Deloitte challenges manufacturers to develop new solutions to reignite growth

Deloitte publishes new insights on the Advanced Materials Approach at Global Chemical Think Tank in Antwerp

Brussels, 17 December 2012 – Deloitte organised the Global Chemical Think Tank on 11-12 December 2012 which brought together the leading industry players in Antwerp – a strategically important location for the chemical industry. The event was organised on the occasion of the publication of the report Reigniting growth: Advanced Materials Systems, from Deloitte Touche Tohmatsu Limited's (DTTL) Global Manufacturing Industry group. The Advanced Materials Systems (AMS) approach calls upon manufacturers to boldly rethink value creation and the means of achieving it, to revisit innovation, and forge new frontiers of opportunity. Additionally, the report concludes that companies have the opportunity to develop targeted functional solutions, enabled by materials and process technologies, to create and capture value in a complex, evolving landscape.

The report analysed the financial performance from 2003 to 2011 of over 6,000 publicly-traded companies across various manufacturing sectors. The results revealed that companies serving as systems developers and integrators of functional solutions achieved nearly one-and-a-half times greater return on net assets versus that of the companies that just provide materials. As these results show, leading companies are being rewarded for bringing functional solutions enabled by materials technology to end markets. The report also analysed several hundred start-up technology companies and interviewed leading venture capitalists and entrepreneurs to understand how these players are accelerating commercial development of advanced materials.

"Manufacturing companies are looking for new methods of innovation and approaches to limit cycle time for new products," says Tim Hanley, DTTL Global Manufacturing Leader. "The AMS approach enables 'liquid and solids' companies to reengineer their business in a more favourable and profitable way to serve the global market as systems integrators. Many leading manufacturing companies are already benefiting from AMS by incorporating important properties into already discovered and available materials to create functional solutions that address global trends."

Reigniting growth and ensuring a competitive chemical industry in Europe

According to the report, the AMS approach encourages companies to think differently about growth and challenge their current innovation and commercialisation processes. "After gradual declining margins due to a slowdown in the rate of new materials inventions, consolidation, and limited advancement, AMS guides manufacturing companies to new solutions for growth and profitability," says Duane Dickson, DTTL Global Chemicals Sector Leader. "It provides a roadmap to translate evolving market demands into future opportunities that create value."

Europe has excellent prospects for a solution and R&D driven chemical industry, supplying advanced materials and functional solutions addressing the megatrends (i.e. worldwide mega problems and challenges, or the big wants and needs of society in energy security, sustainability, and demographic changes – the big opportunity areas of the future). Stefan Van Thienen, Partner Chemical Sector Leader at Deloitte Belgium adds: "We are convinced that the chemical industry in Europe will be part of the solution addressing these megatrends. This requires chemical companies to transform from traditional business models in supplying liquids and solids to becoming solution providers, engaging in innovation beyond materials. The AMS approach will help the European chemical industry transform and prepare for growth."

Deloitte's AMS study suggests that with the current materials base (polymers, ceramics, metals and semiconductors) and technology base (nanotech, biotech, additive manufacturing) breakthrough solutions can be developed by combining them in unique new ways.

In particular, the following evolutions in global markets appear to be defining challenges and opportunities and call for companies to fundamentally change how material solutions are manufactured and deployed:

Necessity to build new business models

AMS also calls upon manufacturers to branch out and expand beyond the traditional mind-sets of product development, partnering, and business models. The report suggests that substantial market share stands to be captured across numerous segments by companies willing to transcend and venture beyond conventional paradigms.

The AMS approach to business models calls for a revaluation of the role of business models themselves. There are important ecosystem components and variables to be considered in commercialising new functional solutions, such as markets, customer behaviours, and environmental forces such as economy, ecology, culture, and IP landscape.

In the AMS framework, successful businesses cannot hold onto rigid approaches and methodologies for system development and commercialisation, even if it means changing a specific material one has started with at the beginning of the development process.

To download the Reigniting growth: Advanced Materials Systems report, please visit: www.deloitte.com/reignitinggrowth