Idea to Market

With a strong focus on innovation and digital transformation, Clariant successfully expanded its intellectual capital in 2018. While managing its patents and trademarks, active innovation projects, and promising scientific collaborations, Clariant developed new digital products and services and implemented projects to improve operational efficiency via digitalization.

2.1. Innovation and Technological Advances

Clariant achieves its growth targets by developing innovative and sustainable products based on state-of-the-art technologies. In 2018, Clariant grew over 3% through innovation projects, surpassing its 2 – 3% target and realizing 1 – 2% sales growth from Top Line Innovation alone. This increase can mainly be attributed to a heightened focus on innovations with high value propositions.

Research & Development spending in 2018 was CHF 209 million, compared to CHF 211 million in 2017. As a share of sales, R&D spending was 3.2%, a decrease from 3.3% in 2017. The higher growth through innovation at slightly reduced R&D expenditures was likely a result of a more efficient and focused R&D organization, which was launched in 2017.

The number of active projects in the innovation pipeline increased from over 370 in 2017 to more than 375 in 2018. This was mainly due to the newly introduced innovation formats iEngine and iGarage, and continuous and stringent innovation portfolio management.

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Management Approach Innovation and Technological Advances

State-of-the-art equipment and infrastructure in eight R&D centers and over fifty Technical Centers formed the basis for successful innovation. In addition, Clariant increased the number of trained innovation belts from 272 in 2017 to over 290 in 2018 — a key factor in improving the project pipeline and increasing the number of Class 1 projects (those with a double-digit million sales potential) from more than 65 in 2017 to over 70 in 2018.

After Clariant revised its Intellectual Property strategy in 2015 and 2016, it abandoned patents that were no longer of strategic relevance, leading to an overall drop in the number of patents. After this strategy adjustment, the number of patents started growing again in 2017. In 2018, Clariant registered another 100 patents, leading to a total number of 6 700 patents at year end. The number of trademarks increased from 8 300 in 2017 to 8 900 in 2018. This was mainly due to the strong portfolio growth of Business Unit Industrial & Consumer Specialties as well as the enhancement of existing trademarks with non-Latin transcript trademarks to improve trademark protection in Asia.

2.1.1. Accelerate innovation by using High Throughput Experimentation (HTE)

In 2018, Clariant mainly aimed to accelerate the innovation process by exploiting the potential of digitalization. By applying the High Throughput Experimentation (HTE) method, which uses automation, miniaturization, and parallelization for intelligent planning and execution of experiments, the time needed to plan, prepare, and screen large numbers of formulations is reduced significantly compared to traditional methods. Since the experimental sequences are operated on small scales, the approach also helps increase resource efficiency. By using intelligent design tactics, the HTE team can maximize analytical data through proper planning and execution in line with the Business Units’ needs and project requests. The analyzed data allows Clariant to find correlations that would not have been detectable with traditional methods. It can also help develop prediction tools that find new digital business models beyond chemical products and thus enable Clariant to become a fully integrated solutions provider. Given the effectiveness of the method, project requests from Business Units to the existing HTE laboratory in Frankfurt, Germany, increased beyond available capacity. To meet demand, Clariant is further expanding its capacity by opening an additional laboratory in the United States, which will be operational in early 2019. Further expansion to Asia is planned for 2020.

2.1.2. Lab Excellence Program

To increase the speed and impact of innovation and decrease time to market, Clariant initiated the Lab Excellence (LabX) program in 2017, which focuses on Clariant’s entire R&D community. The goal of the initiative is to streamline work flows within and across laboratories along the entire Idea to Market value chain, in order to transform the entire R&D system into a lean and agile organization, increase the quality of the research, and boost innovation for Clariant’s customers. In 2018, the first pilots in the Technology Platforms were completed, leading to an acceleration of the examined processes by up to 50%. The identified improvement measures will be rolled out within the R&D community. Together with the consequent introduction of lean principles in the R&D system, this will lead to increased speed in innovation, as sample cycles are synchronized across application and analytical laboratories, and administrative tasks are reduced. Moreover, the implementation of an Electronic Lab Notebook across the company will significantly enhance efficiency by digitizing work flows. In 2019 and beyond, Clariant plans to further expand LabX throughout the organization in order to strengthen the lean innovation culture and the consequent innovation performance management. The achieved efficiency improvements are expected to materialize in reduced time to market, higher innovation contribution margins (COMA), and hence a higher overall contribution to Clariant’s EBIT.

2.1.3. New innovation formats spur disruptive innovation

Finding solutions to unresolved challenges in the industry and exploring strategic growth fields beyond the core business also require collaboration and leveraging the potential of Clariant’s workforce. Therefore, the company launched two new innovation formats in 2018, the iEngine and the iGarage.

iEngine brings together a cross-functional, cross-business team in a series of virtual and face-to-face workshops to collect, prioritize, and refine potential high-quality technology solutions for unmet customer needs. The most promising ideas are selected and pursued in an innovation project. After a 2017 pilot, four additional iEngines were launched in 2018, running on topics across four Business Units and resulting in new Class 1 projects and first feasibility trials at production scale.

iGarage develops strategic innovation growth options at the discovery and early incubation stages by applying agile, design thinking, and lean start-up methodologies to manage uncertainty and drive the development of customer-centric, macro-trend-derived breakthrough innovations outside the current solution space. On behalf of Business Units, a team consisting of dedicated cross-functional talent and supported by external experts and coaches convenes off-site over three to six months to explore an opportunity domain and develop business concepts through constant interaction with prospective customers and other partners. With agility and speed, the teams aim to design corresponding business models, differentiating value propositions, viable technical concepts, and build a compelling financial plan. The ultimate objective is to develop a validated innovation to the point where continuous staffing and funding from the sponsoring Business Unit is secured. In 2018, two pilots of the iGarage were conducted, one with Business Unit Industrial & Consumer Specialties Read more and one on plastics recycling. Moreover, Business Unit Oil & Mining Services conducted the iGarage to develop new business concepts for their innovative pour point depressants used in oil production. Read more, Read more

2.1.4. Scientific collaborations

In addition to internal collaboration, partnerships with external parties are vital to stimulate innovation. In 2018, Clariant engaged in more than 125 scientific partnerships, which is comparable to the number in the previous year.

An example of such a partnership is the collaboration with the Excellence Cluster of the Friedrich-Alexander-University in Erlangen-Nuremberg. The goal of the collaboration is to explore new ways to achieve highly tolerant and flexible production processes that can deal with various internal and external impacts on plant operation, such as variations in feedstock composition or energy fluctuations over the asset life cycle. Modular plants, multifunctional equipment, and unit operations with enlarged operational windows are examples of technical solutions that can be systematically designed and optimized with the tolerant processes approach. To drive the development of tolerant processes further, the research partners are also initiating a public funding platform via ProcessNet, the German platform for process technology, chemical engineering, and technical chemistry.

In collaboration with the China Petroleum Chemical Industry Federation (CPCIF), Clariant organized the first Clariant Chemistry Day in China in 2018. It facilitated in-depth discussions on innovation and sustainability and fostered the exchange between the industrial and academic research sectors. During the event, five young researchers were awarded the CPCIF-Clariant CleanTech Award, recognizing their achievements in the field of sustainable chemical technologies.

2.1.5. Open Innovation initiative

The Open Innovation initiative, managed by New Business Development, identifies collaboration partners ranging from large corporations to start-ups, universities, and other research institutions, thus supporting the Business Units in connecting with external partners around the world. Open Innovation is increasingly focusing on Asia, as local technologies present attractive market-specific growth opportunities with sustainability as a dominant theme. In 2018, more than 300 technology proposals were introduced to the Business Units for consideration.

To further build on regional needs regarding sustainability, the 2018 Sustainability Trend Meeting was held in Shanghai. Multiple Business Units, as well as New Business Development and Corporate Sustainability and Regulatory Affairs (CSRA), gathered to identify innovative business opportunities that address significant sustainability challenges through innovation. The technology challenges relating to these new opportunities will be sourced via the Open Innovation initiative.

In 2018, Open Innovation launched the »Chinese Innovation for China Market« program, encouraging Clariant’s Business Units to explore technologies that help meet local market needs in China. The Business Units are supported by external technology scouts, which use big data analytics and artificial intelligence to find the most promising local innovations.

Under the umbrella of the Open Innovation initiative, Clariant also introduced a »Pitch Day« to provide selected technology providers an opportunity to pitch their technology directly to Business Units. Business Unit Industrial & Consumer Specialties was Clariant’s first business to embrace this new format and conducted a two-day pitching program for the Personal Care and the Industrial & Home Care segments. More than 15 startups participated in the »Pitch Day« and seven of them were selected for further evaluation.

2.1.6. Sustainability screenings

Sustainability is an integral part of the innovation process and a fundamental prerequisite for all new major product developments. Corporate Sustainability Assessments, as defined under Clariant’s Portfolio Value Program (PVP), known as PVP screenings, are thus systematically carried out not only for the entire product portfolio but also for Clariant’s innovation project pipeline Read more

2.2. Digitalization

2.2.1. A two-way approach

Clariant considers digitalization an opportunity that is best tackled in two ways. First, Clariant includes all existing Business and Services Units – including IT – in a continuous effort to transition its business into the digital age. In 2018, all organizational units assessed and realized opportunities to digitally upgrade processes and products in their area of expertise and, where necessary, recruited digitally skilled talents. In addition, the implementation of the »Leading Marketing Organizations« initiative supported the commercialization of products and services with well-designed marketing strategies that covered digital aspects. The use of data-driven predictive tools in procurement for risk management and the use of automated e-auctions are also important steps to speed up purchasing and allow Clariant to buy in a more competitive way, since offers from a large number of suppliers can be easily compared.

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Management Approach Digitalization

Second, Clariant runs a dedicated cross-functional digital program, Digital4Clariant. In 2018, Digital4Clariant further evolved along its three core workstreams »New Business Models«, »Digital@Operations«, and »Big Data and Advanced Analytics«.

2.2.2. Generating new business models

The workstream »New Business Models« incubated several minimally viable products and soft-launched new services in the market for testing. One notable example is Chemberry™, an internet platform that enables customers to easily find chemical ingredients using intelligent search engines. Chemberry™ includes products from all relevant chemical suppliers free of charge, automatically extracting and organizing product information from supplier websites. This platform, which is operated independently to ensure confidentiality and neutrality, currently features ingredients for the personal care industry, but is positioned to be the most comprehensive tool for ingredient-sourcing across all sectors.

2.2.3. Optimizing operations through six clusters

The workstream »Digital@Operations« ran several projects along six digital clusters identified as particularly relevant for Clariant. Clusters deemed to have the biggest impact in terms of cost saving and efficiency improvements are predictive process and quality control, predictive maintenance, digital material flow, connected workforce, retrofitting, and robotics. Clariant also strengthened its collaborations, for example, with universities and technology providers, to better understand and make use of relevant digital process technology developments.

006 DIGITAL INNOVATION CYCLE

2.2.4. Increasing speed and quality of innovation with big data analytics

The workstream »Big Data and Advanced Analytics« identified data science as a method that complements Clariant’s chemical competencies and bears great process improvement potential. As a result, Clariant’s demand for data scientists grew considerably. To meet this growing demand, a new Competence Center for Data Science focusing on data intelligence and process simulations was established at Group Technology and Innovation. While the data intelligence team will primarily support the Digital4Clariant initiatives by focusing on data analytics projects and automated analytics platforms, the process simulations team will focus on process development. Together with Clariant’s high throughput experimentation team, this new organizational set-up is expected to increase the speed and quality of both digital and non-digital products and services development, as well as the improvement of processes.

2.2.5. Attracting and developing digital talents

Lastly, Clariant emphasizes attracting and recruiting candidates with the capabilities relevant in a digital context. It has reviewed hiring processes and educated specific groups in the company with new skills. Examples include training and education measures such as design thinking training for IT, data science training, and events like digital law days.