These strategic focus areas and core processes will result in a set of key actions that lead us to our goal of leadership in coatings and specialty chemicals.
We must deliver on our promises whether they are to the financial market, to customers, to suppliers, or to one another.
We need to build on our strong market sector and geographic positions. The starting point for this is capitalizing on the significant investments that we have made over the last few years, including:
- The creation of additional production capacity in high growth regions, such as investments in China (at our Ningbo multi-site; for new production capability for Decorative Paints; and to add capacity for Automotive and Aerospace Coatings in Changzhou), and in Brazil (Chemical Islands for bleaching chemicals)
- Improvements in capability in mature geographies such as our investment in North East England to build a world class, hi-tech manufacturing facility and the de-bottlenecking of our existing manufacturing sites in Örnsköldsvik and Sundsvall, Sweden
We will need to be more selective in our investments going forward given the uncertainties in the market and our focus on cash and return on investment. Therefore, we are already making difficult choices about where to invest. A good example is the divestment of our North American Decorative Paints business. In 2012, we decided to prioritize our resources and focus on those areas where our end-user segment analysis indicates there will be better growth potential.
Innovation is vital for organic growth and embedded sustainability. Good examples of the kind of product innovation that fit this profile are:
- Emulsion paints which are diluted at the point of use. This provides a sustainability benefit of reduced energy use in transportation
- Dissolvine StimWell biodegradable well stimulation technology for the oil and gas industry, derived from renewable resources (see case study "")
- Dulux Guardian interior wall paint, which has been launched in India with a well-being proposition: low-VOC, low-odor and anti-bacterial
Innovation is also vital for simplicity and focus on cash and return on investment. We need to take an innovative approach to process improvement to cut costs and enhance effectiveness.
For example, we have reorganized our Marine and Protective Coatings business along market sector lines and now operate three distinct, streamlined activities – Marine, Protective and Yacht coatings. They are supported by global organizations in research, development and innovation (RD&I) and supply chain. This will ensure that we take a global approach to innovation and complexity reduction.
By simplifying our product ranges and processes we can deliver care for our customers while ensuring that we maximize our cash and return on investment. Complexity reduction is therefore crucial if we are to capture the benefits created by our considerable global scale.
A good example of successful simplification is in our Powder Coatings business in Europe. Following the acquisition of the Rohm & Haas powder business, we had a very complex product range, with considerable duplication. By creating a much smaller, but better formulated range, we have been able to capture the benefits of scale internally, while offering customers the best quality products, often with shorter lead times and greater availability.
Product line simplification isn’t the only way to take advantage of our global scale. Process simplification can also provide significant advantages. In our Procurement and Finance functions, for example, we are simplifying our back office processes, allowing us to carry out these tasks more efficiently and improve productivity with no impact on customer service levels.
Once we have defined a process, we must standardize it. Core processes are being defined at the highest level of the organization that we can use to leverage our scale. As indicated earlier, we are ensuring core processes at the AkzoNobel level for safety, operational control, continuous improvement, talent management, procurement and innovation.
The use of standardized processes for improved efficiency and effectiveness is a key element of our performance improvement program, which was originally designed to generate an additional €500 million EBITDA by 2014. We exceeded the program’s target for 2012 by delivering €250 million of improvements (the original ambition for 2012 was €200 million). By accelerating the program and by introducing additional measures, we aim to deliver our program benefits a year early, in 2013.
Some processes will also be standardized at other levels of the organization to capture the advantages created by our scale as part of our transition from large to leading. For example, we are standardizing product branding processes within Decorative Paints at Business Area level, while at Specialty Chemicals Business Area level, we will be standardizing process engineering and enterprise resource planning (ERP) processes. Other processes will be standardized and continuously improved at business unit or market sector level.
We aim to have robust and consistent processes for performance improvement, which will be rolled out to the organization through operational excellence training as part of the AkzoNobel Academy. Instead of project-based improvements, we aim to generate these improvements continuously, based on our process and innovation strength.