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There is a quote from Albert Einstein doing the rounds on social media and numerous GIFs that has him say, “Innovation is everyone’s responsibility, not just R&D’s.”

I can find no proof that he did say this, but still part of me likes to think he did. It holds a lot of truth.

Nowhere more so than in the chemical industry, which is constantly at the forefront of scientific discovery. Indeed, the American Chemical Society (ACS) states that, “In 2014, chemical companies invested $59 billion in research and development to support innovation. In fact, the chemical industry invests more in research and development than leading industries like electronics, automobiles and healthcare.”

But while chemical industry R&D investment is important, so is innovation.

As Pat Confalone, Ph.D, Vice President R&D at DuPont Crop Protection, made clear in his speech to the ACS 2013 Entrepreneur Summit, when he said, “We all know the importance of R&D investment and how it leads to the creation of jobs, a vibrant economy and a better quality of life. But there are in fact two major steps between R&D investment and job creation. There first has to be an invention, but that in itself is not sufficient, there really has to be true innovation.”

He continued by comparing Nicolas Tesla with Thomas Edison. “Tesla was an inventor; he spent money to create his inventions, but was unable to monetize them. Edison was an innovator; he made money from his ideas.”

In the modern world, both inventions and innovation are important, but with a global economy and research being conducted on every continent on the planet, in multiple specialties, creating the correct chemical company structure, leadership hierarchy and culture has never been more important.

With over 30 years experience at Evonik (‘one of the most innovative companies in the world’), and in his current role as Head of International Innovation, Peter Nagler is something of an expert on the matter. He set out his thoughts in a recent interview, stating that, “I believe that Evonik has followed a promising approach to foster innovation in global organizations,” although he does admit that, “Innovation in a complex and global organization with more than 35 R&D sites is a challenge.”

In his presentation at the upcoming CIEX 2016 conference that will be held on Sep 28-29 in Frankfurt, Nagler will, “Show examples of what has been achieved so far [at Evonik] as well as things that did not work.”

Additionally, as an event based on the sharing of ideas, attendees will be given every opportunity to give their opinions on how to create a working environment where innovation can thrive. The event will also, “… question whether our traditional organizational and leadership models will be adequate to respond sufficiently to the faster-than-ever changing requirements to innovation.”

As Nagler says, “Innovation is about leadership and the involvement of people. Or, in other words: it is a lot about the right innovation culture in a given organization.”

Sounds like something Einstein might have said, but which he probably didn’t.

You can join Nagler and 20 senior-level speakers from Fortune 500 companies at CIEX on Sep 28-29 in Frankfurt.  Companies participating at CIEX include Henkel,  L’Oreal, Dow Chemical, BASF, Lonza, Covestro, Swarovski, Natura, Dupont, Ineos, DSM, McBride and many more!

CIEX is created for R&D and Innovation experts from the consumer, industrial and specialty chemical sectors. By bringing together all players in the chemical value chain, we create a unique platform for participants to learn, exchange ideas and connect with potential partners.

Join us at CIEX 2016 on Sep 28-29 in Frankfurt! Spot Chemi readers benefit from 20% OFF!

To register, please visit: http://www.ciex-eu.org  Use Promo code: SPOTC20

Photo credit: Mitch Ditkoff

There are many difficult tasks in the work of a chemical trader; making first contact with prospective clients, organising logistics, networking and negotiating, and yet one of the seemingly simplest tasks, pricing, is strangely also the one of the hardest.

Setting an initial chemical product price too high will scare off potential customers, too low and there is no room for negotiation; worse still, no profit.

This has never been more important given the recent rise in online chemical trading websites such as Alibaba and Spotchemi (which hosts this blog page). On these chemical trading portals, a few clicks of the button will show a long list of chemical products on offer with specifications, quantities, location and of course, prices on display. With prices so easily comparable and with trades agreed upon with simple mouse clicks. Chemical pricing strategy and the books that explain it have become a major industry in their own right.

In fact, it seems that there are as many theories on pricing strategy as there are prices. Some of the better ones can be found on the website of the online marketing experts at Kapost. For example they highlight the pricing policy of the Economist magazine. Stating, “The Economist’s recent pricing strategy:

1.  Online subscription, $59
2. Print subscription, $125
3. Onlineand print subscription, $125

At first glance, option two seems useless, offering less value than option three for the same price. However, this option isn’t there to sell print-only subscriptions. It’s actually there to frame the third option, making it more desirable in comparison.

Without option two, consumers have a choice between a $59 online-only package and a $125 print-and-online package—a big price increase, just to receive a magazine in the mail. However, by valuing their print-only copy at $125, the implied value of option three is now $184 ($125 + $59). Suddenly, option three isn’t just the most desirable; it’s also going to save the consumer a ton of money.”

Are the educated readers of the ‘Economist’ seeing the benefits of a well deployed pricing strategy, or falling for a retailing trick?

As discussed on this blog page before (you can read that article here), even expert chemical traders are prey to simple pricing psychology, such as the 99 cent price tag, known as ‘charm pricing’.

This pricing strategy was analysed in detail by researchers Eric Anderson of the University of Chicago, and Duncan Simester of Sloan School of Management at MiT. In their study, ‘Effects of $9 Price Endings on Retail Sales’, they observed that whatever the reason for ‘charm pricing’, price endings made a clear difference in retail sales, as the study even found that, “a standard women’s clothing item was tested at the prices of $34, $39, and $44.To the researchers surprise, the item sold best at $39, even more than the cheaper $34 price.”

Given that much of pricing strategy depends on psychology, logically it is now more important to understand the thinking of your prospective chemical sales target.

As Deloitte’s report, ‘Pricing in the Chemical Industry; Boost your pricing power’, stated, “Customers differ in what they want, when they want it, why they want it, and how they want it. This is where value-based pricing, an innovative way of pricing in order to capture more of the value, becomes relevant.”

The report continues by describing the two key elements as, “The customer-perceived value of a product can reflect need and use.

1.  Need – To price by need, the chemical producer must discover what a customer considers important (such as pre and post-sale support or a product’s specific performance); create an offering that addresses the need; and then price the product according to the customer’s value assessment metrics. The greater the need, the more the customer is generally willing to pay.
2.  Use – To price by use, the chemical producer begins with an understanding of the customer’s desired preferences. The more urgent or complex the purchase, the more the customer should be willing to pay. For example, when a product is used in a hazardous environment, quality expectations are usually higher and a higher price can be charged than when it is used in a regular environment. In practice, this simple concept is often complicated by issues of price transparency and market channels that may make such price discrimination difficult. In those cases, a good solution might ‘tier’ product performance to minimize spill-over effects; classic examples include certifications or quality/purity levels. Understanding how to capture what customers perceive as valuable provides great opportunities for better performance. Without value-based pricing, the risk is high that a chemical company will over-serve or under-serve a customer. The penalty is the same for either mistake: a loss of margin.”

The report concludes with the advice that, “In times of volatile raw material costs, chemical companies need to better understand their customers’ buying behaviour and how their business units price products. Insights into the different steps and players in the value chain of your products reveal which pricing strategies can be useful.”

So it seems that whilst understanding pricing strategy and psychology is useful, it is nothing without first understanding your customer. Overall, while a chemical trader can spend a lifetime studying the pricing of their products, no strategy will work without an understanding of the purchaser.

If you want help studying a chemical market or in developing a product pricing strategy, or even in analysing your prospective customers and competitors, then the professionals at SPOTCHEMI, who host this blog, can be contacted at +420 228 800 800, or by writing to helpdesk@spotchemi.eu

The use of natural gas as a chemical feedstock in the production of polymers, fuels, speciality chemicals and pharmaceuticals may become much easier, following the discovery of a new catalyst to convert it into a base product widely used across industry.

The lead researcher, Prof. Javier Pérez-Ramírez, described the process, saying, “We take a molecule of the natural gas constituent methane (CH4) and replace one of its hydrogen atoms with a bromine atom to form methyl bromide (CH3Br).The latter can be used as a base material in the chemical industry for the production of fuels and a range of chemicals, such as polymers and pharmaceuticals.”

The research team from the Swiss Federal Institute of Technology (ETH) have reported their discovery in the journal Nature, which defined the process as, “An attractive oxybromination method for the one-step functionalization of methane under mild conditions that integrates gas-phase alkane bromination with heterogeneously catalysed HBr oxidation, a step that is usually executed separately. Among many investigated material families, vanadium phosphate (VPO) is identified as the best oxybromination catalyst, as it provides selectivity for CH₃Br up to 95% and stable operation for over 100 hours on stream.”

Whilst previous chemical processes have used the oxybromination of methane via catalysts to convert natural gas to into base materials for use in industry, they release large quantities of waste products. However, by using vanadium phosphate as a catalyst the bromine can be reused. As Pérez-Ramírez explains, “The beauty of our reaction is that it enables the bromine from hydrogen bromide to be embedded back into methyl bromide, using oxygen. In this way, the bromine cycle is closed, and no bromine is lost.”

The online journal Phys.org, explained the advantages of vanadium phosphate as, “Vanadium phosphate is a relatively mild oxidising catalyst, and this is exactly what chemists are seeking in the oxybromination of methane. On the one hand, the catalyst is sufficiently strong to allow hydrogen bromide to react with oxygen at the catalyst’s surface. On the other hand, the catalytic action of vanadium phosphate is too weak to oxidise the unwanted methane and the brominated reaction products.”

Vladimir Paunović, a doctoral student in Pérez-Ramírez’s team, further described the effectiveness of the new catalyst to ETH’s in-house reporter Fabio Bergamin. Saying, “Our method makes it possible to brominate methane in a single step at atmospheric pressure and at temperatures below 500 degrees Celsius. This makes it an attractive route for industry.” He continued by explaining how the new process is based on a stable a reaction. “This is because bromine is a halogen. Halogens react very readily with methane, which is desirable in this case, but they also attack the catalyst. Our catalyst resists the corrosive reaction environment, which is essential for its potential industrial application.”

The research is even more significant given the discovery of a large number natural gas fields in recent years. As more and more of these fields are tapped, the need for a more efficient method to process the natural gas extracted into base feedstock for use in the chemical industry will become more prominent.

As Ramirez himself points out, “We are currently experiencing a boom in natural gas exploration. If you include unconventional, hard to access reservoirs, such as shale gas or coal bed methane, estimates indicate that gas deposits will last for at least 100 years.”

If those estimates are accurate, and with the discovery of vanadium phosphate as an efficient catalyst, will the chemical industry of the future be able to stop worrying about the price of oil?

You can view the YouTube clip of the reaction here.

Photo credit: colourbox