Managing Innovation: challenges for Bonar Nacht van de Innovatie

20th March 2014

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Bonar, part of Low & Bonar, plcLow & Bonar PLC UK listed company for more than 60

years, with 3 divisions:Bonar (61 % of T/O), following mergerTechnical Coated Fabrics (31% of T/O), acq.2007Yarns (8% of T/O)

Bonar (°2013) organised in three regions:Bonar EMEA Bonar NAFTABonar APAC

Bonar manufacturing internationally on 11 sites:Western Europe (6)Eastern Europe (2)North America (1)Middle East (1)China (1)

± 1200 employees, ± 300 M€ turnover in 2013

EMEA69%

NAFTA24%

APAC7%

Market overview : CivilProduct type Applications

Geotextiles:Nonwovenand Woven

SeparationFiltrationReinforcementProtection

3D geosynthetics and composites(Knitted) geogrids

DrainageErosion controlStabilizationSoil consolidationReinforcement

Construction FibersMicro and Macro

Concrete reinforcement Tunneling and Mining

Market overview : Interior & TransportationProduct type Applications

Spunbond Nonwovens of bicomponent yarns

Primary tuft backings for - Carpet tiles - Dust control mats- Commercial broadloom carpet

- Molded automotive carpet - Car mats

Market overview : Building & IndustryProduct type Applications

3-D monofilament structures

Drainage, ventilation and sound control for :- Green & metal roofs- Foundation walls & hard floors

Pre-vegetated green roof mats

New construction and refurbishment

Technical wovens Screens; Ground coversMushroom fabrics

Nonwovens Filter medium support Bituminous roofing membrane reinforcement

Introducing Bonar• Leading producer and supplier of high quality synthetic

technical textiles, with capabilities in extrusion, nonwovens and wovens , 3d polymeric mats and composites

POLYMERS EXTRUSION TECHNOLOGY Platforms

PP/PET/PA/PE/PVAFilament-> Yarns

Additives for specificPerformance & color

Slit Film/Flat Tapes

Fibres

Woven fabrics

3D polymeric mats

Needlepunchednonwovens

Spunbonded nonwovens

Grids

Our Strategy

• Accelerating growth by expanding into high growth markets for Civil, Flooring, Building products (NAFTA, APAC)

• Excelling in innovation by design & manufacturing customer-specific technical textile components, helping

o By adding functionality to their productso Improving environmental sustainabilityo Helping their processes become more efficient

• Cost & Efficiency leadership to build global business• Complementing organic growth with “bolt-on” M&A:

o E.g. Xeroflor™ prevegetated mats for greenroofs (2012)o Texiplast geosynthetics for Civil applications (2013)

Innovative growth ambition

• 16% of revenues from new (<3y) products (2013: 15.7%).

• @ 1% of turnover spent on RD&I.• Launch of 3-5 new products annually.• Active IP policy: > 150 patent positions worldwide.• Active co-creation with key accounts (over 75% of T/O):

o Joint NPD pipeline, 1-3 year horizono Joint IPo Open innovation with suppliers, peers in valuechain.o Participate in EU-projects

Our drivers for product innovation

Sustainability

• Recycled polymers

• Bio-sourcedpolymers

• “Green” applications (greenroofs, water management)

Functionality

• Flame retardancy

• (Non-) woven surface properties

• Application design

• Multi functionality

Efficiency

• Low weight/high performance products

• Customer Process improvement

• In-house process optimization

A brief history• 2006-2007, key acquisitions by Low & Bonar shaping

leading technical textile nicheplayer with global ambition.

• 2008-2010: economic downturn brings focus on bottomline.

• 2011: CEO states that “Innovation is key in growth strategy”

• 2012: CEO announces merger of 2 divisions to accelerate innovative growth in existing markets:

o 25 m€ invested supporting future growth

• 2013: CEO supports “Innovation & Business Creation” initiatives for NPD, NBD, facilitated by The Bridge

• 2014: CEO announces retirement in February.o T/O +17% since 2010, at GBP 403m (2013)o Profit +40% since 2010 at GBP 26m (2013), ROCE (17%),

2012 questionnaire: own perception on innovativeness of senior management of Low & Bonar

Potential obstacle Main respons

Do we really know the market/our customer needs? need to know customer & market better

Are we too much stuck in tradition? More active scouting of new technology needed

Are we avoiding to take risks in order to protect current business?

risk avoidance behavior dominant

Do we have sufficient/strong cross-functional innovation teams?

cross-functional buy-in too small

Do we accept failures and learn from them? rather avoid risk, don’t start

Do we have the right strategy to support continuous innovation?

not clear & communicated

Where are we now (2014)?

• “Innovation” key element of our strategy (annual report)• Organization structure adapted to accelerate innovation.• Role CEO crucial for “Strategy & Structure”

o Systems, Skills, Staff and Style integratedo Shared Values: Freedom to operate, Accountability, Innovation,

Integrity and Open Communication.

• Global business strategy: alignment with global customers

• Regional operational structure: close to/focus on markets

• Challenge: ways of working in a matrix organizationo Cross-functional, regional roles

Help …… how will it work?

How will it work? New

ways of working

Who do I report to?

Functional &

Hierarchical

What am I accountable for? RACI

accountability matrix

Who will run Bonar? CEO

+ Exec team Where do I fit in?

What does the Global Business Unit (GBU) do? Regional vs Global roles

Four Regions

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Adapting global R, D & I

• From Technology-platform organization to Business-aligned.

o Market-led innovation (pull instead of push)

• From Operations-supporting to Sales & Marketing leverage

o Marketing sets priorities, provides focus, “owns” NPD

• From “first make product, then find market” to “early stage business planning” (

o business plan voted before work starts, prioritized NPD roadmaps

• From “making things better” (existing customers) to “making new & better things” (new markets, new technologies)

Research, Development & Innovation

• Market led innovation and strategically balanced R&D project portfolio (25 fte)

• Expertise Centers (NL, B, USA) designed for executing new product development (NPD) roadmaps aligned with global business.

• Sustained partnerships with leading institutes for polymer research and process engineering (over 10% of R&D exp.)

Stage-gated NPD: a prerequisite

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Recommendations internal NPD audit (2013)

• Focus on ownership (“market-led innovation”) and accountability for NPD projects

• Install “ideation” sessions to fill NPD pipeline• NPD projects rigorously (and uniform) in Stage-Gate®

process.• Next to approving gate-transfer, the installed “Gate

Review Board” should focus on project delivery (E2E).

How are we doing on the innovation monitor?

• We have an active operational idea generation/innovation meeting system per business segment: screens ideas, votes, prioritizes (since 2013)

• We have an accepted “stage-gate” system in place for our key projects (since 2008)

• We have clear metrics to measure innovation (2012)• We are progressing on cross-functional buy-in, ownership

and leadership for our NPD roadmaps.• We have innovation on the executive agenda.

Next steps

• “Innovation” reviewed each quarter by Bonar MT.• Hiring (additional) innovators to develop strategic

initiatives: towards 1.25% R&D expenditure?• We have a highly motivated staff in RD&I. Need to work

on cross-functional roles and management support (“ownership”)

• We defined an ambitious growth agenda. Need to keep focus also on longer term goals and safeguarding core expertises.

Innovation is……..turning ideas into Money

“To turn interesting ideas and fledgling technologies into a company that can continue to innovate for years, it requires a lot of skills, competencies and collaboration”

“ Innovation has nothing to do with how many R&D dollars you have…..Its not about money. Its about the people you have, how you’re led and how much you get it.”

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Track record. Processes and tools. Good practice examples.Lets give it the right priority.

What else?• People! Be diverse, foster informal networks. • Invite “inside-out” as well as “outside-in” views.• Foster cross-functional teamwork! From Idea to Launch• Focus on strategic goals! That’s where our (future) market

is!• Empowerment ≠ Accountability!• Take risks, try new ways, but fail fast!• Our roots:

o Technology based (but market driven)o Long term customer-relations in B2B (but open for new

opportunities)o Take pride in what we make (and listen to the customer/end-user)o Value technical expertise/experts (and respect other functions)

• Select the right managers to manage this!

Thank you!Jan.Mahy@Bonar.com

Q&A