Coatings World - October 2011

Christensen argues that disruptive innovations can hurt successful, well-managed companies that are responsive to their customers and have excellent research and development capabilities. These companies tend to ignore the markets most susceptible to disruptive innovations, because the markets have very tight profit margins and are too small to provide a good growth rate to an established (sizable) firm.

Thus disruptive technology provides an example of when the common business world advice to “focus on the customer” (“stay close to the customer”, “listen to the customer”) can sometimes be strategically counterproductive.1

This last Christensen statement unfortunately, is where many small- to mid-sized companies are currently struggling. Their historic “focus on the customer” (“stay close to the customer”, “listen to the customer”) emphasis is now placing them in a quandary as they face not only new technology offered by their larger competitor counterparts but they must organize differently as well.

Are these events or product
introductions disruptive or
transformational?

The U.S. Environmental Protection Agency (EPA or sometimes USEPA) is an agency of the federal government of the United States charged with protecting human health and the environment, by writing and enforcing regulations based on laws passed by Congress. The EPA was proposed by President and began operation on December 3, 1970, after Nixon submitted a reorganization plan to Congress and it was ratified by committee hearings in the House and Senate. The agency is led by an Administrator, who is appointed by the president and approved by Congress. The current administrator is Lisa P. Jackson. The EPA is not a Cabinet department, but the administrator is normally given cabinet rank. The agency has approximately 18,000 full-time employees.

Until the end of November 1970, the coatings industry was essentially marketing one technology to most of the coatings end-users in North America. This coating technology was generally described as a low solids, solventborne paint or coating.

The coatings industry environment was slow in growth and marketed as a necessary afterthought in OEM overall design considerations.

Then, in December 1970 EPA came upon the scene demanding not insignificant but monumental changes in solvent emissions causing the industry to change in an unprecedented manor. The paint and coatings industry was truly “disrupted” by the intrusion of these new regulations. We had to change not only from a technology offering but we had to change the way we did business as well.

So, we conclude that the creation of EPA was a direct disruptive event to the paints and coatings industry causing downstream transformational wave (not ripple) effects, fragmenting our coatings and paints industry forever. These aftershock waves from the introduction of the EPA regulations were NOT disruptive in and of themselves since by definition, they did not change the appeal to a new customer base and they were “coatings” themselves and not “ coating” replacements.

Those of us who were there when EPA came into prominence could certainly argue the term ‘disruptive’ since this event forced us collectively into uncharted technical as well as managerial waters since these new undeveloped technologies caused major disruption throughout the value chains of market activity. Labs would have to add headcount; spray/emersion equipment would have to change in labs and at the point of application; coatings manufacturing equipment would be expanded; training at all levels of the organization would have to be incorporated; inventories would be fragmented to match the market, etc.

Now, almost 42 years later, we have seen significant consolidation due to many influences from globalization to the Wal-Mart effect of end-user price back pressures and yes, the disruptive event of EPA creation.

What about the future disruptions in our industry? Can we predict their occurrence and their effect? The answer is, only partially.

The future of our industry’s profitable success lies in two broad business sectors: management and technology.

In general, management must move down from its abstract insular environment into more of the real portion of the organi-

zation and even into the marketplace. Don’t get me wrong, in our consultation we know some of our industry management is doing this now and some degree of being abstract and insulated is good, but extremes in either direction is not going to work in the global business we find ourselves in today. Is the transferring of time, attention and intelligence from the C-Suite to the “street” a disruptive event or a transformative event? Probably the latter but importantly it will change how we do business.

Historically, coatings have served two primary purposes: to protect the underlying surface and to decorate. Functionality has not been a part of our industry’s offerings to any great degree until now. With the advent of biotechnology, we are seeing the emergence of new, “smart” surfaces that are capable of autonomously recognizing the environment and reacting to it.

Currently being introduced are functional additives. These naturally occurring additives are designed to provide intelligence to coatings. Some of the intelligence provided is: self-healing, detoxification, non-toxic and non-polluting biocides, self-degreasing surfaces and nerve agent neutralizer.

There are other new functional coating systems being discussed. One such system of high interest is an additive that when incorporated into a marine coating, through its interaction with the naturally occurring metals and minerals in the ocean, sets up a battery effect eliminating the growth of barnacles, thus providing less weight, more “slip” resulting in enormous fuel saving for ocean-going vessels.

Are these latter innovations disruptive? Very much so! We feel they provide a whole new life for a coating/paint system in their respective applications and markets. They will drive other innovations more quickly. Most importantly, they will drive coatings and paints from being an after-thought reactive technology to a front-row seat, proactive in the design of new products to be coated. CW