Chemicals Industry Overview

Advanced Materials Systems

Challenges associated with traditional business models of selling materials by volume have become increasingly apparent in industry performance for the past two decades. At the same time, many manufacturing sectors have seen significant rates of erosion in their performance. Yet, industries that are enabled by materials are particularly well poised to capture value in current global markets through the development of systems-level solutions to address globally unmet needs.

The Advanced Material Systems (AMS) framework provides a new way for manufacturers to address these challenges and invigorate value generation by pursuing opportunities in large markets, enabled by materials technologies. This approach has the potential to spur growth, create value and renew innovation by delivering functional solutions (physical systems enabled by the specific performance properties of materials and process technologies) to markets and customers to address unmet market needs driven by global megatrends.

The AMS framework calls for utilizing inventive combinations of materials from existing industry inventories (versus solely relying on discovering new molecules and materials), process technologies, new business models and open innovation partnerships. It is a call to action for players in AMS to rethink conventional approaches. Four areas of opportunity for creating and claiming value in a complex, evolving AMS landscape are:

• Open innovation: Open innovation describes companies’ use of external and internal ideas, technologies and resources to reach the market. Innovations include technology and product development, and approaches to commercialization through partnering to take solutions to market. 
• Systems-level design: In the AMS framework, value-capture lies in the capacity of existing materials to serve as building blocks for integrated solutions, rather than in their inherent commodity value. Deloitte research shows that markets now favour systems integrators over materials suppliers, thereby ushering in a new era of integration engineering.
• Global market trends: Evolutions in global markets point to challenges and opportunities for AMS solutions: 1) carbon-source-agnostic fuels and chemical feedstock as alternatives to petroleum; 2) more emphasis on the circular economy, requiring materials’ reuse to be engineered at the systems level of functional solutions; 3) decentralized and scalable solutions to serve emerging markets; and 4) the increasing role of reverse innovations.
• End-user-defined performance criteria: Implicit to potential value capture in AMS is a keen understanding of real end-user needs and a willingness to permit end-user performance requirements to dictate the design of AMS solutions.

With the AMS approach, innovation moves beyond the frontier of new molecules and materials to functional solutions that use combinations of materials, process technologies, new business models and open innovation partnerships and collaborations to create and grow new businesses.

Case Study – Public-Private Partnership: Carbon-Fibre Composites

Stakeholders Ford Motor Company, The Dow Chemical Company and Oak Ridge National Laboratory have partnered to explore carbon-fibre composites for low-cost, energy-efficient transportation.

Unmet need: Ongoing trends related to sustainability and energy-efficiency have resulted in a need to reduce high-volume-vehicle weight and energy consumption.

Material innovation: The manufacture of lighter-weight vehicles calls for carbon fibre to be developed at a lower cost and high volume. The Dow Chemical Company (Dow) has partnered with the US Department of Energy’s (DOE) Oak Ridge National Laboratory (ORNL) to expand the sources of precursors for the carbon fibres needed to make composites affordable for the automotive industry. 

Process technology: Process and design technologies that enable these materials to be applied to composite automobile frames, as well as manufacturing methods for high-volume applications, will be the key for success. Frames made with these innovative designs and manufacturing processes could potentially reduce vehicle weight by up to 750 pounds.

Ecosystem and business model: To best utilize their combined expertise in materials, process technologies and federal research grants, Ford, Dow and ORNL established a partnership in April 2012 to develop these lower-cost, energy-efficient vehicles, to which the US DOE committed US$ 9 million in June 2012.

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Deloitte Touche Tohmatsu Limited. Reigniting growth: Advanced Materials Systems. Deloitte Global Services Limited. 2012.