In recent years, the vast majority of companies in the industrial gases sector have had to re-evaluate where the next wave of growth will come from under the stifling weight of the financial crisis – which has left innovation prospects in Europe looking bleak at best. But as I discovered during gasworld’s Europe Industrial Gas Conference last week, there are some rays of prosperity amongst the storm.
CEO and founder of gasworld John Raquet, mused, “How does an industry like ours move forward with lower growth prospects in our key industries, and how can we carve out higher growth than we are likely to see?”
Echoing gasworld’s 2016 conference theme of ‘Carving Out Growth,’ the quest for how to actually achieve this growth was thrust into the spotlight and fundamentally, it appeared to come down to two things; essential investment in in-house research and development (R&D) and the ability to keep up with digitalisation.
It is no secret that carving out growth in the current European market has been a difficult slog in recent years, with the overarching conclusion to emerge from the conference being that despite the tediously flat economy, the industrial gases market is a resilient one, with R&D and in-house investment the key to bouncing back in these uncertain times.
But despite this key necessity for added-value in innovation becoming more and more crucial, it was revealed that the major Tier One players spend just 1% of their average annual revenues on R&D.
Sue Graham Johnston, BOC’s Managing Director, described this as “a real opportunity to use as leverage for the future,” with current R&D budgets being a major “underexploited investment in our industry.”
In an enlightening presentation, Johnston questioned, “So why is industrial gas innovation essential? In the UK, on the brink of the Brexit, to the US with the unusual election happening there – society is changing. Markets are clearly changing, customers and the way in which we communicate is changing; and in a digital world, innovation becomes the norm.”
“We are seeing technology substitution as opposed to well-made manufacturing operations,” she continued. “The potential is there to integrate technology with what we do, so we can offer what is needed to customers before they actually know that they need it – that is the big opportunity with digitalisation.”
It is estimated that there will be 50 billion digitally connected devices by 2020, which has practically unlimited potential to create significant new business value. Cisco Systems, Inc. estimated that a mind-boggling $8 trillion in revenue will be created solely from digitalisation in the next few years. Johnston explained that, “This will come from innovation and new revenue sources, from asset utilisation, supply chain and logistics enhancements, and through employing productivity enhancements. Growth across the industry might only be 4-5% in this time, but layer some of these technologies on top and it will accelerate everyone’s base businesses.”
One man who appeared to hold all the answers in how to stay afloat in this sector awash with stunted investment, was Aldo Belloni, recently retired member of Linde’s Executive Board. I for one was enthralled by his after dinner speech at the Conference Dinner.
R&D spend is simply not an option, especially today when the world has become that flat
He started by emphasising, “Manufacturing is not over; it’s just different. Since the financial crisis (in 2008/2009), R&D spending in our industry has curbed significantly.”
“Now, innovation begins and comes from management – management has to create a culture of innovation within the company, which implies Aristotle’s definition of courage; the courage to fail. Failure, if it is not due to foolhardy, has to be seen as a step to success. We must fail our way to success.”
“Today, and digitalisation is a perfect agent for it, you can really plan serendipity. Smart solutions can easily be extrapolated for totally different applications. We must invest in our most creative employees and give them the courage to fail and succeed.”
He concluded by saying, “Our industry, your industry, is blessed by the variety of fields where we can put our know-how to fruition. R&D spend is simply not an option, especially today when the world has become that flat.”