13 October 2008 00:00 [Source: ICB]
Dow Corning applies its global innovation frameworks to develop markets in emerging geographies. Tom Cook explains how this is working for the company in China
ALL TOO often, US and EU chemical producers view innovation as a way to stay one step ahead of lower-cost, more commodity-oriented competitors, notably from Asia. But benefits are to be gained from innovating in emerging geographies, either by ensuring a global approach to innovation is adopted and/or by developing local initiatives in emerging markets.
At Dow Corning, both approaches are heavily endorsed and practised. Corporate vice president Tom Cook, who acts as president for Greater China and for Asia, believes the company has created an innovation culture among its employees.
"Innovation at Dow Corning is one of a small set of key priorities that has brought about a major transformation over the past five or six years, doubling turnover to close to $5bn (€3.5bn). By developing a series of innovation frameworks we have laid a really good foundation and created a common language to talk about innovation, whether in emerging or developed economies."
These three frameworks provide various ways to think about the process and planning of innovation. The first says that innovation is not just about products, but business models and processes, branding, customer experience, and so on. It builds on the "Ten Ways to Innovate"created by innovation company Doblin, of Chicago, Illinois, US.
The second framework sets out three time horizons for innovation: the first brings research and development to bear on core businesses, seeking to improve products and processes the second seeks to stimulate a deliberate shift from core business to real growth opportunities, such as electronics, life sciences and personal care and the third looks even further out to create new options for the company.
The third framework sets out to divide innovation into sustaining and disruptive innovation.
Cook describes how these have successfully helped Dow Corning's innovation drive in emerging economies. "We usually find at least two customer segments in these markets", he explains. "Multinationals and leading local companies that are looking for globally consistent materials and to do business on a global basis and a local base of customers setting out to meet the basic needs of the local market and looking for minimum performance at best price.
"These approaches provide challenges, and we need to adjust our business to meet both."
He points to Dow Corning's development of Xiameter, an online market platform for selling basic silicones, as one innovation to meet the needs of the latter type of customer. It allows Dow Corning to serve at low cost those customers that are willing to order in bulk on standard terms and not expect customer support.
Cook gives some further examples from Dow Corning's experience in China. This autumn, the company will start a brand-awareness campaign for its silicones by launching a public advertising campaign on bill boards, newspapers and online portals in China.
"These advertisements will talk about fascinating facts of silicones and their ability to improve the quality of our lives. They will intrigue the curiosity among people and drive them to the Dow Corning Silicone Discovery Center website in English or Chinese. We do not do this in developed economy areas but feel it is the right thing to do here to raise the level of awareness of both silicone and Dow Corning."
Also, he points to the establishment of a downstream partnering programme with silicone formulators in China. "We are working with them to train personnel and to increase their expertise in return, they use our materials and co-brand their products and we share in the profits."
Approaches such as these, he notes, help to maintain brand identity in emerging markets.
Entering emerging markets, of course, brings other, unique ways to innovate. "From the beginning in emerging geographies there is a real opportunity to align behind the development of the region. For example, in China, the company has aligned itself behind several of the government's priorities in its 11th Five-Year Plan, including environmental and energy concerns.
Cook illustrates how this works with the example of a new product that acts as a softener for denim during the manufacture of jeans. The granulated product makes it possible to combine several steps in the manufacturing process and thus reduce the amount of water needed and therefore amount of energy used to heat the water.
China produces more than one-third of the world's output of 1.5bn pairs of jeans a year. The new product can save between 15 to 50 liters per pair of jeans, or around 7.5 to 25bn liters of water a year in China, where water is not in huge supply. Energy savings could amount to 20m kW/year.
Cook explains that Dow Corning has worked with government agencies, textile industry associations and companies to develop the new processing aid, which is now being trialled in Chinese textile factories. The government is encouraging the uptake of the innovative technology by calling for companies to cut water use by 30% over the next two years.
"This is a great example of bringing expertise and innovation to solve a specific problem that we perceived in China. But it is also applicable in Turkey and India, the two other prime locations for denim production. The product is made in Europe, which shows we can use global development to solve problems like this. But, in time, we expect to move to local manufacture of the product."
In a second innovation project in China, Dow Corning is working with the government to develop silicone-based insulators for high-voltage power cables as an alternative to glass or ceramic insulators. Silicone brings a number of advantages, including lighter weight, lower maintenance and less energy leakage. The lower weight, points out Cook, means the pylons can be spaced further apart, or can be made with less steel.
This type of business innovation - aligning company innovation with government priorities - could be used in any developing geography, notes Cook. In China, Dow Corning has established a specific government affairs group to liaise with the government. The group's activities are integrated with business units and will eventually be incorporated into the day-to-day activities of the company.
Dow Corning has a geographic development team with a full-time leader and members in developing regions. "These allow us to share best practice in other countries, so that what we have done in China can be replicated in other countries," he explains.
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