Compare Innovation Effort and Business Execution to Rate Leaders and Highlight How Innovation Impacts Different Industry Segments
While the chemicals and materials industry is centuries old, it still requires innovation, particularly in using new digital technologies to drive growth in the face of market challenges. To help understand the role innovation plays at top companies in the industry, we compiled the Lux Competitive Benchmark focused on the chemicals and materials market.
The Lux Competitive Benchmark for Large Chemical and Material Companies analyzes 40 leading chemical and material firms using the proprietary Lux Competitive Benchmark, which rates companies based on Innovation Effort and Business Execution. Innovation Effort is a quantitative evaluation of the resources a company invests in developing and commercializing new technologies, while Business Execution is a measure of a company's ability to generate cash and growth.
While not all companies should necessarily aim to maximize Innovation Effort, for many sectors of the industry, we do find a strong positive connection between Innovation Effort and Business Execution. Specifically:
1) Basic Commodity Chemicals Sector: Business performance in this sector is driven by factors like operational excellence, access to end markets, and feedstock advantage, rather than cutting-edge material innovation, and most companies show relatively low impact from Innovation Effort. The Lux Take on innovation here: Invest in advancements like industrial internet of things (IIoT) to more efficiently operate manufacturing, storage, and distribution functions.
2) Paint, Coatings, and Adhesives Sector: These are specialty chemical producers, reliant on developing formulations for specific, and evolving, customer applications, so innovation is a key driver of success. For these firms, there is a strong correlation between Innovation Effort and commercial results. Lux Take: Use materials informatics to efficiently develop high-performance formulations.
3) Diversified Chemicals Sector: These firms develop a large variety of chemicals, so new applications and customer-focused formulations are growth areas. While diversified chemicals show a range of performance, Innovation Effort correlates reasonably well with better Business Execution. Lux Take: Tap into digital platforms to support the roll-up and portfolio management of valuable businesses.
4) Materials Sector: These companies primarily manufacture materials and fabricated subcomponents rather than bulk chemicals. There is also a strong relationship between innovation and business results, as tailoring downstream products to customers is a key driver of performance. Lux Take: Exploit opportunities enabled by digital manufacturing to move to a higher-value position in the value chain.
The Lux Competitive Benchmark for Large Chemical and Material Companies dives into detail about the Innovation Effort and Business Execution mix of top performers across the chemicals and materials industry and in each of the above sectors. The report also provides a geographic breakdown of the Lux Competitive Benchmark.
- Recent report: The Lux Competitive Benchmark for Large Chemical and Material Companies: Assessing corporate innovation effort and business performance (for Lux members only)
- Download the Executive Summary of the report above
- Recent webinar: Playing to Win: Strategies for Accelerating Materials Innovation in Turbulent Times