Why Launching A New Material Is Difficult
Hint: It's not due to lack of technology
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I was talking to a former coworker one day (she has since moved out of product development) and we were discussing the topic of launching a new product. We both sort of came to the conclusion that there is a lot of luck involved in getting a new product out into the world successfully and the first few years are almost always rougher than anyone expected. The difficulty isn’t technical issue either.
Let me try and explain.
You Need Strong Demand, Good Technology, And Time
When I wrote Push, Pull, Launch it was really about the driving motivators behind why we develop new chemical products in the first place. There is either a new technology pushing into the market (i.e. compostable polymers, biosurfactants, etc) or there is a market demand that is pulling, such as demand for recycled polyethylene terephthalate. The best situation to be in is to have both a new technology push and a market pull. I’ll make up a scenario to illustrate the point. This is fictional:
Let’s say we’ve invented a completely new polymer that is biobased, can easily be dropped in to replace polyethylene with respect to thermomechanical properties, it can be composted in backyards, and it’s equivalent in cost to polyethylene. The only drawback is that from a water blocking standpoint perhaps our new polymer is maybe 20% less effective than polyethylene.
By all means, this new polymer should be an absolute hit, but I think if it was taken to market today it would still be at least a year or two before any significant sales were realized.
The market pull in this scenario is around a desire for sustainability from companies that produce goods that are often viewed as disposable. Think about the those air cushions that come in your Amazon package or a produce bag. If a company that made those could say, “biobased and compostable,” while not paying more than what they are now it would, in theory, be a homerun.
The technology push would be that this is a new to the world polymer that no one has yet (except in theory us). This new polymer would do well at trade shows, conferences, and the product people who design and make the stuff we use everyday would be intrigued enough to ask for samples.
Even after customers have their samples it might still take a year or more to realize significant sales. Sure, a few customers ordering small volumes initially might occur, but those big orders I think will take some time. Like this curve:
The issue we run into is that our customers need to develop a new product of their own with our new product. They need to test, formulate, scale-up, field trial, and get customer feedback on this new product. If there is new IP being developed it needs to be protected and if there is existing IP out there our customer needs to make sure they are free to practice. Depending on our customer’s application there might be a whole host of questions we’ve never entertained before such as UV stability, stability in immersed water, salt water stability, shrinkage at elevated temperatures, shelf life, and more. All of this testing takes time.
The best case scenario we have here is that our customers are begging for the material and we are the only provider of the material. Further, customers might think they know what they want and while our product might “tick all the boxes,” it might also not work in the customer’s process. Once a customer starts working with this new amazing material they might realize they want something a little bit different or ask for a slight tweak to fit their purpose.
Another good way to look at specialty versus commodities is that a specialty chemicals company would likely do the tweak while a commodity player would not.
Technical Advances Are Not Impactful In The Short Term
The big thing to keep in mind is that even with what many would consider to be a technological breakthrough there is still a long way to go when it comes to customers building viable products. This long product development cycle is part of the reason why Zymergen’s stock price tanked, which I wrote about at length, and it’s also why it takes so long for anything to happen in the chemical and materials space. When building out any sort of timeline for a new chemical or polymer product launch the customer trial stage should viewed as the black box and taken into consideration before profits will be gained.
This is why it’s so important to have product and marketing managers that have a deep understanding of how chemical and polymeric products are developed throughout the whole supply chain. Ideally, these marketing professionals know the customers very well to and have strong visibility into their process. If you develop a new raw material that’s used in a formulation for polyurethanes it is going to take a few years for you to start realizing sales even if you provide value and are cost competitive. Further, there is no guarantee that your customers will be able to get the most out of your product either or that they will be able to process it.
This is the tricky part about being a marketing or product management professional in any chemical company. You need to be able to tell your senior leadership when revenue and profits will start to hit the company’s balance sheet. There are so many unknowns when it comes to a product launch and even with the tailwinds of market demand and new technology there is no guarantee of success or of adhering to your timelines.
A Message From My Sponsor
The team at Origin Materials is working to eliminate the need for fossil resources while capturing carbon in the process. Roughly half of global emissions are associated with the production of materials — a problem that no amount of solar panels or wind turbines can solve. By converting biomass into chemicals, Origin can tackle more than a few industries with a total addressable market of about 1 trillion dollars. Their first product is bio-based, carbon negative PET (polyethylene terephthalate).
Origin’s first plants are taking shape in Sarnia, Ontario, Canada and Geismar, Louisiana, USA. Once operational they’ll start fulfilling the $5.6 billion worth of signed offtake agreements and capacity reservations from companies like PepsiCo, Ford, Nestle Waters, Danone, Mitsubishi Gas Chemical, and Solvay. They are looking to hire passionate chemical industry professionals who believe in doing something different. If you’re interested in working for or with Origin, head to their website. The top 3 types of positions right now are:
Drop It In
The risk around new products is why product teams often work on what we call “drop-in” replacements. The concept here is simple in that customers want to just literally replace a component in their formulation or process with your product and have everything run perfectly. If something isn’t a pure “drop-in” replacement then you need to get people like me involved to figure out if things will work or not. “Drop-ins” are nice because there is minimal risk and significant upside (usually via cost reduction).
We can actually see this example playing out right now in the biobased plastics space with Origin Materials and Avantium. Both companies are seeking to commercialize biobased routes to plastics that would go into a Coca-Cola bottle, but Avantium is trying to do it with a “new” plastic named polyethylene furanoate (PEF) while Origin Materials is trying to do it with polyethylene terephthalate (PET). I suspect PEF is not an exact drop-in replacement for PET and thus the whole value chain downstream of PEF needs to figure out how to use it and understand it’s stability.
Based on the current market situation for PET I suspect that Origin Materials will have an advantage over Avantium in that their customers already know how to process and make stuff out of PET. Avantium on the other hand has a polymer that hasn’t really seen a lot of real world use, but the structure is similar to PET. No one has spent decades using PEF as a food contact polymer and recently PEF’s stability under UV has been shown to be not as robust as PET. If I was going to bet on the two in a race I’d pick Origin.
Solugen is another good example with how they came to market with glucaric acid at a lower cost than the incumbent route, but were still able to turn a profit due to a deflationary cost route. Companies that use glucaric acid knew exactly what to do, how to formulate it, and the Solugen product was an easy drop in compared to some other chemical that did something similar, but just not quite as good.
Drop-ins are good in the short term, but chemical and material companies need to have short, medium, and long term strategies being executed in parallel. New products fall within the domain of medium and long term strategies and even with all the right conditions new products can fail.
Not every bet is going to be a winner.
Were you looking at writing a book on this? You have a lot to share on product development in the polymers / material science space.