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[ Journal of
Business Chemistry
Vol. 14, Iss. 2 www.businesschemistry.org
] 06.2017
The academic journal for management issues in the chemical industry
Frithjof Netzer
Digitalization of the chemical industry
Andreas Konert and Harald Kaiser
Marketing of chemical parks: Challenges and perspectives
Benedikt Waerder, Sigrid Stinnes and Oliver Erdenberger
Design thinking as driver for innovation in the chemical
industry
Sebastian Eidam, Klaus Kurz and Eva Brockhaus
Implementation of Open Innovation in Chemical B2B
Companies
Published on Behalf of the Institute of Business Administration at the Department of Chemistry and Pharmacy,
University of Münster and the Center for Industry and Sustainability, Provadis School of International Manage-
ment and Technology
▀ Editorial Board ▀ Publisher
Editor-in-Chief The Journal of Business Chemistry (ISSN 1613-9623) is
Prof. Dr. Jens Leker, Professor for Management in the jointly published by the Institute of Business Admi-
Natural Sciences, Managing Director of the “Institute nistration at the Department of Chemistry and Phar-
of Business Administration at the Department of Che- macy (University of Münster) and the Center for
mistry and Pharmacy”, University of Münster Industry and Sustainability (Provadis School of Inter-
Prof. Dr. Hannes Utikal, Professor for Strategic Ma- national Management and Technology). It is publis-
nagement, Managing Director of the “Center for In- hed every four months as an open access journal.
dustry and Sustainability”, Provadis School of Inter-
national Management and Technology ▀ Subscription
Executive Editors Online-Subscription is possible at:
Birte Golembiewski subscription@businesschemistry.org.
Ruth Herrmann The articles are available for download free of charge
Bernd Winters at www.businesschemistry.org.
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▀
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The Journal of Business Chemistry is covered by the
tian Kortmann, Prof. Dr. Thomas Lager, Dr. Stefan Pi-
following abstracting and indexing services:
cker, Dr. Carsten Schaffer, Prof. Dr. Stefan Seeger
- EBSCO Publishing
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The Journal of Business Chemistry (JoBC) focusses on
vier Engineering Information, Inc.
current developments and insights at the intersection
of management and chemistry, biotechnology or
▀
pharmacy.
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The JoBC provides an international forum for re-
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stitutes, public authorities, consultancies or NGOs to tion (University of Münster) and Center for Industry
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ISSN 1613-9623 © Journal of Business Chemistry
Vol.14, Iss. 2, June 2017 Contents Letter from the Editors Commentary Digitalization of the chemical industry Frithjof Netzer............................................................................................................................................26 Practitioner’s Section Marketing of chemical parks: Challenges and perspectives Andreas Konert and Harald Kaiser......................................................................................................29 Design thinking as driver for innovation in the chemical industry Benedikt Waerder, Sigrid Stinnes and Oliver Erdenberger.........................................................41 Research Paper Implementation of Open Innovation in Chemical B2B Companies Sebastian Eidem, Klaus Kurz and Eva Brockhaus...........................................................................51 ISSN 1613-9623 © Journal of Business Chemistry
Vol.14, Iss.2, June 2017 Letter from the Editors Medication for the sick patient Does the chemical industry lose its future? The ongoing wave of consolidation is profoundly chang- ing the landscape of the chemical industry. Companies in the industry are more and more focused on M&A activities. But what are the reasons for this development? One might assume that the in- terest level is one decisive contributing factor. Another reason could be the lack of embedded in- novative capabilities within the industry. Overall chemical companies nowadays seem to be more into financial engineering than chemical engineering. Over the last decade no chemical block- buster has reached the market. In the wake of this development two trends are apparent. Firstly, companies focus on improving their operational efficiency by M&A activities. Secondly, players in the market align and restructure their product portfolios towards higher specialization. The pres- ent issue of the Journal of Business Chemistry addresses the chemical’s industry current dilemma and provides some helpful insights for managers. The first article of this issue is the commentary „Digitalization of the chemical industry“ by Frithjof Netzer, Chief Digital Officer BASF Group, which on the one hand highlights the importance of digi- talization and on the other hand presents how an international operating German company is fac- ing the challenges arising from it. Furthermore, it provides insights into three different approaches on how the chemical industry can benefit from applying digital technologies. In the practitioner’s section Andreas Konert and Harald Kaiser from the Infraserv Höchst GmbH shed light on the topic of “Marketing of chemical parks: Challenges and perspectives”. The authors present how site managers create and implement an effective and efficient marketing strategy. In this context, they also emphasize on the importance of defining the target group, specifying ade- quate value proposition and using the most promising communication channels. The article „Design thinking as driver of innovation in the chemical industry“ by Benedikt Waerder, Sigrid Stinnes and Oliver Erdenberger shows the relevance of systematic thinking during the inno- vation processes. In addition, they present empirical evidence for Design Thinking as an adequate instrument to overcome barriers as well as including stakeholders in a company’s innovation process. Sebastian Eidam, Klaus Kurz and Eva Brockhaus offer in their research paper „Implementation of Open Innovation in Process B2B Industries“ an overview of applied open innovation approaches and the motivation for implementing them. In the executed study based on data from 42 online sur- veys, they assess the potential to use open innovation for exploration and exploitation purposes and the need of top management support for suc cessful implementation. Please enjoy reading the second issue of the fourteenth volume of the Journal of Business Chem- istry. We are grateful for the support of all authors and reviewers for this new issue. If you have any comments or suggestions, please do not hesitate to contact us at contact@businesschem- istry.org. Ruth Herrmann Thomas Kopel Bernd Winters (Executive Editor) (Executive Editor) (Executive Editor) ISSN 1613-9623 1 © Journal of Business Chemistry
Digitalization of the chemical industry
Commentary
Digitalization of the chemical industry
Frithjof Netzer*
* Chief Digital Officer BASF Group, Project Leader BASF 4.0,
BASF SE, Carl-Bosch-Str. 38, 67056 Ludwigshafen, Germany, http://www.basf.com/digitalization
The chemical industry – much like all other indus- The anticipated potential of digitalization in the
tries as well – has entered the digital age. The tar- chemical industry is high (see figure 1). Revenue
geted use of data in order to create growth or growth of 3.1% p.a. and cost reductions of 4.2% p.a.
increase efficiencies is at the very core of digitali- are quoted in a PWC study (2016) focusing on dig-
zation. The term “data is the new oil” describes the ital business models, smart supply chain solutions,
strategic importance of access to data, skills to store smart manufacturing applications and a digital-
and process it and to turn it into valuable customer- ized R&D as sources of such opportunities. Lifting
centric solutions. this potential requires the skilled use of digital core
Key trends like an ever-rising connectivity, technologies and foremost the readiness of an
increasing transparency, quantification and profil- entire company for a digital transformation.
ing as well as mass customization impact the way Digital core technologies typically include cloud
business is done. These trends are fueled by tech- technology, IoT (internet of things), big data ana-
nological step changes in computing speed, data lytics, mobility devices, augmented reality and arti-
storage and mobile data transmission rates – to ficial intelligence. Depending on the industry con-
name but a few. text 3D printing and robotics can be added to this
Chemical companies have embraced this devel- non-comprehensive list. All of them are enabling
opment at a later stage than many other indus- companies to create solutions that differ from the
tries. They often operate several market steps away status quo of running supply chains, production,
from end consumers who are closely linked to some R&D, marketing and sales.
of the key digital trends. Additionally, enterprises Readiness of a chemical company to drive a dig-
place a high value on safety and security issues due ital transformation can be linked to four different
to the nature of chemical production (e.g., toxici- factors:
ty, risk of explosion, dual use) – a concern that has
impacted the development speed of data-driven 1.) Digitalization is reflected in the corporate
applications in the IT and OT (Operations Technol- strategy
ogy) environment of these companies. 2.) Organizational structure embeds digital
Figure 1 Digitalization is driving growth (adapted from an internal graphic provided by BASF).
Estimated effects of Industry 4.0 by 2020 (dollars per year)
USD 907 billion
Investments
USD 421 billion
Cost Reduction
USD 493 billion
Revenue increase
Journal of Business Chemistry 2017, 14 (2) 26 © Journal of Business ChemistryFrithjof Netzer
Figure 2 Digital Transformation at BASF (adapted from an internal graphic provided by BASF).
increased pro- ideas inspired
Agile research & development
new solutions
ductivity and by data A fertile innovation culture
competitiveness
▀ New solutions by integrating data from customers
and partners
▀ Customized application performance
▀ New opportunities through modeling, simulation
and high-performance computing
▀ Bridges towards academia, technology providers
and start-ups more satisfied
customers
improved pro-
Higher efficiency ducts and work-
Faster growth
Digitally connected manufacturing pro- places Business models for the digital age
cesses ▀ Strengthen existing business via digital services
▀ Support our workforce to access key information ▀ Create new offerings
Supplier by using mobile devices ▀ Gain access to new customer segments
Customer
▀ Predict unexpected plant shut downs and optimize ▀ Develop digital ecosystems
production processes
▀ Connect manufacturing and business processes for
enhanced decision making
more customer
Superior customer responsive- value
ness
An integrated, digital supply chain
▀ Closer partnership with key customers
▀ Improved supply reliability
▀ Reduced costs across the end to end supply chain
▀ Enhanced data visibility and transparency to sup-
port decision making
roles & responsibilities in a sustainable way and adjust important parameters accordingly.
3.) IT systems support agile solutions and Depending on the need, customers can use one
safeguard the company with a resilience-based or more OASE connect functions. BASF is current-
security system ly testing the offer together with some of its cus-
4.) Corporate culture embraces iterative tomers. Their feedback is used to develop and fur-
improvements, agility and data literacy ther enhance the software.
BASF has included digitally enabled solutions, Smart Innovations.
horizontal and vertical connectivity as well as work-
force enablement to recognize and capture the In catalyst research, BASF implements quick
value of data in its Digital Vision (see figure 2). Based tests based on mathematic models and experi-
on this vision more than 15 lighthouse projects with ments. A much simpler view of complex connec-
a dedicated business case were generated in 2015, tions through networked data structures is the
followed by a total of more than 100 projects in result. This enables BASF scientists to test hypothe-
2016/17. A few examples can showcase this ses much earlier and in a much more targeted man-
approach. ner, making better use of innovation opportunities
and shortening development time.
Digital Business Model: OASE connect. For automotive paints, BASF uses real time data
from customers’ painting line to optimally adjust
In the near future, BASF will be able to support the color based on customer needs. This allows
customers in the gas treatment business through BASF to ensure that the vehicle is painted in exact-
the OASE connect online platform. With the help ly the right color in a shorter amount of time.
of the platform, the business team strengthens its In enzyme research, BASF has combined its own
service and offers BASF’s customers real-time access and external information into huge data records.
to important information. The functionalities On this basis, and using simple tools, researchers
include, for example, a software that helps cus- can quickly identify the most promising candidates
tomers find the optimum settings for their system for further development.
Journal of Business Chemistry 2017, 14 (2) 27 © Journal of Business ChemistryDigitalization of the chemical industry
ings, 2016 Global Industry 4.0 Survey - Industry key
Smart Manufacturing. findings, p. 5
BASF’s Ludwigshafen Verbund needs roughly
20 million metric tons of steam per year, which are
generated by the production plants and the site's
three power plants. In addition, the power plants
produce the majority of electricity needed at the
site – and sometimes more than is required, so that
electricity can be fed into the public grid.
However, electricity is a complex business as
market prices fluctuate every 15 minutes. Comput-
er programs help to buy and sell at the best times.
For this, however, a precise forecast is required as
to how much steam and waste heat the produc-
tion plants supply at the site, how much steam the
power plants have to contribute and how much
electricity is needed. This also fluctuates depend-
ing on the time of year, the weather and the eco-
Supplier Customer
nomic conditions.
To date, the total requirements have been deter-
mined manually combined individual forecasts of
the plants. A new statistical model, based on large
amounts of data, now provides even more precise
calculations: The software takes into account, among
other things, historical and up-to-date information
on production shutdowns, weather data and eco-
nomic indices. The program searches for relation-
ships and establishes connections with the ener-
gy demand.
This has been very successful: The forecast for
steam demand has already improved by up to 60
percent. The former procedure will now be gradu-
ally replaced and applied to other areas. The new
program supports BASF also in electricity trading
to make better price forecasts.
These use cases demonstrate the potential of
digitalization in a chemical industrial context. Mak-
ing digital transformation a key priority of the CEO
is paramount to a successful implementation. BASF
has started a journey that builds awareness, under-
standing, practical skills and good practice sharing
amongst all employees. Different formats and mes-
sages are used to reach a broad range of commu-
nities with the overarching claim “We have a chal-
lenging route ahead but the confidence of the right
direction”.
Digitalization is here to stay. It is in everyone’s
hands to contribute to its shaping.
References
PWC (2016): Industry 4.0: Building the digital
enterprise: Forest, paper and packaging key find-
Journal of Business Chemistry 2017, 14 (2) 28 © Institute of Business ChemistryMarketing of chemical parks: Challenges and perspectives
Practitioner’s Section
Marketing of chemical parks: Challenges and
perspectives
Andreas Konert* and Harald Kaiser*
* Infraserv GmbH & Co. Höchst KG, Brüningstraße 50, 65929 Frankfurt am Main, Germany
Managing industrial parks is a multi-billion euro business with special importance
to the asset intensive chemical and pharmaceutical industry. Site managers face
many challenges, one of them being attracting new investments to the site. This arti-
cle describes how site managers may create and implement an effective and effi-
cient site marketing strategy by defining the relevant target group, specifying the
adequate value proposition and using the most promising communication chan-
nels. The authors illustrate their recommendations with their site marketing expe-
rience from one of the most suc cessful industrial parks in Europe, the Industriepark
Höchst.
1 Introduction: Marketing specifics of ize learning processes between companies on site
industrial parks and the relevant external stakeholders (e.g. acade-
mia, policy makers).
Industrial parks can be found worldwide. In Ger- Service operators argue that outsourcing site
many, the chemical industry has 37 (VCI, 2012) indus- operation activities to a specialized site operator,
trial parks. Industrial parks are clusters of research, allows companies in the chemical and pharmaceu-
production/manufacturing and service activities tical industry to focus on their core competencies
of several companies that share one physical loca- of developing, producing and selling goods. Fur-
tion (see for instance, Wildemann 2016, or Suntrop thermore, it creates cost and risk synergies in shared
2016). From the outside an industrial park is seen infrastructure assets and provides a sufficient mass
as “one entity”. One can distinguish between so for holding expert knowledge available at the site.
called major-user parks that are operated and often Operationally, industrial park operators highlight
owned by the largest tenant at the site. The most the potential for reducing customers’ costs, increas-
prominent example in Germany is the BASF Lud- ing their speed and flexibility and improving the
wigshafen site. Sometimes, several large tenants quality of services.
provide services to each other and the minor users And the leverage site operators are working on
at the site, as is the case at CHEMIEPARK.LINZ. On is significant to their customers in the chemical
the other hand, there are multi-user parks that are and pharmaceutical industry: Analysis shows that
owned and operated by a professional service com- costs of infrastructure and services outlined above
pany that does not have chemical production assets are between 10-15% of the revenues of chemical
at the site, as is the case with Infraserv Höchst, the companies (with core costs in the field of energy,
owner and operator of the Industriepark Höchst in waste management, logistics and facility manage-
Frankfurt. ment) and around 5% of pharmaceutical sales
Site service companies at industrial parks offer (Wildemann, 2016).
a range of different services (see Hofmann/Michel In the following, the term marketing will be
2016). The site service company may organize the used to characterize (a) the general challenge of
management of the facilities, the treatment of creating and managing business to business rela-
waste water, the grids and pipelines for all compa- tionships between the industrial park operator and
nies on site, as well as heating and cooling, ware- his potential customers and (b) to characterize the
housing, logistics or health and safety services (see tasks of the respective department within the indus-
figure 1). In addition, the site company may pro- trial park operator company.
vide recruitment and training activities and organ- Industrial park operators face specific market-
Journal of Business Chemistry 2017, 14 (2) 29 © Journal of Business ChemistryAndreas Konert and Harald Kaiser
Figure 1 Site services at industrial parks (source: VCI Sector Group of Chemical Parks, 2013).
▀ Analytics
▀ Environment/safety/
▀ Vacant land health
▀ Authority
management
▀ Site security ▀ Warehousing
▀ Maintenance/
▀ Emergency manage- ▀ Energies/utilities
workshops
ment/fire service
Production ▀ HR services
▀ Purchasing
▀ Supply and disposal
networks ▀ Logistics
▀ Site restaurants
▀ Roads and railway ▀ Hazardous goods
▀ Engineering
tracks handling
▀ Basic and advanced
▀ Disposal training
ing challenges. They act on business-to-business service offered within the park. Changes in quali-
markets and offer their services to customers in ty and costs will directly affect the producer’s prof-
the chemical and pharmaceutical industry. The it situation. Another important aspect is the path
demand for services in industrial parks ultimately dependency of industrial park development. Some
depends upon the development of the consumer industrial parks exist for more than 150 years; dif-
markets where chemical and pharmaceutical prod- ferent production activities have been built over
ucts are used. If consumers or regulation, for exam- the years, hazardous goods have been produced,
ple, decide against plastic bags in Europe, the cor- the land has been used in different ways over time.
responding production will decrease and there will All these aspects have to be taken into account
be lower demand for the related industrial servic- when an industrial park tries to attract new invest-
es. For the chemical industry customer, a buying ments. So marketing of industrial parks is interest-
center structure is typical, with multiple persons ing from a broad range of marketing perspectives,
on the customer side having influence on the buy- encompassing business-to-business marketing,
ing decision. The decision making process on the service marketing, information economics, princi-
customer side is highly formalized and profession- pal agent theory and path dependency theory to
alized in terms of methods and tools used for select- name but a few (Hutt/Speh 2003).
ing the right production site. The services offered
are highly individualized and cannot be stored 2 Case study: Site Marketing at Infraserv
(Peters et al. (2013), Homburg (2017), Zeithaml et Höchst
al., 1985). Some of the services may only be offered
within an industrial park (e.g. site security, firefight- The Infraserv Höchst Group developed from
ing), some others may be offered to external loca- Hoechst AG in 1997 and is the operator of the indus-
tions as well (e.g. facility services, consulting). Typ- trial park in Frankfurt Höchst. In 2016, it had a
ically, long-term relationships between industrial turnover of approximately 1 billion Euros and 2,500
parks and their (potential) clients can be observed; employees organized in eight business segments,
personal interaction prevails over mass media mar- including energy and waste management, site serv-
keting. ices, logistics and real estate, as well as education
When an industrial park attracts a new client and training specialist Provadis GmbH.
to its location and the client builds his production This highly diversified portfolio with at first
facility in the industrial park, a significant lock-in glance seemingly unrelated services under one roof
effect occurs after the investment in the park, due does, however, add superior value to clients. How
to the capital-intensive production assets. Further- so? Rather than just focussing on steady site oper-
more, the producer is in some cases bound to the ation, Infraserv Höchst puts its focus on partner-
Journal of Business Chemistry 2017, 14 (2) 30 © Journal of Business ChemistryMarketing of chemical parks: Challenges and perspectives
Figure 2 Life cycle of an industrial park (source: own representation).
>> CUSTOMER NEEDS
>> LAUNCH >> GROWTH >> MATURITY >> CONSOLIDATION >> EXIT
Lead Time Penetration Market Share Cash Flow CSR
Approval Volume/Quality Availability/Costs Marge/CapEx Present Value
R&D Marketing/Sales Operations Finance/Controlling Communication
>> THE CUSTOMER’S NEEDS CHANGE IN THE COURSE OF THE LIFE CYCLE
>> VALUE PROPOSITION OF INFRASERV HÖCHST
▀ Site selection ▀ Relieve Core Business ▀ Transparency and ▀ M&A/post-merger ▀ Site Develop-
▀ Approvals, Start- ▀ Flexible Capacity Controllability ▀ Multi-user Concepts ment
up, Scale-up Adjustment ▀ Standardization ▀ Cost Reduction ▀ Dismantling,
▀ HR Concepts ▀ Support Investments and Improvement ▀ Outsourcing Restructuring,
▀ Plan, Build, Run and Infrastructure ▀ Bundling/Synergies ▀ Portfolio Manage- Conversion
across Locations ment ▀ Sale, Shutdown
▀ Communication
>> SITE OPERATOR OFFERS SITE OPERATION, MANAGEMENT AND CONSULTING
ing with clients to dynamically develop their sites. sustainable solutions for the site as a whole. The
Every client business and every client site under- site management company may also help with all
goes one or even several cycles over time. One way legal and regulatory requirements that need to be
to describe this site development is to differenti- fulfilled for creating new factories and may find a
ate between launch, growth, maturity, consolida- flexible solution for the infrastructure as well, based
tion and termination/exit phases, as depicted in on their experience and reputation gathered from
figure 2. Obviously, however, businesses and sites multiple projects with many clients in the past.
have different lifespans, investment cycles, profit- The growth phase is characterized by market
risk-profiles and so on. From our understanding, penetration. The volume and/or the quality of the
one key to successful site development is to align products offered are seen as key success factors.
both aspects – the needs of the chemical and phar- Therefore, the marketing and sales departments
maceutical company in a specific phase of the prod- lead on this, with production keeping pace as much
uct life cycle on the one hand, and the site param- as possible. Site operators must be able to offer
eters on the other hand - in the most effective and flexible capacity adjustments while relieving the
sustainable way. core business activities. During the maturity phase
For example, in the launch phase a product tran- customers are confronted with intensified compe-
sitions from the development/approval stage into tition. Thus, availability and costs of products shift
the production phase. In pharmaceuticals, for into focus. Infraserv Höchst, for instance, provides
instance, when new active ingredients are involved the ability for continuous improvement and stan-
the clock tends to be ticking as patent protections dardization as well as the exploitation of synergies
are limited and pharmaceutical companies try to across secondary processes. In order to remain com-
sell the patent protected drug as long as possible petitive in the consolidation phase customers focus
in order to generate profit. Speed in scale up of pro- on cash flow, margin, finance and controlling. The
duction activities is therefore of the essence for site service provider’s value proposition consists of
companies in the pharmaceutical industry. But sub- developing multi-user concepts after M&A activi-
optimal sizing of production facilities or lack of flex- ties, initiating cost reduction processes and adapt-
ibility of infrastructure assets, for example, may ing the service portfolio to changing needs. The last
prove to be costly in the future. Site partners like phase is described as the termination/exit phase.
Infraserv Höchst can play a vital role in making the For customers, present value of their business is of
launch fast, successful and finding flexible and thus utmost interest. Accordingly, services like disman-
Journal of Business Chemistry 2017, 14 (2) 31 © Journal of Business ChemistryAndreas Konert and Harald Kaiser
tling, restructuring and conversion, in addition to try predicts only 1.5% growth per year until 2030
sale and shutdown, are in high demand. All in all, (VCI, 2016). Compared to Asia with a predicted annu-
in the course of the lifecycle the site operator must al growth rate of 4.5%, we can consider the Ger-
be able to respond to the varying customer needs man and European chemical industry to be at a
and must offer an integrated solution to enable mature stage (VCI, 2016). Given this macroeconom-
clients to adapt to their changing business needs, ic environment, attracting new investments to
not just at Frankfurt-Höchst, but nationwide at existing industrial parks in Germany must be under-
other client sites and parks. stood to be a very difficult task.
One gauge for the success and long-term per- Marketing managers at industrial parks should
formance of a site operator is the amount of invest- be aware that overcoming general investment bar-
ments attracted to the site it is managing. In the riers for the chemical industry in Germany is hard-
case of the Industriepark Höchst with more than ly possible. To put it simply, most investments in
90 chemical, pharmaceutical and services compa- industrial parks stem from existing customers,
nies and approximately 22,000 employees on expanding, overhauling or replacing their existing
around 460 acres, this number totals 7 billion Euros production assets, as well as subsequent invest-
of investments since the year 2000, representing ments by the site operating company. Following a
an average of more than 400 million Euros per year. recent study from German Trade and Invest, on
Each investment strengthens the site´s base average there are 6 new large production facilities
and points to a promising future, attracting fur- built in the chemical industry per year out of which
ther investments in turn. Investments are in fact only 1-3 are relevant for industrial parks (GTAI, 2014).
very hard to come by, however. Many sites there- So site operators are correct in putting a major
fore invest strongly in site marketing activities. But focus on this most important segment and in close-
what strategies can the marketing department use ly following and accommodating the development
in order to attract investments? Chapter 3 will give of their existing key accounts. Infraserv Höchst, for
some methodological background on finding out example strives to achieve close links between man-
“where to play”. Chapter 4 will go into more detail agement, key account management, sales and oper-
on customers’ decision making processes and ”how ations and the various levels of the client organi-
to win” from a marketing perspective. Chapter 5 zation to best anticipate and support all develop-
will look at the buying centre in more detail and ments in order to facilitate growth. Marketing has
offer some guidance on “where to put your money” an important but supporting role focused on activ-
in the most cost-effective way. ities advancing customer satisfaction, loyalty and
promotion.
3 Where to play: Selecting the most prom- Beyond that, Infraserv and the business devel-
ising target segments opment agency of the region FrankfurtRheinMain
carry out a value chain analysis together with cus-
Since 2010 the chemical industry has been grow- tomers at the site in order to further develop the
ing in Germany and Europe at a rate of 2.5 % per production network at Höchst, to identify blind
year. The German association for the chemical indus- spots or gaps which can be filled by new additions
Figure 3 Investment in Industriepark Höchst since 2000: approx. €7 billion (source: own representation).
+341
+352
+365 +370
+310
+383
+644 +496
+600
EUR 7 billion
+370 +400
+350
2000 2006 2008 2010 2012 2014 2016
Journal of Business Chemistry 2017, 14 (2) 32 © Journal of Business ChemistryMarketing of chemical parks: Challenges and perspectives
to the value chain. One example of this logic is tion. This profit function includes the dimensions
shown by one company investing into a small plant “profit per square meter”, “revenue per square
to capture the surplus CO2 from the production meter” and “growth potential over the next five
process of another company at the site, as is the years”. The different dimensions were weighted by
case with Westfalen AG and Celanese Corporation board room members and applied to the 36 mar-
at Frankfurt-Höchst. ket segment profiles. Eight market segments were
In order to develop an effective strategy for excluded from further analysis as they did not sig-
attracting new customers to existing industrial nify adequate profit potential.
parks, industrial parks need to combine their knowl-
edge about company’s external developments Step 3: Estimate the probability of an invest-
(investment probability by industry segments; deci- ment in Europe
sion criteria for selecting industrial parks; knowl-
edge about buying center structures on the site of In order to further narrow down the list of poten-
the customer) with the knowledge about internal tially relevant market segments, the probability of
conditions (knowledge about available land; knowl- an investment by a company – belonging to one
edge about goals for attracting new investments; of the prioritized production profiles – was ana-
knowledge about one’s own company profit func- lyzed in a multi-method, multi-source approach.
tion). Infraserv Höchst developed a five step While the basic work was done in 2010, the results
approach for attracting new customers to the Indus- are frequently updated to readjust the site mar-
triepark Höchst – this approach can be individual- keting activities. This approach screens publicly
ly adapted for use in other industrial parks too: available data sources such as ebsco.com, chemie.de,
chemanager-online.de. In addition a semi-stan-
Step 1: Define target segments dardized questionnaire was used for expert inter-
views to evaluate the probability of investment in
Firstly, Infraserv Höchst has identified 7 poten- production facilities in Europe. As a result, new pro-
tial target segments with 36 sub-segments in total. duction activity and growth is predicted in innova-
Examples of these segments include pharmaceu- tive fields such as pharmaceuticals, specialty chem-
ticals (the production of active ingredients), spe- icals, biotechnology (medical and industrial uses)
cialty chemicals (e.g. construction chemicals, fra- and green technology (with renewable energy). The
grances, food additives, pigments) and other process following table summarizes Germany’s competi-
industries. tive position and lists the strongest competitors.
These potentially attractive market segments As a result investments seemed likely to result
have been profiled according to their patterns of from around 17 out of the initial 36 industry seg-
consumption of services offered by Infraserv Höchst. ments analyzed.
Eight profiles with a specific need structure in the
fields of production, energy, waste management, Step 4: Identify relative competitive strength
logistics, safety, space (square meter) have been
identified. These encompass, for example, volume Finally, the competitive position of Industriepark
oriented specialty chemistry with a continuous pro- Höchst was analyzed from a customer perspective
duction system, a high energy demand and need (concept of competitive advantage, see von der
for waste management, logistics, safety and space. Gathen/Simon, 2002). Therefore, in-depth inter-
Another example consists of research based drug views were conducted with existing customers (site
producers using batch production, with a high managers) in order to better understand
demand for logistics service and medium need for
energy, safety and space. Production profiles of a) the importance of different criteria when
smaller research based entities with lower produc- selecting a production site and
tion activities and logistics companies with large- b) the perceived performance of the indus
space requirements but little need for energy or trial park compared with that of the next
waste management services have also been pro- best alternative.
filed. All market segments have been matched to
a specific production type. The results of the interviews were integrated
into a matrix of competitive advantages. Each deci-
Step 2: Determine profit potential/customer sion criterion was depicted according to its relative
lifetime value importance (as evaluated by all respondents in a
specific market segment) and according to the
The market segment profiles have been evalu- industrial park’s relative performance (as compared
ated on the basis of Infraserv Höchst’s profit func- with the strongest competitor evaluated in a spe-
Journal of Business Chemistry 2017, 14 (2) 33 © Journal of Business ChemistryAndreas Konert and Harald Kaiser
cific segment). Consequently, the industrial park’s performing” in this area from the customer per-
competitive advantages (above average impor- spective.
tance of a criterion and better performance than
competitors), competitive disadvantages (above Step 5: A focused marketing strategy
average importance but performance lower than
competitors), fields of overperformance (low impor- As a result of this four step approach, 12 mar-
tance of the criterion but performance beyond com- ket segments have been identified as most impor-
petitors) and the levels of consistency (low impor- tant for active site marketing activities. The list of
tance with low performance) were identified. these target segments is updated yearly. It goes
The analysis showed that the industrial park’s without saying that new customer insights are
competitive position varied significantly depend- then worked into the industrial park’s value analy-
ing on the market segment studied. sis and marketing and sales materials. In order to
For example, respondents in segment A – high develop a precise value proposition, a matrix of
quality, research intensive development and pro- competitive advantages is very helpful: Those
duction of active ingredients for pharmaceuticals aspects identified on a segment basis as compet-
– highlighted relevant competitive advantages in itive advantages (thus receiving high relative impor-
the field of fast and reliable construction of new tance scores and representing a stronger perform-
facilities, and access to high quality personnel and ance compared with the strongest competitors)
research collaborations in the neighborhood as form the basis for the value proposition. These
relevant competitive advantages of the Indus- aspects are used in the individual sales pitch and
triepark Höchst compared with all other produc- can be adapted to specific customer requirements.
tion sites analyzed. These characteristics support-
ed the company’s goal of ensuring a short time to 4 How to win: Finding the right market-
market for patent protected new drugs produced ing strategy
at Industriepark Höchst. Competitive weaknesses
such as, for example, the higher tax burden com- For the selected target segments, a detailed cus-
pared with low cost production sites abroad, were tomer acquisition strategy was developed. For each
not seen as very significant. The direct proximity segment, the market specifics were identified and
to end consumer market was not seen as an impor- answers to the following questions were found:
tant characteristic, the park was seen to be “over-
Figure 4 Competitive assessment of chemical industry regions (source: own representation).
Pharma
Biotech Specialty Basic Bulk Petroche-
Agro Polymeres
Renewable Chemicals Chemicals Plastics micals
Energy
Competiti- Medium
veness of (only if pro-
Medium to Medium to
Chemical High High High Medium duction
low low
Industry in network
Germany exists)
Strong USA,
USA, Middle Middle Middle
Competi- USA USA Middle
Asia East, Asia East, Asia East, Russia
tors East, Asia
Strong Head on Difficult
Category
Position position position
Germany’s competitive strengths:
Process-, R&D-, customer-knowledge and employee qualification
Journal of Business Chemistry 2017, 14 (2) 34 © Journal of Business ChemistryMarketing of chemical parks: Challenges and perspectives
Figure 5 Matrix of competitive position (source: own representation).
Competitive Competitive
high
Disadvantage Advantage
▀ Higher Tax Burden ▀ Fast and Reliable Cobstruction of
New Facilities
▀ Access to High Qualified Person-
Relative Importance
nel
▀ Access to Research Collaborations
„Konsistent“ „Overperforming“
▀ Direct Proximility to End
▀ Higher Labor Costs than
Sites abroad Consumer Market
low
low Performance high
1) Who are the main players in the relevant tial evaluation of the potential sites and the cre-
market arena? ation of a short list of up to 10 sites that will be
2) What are the phases of the customer deci evaluated in more depth. Most of these activities
sion process? will be conducted undetected and with an air of
3) How can the industrial park influence the great secrecy, involving only few people within the
different actors in the buying center? client organization below board level and maybe
a handful of external partners. This is done with
In order to answer these questions, internal good reason, as adding capacity is a competitive
workshops were held with Infraserv Höchst sales maneuver in any market and may be subject to
managers, key account managers and relevant mar- counter-measures by competitors. Also, listed com-
ket partners. The decision process and the role of panies may want to pay close attention to timing
different actors were analyzed through semi-struc- their announcements just right so that they can
tured interviews. On this basis, a segment-specif- avoid the need to react to market rumors with ad-
ic marketing strategy was developed. hoc notices.
The decision making process of the potential So by now we have prioritized market segments
customer was taken as a starting point, i.e. the and have a solid understanding of the general deci-
chemical or pharmaceutical company looking for sion making process. But how can the industrial
a new production site. Even though the chemical park be positioned best in the sphere of the buy-
or pharmaceutical company may have experience ing center and its influencers without spending
in selecting production sites, this is typically an enormous amounts of money? First off, industrial
extensive and highly formalized decision process parks have to realize that the target segments will
(Robinson/Faris/Wind, 1967). share some similarities but will probably be quite
The site selection process can be structured into different in the detail. Chemical companies, for
seven phases. From the customer’s point of view, example, organize the site selection process in var-
the process starts with the perceived need for a ious ways. Typically a formal team is installed for
new production site (phase 1). Then the relevant screening and selecting potential production sites.
criteria for searching and evaluating potential sites This team consists of experts in the field of pro-
are defined and operationalized by the customer duction planning, controlling, research & develop-
(phase 2) before the customer actively invests time ment and purchasing and is often formally struc-
and money in searching and defining a long list of tured as a project within the company. This team
potential sites (phase 3). Phase 3 ends with an ini- defines the site selection criteria, searches for the
Journal of Business Chemistry 2017, 14 (2) 35 © Journal of Business ChemistryAndreas Konert and Harald Kaiser
relevant information (stages 1-3 in the above men- industry associations and business development
tioned site selection process) and proposes a short agencies. Relevant information sources for chem-
list of potential locations for the new production ical companies in the site selection process include
site. While all relevant competencies are represent- international databases summarizing the techni-
ed in this team, the final decision on the short list cal characteristics of industrial parks (homepages
is made by the chemical company’s board and the e.g. VCI, ECSPP), industry associations conventions,
head of the production units. After this decision a industry publications and personal networks and
core team with experts from the production and experiences of the actors involved. The confiden-
purchasing departments is put together to gath- tial nature of the site selection process on the cus-
er in-depth information, make on-site visits and tomer side rules out any direct marketing and sales
start the negotiations with potential production approaches geared at lead generation. Imagine an
sites. Again, the final decision is made by the board. outbound marketing campaign centered upon call-
Sometimes, the process is steered by a compa- ing up companies asking them for upcoming invest-
ny’s “site selection and benchmarking department”. ment projects. Chances of not talking to the right
Thus, while the board of the chemical company person are high and even if you were, he or she
may be characterized as the key promoter of the would not want to let you know or even talk to you.
site selection decision, the team also consists of Chances of not making a good impression this way
expert promoters and they are coordinated by the are also very high. Regarding these first phases, the
site selection department as expert and process main marketing task is to make as much informa-
promoters (Webster/Wind, 1972; Backhaus/Voeth tion as possible publicly available and position the
2014). Important influencers in the process are plant industrial park in the relevant networks so as to be
manufacturers that, together with the chemical in the relevant position to enable the potential
company, develop the new production facility and client to make an informed decision. Chapter 5 will
share their expertise with different industrial sites provide more details on this.
worldwide. Further important influencers include
Figure 6 Phases of site selection process (source: own representation)
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 Phase 7
Identifi- Building of
Definiti- Call for Direct Signing Production
Need cation of
on of Propo- Negotia- of Letter Site&Start
Detection a long list
Selection sals tion of Intent of Pro-
of poten-
Criteria duction
tial sites
Signs toget-
Operatio- Performs a Starts
Detects her with the The custo-
nalizes first evalua- Asks for direct
the need industrial mers’ pro-
Customer
relevant tion of detailed negotiati-
for a park a letter duction faci-
criteria for potential technical on with
new pro- of intent and lity is finally
selecting sites and informati- industrial
duction clarifies all built and
production craetes a on park; many
site technical and production
sites short list of interac- economic starts
relevant tions parameters
sites
Establish a
Marketing Objective
relationship
Industrial Park’s
with clients’
Survive the down selection and lead key personnel Closely monitor and manage content and
the short list of potential industrial based on image of your company and your site
sites oppenness and
commitment
of regardless of
the outcome
Journal of Business Chemistry 2017, 14 (2) 36 © Journal of Business ChemistryMarketing of chemical parks: Challenges and perspectives
Marketing objective: Survive the down selec- site.
tion and lead the short list of the potential indus-
trial sites. 5 Where to put your money: defining an
efficient communication mix
The other phases are no longer characterized
by marketing activities but mostly driven by sales Even though the most important decision mak-
and top management. The customer makes the ers for site selection are the chemical company’s
first move in phase 4 with the call for proposals. board and the head of the production department,
Here the customer lists his needs and describes his a broad variety of actors need to be influenced using
requirements in a technical manner. This is also marketing measures to increase an industrial park’s
usually the first time he or his consultants will speak success in acquiring new potential production activ-
with the industrial park directly. This will always ities for its site. Four directions for any marketing
be a lengthy and time consuming process that will communications mix can be defined according to
go back and forth, but reaching a more detailed the marketing activity goals (push vs pull market-
level each time. This process helps the client eval- ing) and the character of the communication activ-
uate the different proposals and reduces the num- ity (direct vs. indirect customer communication).
ber of names on the list. This process should be If the industrial park focuses on a direct com-
used to build up trust and establish viable relation- munication line with the (potential) customer, the
ships with the potential customer. The goal of the activities may be defined as:
industrial park in this phase is to be a good host,
give open and honest answers to all potential client A) customer push-marketing activities (e.g.
questions and ask the right questions in return. newsletters; trade fairs; activities of sales
Ultimately, the potential client’s needs are highly representatives) which are designed to
specific and often the potential client will not con- promote the industrial park’s services direct-
tinue to the later stages because their project does ly to the customers’ buying center or as
not fit the site. Nevertheless, the industrial park B) customer pull marketing activities that
wants to leave a good impression in case the poten- address a customer need, highlight the indus-
tial client ever comes back or is asked about his trial park’s benefits indirectly (e.g. by using
experiences with the industrial park. case studies) and thereby create a pull for the
industrial park’s services.
Marketing objective: Establish a relationship
with clients’ key personnel based on openness and Another important way to promote an indus-
commitment regardless of the outcome. trial park’s service is to work with intermediaries
such as the agency Invest in Germany, chambers
In phase 5, the customer starts negotiations of commerce or business development agencies.
directly with an even shorter list of industrial sites. Depending on the character of a specific activity,
In phase 6, a letter of intent is signed and all tech- the activities may be characterized as:
nical and economic parameters are clarified. In
phase 7, the production facility is finally built and c) push marketing activities which focus on
production eventually starts. These final stages are influencing intermediaries directly with the
exclusively driven by top management, sales and goal of using the intermediary as an ambas-
finance. However, the number of employees involved sador for the industrial park’s services.
directly or indirectly on the client side will grow d) pull-marketing activities for intermediaries.
during these stages. A good marketer will make Typical activities here focus on supporting
sure that client information needs are met in a con- the intermediary in creating demand for the
sistent manner and all information promotes the industrial park’s services. For this goal, indus-
site in the best possible way. This is a complex trial parks may support industry studies, cre-
process as it may range from between 18 months ate joint internet sites or become involved in
and five or more years for major projects. A consul- joint activities.
tative selling approach is used by Höchst industri-
al park during this process, with the aim of contin- Infraserv Höchst uses all four options in its com-
uously adapting to the potentially changing spec- munications mix. The “Site Excellence Newsletter”
ifications of customer demand (Moncrief, Marshall may be understood as a push-oriented medium
and Lassak, 2006). aimed directly at potential clients. It is a regular
push medium to engage with the site marketing
Marketing objective: Monitor and manage close- network and (potential) clients about current park
ly content and image of your company and your developments and best-in-class service examples.
Journal of Business Chemistry 2017, 14 (2) 37 © Journal of Business ChemistryAndreas Konert and Harald Kaiser
In addition, a range of other push-oriented activ- agent theory and path dependency theory have all
ities focusing on the indirect client are also used. been helpful in developing the marketing strate-
Infraserv participates in and hosts regular network- gy and implementing it effectively.
ing events with site marketing partners, such as As the chemical and pharmaceutical industry
on-site business breakfasts or invitations to trade faces more and more pressure from competitors
fairs and events. A pull-oriented approach is illus- outside Germany and Europe, site service compa-
trated through the presentation of content on the nies have to position themselves in the best pos-
website and via other relevant channels. Here all sible manner to be shortlisted by relevant cus-
relevant information that is showcased is high- tomers. Growth opportunities exist not only exter-
lighted in such a way which supports screening nally through acquiring new customers, but also
processes and builds brand preference. Pull-orient- internally through offering extended or better serv-
ed communication activities aimed at indirect clients ices to already existing customers. The past has
are also used. Infraserv makes sure that all relevant shown that it is very difficult to realize large site
multipliers have access to the relevant informa- settlements by companies. Therefore, focusing on
tion conveyed via the various relevant network part- gaining “smaller” investments from existing cus-
ner media channels based on standardized tem- tomers might be the better option.
plates. Marketing of industrial parks is a challenging
endeavor, facing a high level of market and tech-
6 Summary and Outlook nical complexity. Insights from a variety market-
ing perspectives can be applied to support practi-
This paper has presented the marketing insights cal decisions in this context.
of a site service operator. The established concepts 1. Marketing of industrial parks means that
in the field of business-to-business marketing, serv- industrial services are to be sold. These services
ice marketing, personal selling as well as the under- have a high impact on a client’s profit position and
lying theories of information economics, principal are subject to extensive decision making process-
Figure 7 Effective marketing communication mix (source: own representation).
Indirect customer communication
Direct customer communication
Work with intermediaries
Direct contact with the customer
e.g. Invest in Germany
Newsletters
Intermediaries (e.g. German trade and
Trade fairs invest; chambers of commerce)
Push Sales representatives / personal sel- Incentive programmes for marketing
ling partners
Offer the product
directly to the market Promotion (phone / e-mailing marke- Example: Networking Events
ting)
Example: Infraserv’s Site Excellence
Newsletter
Focus on image /reputation
Collaborate in industry studies with
Pull economic development agencies /
Success stories / publications / presen- Invest in Germany / Consultants
Create demand for the tation at industry conferences
product/service Be listed in rankings and site-selection
Advertising / sponsoring data bases
Example: Content on Websites and Example: VCI chemical parks associati-
through other relevant channels on
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