Growing your business through innovation: growth markets requiring innovation in Rubber.

Mike Gallagher, a Business Development Manager with the Bayer Polymers Industry Innovations Group, focused on innovation as a way of thrusting companies and even entire industries into the path of change. He reminded the audience that innovation was the force behind the start-up of each of the companies represented in the room. "Innovation is the art--not science--of meeting emerging needs with practical solutions," Gallagher said. "It is often confused with invention, but they are not the same. Growth through innovation requires more doing and less thinking." Gallagher tempered his remarks by noting that there are competing schools of thought on the importance of innovation to modern business. While the research shows that it has a positive effect on sustainable profits, a recent survey of executives showed that only 5 percent were satisfied with their R&D investments, pointing out that 50 percent of their growth would come from existing customers with acquisitions making up the next largest area of growth over the next five years. *

Gallagher drew attention to changes that present imminent opportunities for members of the rubber industry. In the refrigeration market, for example, HCFC refrigerants are scheduled to be phased out by the end of 2010 in Europe and 2020 in the U.S. The new coolants will create new standards for the more than 200 million compressor seal markets alone. In addition there may be new hose requirements as the industry moves to find an alternative refrigerant. "There are still unanswered questions that will have an impact on competitive advantage," he said. "Will the industry want smaller compressors to reduce cost and save weight? Can we adapt our elastomers to meet the demands of higher operating temperatures and pressures required for smaller compressors? Will the U.S. adopt the European model? While the answers to these questions may change the trajectory of the changes taking place, there is no question that there are opportunities for the rubber industry to add value for the refrigeration industry," he said.

The small engine market presents another kind of opportunity to innovate into market change, Gallagher noted. "There are some very interesting innovations in 2 stroke engine development as the industry works to meet the Clean Air Act regulations," said Gallagher. He pointed out that the rubber industry has an opportunity to leverage existing automotive knowledge and experience as the small engine market shifts emphasis from exhaust to evaporative emissions, as it explores alternative fuels and synthetic lubricants and moves to further decrease engine size.

"There is always the danger that in our search for new markets with existing technology, we simply end up discovering a mature market and inheriting its declining returns," said Gallagher. "We need to jump in with a new technology s-curve and intercept change to be successful."

"Almost a third of our ideas come from our employees, but almost one half of new innovation originates from customers, suppliers and market intelligence," Gallagher noted, citing a study by PriceWaterhouseCoopers. "Our industry needs to expand its approach to share and act on ideas," he said in closing. "We should not be intimidated by technological advances brought forward by others. We should leverage them to our advantage," he told the audience. "I want to leave you with a thought from Pyanfar Chanur who said 'If you are against a smart opponent, make him think himself to death'."

* "Harvard Business Review, August 2000; Accenture and ACC Survey, David Hunter, Chemical Week, February 2000.