For the chemical industry, innovation is now considered a top strategic priority. Whit Keuer, a partner with Bain’s Chemicals practice, discusses three key areas that executives have to get right in order to effectively manage innovation.
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Read the transcript below.
WHIT KEUER: We recently surveyed executives in the chemical industry, and two-thirds of them told us that innovation is a top strategic priority. However, of those same executives, only 25% believed that they were effective at innovating.
So what's the reason for this difference? Well, the first issue is that the nature of innovation in chemicals has fundamentally changed. There are many fewer big, blockbuster innovations or new chemical compounds, and so it's much more about executing hundreds of small product applications or product tweaks where existing products are customized for new markets.
And so because innovation itself has changed, the way companies manage innovation also needs to change. And we think there's really three key areas where that needs to happen. The first is in linking the innovation, strategy and investment allocation to the company strategy. Too often we see innovation groups, R&D departments working on cool engineering problems or fragmenting their resources across many products and many end markets.
The second thing is for companies to bring their customers into their own innovation process. Start with understanding what is on your customers' roadmap rather than working on always pushing out new products. The way you can do this that we've seen many of our clients do is to spend time doing product teardowns with the customer and identifying where your materials could substitute for other materials.
And then the third way is to adapt your organization structure and operating model. Innovation needs to be tightly linked to the sales organization. And the way innovation itself is managed through a development stage-gate process needs to become much more agile, so that products can move through the pipeline at the speed in which business is conducted.
So every company has a slightly different starting point. But because innovation itself is changing, the way you manage innovation also needs to change. And we think these are the three key things that you have to get right.