Innovation is critical to the long term growth and prosperity of the petrochemical industry. Innovation can come in a variety of areas including new product development, improvements in raw material and feedstock identification and utilization, the use of techniques such as pinch technology to identify ways to improve process efficiencies, increase production yields, and improve energy utilization, and supply chain optimization, among others.
While the pursuit of innovation would seem to be an obvious objective within in the industry, its execution can be constrained by a number of factors including:
Lack of commitment to innovation as a core company strategy
While many companies pursue innovation as a subset within various functional groups, few have dedicated teams and resources allocated toward its pursuit. Even fewer have identified innovation as a core strategy of the company. Why? The reasons can be many and varied, but usually come down to limited resources and perceived higher priorities. As production costs and ultimately profit margins can be significantly impacted by upstream factors, not the least of which is feedstock supply and cost variability, companies can find it difficult to go “all-in” on committing to innovation for the long term. History has shown that innovation funding and support can be one of the first “luxuries” to be curtailed or defunded when costs must be reduced.
The underfunding of innovation within Research and Development groups
This is probably more prevalent when the pursuit of innovation is an implied goal within a company’s functional R&D groups as opposed to where innovation is staffed and funded as a standalone functional pillar of excellence. The objectives of most R&D organizations in chemical companies are predominantly new product development, and plant/operations support and problem solving. The identification of new, innovative technology is often a secondary or even tertiary objective, and largely goes unfunded, especially if such technology has to go through a formal stage gate process. Since new technology in this industry is often viewed as a long term investment, it therefore has to present an acceptable return to be funded. Valuation of breakthrough technology is often an inexact science, and depends on estimates in terms of risk and benefit. R&D groups typically will pursue quick, short term wins at the expense of longer term, more theoretical valuation estimates – especially if department funding is constrained.
The aversion to technical risk in fundamental chemical process unit operation innovation
This is the one area where strategy and resources really don’t come into play. The chemical industry is perhaps the most risk averse of all established industries. Compared to industries such as information technology, telecommunications, health sciences, and even pharmaceuticals, to name a few, the development, demonstration, and adaptation of innovative technologies within the chemical industry moves at a snail’s pace. Why is that? It can be as simple as risk versus reward….or put a different way, risk versus the potential cost of failure. While emerging technologies – truly innovative game changers – exist in the chemical industry, their demonstration and adoption to enhance, or even replace, decades-old tried and proven technology can be a difficult risk hurdle to overcome. Faced with the choice of a novel, cost saving, energy consumption and emission reducing technology versus an established, textbook approach (well established unit operations for olefin-paraffin separations such as distillation or cryogenic separation, for example), most companies are not willing to take the risk on such an enabling technology. While the adoption of such emerging technologies could have a major effect on the competitive landscape, not to mention the obvious cost and environmental impact benefits, most companies in the chemical industry are unwilling to take the technology leap.
So, what is the solution? Well, chemical companies would be wise to take a hard look at their core strategies – and make sure that real innovation in all areas of their businesses are pursued where absolute value is evident, and encourage and reward those who are willing to identify and pursue new technology in non-traditional areas. R&D departments need to be fully funded and resourced to innovate in every area of the organization – again, with emphasis on the pursuit of game-changing technology that will ultimately lead to a sustainable, competitive advantage. Finally, commercial and business leadership within chemical companies should be intimately engaged in the innovative process within their respective businesses. Process improvement innovation goals and objectives should be aligned with business objectives to make certain that technology innovation is fully integrated within, and a critical component of, the overall strategy of the company. The ultimate winners in the chemical industry will be those who resource and support innovation, and overcome the technical risk barriers through successful and more timely integration.