Discuss the successful methods of chemical products and business model innovation

Stephanie burns and Gregg zank of Dow Corning talked about successful ways to innovate new products and business models.

Dow Corning’s performance in the past 10 years is one of the neglected success stories in the global chemical industry. Dow Corning, which is privately controlled by Dow Chemical and Corning, is the world’s largest producer of silicone resin. By holding a majority stake in hemlock semiconductor group, Dow Corning has become a leading manufacturer of polysilicon, the raw material for computer chips and solar cells. Dow Corning has been growing steadily throughout its history, but its performance has accelerated significantly in the past six years, in which innovation has played a key role.

Dow Corning has been growing by combining the ability of low-cost bulk silicone with the leading position of silicon-based specialty chemicals. It continues to follow this approach by establishing a new large plant in Zhangjiagang, China (a joint venture with Wacker chemical), which will complement its large plants in the United States and the United Kingdom. Similarly, in polysilicon, hemlock semiconductor is building a new plant in Clarksville, Tennessee, to maintain its capacity and cost leadership.

What’s new is that the company’s sales and profit trajectory are accelerating. This is partly driven by the strong growth of demand in developing markets such as China. Dow Corning’s low-cost manufacturing base puts it in a good position to meet this demand, but it is not sitting on its feet. On the contrary, it vigorously promotes innovation to enhance growth momentum. It has thoroughly redesigned and reinvigorated the development methods of new products. At the same time, it has become a leader in the chemical industry in business model innovation.

In 2002, during the Internet boom, Dow Corning boldly gambled. When xiaometer was released, a new business model composed of online managed, low-cost, cheap commodity silicone sales channel, provided customers with competitive prices, willing to buy bulk, without research or technical support. Many other chemical enterprises are involved in e-commerce, but none of them embrace a business model and effectively divide the company’s products into two brands, because in this case, there is a traditional Dow Corning. On the one hand, it provides customers with professional silicone support, technical support and R & D, and xiaometer.

Dow Corning confirmed the success of this new business model in 2009, when it announced a five fold increase in the number of products available through xiameter. Meanwhile, sales growth based on new product innovation continues to accelerate.

Financial performance proves that. Dow Corning’s sales increased from $2.49 billion in 1995 to $3.37 billion in 2004. In 2004, Dow Corning got rid of the nine-year bankruptcy protection related to breast implants, with a compound annual growth rate of 3%. Net income increased from US $153 million in 1995 to US $289 million in 2004. Over the next four years, its sales grew 62% to $5.45 billion in 2008, a compound annual growth rate of 13%, and its net income increased more than 2.5 times to $739 million. After the fall in 2009, the performance rebounded strongly in 2010; the company’s sales increased by 18% to $6 billion, and its net profit increased by 45% to $866 million, both reaching record levels.

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