Evonik keeps the faith in long-term research

Organizing R&D at a major specialty chemical maker like Evonik Industries can seem at first like an overwhelming task. The German firm sells materials in countless formulations to multiple industries. It employs 2,800 researchers at 40 locations worldwide.

But orchestrating the efforts of all these scientists in a meaningful way is actually surprisingly simple, according to Ulrich Küsthardt, the company’s chief innovation officer.

“About 90% of our R&D is very decentralized,” Küsthardt said. Most of Evonik’s researchers spend their time responding to requests from customers and potential customers, meaning that top management doesn’t need to provide much direction or oversight. “It’s locally managed and provides a secure return on our investment,” he said.

Küsthardt was in Singapore recently for the opening of Evonik’s newest R&D center, a relatively small lab that will employ about 50 people. The researchers there will contribute to the other 10% of Evonik’s R&D effort: long-term, potentially transformational scientific investigation that goes well beyond supporting customers of existing products.

“Incremental research doesn’t grow the company by much,” he noted at the launch. “That is why you need transformational innovation.” To Evonik, that means research that can result in whole new markets and product classes. It can also fail and yield no tangible results, Küsthardt said. Evonik needs to engage in the effort “to move the needle in terms of growth.”

Creavis, a business unit that Evonik created to lead its long-term research efforts, will oversee tissue engineering research in Singapore. The Singapore center will also study materials used in three-dimensional printing and technologies for treating surfaces.

Locating the facility in Singapore is also part of an effort by Evonik to move some of its R&D away from Germany, where the company conducts about 60% of its research today, Küsthardt noted.

China, a far more important market than Singapore, is home to Evonik’s largest R&D center in Asia. In Shanghai, the company operates a facility that spreads over five floors and comprises 50 labs. But other than some bioprocess research managed by Creavis, the Shanghai facility focuses on product applications rather than basic research. Küsthardt explained that government policies—specifically protection of intellectual property rights—are not favorable to basic research in China.

Küsthardt is not alone in holding that view. A recent survey of members of the American Chamber of Commerce in Shanghai revealed that many managers of multinational corporations with offices in China choose not to locate core R&D operations in the country because of concerns about intellectual property protection. At most companies surveyed, Chinese research centers were of minimal importance or functioned as just one of many supporting labs.

Evonik chose Singapore for long-term research because it’s a modern city offering strong legal protection for intellectual property rights. Just as importantly, Küsthardt said, the city-state’s universities are centers of excellence in several areas, tissue engineering being one. “We would be dumb if we chose not to come here,” he observed.

The company already has facilities in Singapore producing methionine, oil additives, epoxy curing agents, and a few other products.

The tissue engineering research that Evonik will conduct in Singapore will focus on the medical use of the technology, such as regenerating skin or organs after they’ve been damaged from an accident or illness. But at other locations Evonik is also researching tissue engineering for the purpose of growing artificial meat, despite the risk that consumers may not want to consume such food when it becomes available, Küsthardt said.

Several organizations are currently developing ways to produce meat and leather without animals to reduce animal suffering and the meat industry’s environmental impact. In March, Evonik struck a deal with one of those firms, Modern Meadow. The two will work together to scale up fermentation of collagen, which Modern Meadow uses to produce a material it calls bioleather.

Because basic research into new product lines involves a significant risk of failure, Evonik structures some of the work as “project houses.” The idea is for a group of scientists to get together to pursue a certain research theme. After three or four years, Evonik managers assess the progress made and whether it’s worth keeping the R&D going. If the results aren’t encouraging, the company dissolves the project house.

Evonik reviewed the fate of a project house in Birmingham, Ala., earlier this year and upgraded the facility to permanent status as a global competence center. The facility conducts research on polymers that can be used in the manufacturing of resorbable implants—bone-setting plates or screws that gradually dissolve as they become redundant. Resorbable implants eliminate the need for an additional procedure to remove metal parts left in a patient.

Generally, Küsthardt noted, one focus of Evonik’s research into materials used in medical applications is reducing the cost of medical care. “We need to prevent a collapse of health care” caused by rising medical costs, he said.

Dispersing a project house doesn’t mean that researchers lose their jobs, Küsthardt emphasized. For example, Evonik ended up closing a project house it had launched in Taiwan in 2011 to develop materials for displays, light-emitting diodes, lighting, and photovoltaic cells. “It wasn’t promising,” Küsthardt said. Staffers at the facility moved to Evonik businesses elsewhere on the island, he added.

The focus of research in Singapore could change over time, but the facility itself is permanent, Küsthardt said at the launch. “This is here to stay,” he insisted.

According to Evonik’s internal accounting, basic research into new lines of business is well worth it, even when conducted in high-cost locations like Germany, the U.S., and now Singapore. The firm estimates that nearly $2 billion of its $17 billion in 2017 sales came from products developed over the previous five years.