Hello and welcome back
to the second part of my “the future of plastics industry” series.
In this second part we keep the focus on polymer
manufacturing only and how the future can evolve in this segment of the
plastics industry. I still do not have a crystal ball, however orienting on the
megatrends, we can try to anticipate a scenario for the future. Other areas
such as plastics converting I have touched already in this post.
Key factors for success
in polymer manufacturing
Before we jump into a future scenario, let us examine how
business is done currently at a polymer manufacturer. Apart of operating state-of-the-art
polymerization technology, the following three key product factors are keeping
a polymer manufacturer in business for a long time:
-High performance
-Consistent properties
-Competitive costs
Using the optimal technology, a polymer manufacturer is
able to produce high-performance products with consistent properties at
competitive costs. Product and process development are critical, since new
products are an enabler for growth and process optimization can make any
product more profitable.
Altogether, there are
four major strategies a polymer manufacturer can follow:
-Be the first with your
polymer and compound solutions
-Be better with your
polymer and compound solutions than the first one
-Be different with your
polymer and compound solutions
-Be faster approaching
certain applications with your polymer and compound solutions
In past decades, world economies were growing with an average
of 6% yearly and polymer manufacturers could participate on this growth.
However, in the past ten years digitalization is exponentially changing the way
we do business and also the way we consume. New technologies allow the rise of businesses
with complete new business models attacking all incumbent old industries.
Revenue
growth rates for digital players are in the double digit range year over year.
Digital players have the advantage of scaling their businesses in a fast way
and keeping the margins very high too. For polymer manufacturers to grow, more
material needs to be made and sold as well as and new high end niches need to
be found where high prices can be achieved with polymer solutions.
Also,
business volatility is increasing and it can be best summarized with the Law of
Requisite Variety or for short Ashby’s Law. It is the ability to react to a
situation and to have a portfolio of alternatives to pick from (scenario
thinking). It also states that when the business world seems to fall apart, it
is not helping to build walls and pretending not to see the change. This is the
wrong way. One need to meet complexity with complexity itself. Therefore, all
industries need to use the new technologies to re-shape and re-invent their
businesses. This we discussed in my post where I show 5 ideas on how you canget the digital revolution started in your plastics business [2, 3].
New economy and new business models – when data is the
new plastic product
“The goal is to turn data into information, and
information into insight.” – Carly Fiorina, former executive, president, and
chair of Hewlett-Packard Co.
Several
years ago, Eric Schmidt already said that all those companies that define
themselves through their product or their technology will struggle in the
coming years and those companies that define themselves through their ecosystems
and platforms will survive and strive [4,5].
The idea is
simple, however it has a tremendous impact: from product manufacturer to
platform and ecosystem provider.
We see
already established plastic industry players such as Lanxess with their
material platform Chemondis, as well as plastics machine manufacturer company
KraussMaffei set up with Polymore their own market platform for compounds,
recyclates and post-industrial waste, which can serve plastic converters as
well as compounders. It is a good example of thinking outside the box and
leaving the industry standard of selling plastics machinery since over such a
platform it is possible to link polymer manufacturers and plastics convertors
together.
Aim is for polymer manufacturers not only to create
and participate in B-2-B marketplaces, but also establish ecosystems with their
own services and products.
Circular economy as a service platform for polymer
producers
Circular
economy allows the shift away from linear business models (“take-make-dispose”)
to a model of recycling, re-use, and designing for recyclability (DfR). The
polyolefins industry is already setting foot into this major change since
polyolefins are used in large quantities in packaging where the potential and
need of circular recycling is given. A recent example is the EverMinds™
platform where polyolefin producer Borealis is a major driver behind. This
platform connects stakeholders with the aim to innovate together and create a
product portfolio based on circularity [10].
Ecosystem – polymer
manufacturer as service provider
Also for
polymer manufacturers, digital services become more and more important. It is
not enough anymore to just sell plastics pellets. Successful polymer
manufacturers will establish themselves as service providers in the next ten
years or even earlier. There are several services which can be horizontal or
vertically integrated along the current value chain. From polymer materialselection, part design, virtual engineering (filling simulation and FEA) to
manufacturing key components including material, regulatory and logistics
support. Key is to cleverly add the service business onto the product business
and combine it with platforms to establish ecosystems.
An industry
example is Diversey Inc. which started out as a chemical company providing
cleaning products to hospitals and other facilities. Now, it is a solution
provider, not a product provider anymore. For example, they combine cleaning
care plans for hotels and hospitals which include their chemicals, application
tools, smart machines, as well as training and support [7].
Collecting
data over sensors on production facilities as well as online in the web via
marketing tools is key part for this change too. The more structured the information
is, the better new strategies can be established and decided upon on by the business
executive teams.
New service
based revenue streams will stabilize current business streams and may outgrow
the established business in the next 10 years. Amazon Web Services (AWS) is
such a case, where it was a small offering of external online storage space in
2014 and now it is with 60% the largest operating profit contributor of the
Amazon ecosystem [11].
Conclusions
In plastics
manufacturing, there are well established industry standards which the majority
of the companies follow. They follow the norm and achieve normal results.
Extraordinary results are achieved by breaking out of the industry standards.
Developing to a service platform provider with an ecosystem represents such a
breakout. Only 3% of organizations or people are able to create such changes
which lead to high performance results [8]. And those will get the biggest
share of the cake, since in the new economy the “winner takes it all” principle
rules.
I want to
close this post with a quote to keep in mind when driving your business
forward:
“That which we need the most will be found where we least want to look.” ~ Carl Jung.
Thank you for reading
and #findoutaboutplastics
Herwig Juster
Literature:
[1] W. R. Ashby: An
introduction to Cybernetics. Wiley, New York 1956
[2] https://www.findoutaboutplastics.com/2016/12/plastics-industry-level-up-your-digital.html
[3] https://www.findoutaboutplastics.com/2017/02/a-mind-sharpener-guide-for-plastics.html
[4] https://repository.fteval.at/191/1/2016_RadikaleInnovationen_Endbericht.pdf
[5] https://wien.orf.at/v2/radio/stories/2801064/
[6] https://www.berndtsoninterim.de/aktuelles/im-service-liegt-die-zukunft
[7] https://diversey.com/en/solutions/floor-care
[8] https://www.youtube.com/watch?v=VNGFep6rncY
[9] https://www.findoutaboutplastics.com/2019/07/second-wave-of-digitalization-from.html
[10] https://www.borealisgroup.com/polyolefins/circular-economy-solutions/overview
[11] https://www.geekwire.com/2021/amazon-web-services-posts-record-13-5b-profits-2020-andy-jassys-aws-swan-song/
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