the importance of creativity and innovation for medium and long term growth dr. charles g....
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The Importance of creativity andInnovation for medium and long term
Growth
Dr. Charles G. Bienfait-SOLVAY SADirection Centrale Recherche & TechnologyBruxelles
Conference/ May 7- 8, 2007 / AMSTERDAM 2nd Annual « MANAGING R&D for BUSINESS GROWTH » (in the Chemical Industry)
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Topics
1. Introduction 2. Position of our Industry today(2005 results):
EU situation (from DTI) World position (from own graphs)
3. Medium & long term Growth versus creativity & innovation:
Relation with innovation Relation with R&D expenses Addition: a few ex. of SOLVAY ‘s innovations
4. Conclusion
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
1. Introduction
Innovation and creativity= key challenges for EU for all industries.
Innovation is not only the task of R&D but of the all organization…..but R&D is a major partner (time to time forgotten
See next
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Response Strategies (added by Porter and others)
INNOVATIONDeveloping new products & services
GROWTH
Increasing market share, acquiring more customers or selling more products
IMPROVE INTERNAL EFFICIENCY
To improve employee and customer satisfaction
ALLIANCESWorking with business partners to create synergy & provide opportunities for growth
CRMCustomer-oriented approaches, e.g. the customer is king (queen)
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
2. Position of our Industry today (2005 results):
Before to go to Innovation/Growth,
WHAT IS THE BUSINESS SITUATION today OF THE CHEMICAL INDUSTRY ?
From DTI(UK)…for EU From own graphs….for World
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
DTI
Two majors parameters: P1= « Value added per employee » (Productivity) P2= « Wealth creation efficiency » % (Output/versus
major inputs)
Performance of a group/compagnies linked to: Growth of VA Maintain highest P2 (the highest value)
(for definitions: go to: http://www.innovation.gov.uk/value_added/default.asp?page=60
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Chemicals Pharmaceuticals
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
SolvayBASFDSM
BAYER
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0
20
40
60
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140
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0 50 100 150 200 250
P2 =VA/(employee costs + depreciation) %
P1=
VA
per
em
ploy
ee £
KPharma 2005 10
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Own graphs/ C.G.Bienfait(from published data)
All relations related to % operating margin
(for chemicals: % operating margin (brut) (for pharma: % operating margin(net)
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0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
-10 0 10 20 30 40 50
% Operating margin (brut)
Chem.Sales (M $)
Total Chem Sales versus Operating margin (Brut)(*)(*)= sales - administ.expenses & cost of sales)
Chemical Industry 2005 results/first 50th
DowBASF
Shell
Exxon M.Total Dupont
SabicBP Bayer
China Petr
Formosa Plast
PraxairShin Etsu
SolvayChem Plast.
SOLVAY
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4000
5000
6000
7000
8000
9000
10000
11000
12000
-5 0 5 10 15 20 25 30
Chemical Industry :2005 results for companies from Nr 21 till 50 Total Chem.Sales versus Operating margin(Brut)(*)(* = Sales- administr.expenses & cost of sales/sales)Chem.Sales M$
% Operating Margin (Brut)
Toray Chevron Phillips
ICIBasellShin-Etsu
DSMDICLanxess
BOC
PPGAsahi
Solvay Chem Plas
ENI
Air Prod.Praxair
Yara
Eastman
RelianceGEClariant
Sasol
RhodiaSyngenta
Celanese
Borealis
NovaLG
Ciba
Teijin
SOLVAY
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4000
5000
6000
7000
8000
9000
10000
11000
12000
-5 0 5 10 15 20 25 30
Chemical Industry :2005 results for companies from Nr 21 till 50 Total Chem.Sales versus Operating margin(Brut)(*)(* = Sales- administr.expenses & cost of sales/sales)Chem.Sales M$
% Operating Margin (Brut)
Toray Chevron Phillips
ICIBasellShin-Etsu
DSMDICLanxess
BOC
PPGAsahi
Solvay Chem Plas
ENI
Air Prod.Praxair
Yara
Eastman
RelianceGEClariant
Sasol
RhodiaSyngenta
Celanese
Borealis
NovaLG
Ciba
Teijin
SOLVAY
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05000
100001500020000250003000035000400004500050000
-10 0 10 20 30 40 50
Profit Margin (Net) % CA total
CA
Pha
rma
(mill
ion
U$
)PHARMA –Résultats 2005 CA en Million U$ versus Profit Margin(Net)
USA
EU
JP
Pfizer
GSKSanofi-Aventis
Novartis
Astra Zeneca J&J
MerckWyeth
BMS
Eli Lilly
Abbott
RocheAmgen
Boehringer Takeda
Astellas
Shering-Plough
Bayer
Isr.
Teva
Allergan
Schering
GenentechNovo
Eisai
Merck KG Forest
SeronoAkzo
Solvay
Gilead
UCB
SOLVAY
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
3. Medium & long term Growth versus creativity & innovation:
Growth in relation with Innovation:
Innovation/creativity = essential to avoid loss of growth and profit ( « experience curve » = fatality going to lower profit)
Growth in relation to innovation in the two axes (technology-Products/markets)
See next graph
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Innovation processes
Core Competences
PresentPresent ExtendedExtended NewNew
Pres
ent
Pres
ent
NewNew
MARKETSMARKETS
TE
CH
NO
LO
GIE
ST
EC
HN
OL
OG
IES
€ € $$
Inn
ovative p
rojects
Acquisitions:Acquisitions:
« HT Engineering« HT EngineeringPolymers/BP-Polymers/BP-AMOCO »AMOCO »
« Fluoro « Fluoro Products /Products /AusimontAusimont
« FOURNIER « FOURNIER »»
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
• For Innovation + R&D : to not forget :
Horizon 1
Horizon 2
Horizon 3Growth
Time and Level of Uncertainty
Mature businesses & markets
Major new growthBusinesses & markets
Portfolios ofExperiments forLong term growth
The three Horizons for Growth
Ref :« The alchemy of Growth » (Baghai, Coley and White)
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Growth & return in relation with R&D expenses ?
A lot of confusion : even in some « consulting group »
More R&D = more innovation ? More growth/return?
Need to take care of « time frame » in addition to other parameters :effectiveness/efficiency ,…..
Easy to see the relation in Pharma…more difficult in Chemicals see graphs
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Pharma/drugs /Industries : 20
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
MEASURING UP: RESEARCH & DEVELOPMENT COUNTS IN THE CHEMICAL INDUSTRY
2001
• Chemical Industries
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: Research & Development Counts in the Chemical Industry, the critical role of R&D to the chemical industry is quantified for the first time. With economic, bibliometric, and historical analysis, this study demonstrates that R&D has helped the chemical industry become a
major building block of the U.S. economy, growing steadily and becoming a world leader in scientific advances even in the face of
increasing global competition.
Key findings of this new study include:
On average, every dollar invested in chemical R&D today produces $2 in corporate operating income over six years – an average
annual return of 17% after taxes. Business performs better when public policy, including government
funding of R&D, is consistent. Publicly funded science makes significant contributions to new
technologies in the chemical industry. ….etc…
Ref: http://www.ccrhq.org/CCRNET/index.html
In Measuring Up
SOLVAY
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
R&D return (all industries)(from U.S. Bureau of Economic Analysis ) September 28, 2006 :PRELIMINARY STUDY SHOWS
RESEARCH AND DEVELOPMENTCONTRIBUTION TO ECONOMIC GROWTH: Between 1959 and 2002, R&D investment accounted for
4 1/2 percent of growth in real GDP. Between 1995 and 2002, its contribution to real growth
rose to 6 1/2 percent. In comparison, businesses’ investment in commercial and
all other types of buildings accounted for just over 2 percent of real GDP growth between 1959 and 2002.
If R&D were included in the GDP as investment instead of as an expense, business investment would be 11 percent, or $178 billion, higher; and the 2002 national savings rate would be 16 percent instead of 14 percent.
http://www.bea.gov/bea/newsrelarchive/2006/rdreport06.pdf
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
a few ex. of SOLVAY ‘s recent innovations
Epichlorohydrin with new process EPICEROL TM
New High productivity/High capacity of H202 process
NEUTREC ® process for flue gas cleaning
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Water consumption divided by 10
Epicerol™: Sustainable development
Chlorydric Acid
Glycerin from Renewable source (e.g.
from biodiesel ‘byproduct )
Epichlorohydrin
Chlorinated byproducts divided by 8
Utilization of chloridric acid vs chlorine.
Consumption of Cl divided by 2
22 Patents requests
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
STRATEGY - WORK ON GROWTH
Chlorinated byproduct production
divided by 8
Water consumption divided by 10
Using HCl in spite of chlorine
Cl consumption divided by 2
Winner of “Pierre Potier Prize” for Innovation in Favor of the Environment
TAVAUX, France
EPICEROL® PROCESS
Pull out of oil chain
2007
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
Contribution R&D= High Productivity H2O2 Process
High Productivity Réduction of investment by unit installed capacityHigher installed capacity by line :
1958 : 5 000 t/year 1992 : 60 000 t/year 2006 : > 200 000 t/year ?....230.000 in Antwerpen (PO-
BASF-DOW)Reduction of variable costs
g H2O2
kg Working Solution
Productivity =
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
STRATEGY - WORK ON GROWTH
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*
* forecast
2008HYDROGEN PEROXYDE
ZANDVLIET, Belgium
• CAGR 1995-2005: > 6%
Sol
vay
kT/y
Partnership BASF/DOW for a new
plant of Propylene Oxide (HPPO)
World largest peroxyde plant of 230
kT/y under construction. Two
times the size of today largest plant
Based on Solvay high-yield production
process
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
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Jacob Fleming- Conf.Amsterdam –May 7-8 ,2007© SOLVAY SA – C.G.Bienfait
4. CONCLUSION:
Importance of creativity and innovation for growth
Do not forget R&D …one of the main source of innovation for growth!
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© 2005, SOLVAY SASOLVAY
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