Innovation Awards: Driving innovation from maturity

18 October 2013 10:22  [Source: ICB]

Innovation is not just about groundbreaking new products and technologies – there is plenty of mileage, and profit, in innovating in mature business areas

New processes, new materials, new products. When we think of innovation in the chemical industry, the images that initially spring to mind are of groundbreaking advances in novel areas.

Microencapsulation can ensure that freshly laundered clothes remain fragrant

But much of the industry’s innovation can be found in mature areas, as companies are driven to improve on existing products and services to keep customers happy and businesses moving forward.

As Neil Checker, Partner at Roland Berger Strategy Consultants, puts it, “there is often life in the old (technology) dog.” The international consultancy has taken over the role of overall sponsor of the ICIS Innovation Awards this year, but Checker has been on the Awards judging panel for several years and has seen plenty of examples of both types of innovation.

“We have run the ruler over a good mix of innovations over the years. Of course, many are in novel areas, like bio-based materials and nanotechnology, but there are always plenty of innovations from the more mature businesses – often involving a new way of looking at what a product can offer or developing new service offerings or routes to market.”

Looking back over the first 10 years of the ICIS Innovation Awards reveals that of the 54 winners over the decade, around 15 – over a quarter – can be adjudged as innovating in mature areas. Indeed, the very first winner back in 2004, Air Products, was commended on the way it had developed a new concept for packaging bottled industrial gases – a mature area if ever there was one!

Other examples that spring to mind are Arkema’s innovation in road bitumen to reduce preparation temperature, thus saving energy and reducing health issues (2009), DSM’s innovative micro-packaging for delivering vitamins to third-world markets (2008), and Evonik’s RohMax’s approach to energy saving in hydraulic fluids (2007).

Entries in recent years, adds Checker, have perhaps seen a tendency to cluster around novel bio-innovations, as these technologies have come to the commercialisation phase. But this year there has been a reversion to a more normal pattern, with many of the shortlisted coming from more traditional chemical sectors once again.

“It is important to recognise this aspect of innovation,” he argues. “And to appreciate how important innovation can be in sustaining and extending the life of many so called mature products.”

Of course, there are very many ways to innovate, but an example of one approach that Roland Berger is seeing attract increasing levels of interest is microencapsulation. Taking an existing, mature product and tailoring its delivery mechanism by using microencapsulation can not only open up new markets, but deliver cost savings and environmental benefits, believes Chris Cardinal, a Principal at Roland Berger.

Microencapsulation techniques have been used in the pharmaceutical, agrochemical and personal care sectors for some while, but many companies are now turning to it to deliver innovation in the area of industrial chemicals as well. Examples include additives for coatings, adhesives, and cleaning products, biocides, food additives, and many other products.

“Microencapsulation is a way of delivering new functionality – such as controlled product release – to mature products, thus extending the traditional S-curve of a product’s life cycle by delaying or reducing the decline phase,” says Cardinal (see illustration).

Specialty chemical companies are continually looking for new growth avenues for their products and microencapsulation is one route that is showing promise in this sector. In many instances it allows companies to use less product to achieve the same effect, thus saving material and cost; in other examples it enables companies to add more value to products experiencing creeping commoditisation, or to win added market share or to move the product into completely new ­market areas.

In almost all cases, says Checker, the use of the technology can stimulate renewed growth in a mature product area. And from an efficiency point of view, says Cardinal, “it is possible to drive higher sales from less ­volume.” This can be important, for ­example, where capacity is tight for a ­material, but investment in added capacity is perhaps not economically warranted.

The two consultants give several examples of where Roland Berger is seeing innovation ­interest. Pigments, for example titanium dioxide, is one – where microencapsulation can reduce the use of the expensive white pigment while still delivering the same ­covering power.

Fragrances are another, where microencapsulation can ensure that fabric softeners/fresheners added to washing powders and liquids deliver their effect over several days on freshly laundered clothes. Biocides and agrochemicals are other areas where controlled release technology has potential to better deliver active comp_unds when and where they are needed most.

Microencapsulation is also helping new products to be commercialised, points out Cardinal. In the construction sector there is growing interest in the use of phase change materials to help with climate control in buildings. As the temperature rises, the material absorbs heat as it changes from one phase to another; as the temperature falls, the heat is released as the phase change reverses. Microencapsulation of the phase-change material is an essential part of the way these materials are produced for use in wall and ceiling structures, as well as other applications in heating, ventilation and air conditioning (HVAC).

There are some areas, though, where use of microencapsulation remains challenged – but ones that would reap big rewards if ­realised. Organic catalysts and specialty monomers are two areas that have so far proved more challenging to develop effective microencapsulation solutions, notes Cardinal, but where the potential benefits are significant – in terms of worker safety, targeting of delivery, material usage and product performance.

 
Roland Berger estimates the market for microencapsulated products will be worth around $7.5bn by 2018, with the pharmaceuticals sector accounting for the major share, of around 67%, a figure that stood at around 80%+ just five years ago.

Household detergents and cleaners, with about 10% share of the pie, are the biggest growth areas today, with companies such as Procter & Gamble and Unilever espousing its use in many products to achieve material savings and product differentiation. By microencapsulating fragrances, bleach activators or anti-bacterial compounds, for example, material usage can be cut by 15-30% while still giving the customer the same experience or better. What’s more, the sustainability benefits appeal to consumers, which further drives interest from leading consumer products companies.

Agchems, food and nutraceuticals and industrial chemicals are expected to each hold around a 5-10% of the market within the next five years.

To enable this growth, new technologies and new providers are entering the marketplace, says Cardinal. And this better technology is itself driving interest in the use of microencapsulation. There are two main technology approaches – chemical encapsulation, using a solution-based process to coat particles in a liquid suspension with a polymer layer, and physical encapsulation using spray-drying or fluidised-bed technology, whereby solid particles are physically coated by the encapsulant.

This too is seeing innovation – with chemical microencapsulation companies looking at newer types of coating polymers, including natural lactides, and synthetic acrylics to offer alternatives to the conventional gelatine and urea-formaldehyde resins that are frequently used today.

While a substantial portion of micro-encapsulation technology and capability resides in larger consumer products and specialty chemical companies, significant innovations, explains Cardinal, are being developed today by smaller and medium-sized specialist microencapsulation companies. He cites as examples Lipo Technologies, Appvion (formerly Appleton Papers), Capsulae, Tagra Biotechnologies and the Aveka Group as representative players in the field, but there are, he says, dozens of others worldwide developing innovative product delivery technologies.

Checker says Roland Berger, when advising on technology strategies, is finding that its clients are increasingly interested in and asking about innovative ways to extract value from traditional technologies.

“Just as individuals are looking for solutions to defy the ageing process so too are companies seeking ways to defy the product ‘S-curve’. Microencapsulation is one tool in the armoury in an overall innovation approach to extend a product’s life and/or deliver added value,” he says. In the drive to realise innovation in mature areas, it is certainly worth a look, he concludes.


By: John Baker
+44 20 8652 3214



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