Europe Reports

Innovation is key for SMEs

By Sean Milmo | August 4, 2009

During recessions SMEs need to rely on innovation to help stay afloat.

Recessions are usually a time of opportunity for innovators in manufacturing. Companies want to ensure that when the economic recovery comes they will be able to market new products to take advantage of increasing demand.

In particular economic crises can offer chances for expansion to SMEs, which are active on the leading edge of new technologies. At the same time, recessions can be periods of great financial difficulties for small companies.

In the European coatings sector the need for innovation is particularly intense in the current recession because, in addition to the requirements for product differentiation, coatings producers have to comply with tougher regulations in areas like emissions of VOCs, recycling and controls of potentially dangerous chemicals.

"These are very challenging times for our industry," Neal Williams, research associate at AkzoNobel's decorative paints division, told a recent coatings conference in Europe. "Those companies that develop innovative solutions in the downturn will thrive in the upturn."

The biggest scope for innovation is in the development of new raw materials, which because of the wide range of chemicals involved can provide openings to medium- and small-sized companies.

In Europe the recession is enabling SMEs to move into or strengthen their positions in niche segments because of their ability to be quicker on their feet than larger raw material suppliers. Nor do they have to worry so much about gaining a fast return on R&D expenditure to satisfy investors and shareholders.

"At times like this there are additional advantages in being small," said Ralf Klein-Kretzschmar, application engineering manager at Nano-X, Saarbrueken-Guedingen, Germany, a company with 50 employees specializing in nano materials for coatings, adhesives and related products.

"We can be much more flexible than big companies and we can be highly responsive to customers needs," he said. "We are also financially independent. We don't have to worry about earning returns for venture capitalists."

Nano-X's business model is based on doing development work for companies in the coatings and other sectors on new materials for which they would have exclusive rights for a number of years.

"Currently we are getting a lot of requests for development projects," Klein-Kretzschmar said. "There seems to be more interest in innovation because companies are looking at ways of staying competitive especially when the economy improves."

One of Nano-X's latest R&D successes has been the development of an anti-corrosion material for a steel coating in a production machine used by Volkswagen, the automobile manufacturer. The material enables the coating to withstand temperatures of 900C.

In the fledgling segment for carbon nanotubes, Nanocyl SA, a Belgian start-up, is successfully competing in the coatings sector with multinationals like Bayer MaterialScience (BMS) of Germany and Arkema of France. As a result of the inroads it has been making in markets like those for aqueous dispersions and for antistatic, flame barrier and antifouling coatings it is planning to expand next year its 40-tons-a-year plant for carbon nanotubes (CNTs) at Sampreville, Belgium.

Nanocyl has been exploiting an affinity which carbon nanotubes have with silicone resins enabling a low loading of CNTs in silicone composites. It has developed an anti-fouling paint combining CNTs and silicone to stop organisms adhering to coated surfaces. Another CNT silicone-based dispersion of the company provides protection to metal plates against temperatures of 1000C.

In addition to demands for improved performance in areas like heat resistance, a top requirement of coating companies in Europe are for chemicals which help them comply with the European Union's environmental regulations.

"Companies are more willing now to look at innovations, particularly if they help them deal with environmental regulations," said Julien Fischer, technical support manager at Interpolymer, Hassloch, Germany, a family-owned specialist in waterborne polymers. "Environmental compliance has become the number one priority, ahead of costs and performance-even during the recession."

"Because of our size we can be faster and more flexible than other companies," he said. "We can also provide a good technical support service. As customers become more interested in innovations they expect their suppliers to put more into technical backup."

Interpolymer has recently increased its R&D personnel to put even more emphasis on research. Among its latest innovations are dispersions and binders enabling waterborne primers to provide the same stain-blocking performance as solventborne ones.

Resiquimica, a Portuguese-based medium-sized resins producer, is close to commercializing a technology that can provide a partial replacement of titanium dioxide in coatings. It comprises a waterborne emulsion of cross-linked unsaturated polyester particles with air voids whose relatively high refraction index gives the dispersion an above-average level of opacity. This allows coatings producers to reduce the TiO2 content in their formulations.

A number of chemical companies in Europe, North America and Asia have over the past decade being trying to develop technologies using the light-scattering properties of voids within polymer or metallic microstructures as a partial TiO2 replacement.

"We think we have resolved the difficulties of developing a production process for this technology," said Jorge Moniz, Resiquimica's technical director. "Customers are interested in innovations which cut costs. Once the recession is over TiO2 prices will go up so this will be a useful technology, while it will also enable us to expand our product portfolio."

The market launch of innovations can be delayed because of the need for customers and other companies along the supply chain to test them first. But with some companies the recession seems to be speeding up the testing procedure.

"Testing of samples can take months or years," said Russell Clarke, business manager at Thomas Swan & Co., a specialty chemicals SME, based in northeast England. "But we are finding that at the moment there are some companies who want to move quickly and get the testing process done as soon as possible."

Thomas Swan is currently producing from a pilot plant samples of an additive comprising inorganic-organic hybrid silsesquioxanes, which have a high degree of anti-abrasion and heat resistance. The innovation has been developed in partnership with TWI, a research company at Cambridge, England.

"TWI chose us because of our technological expertise in this area and our knowledge of the coatings market," said Clarke. "Also we can strongly focus on the development of the specific technology in a way a multinational might not be able to do."

For many SMEs survival is the prime objective during a recession. But an ability to innovate can make their futures much more secure.

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