stagegatesummit j ic

February 20-21, 2007 / St. Pete’s Beach, FL

Pushing the Envelope – Driving Innovation in a Mature Market

Dr. John Irven,

Director of Technology, Packaged Gases, Air Products

Visiting Professor , Queen Mary, University of London

First International Stage-Gate Leadership SummitFebruary 20-21, 2007 / St. Pete’s Beach, FL

Slide 2© 2005© 2007 Air Products

A ~$9bn industrial gases & special chemicals company

Diversified markets & geographiesin 30 countries, 50% outside USA

Number # 1 in ElectronicsHeliumHydrogen



Air Products - some examples of our businesses

Cryogenic Air Separation Cryogenic liquid, space

Cylinder packaged gases

Helium MRI scanning

Electronics, analyticalHydrogen fuelling



Air Products Global businessPG ~$1.0bn within a $30bn Industrial Gases market

Cylinders and packages to users in many industries

Regional & Technology Centres

Countries where we operate or partner



Old Business model - Strategy

• No real opportunity for change• Supply chain dominated• Operations & distribution focused• Target cost reduction in filling &

distribution• Low profit expectations

New Business Model - Strategy

• If we don’t change we die• Refocus on high value ‘retail end’• Use new agent distribution model• Cost reduce, but drive profit growth

by differentiated offerings• High profit expectations

BulkGases

CylinderFill

DirectDistribution

RetailDistribution

CustomerOn-siteProduction

x % 2x % >4x %x %Best

PerformerOROI

1.5x %

Old model New agent modelGases Supply chain

100,000s customers, transaction intensive commodity business

‘Lead don’t follow’



BUT - Size of innovation challenge in mature, commodity, conservative industryno new products in decades !

KEY FEATURES :•Cylinder•Cylinder Valve & Cap•Compressed Gas

The only change had been the colour of the paint…...

1900 20002000

KEY FEATURES :•Cylinder•Cylinder Valve & Cap•Compressed Gas



Changing the paradigmBIP® - a purifier inside the cylinder

BUT – DESPITE great response from Customers– ‘NIH’ attitude was preventing take–up

WHY?– we had an un-integrated innovation approach

NEW APPROACH– developed & applied

RESULT – our first success

– UK Queen’s Award for Innovation – BIP commercialised in > 20 countries,

becoming global analytical standard

ExternalPurifierHIGH VALUE

Analyser

BIP in CylinderHIGH VALUE

ImprovedPurityQualityReliabilityReduced ‘hassle’

CylinderLOW VALUE



Regional & Technology Centres

Countries where we operate or partner

Effect of globalisation on BIPEuropeUK, IrelandFrance, GermanyBelgium, NetherlandsLuxembourg, SpainPortugal, ItalySwitzerlandScandinaviaAmericasUSA (Airgas)Canada, MexicoPuerto Rico, BrazilAsiaSingapore, MalaysiaIndiaAfrica/M.EastS.AfricaDubai



So what were the key strategic initiatives ?

1. Embed technology in business & strategy, linked to defined market segmentation

2. Demand differentiated offerings, ‘lead not follow’3. An integrated process and cross functional approach4. Drive VOC at all stages of development5. Manage the Gate 4 and launch aggressively6. Use tools & metrics to support the culture change

Best practices have fed into our corporate wide “Innovate” process



Strategic initiative # 1Embed technology in business strategy

• Integrate technology into the business programs and strategy

• Link to market segmentation & selection

• To ‘Lead not follow’the market



Strategic initiative # 2Demand differentiated offerings

50 ℓ200 bar

Customer

‘Conventional wisdom’- value 2 + 2 = 4

Reduced size/weight

Incorporate functionality & safety to capture value, and meet ‘VOC’ needs for light, easy to use packages

New opportunity- value 2 + 2 = 5 !

Integra weldingIntegration

Integra medicalParty Perfect Helium balloons



Strategic initiative # 3An integrated process & cross functional approach

• Cross-functional and cross-regional participation in strategy, planning and prioritisation in a steering team– Technology/ R&D– Marketing– Operations, Engineering, Supply chain

• Use staged development pipeline, with gatekeepers from key functions

• Rank & select ideas by financial impact & risk analysis

• All aimed at avoiding the ‘NIH’ issue

R&D Group + Dev Group + Commercial Group

Ideas Development Introduction

0 Gates 4



• Stage-Gated process with VOC at all stages• Understand customer and market need, recognising

‘unmet’ or unstated needs with a truly innovative offering

Ideas

Com

mer

cial

isat

ion

0 1 2 3 4Gates

Con

cept

Feas

ibili

ty

Prot

otyp

e

Dev

elop

men

t

‘Voice of customer’VOC at all stages

$

Strategic initiative # 4Drive VOC at all stages

‘Voice

s to ch

oices’

& market

research

Value stre

am maps

Focus groups

Customer/

OEM trials

Field tr

ial pilo

ts

Customer

satisfacti

on

surveys



Gate 4

Strategic initiative # 5Manage the Gate 4 & launch aggressively

• Gate 4 determines move into commercialisation• Tied to mandatory Business & Launch plans• Targets baked into our

– Plan & commitment process, regional marketing & sales budgets– individual and team appraisals for accountability– “Innovate” make-good tracking

• Driven and supported by senior business executive & team• Linked to market-communications & branding strategies

Development Launch & commercialisation

BusinessPlan



Strategic initiative # 5Manage the Gate 4 – understand/optimise the process

• Heading to the Gate 4 decision, & post Gate 4 ‘Launch’• An Environment of :

• Intense Communication & change• Commitment !• Hand-Over and Changing RACI

• ‘How to’– optimise effective transfer to the market– industrialise the product

• So that the offering becomes part of our ‘standard’ portfolio in a sustainable way as soon as possible




0 4

R&D Group Dev GroupCommercial

Group


•• CI role mappingCI role mapping

Concept/ Feasibility/ Prototype/ Development

Gates

Development proven with field trials

Standard activity

Launch/commercialisation




0 4


Group


•• CI role mappingCI role mapping•• TransitionTransition from ‘end developmentend development’ to ‘routineroutine’



Standard activity


Gates

Launch plan




0 4


Group


•• CI role mappingCI role mapping•• TransitionTransition from ‘end developmentend development’ to ‘routineroutine’



Standard activity


Gates

TransitionTransition

Launch plan




• Marketing & Sales– The (Central) Launch Manager Role– Linking Strategic & Tactical marketing to Sales

• Engineering & Operations– Use ‘Pilot Field trials’ pre-Gate 4– Management Of Change (MOC) Best Practice

• Procurement & Supply Chain– Supplier/partner engagement – ‘open innovation’

• Knowledge management – Training & skills development– Build Manuals, Procedures & documentation



Strategic initiative # 6 Tools & metrics – Air Products & PG

• ‘Make-good’ predicted v actual• Number of new offerings

through Gate 4 over time• Predicted impact of offerings in

pipeline• # ideas in each stage• Times in each stages

– Development cycle time– Product life cycles

• Customer loyalty

Air Products Corporate Portfolio

0

20

40

60

80

100

120

1999

2000

2001

2002

2003

2004

2005

Year

Impa

ct b

enef

it (n

orm

alis

ed)

0

5

10

15

20

25

30

35

Num

ber g

ate

4 pa

PredictedActualGate 4s p.a.



Forecast Impact of Completed Gate 4 Projects (2000-2005)

-5.0

0.0

5.0

10.0

15.0

20.0

0 20 40 60 80 100 120 140 160

Project Number

Impa

ct (M

M$)

Strategic initiative # 6 Tools & metrics – AP corporate metrics

0 5 10 15 20 25 30 35Number of Projects

Cum

ulat

ive

Impa

ct o

f pro

ject

s

02

03

04

01

05

Predicted impact in pipeline



New Revenue

0

20

40

60

80

100

120

140

160

FY01FY03FY05

FY07 P

&C

Year

Nor

mal

ised

bas

is

SRLD

Experis

Home Medical

Medical

Licensing

Oxy DA

Acetylene (DMF)Carbon Black

Linx Gases/Inframix

Party Perfect

Heligas / Ballonium

BIP

Maxx

Integra Welding

Strategic initiative # 6 Tools & metrics – Packaged Gases ‘make good’

Differentiated offerings grow > 25% pa CAGR even in flat mature markets

Growth in Market, AP PG Sales & Differentiated Offerings

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2002

2003

2004

2005

2006

2007

Year

Perc

ent

Market growth%

AP PG SalesGrowth %

Differentiatedofferings CAGR%



38

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

GI Non Premium Maxx Heligas BIP

At RiskIndifferentFavourablesecure

Customer loyalty measure

Categoryof risk

Commodity

Strategic initiative # 6 Tools & metrics – Packaged Gases

• Support culture change, with metrics showing progress

• Demonstrate price premiums over standard offerings at much higher profit/OROI

• Measure and demonstrate the benefit in customer loyalty surveys (part of VOC)



Key learningsBusiness & Technology together

Strategic initiatives

1. Embed technology in business & strategy, linked to defined market segmentation

2. Demand differentiated offerings, ‘lead not follow’3. An integrated process and cross functional approach4. Drive VOC at all stages of development5. Manage the Gate 4 and launch aggressively6. Use tools & metrics to support the culture change



The future-what’s next ?

• Idea collection from wider sources • Better assessment/prioritisation tools

– Different ‘incremental’ v ‘step out’– DDP, ‘MacMillan’ & risk analysis

• Improved idea selection – related to strategic marketing and

segment analysis• Forward-looking metrics• Reduce cycle time through

– Improved project management– CI & lean techniques

Tech

nica

l Unc

erta

inty

Market Uncertainty

IncrementalExpansions

PlatformLaunches

ScopingOptions

SteppingStones

ScoutingOptions

Tech

nica

l Unc

erta

inty

Market Uncertainty


PlatformLaunches

ScopingOptions

SteppingStones

ScoutingOptions

Tech

nica

l Unc

erta

inty

Market Uncertainty


PlatformLaunches

ScopingOptions

SteppingStones

ScoutingOptions

MacMillan matrix



7

BIP

Heligas

“Maxx”Welding Gases

Medical

Integra

OxyWalker

PartyPerfect Linx

Gases

Best gas supplier awardExternally recognised© 2007

Silver awardUK Chartered

Institute of Marketing

Silver awardUK Chartered

Institute of Marketing

2006

Winners of Dow-Corning Chemical Industry Innovation award, Queens Award for Innovation


Key take awaysBelieve in your product and approach - if you don’t the market won’t !Recognise and nurture innovation – it’s quite hard to do !Thank you



Bibliography

‘Stage-Gate systems: a new tool for managing new products’ Robert G Cooper, Business Horizons, May-June 1990 pp 44-56

‘Voices into choices’ C.Brodie, G.Burchill, Center for Quality management, Cambridge Mass, Joiner Associates 1997

‘The entrepreneurial mindset’ R.G.McGrath, I MacMillan, Harvard Business School Press Publishing Corp, 2000

‘Open Innovation’ H. Chesbrough , Business & Economics 2003

‘The Lean design solution’ B.Hulthwaite, The Lean design solution, 2004

‘Lean, rapid & profitable:new product development’ Robert G Cooper, Cambridge Mass, Perseus Books 2005

‘Market busters’ R.G.McGrath, I MacMillan, Harvard Business School Press Publishing Corp, 2005



Biographical sketch

Professor John Irven MA, PhD, CSci, CChem, FRSCJohn Irven is Director of Technology for Air Products, Packaged Gases Group, where he is responsible for the global R&D and innovation of new products, processes and applications in industrial gases technology. A particular area of focus is on gases for welding and fabrication processes, as well as applications across Electronics, Specialty and Helium gases businesses.Before joining Air Products, John read Natural Sciences at St. John’s College Cambridge, worked for the Plessey Company on Electronic materials and semiconductor processing, and Standard Telecommunication Laboratories on optical fibre technology, in which his PhD is based.He is a chartered scientist, chartered chemist, and Fellow of the Royal Society of Chemistry, and is visiting Professor in Chemistry at Queen Mary University of London. He chairs the TWI (Welding Institute) Cambridge Research Board activities on welding and fabrication, and is member of EPSRC, and RSC solid state committees.New products developed by John’s team have received a number of external recognitions, including a UK Queen’s Award for Enterprise, Innovation 2004, the inaugural ECN Dow Corning Chemical Industry new product innovation award 2004, and endorsements from the UK Chartered Institute of Marketing and TUV Germany.He has over 60 published papers, 25 patents, and has presented a number of invited talks at scientific meetings, as well as on the topic of Innovation.


Back-up slides



Strategic initiative 6 Tools & metrics – Packaged Gases Product lifecycle studies

Revenue & profit

-20

0

20

40

60

80

100

1 3 5 7 9 11 13 15

year

$

Rev

Profit

Introduce Grow Mature Harvest RetireDevelop

ImprovedNew

Improved

Integra-Maxx revenue

0

5

10

15

20

25

30

35

40

FY00

FY01

FY02

FY03

FY04

FY05

FY06

$mm pa

Improved

Improved

New

New



Key lessons learned

• Ensure ongoing integrated cross functional support to avoid the ‘black hole’ syndrome at ‘hand-overs’


0 4


Group

Non-aligned, non-integrated processes

Integrated OLM, P&C & Strat Plan processR&D Group + Dev Group + Commercial Group


FINISH

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