We are living in a transformative world. Everything around us is changing at a very rapid space. This disruption has created new categories and products in established industries – from retail, hotels, and transport to telecom. Innovation lies at the heart of this rapid change. Industries across domains are innovating in terms of learning & unlearning, implementing ideas differently or re-designing in this dynamic environment. Trying to understand this from the chemical industry’s lens, it is evident that the industry needs to be agile in adapting innovation and research to keep pace with the changing world.
The global chemical industry is not new to innovation. Many new chemicals and compounds were discovered and commercialized post World War II. Most of these discoveries were of plastics and polymers, derived mostly from hydrocarbons, particularly petroleum. The chemical industry played an important role in global economic growth on the back of these high-value innovations. For example, as demands on the nonferrous metal industry increased in America, plastic replacements were used wherever possible.
The product pipelines of chemical companies dried after the 1980s. They started focusing on global expansion, thus moving production to the emerging markets. However, the financial crisis of 2008 stalled this globalization phase. With their products turned into commodities, the chemical companies now concentrated on acquisitions for growth. For legacy chemical businesses, investing Research & Development became secondary as they were competing against an entrepreneurial mindset with uncertain outcomes. As specialty chemicals also became commoditized, price became a dominant factor of competition.
In recent years the role of innovation has dramatically changed at chemical companies. The new dynamics are forcing companies to alter the ways they manage innovation portfolios. Traditionally one breakthrough – molecule or a product was a profitable proposition for companies for years together. The innovation in plastics was a growth driver for decades. Today consumers – individuals and corporates, are consciously reducing the use of plastic to curb damage to the environment. Major multinationals have started looking at alternatives for plastic packages. Hence the role of innovation in chemical companies is moving from product innovation to enhancing functionality, customizing products and adapting to the new market opportunities catering to the needs of their business customers.
With a domestic chemical industry of approximately $160 billion, India has the potential to play an important role in R&D innovations. In India companies typically spend 3-4 percent of revenue on R&D against the global average of 7-8 percent. The research spending does not include the research grants provided by the government to R&D, academic and industrial establishments.
Since its inception, the Indian chemical sector has regarded science and technology (S&T) as a major source of growth. The pool of scientific knowledge actually applied in its production activities, however, varies from sector to sector. In smaller chemical companies, the technological sources are mainly in-house whereas in several medium and large scale companies, the technologies are being brought in through transfer from external including overseas agencies. Modern S&T application through R&D requires teamwork in well-equipped laboratories under the umbrella of a large number of research projects. The specialty and knowledge-intensive chemical sectors requires R&D for product improvement as well as orchestrate process innovations for cost savings.
The Indian manufacturing companies invest in R&D depending on several factors like short or long term goals, viability and gestation period of their ongoing projects, profitability levels of their manufacturing activities and the market structure. Most of the Indian R&D is of adaptive nature as it provides technological independence and strengthens their position in an increasingly competitive global environment. The innovation lies at the core of Tata chemicals businesses as the key differentiator in a competitive market and encompasses multiple facets of business, communities, and environment to develop solutions for a better world and ensure sustainable value creation for stakeholders.
India’s increasing spending power, access to information and technology has provided chemical companies avenues to diversify and expand. A well-known paint company has successfully changed the perception of painting from a routine chore to a decorative exercise. Using digital technology, it now gives individual and institutional customers an option to visualize their preferred colors and designs and also offers painting services.
Another sector that could see a large adaption of R&D is FMCG, Healthcare, and Wellness. Indian consumers have become more health-conscious and opt for nutritious food and healthy snacks. Using natural and sustainable products is also on their top agenda. This trend gave chemical companies a window to introduce segmented offerings, an opportunity to enter new categories or revamp existing products for applications across domains. This has helped companies re-engineer their business models and enabled them to generate higher returns on their investments through innovation.
Executives recognize that R&D is at the heart of the chemical industry’s success, but the majority of them are of the opinion that companies are not fully utilizing the potential. To improve innovation, companies should align R&D to the business objective and growth drivers. Failure to do so will lead to a weaker R&D team and innovation portfolio. Many times though companies hire top researchers, lack of direction undermines returns. Sometimes solving engineering problems becomes the R&D team’s priority instead of building delivery features that customers are looking for. At times teams do not invest enough in understanding customer needs, product roadmap or are unable to translate them into requirements. These weaknesses can be addressed by streamlining decision making and tightening development cycles. Companies have realized that the shift from pure research projects to developing applications in response to customer needs requires fewer stage-gate reviews. This is possible as the parameters for quality and success are well articulated. The traditional stage-gate process, with a lengthy waterfall-style cycle, is making way for a more agile model that can keep up with the speed of business.
One of the challenges for R&D teams and production labs is to innovate and develop high-quality products at lower costs and also meet the needs for improved health, safety, and environmental impact. The laboratory information management solution digitalizes the R&D process, optimizing the development of innovative, high-quality products, managing traceable processes and information flows, and aligning all R&D processes to directly support more successful new product launches.
A gradual step towards making R&D more agile and inclusive is adopting open innovation. The chemical industry is opening its doors to external ideas, thus making R&D not so secretive. The idea here is to broaden the research parameters and exchange of knowledge and ideas. This open approach also helps in understanding the value chain better, collaboration with industry and academia and also improve R&D outcomes. More so, it also encourages interdisciplinary cooperation as applications are developed across industries. For example, an automobile company’s inputs and research insights are equally critical in developing an energy-efficient battery.
Research indicates that open innovation is preferred during the initial stage of development than stages close to commercialization. There is a case made for making open innovation a strategic aspect of R&D instead of a tactical approach when in-house research is not enough. Technological advancements are making open innovation further mainstream as digital platforms are making real-time collaboration possible. While there are aspects like secrecy that need to be considered, open innovation could encourage more research across industries and academia.
Digital technologies like AI, Data Analytics are seeing quick adaption across industries. However, the research in the chemical industry is largely stuck in the traditional methods. Researchers and laboratory technicians still depend on collating data using conventional methods like internal sources, datasheets, CRM, etc. Rethinking information management in the lab settings supported by digital technologies will boost R&D in the industry and improve outcomes.
Accenture’s Technology Vision 2018 survey revealed that 51% of chemical industry executives are planning to apply AI in R&D in the next two years. Deploying AI will help companies to automate the integration and cleaning of diverse laboratory data. Accenture’s strategy experience report indicates that digital capabilities in R&D can improve the innovation process by 15 percent. For example, companies will be able to include faster preparation and experimentation through lab automation and robotics and complete research quickly. Digital technologies have the capability to make better decisions and increase R&D value.
The chemical industry has traditionally benefitted from R&D. In the digital and knowledge economy it is imperative for the industry to reinvent its research vigor. Shedding the black-box approach, the industry needs to embrace a collaborative approach to reinvent business models.
With rapidly growing competition for resources and increasing waste and pollution, the need to move towards an inclusive circular economic system is growing. A circular economy has the incentives and means to use existing resources in an efficient and sustainable fashion – relying on renewable energy sources, extracting more value from waste products, eco-friendly products, minimizing food waste, and increasing the quality of life for all segments of society. The transition to chemicals that are safer for human health and the environment is a prerequisite for a globally competitive, low carbon, resource-efficient, and sustainable India as well as for a circular economy. This rests on safer chemical material flows, from product design to end of life.
It requires innovation and new ways of producing and consuming new products, markets, and business opportunities. Actions that are designed to scale investment and innovation in safer chemicals and technologies to accelerate their adoption. This will shape organizations from a range of industry sectors that have invested in chemicals, processes, and product innovations – often before and beyond the demands of regulatory compliance – to prevent, identify and eliminate the use of substances of concern across the life cycle of their products and to make it more sustainable. To achieve these, we require a concerted effort of a variety of actors: Government and the public sector, businesses (including SMEs), investors, academic and private/public research institutions.
Author’s Bio:
Mr. Zarir Langrana
Executive Director & Head of Global Chemical Business, Tata Chemicals Limited
Zarir Langrana currently heads the Global Chemicals Business of Tata Chemicals and is responsible for operations and growth of the inorganic chemicals business and the new ventures in Nutraceuticals and Silica. In the past, Langrana has headed the global marketing and strategy function overseeing and directing all sales and marketing plans, developments, growth, and new product activities and processes in these two areas for its global chemicals business across the four continents where it operates. He has been with Tata Chemicals for over thirty years, having been inducted through the Tata Administrative Services. Mr. Langrana is an economics graduate from the University of Madras and holds a post-graduate qualification in business management from XLRI, Jamshedpur.
