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Exploring new models to tempt process industries home
31/10/2018

For many years there has been a trend for companies in many of the process industries to relocate their operations outside Europe, with the loss of skilled jobs, capital investment and to some extent technical leadership. ZLC has been working with the INSPIRE project, funded from the EU’s Horizon 2020 programme, to explore whether the promotion of innovative business models could stem or even reverse this flow. 

Industries such as chemicals, metals, cement, ceramics and others have been driven by traditional business models. Considering these industries in isolation, the models have tended to emphasise factors such as labour costs or proximity to raw materials and feedstocks which favour offshore locations. But the future competitiveness of Europe’s manufacturers (the process industries’ customers) depends on producing differentiated and high added value products efficiently and sustainably. The premise of INSPIRE is that for European businesses to maintain and improve competitiveness as well as to meet growing environmental and other challenges, new business models are needed which marry the needs of the process industries themselves with the requirements of their downstream manufacturing customers. Of particular concern to the latter are Flexibility and Sustainability. 

Process industries and their customers will require flexibility around the use of capacity, the locations they operate in, their sources and types of feedstock, the products they manufacture, the innovations they deploy, and their sources of energy. These flexibilities are essential to create sustainable value chains, which must also show themselves to be sustainable in their environmental and societal impacts. In many ways these goals should be easier to achieve if process operations are based close to their European customers, providing the right business models can be found. 

A Business Model, in this context, should bring together four considerations: who is the customer, what is being offered; how is value for the customer going to be created and delivered; and where is the revenue that makes the model financially viable? 

There is no shortage of business models. INSPIRE has looked at over 100 business cases for different process companies and products and identified five groups or Business Model Archetypes (BMAs), along with their associated clusters of technologies and techniques, which seem likely to deliver the desired flexibility while encouraging process industries to relocalise. Moreover, “digitalization” has been identified as the “enabler and/or amplifier” of these 5 BMAs. 

These BMAs include: 

• Mass customisation (upstream and downstream) 
• Decentralised or modular production 
• Servitisation (where the product is just one element in a wider, service based value chain offer) 
• Reuse and sustainability (as in the development of low carbon and circular economies) 
• Emerging energy carriers

The last one (Emerging energy carriers), as the name implies, involves technologies that are only just being developed and so there are insufficient ‘real life’ cases for analysis. For the other BMAs however, INSPIRE has collated the views of both academic and industry experts (using an Analytic Hierarchy Process) to evaluate the potential impact of these BMAs on the different forms of flexibility, as well as on costs, customers, capabilities, risks, sustainability and corporate identity.  

This work doesn’t give simple answers like “If you are a company of this size with these products, employ Business Model A”. What INSPIRE has been able to do, however, is to create guidelines and a set of four business tools to support business model innovation. These tools have been created specifically for the process industries, but can be integrated with other more generic and comprehensive business model innovation processes to enable companies, with their partners, to conceptualise and implement innovative relocalisation business models. Importantly, the process encourages a dynamic and forward-looking view of the key supply chain factors that may influence the choice of a novel business model. 

The INSPIRE toolkit includes:

 • A Technology Dashboard for each BMA, which shows the relevant clusters of enabling technologies and techniques, and their level of maturity (some are well established in other industries, others still under development).

 • A Business Model Innovation Game for each BMA. This is a method to help companies and their partners and stakeholders to explore their value chains and objectives in the light of the business technologies that are available.

 • A Decision Support Tool. A business can be ‘scored’ against a BMA to determine whether it is ‘ready’ for business model innovation, considering the most critical factors/specifications for that particular BMA. Existence of networks and collaboration, customer centricity, flexibility, cost, profit, capabilities to deliver the required services, strategic alignment with environmental and safety concerns, and understanding market demand seem to be the major factors to be taken into account before implementing any BMA. The four BMAs have been tested with this tool, and the results show that these models have mild to strong positive impact on improving flexibility and seem to be robust under different future scenarios. This can also point to the challenges to be faced and the possible solutions available. Generally, it is expected that challenges are likely to arise from a lack of clarity around scope, obligations and expectations, and misalignment, miscommunication or mistrust between different parties, rather than around purely technical issues. This decision support tool can also be used by firms in process industry to benchmark their readiness for each BMA against the rest of the sector, using the survey designed by the INSPIRE team.  

There is considerable scope to refine and deepen the toolset by analysing further cases and, particularly, by following the experiences of companies who implement Business Model Innovation. The ‘proof of concept’, of course will be if this work inspires significant relocalisation of process industry operations over the next five to ten years.