most of our chemical clients, innovation is already a core part of their internal culture and their company mission, but it may not yet be delivering all the value it could be. But innovation can, and should, help improve the bottom line. A solid strategy for innovation is the essential starting point – yet more than a third of chemicals executives say they don’t have a well-defined strategy.
“Chemicals is really a cornerstone industry -- 96% of all manufactured goods are touched by chemistry”. So innovation in the sector really impacts the whole economy
– Mike Walls, Director of American Chemistry Council
Products still top the list as the number 1 innovation priority for many chemicals companies. They’re critical, and so is making sure your product portfolio can address the major trends that are transforming the global economy. But it’s important to recognise, and drive, innovation in other areas too. In three areas – technology, customer experience, and the supply chain -- more than 40% of chemicals respondents expect breakthrough or even radical innovation over the next three years. Those companies that aren’t emphasising these areas, or that settle for primarily incremental innovations, may fall behind the competition. And we see business model innovation as vital too.
“To make progress on a meaningful scale, we need to forge what I call a golden triangle of partnership: business, government, and society at large, working harmoniously together.”
─ Andrew Liveris, CEO Dow Chemical
In our overall research, we found that the top innovators spend a greater portion of revenues on innovation, compared to the overall sample. Our chemicals respondents told us their companies were spending significantly less; some may need to consider increasing their investment. But to make the most of it, chemicals companies need to get innovations to market. Technology advances can help, for example by streamlining testing procedures. Building an innovation function across the whole organisation can also help increase overall efficiency.
“Being part of innovation and R&D has become the most important role in our organisation – everybody recognises these people as crucial for future company success.”
─ Jörg Unger, Head of Innovation, Performance Materials, BASF SE
Every kind of innovation is driven by people. When it comes to building a strong innovation culture, chemicals executives put the most emphasis on recognition and reward and strong processes. Most are also making sure that employees get opportunities to innovate and setting tone from the top. A strong innovation culture can help with recruiting. Chemicals companies will need to win the fight for talent – especially in growth markets like Asia. Some are already supporting math and science education today, to help increase tomorrow’s pool of skilled workers.
“Here in the US, the advent of reliable, affordable natural gas is helping to turn the US chemicals industry into a low-cost producer. Currently there are 135 new chemicals facilities planned. That adds up to 90 billion dollars in investment and more than half is coming from outside of the US”.
─ Mike Walls, Director of American Chemistry Council
Around one in five chemicals executives say their companies are already co-creating innovative products and services with customers and external partners. That’s good – but it needs to get even better to match top innovators across industries. Many chemicals companies see open innovation as the way forward. And some are starting to explore corporate venturing too. Both can be good ways to help open up more collaboration.