Staffing for Innovation in the Chemicals Industry

Tom ReginoTom Regino

President, Crossroads Search Group, LLCPresident, Crossroads Search Group, LLC

A part ofA part of

CDMA 2008 Spring Meeting: Innovation Led Growth

First, let’s set the stage…

• Reporting observations from hiring authorities and NPD Reporting observations from hiring authorities and NPD professionals in performance chemicals and materialsprofessionals in performance chemicals and materials

• Not a rigorous survey with a project team and a budgetNot a rigorous survey with a project team and a budget

• A snapshot of opinions, not an editorialA snapshot of opinions, not an editorial

• No solutions or recommendations are offeredNo solutions or recommendations are offered

• The strong agreement across these independent discussions The strong agreement across these independent discussions is significantis significant

Hopefully, these findings will be interesting and useful, if Hopefully, these findings will be interesting and useful, if only to confirm what you already know.only to confirm what you already know.

Dedicated innovation and NPD functional groups are absent or phasing out at many companies…

• Most have adopted some form of “stage-gate” processMost have adopted some form of “stage-gate” process

• Some are more rigorous about their process than othersSome are more rigorous about their process than others

• Several have in-house trainers or internal consultants to Several have in-house trainers or internal consultants to spread process knowledgespread process knowledge

• Most activity is now decentralized to divisions and SBUsMost activity is now decentralized to divisions and SBUs

• There is relatively little centralized, longer-term innovation There is relatively little centralized, longer-term innovation efforteffort

A growing combination of factors is driving innovation-related decisions…

• Maturing domestic markets; maturing technologyMaturing domestic markets; maturing technology

• Emphasis on cost reduction, geographic expansion, other non-Emphasis on cost reduction, geographic expansion, other non-organic growthorganic growth

• Foreign competition and outsourcingForeign competition and outsourcing

• Industry rationalizationIndustry rationalization

• Raw material and energy costsRaw material and energy costs

• Economic downturns; general turbulenceEconomic downturns; general turbulence

Fire fighting grabs more attention than innovation, even in Fire fighting grabs more attention than innovation, even in the best of times.the best of times.

Innovation functions are often tracked against productivity metrics similar to line businesses, leading to…

• Perceived lack of relative valuePerceived lack of relative value

• Impatience with time lags, inevitable fuzziness, and riskImpatience with time lags, inevitable fuzziness, and risk

• Difficulties in linking commercial results to NPD contributionsDifficulties in linking commercial results to NPD contributions

• Continued perception of innovation efforts as a cost centerContinued perception of innovation efforts as a cost center

• ““There is a huge There is a huge desire to measure everythingdesire to measure everything at publicly held at publicly held companies. ‘Precise’ NPV estimates 5 to 10 years out is both companies. ‘Precise’ NPV estimates 5 to 10 years out is both a misnomer and damps down risk tolerance a lot.” – a misnomer and damps down risk tolerance a lot.” – Operations Director, JM HuberOperations Director, JM Huber

Real-time metrics for innovation are largely unrealistic.Real-time metrics for innovation are largely unrealistic.

In the competition for limited resources:

• ActiveActive support from senior management is still essential to the support from senior management is still essential to the innovation function’s survivalinnovation function’s survival

• It remains in a precarious position in many companiesIt remains in a precarious position in many companies

• The face-off between “functions” and “line” activities has never The face-off between “functions” and “line” activities has never really been on a level playing fieldreally been on a level playing field

• ““Even with strong management support, Even with strong management support, innovation structures innovation structures are the first things to goare the first things to go when the company has a tough when the company has a tough stretch.” – stretch.” – Former CTO at a major specialties manufacturerFormer CTO at a major specialties manufacturer

• Much NPD success has been the result of heroic effort across Much NPD success has been the result of heroic effort across the cultural/political dividethe cultural/political divide

Heroism is difficult to sustain.Heroism is difficult to sustain.

The best NPD projects are, by definition, handed off to downstream groups with different skills and resources…

• Credit for commercial success tends to go to the Credit for commercial success tends to go to the implementation teamimplementation team

• ““NPD professionals carry a lot of water without getting to NPD professionals carry a lot of water without getting to drink.drink.” – Global Manager at Cytec Industries” – Global Manager at Cytec Industries

• ““The downside of failure is substantially larger than the upside The downside of failure is substantially larger than the upside for successfor success.” – Market Development Manager at Infineum.” – Market Development Manager at Infineum

• ““It’s tiring walking around with a bulls-eye on your back.It’s tiring walking around with a bulls-eye on your back.” – ” – Marketing Manager, Air ProductsMarketing Manager, Air Products

• This encourages many of those with a real talent for innovation This encourages many of those with a real talent for innovation to “find a real job”, often in a line management roleto “find a real job”, often in a line management role

Most NPD work is collectively done by multidisciplinary teams…

• SalesSales

• R&DR&D

• Technical service & Technical service & customer supportcustomer support

• MarketingMarketing

• ManufacturingManufacturing

• Legal, financial, otherLegal, financial, other

- There may be a process champion/mentor in place, but often few to There may be a process champion/mentor in place, but often few to no dedicated NPD/innovation specialists per seno dedicated NPD/innovation specialists per se

- ““The internet and PDMA-like how-to materials and tracking programs The internet and PDMA-like how-to materials and tracking programs have given the have given the mistaken impressionmistaken impression that the necessary NPD that the necessary NPD expertise is readily available, and that procedure is more important expertise is readily available, and that procedure is more important than talent and culturethan talent and culture.” – Marketing Manager, Air Products.” – Marketing Manager, Air Products

These and other logistic and political factors have driven the following changes for individuals:

• NPD/innovation is increasingly treated as a transitional, NPD/innovation is increasingly treated as a transitional, grooming, or otherwise secondary activitygrooming, or otherwise secondary activity

• More frequently, NPD is just one of several responsibilities for More frequently, NPD is just one of several responsibilities for each individual (one of several “hats” to wear)each individual (one of several “hats” to wear)

• Multi-functionality is being sought for other reasons as wellMulti-functionality is being sought for other reasons as well

• Many of the “NPD-dedicated” individuals are in emeritus-like Many of the “NPD-dedicated” individuals are in emeritus-like positions for talented innovators approaching retirementpositions for talented innovators approaching retirement

In this industry, NPD/innovation is more a significant skill set In this industry, NPD/innovation is more a significant skill set than a profession per se.than a profession per se.

Things have certainly also changed for company practices:

• NPD/innovation is increasingly carried out at the SBU level, so NPD/innovation is increasingly carried out at the SBU level, so much of the function is now “in the family” and carried out by much of the function is now “in the family” and carried out by “family members” themselves“family members” themselves

• NPD/innovation expertise is rarely hired in directly, but rather NPD/innovation expertise is rarely hired in directly, but rather as “part of the package”as “part of the package”

• The presence of such talent is now a key The presence of such talent is now a key differentiatordifferentiator between candidates competing in their “core” job descriptionbetween candidates competing in their “core” job description

• For example: a talented application chemist For example: a talented application chemist withwith a good basic a good basic grasp of business grasp of business andand customer-facing abilities customer-facing abilities

OROR a skilled marketing executive a skilled marketing executive withwith solid technical skills solid technical skills

Importantly, decentralized NPD is focused mainly on near-term, Importantly, decentralized NPD is focused mainly on near-term, incremental developments.incremental developments.

Hiring in this way is seen to kill multiple birds with one stone…

• The position is firmly rooted in a core/line function much less The position is firmly rooted in a core/line function much less subject to challengesubject to challenge

• But the NPD skills do strengthen the company’s But the NPD skills do strengthen the company’s innovativenessinnovativeness

• ““Us vs. themUs vs. them” conflicts are minimized, both in the trenches and ” conflicts are minimized, both in the trenches and at more senior levelsat more senior levels

• At least for near-term work, NPD/innovation is much less At least for near-term work, NPD/innovation is much less vulnerable to excisionvulnerable to excision

• Bringing the function “in” may also better demonstrate the Bringing the function “in” may also better demonstrate the function’s value over time, both to the company and for the function’s value over time, both to the company and for the individuals involvedindividuals involved

One last observation on staffing needs:

• If each NPD team member is a “musician”, several companies If each NPD team member is a “musician”, several companies report increasing need for “conductors” that can:report increasing need for “conductors” that can:

– Manage disparate teams through the sequenceManage disparate teams through the sequence

– Inject process know-how, judgment and bigger-picture contextInject process know-how, judgment and bigger-picture context

– Manage the portfolio and report up the lineManage the portfolio and report up the line

• ““There is a big unmet need for people that can wire it all together, There is a big unmet need for people that can wire it all together, to create businesses that don’t yet exist.to create businesses that don’t yet exist.” – Product ” – Product Commercialization Director, Eastman KodakCommercialization Director, Eastman Kodak

The best conductors will likely be seasoned professionals in The best conductors will likely be seasoned professionals in “off-the-ladder” capacities, focused on quality and geared “off-the-ladder” capacities, focused on quality and geared to leaving a lasting legacy at the company.to leaving a lasting legacy at the company.

Other comments worthy of note:

• ““The ‘developing’ regions (e.g., China, India, South America) The ‘developing’ regions (e.g., China, India, South America) are are notnot content to stand pat as low-to-medium sources of content to stand pat as low-to-medium sources of inexpensive labor. They are gearing up to inexpensive labor. They are gearing up to compete at compete at innovationinnovation, one of our last areas of so-called competitive , one of our last areas of so-called competitive advantage.” advantage.”

““Six-sigma, lean manufacturing, geographic expansion, and Six-sigma, lean manufacturing, geographic expansion, and M&A can only deliver so much. Over the longer term, M&A can only deliver so much. Over the longer term, it’s also it’s also about innovationabout innovation.” – .” – Director at Eastman KodakDirector at Eastman Kodak

• ““Two current misconceptions are that a process ensures Two current misconceptions are that a process ensures success and that all factors of importance are quantitativesuccess and that all factors of importance are quantitative. . The process is only a tool, and metrics at best are only The process is only a tool, and metrics at best are only bellwethers toward the bellwethers toward the real goals of the companyreal goals of the company.” – Senior .” – Senior Director, 3M Director, 3M

To further the discussion:

• Which of these issues best reflects your organization?Which of these issues best reflects your organization?

• What trends do you see in your company?What trends do you see in your company?

• What is your biggest innovation-related challenge?What is your biggest innovation-related challenge?

• What approaches have worked in your company?What approaches have worked in your company?

• What changes would you suggest to enable improvements in What changes would you suggest to enable improvements in compensation, recognition, and/or professional stability?compensation, recognition, and/or professional stability?