Why there is no way around innovation

Sebastian Smerat, Head of Tribe Customer Innovation, on innovation tools and goals at thyssenkrupp Materials Services.

We are the largest materials distribution and service provider in the Western world. We benefit from long-standing customer and supplier relationships. We are expanding in growth markets. Why do we, as a successful company, still think about the topic of innovation? Quite simply, because the world in which we live and do business is changing dramatically and we want to continue to offer our customers solutions that address the issues and challenges along their supply chains. Digitalization offers us a range of opportunities that we want to exploit in order to use smart ideas to make more efficient, resource conserving and resilient material supply chains possible.

Innovation target: Digital supply chains

To put it in a nutshell: We want to use innovations strategically to digitalize supply chains, make them transparent and thus enable new forms of value creation. In this way, we are meaningfully expanding traditional materials distribution, which moves physical goods, to include digital services. After all, every material flow also generates a flow of data and information. Used correctly, these can lead to better decisions for our customers, whose needs are at the heart of our innovations.

Our customers are already signaling that they give the topic of digital supply chains top priority. This is only natural, because digitalization helps to precisely record and better plan the often intransparent flows of goods. Deliveries based on precise data and forecasts make goods available exactly when they are needed: Just-in-time or just-in-sequence. At the same time, for example, we reduce the storage costs incurred by material that has not (yet) been called off and save on emissions. This is because data can also help us to optimize transport capacity utilization and select suitable routes. This is an enormous value-creation potential for our customers, which is becoming increasingly important and goes far beyond the physical flow of materials: "Bits replace tons" sums up this relationship.

Materials Services Innovation Process Sherlock

But how does an idea become a new business model? This is best explained by one of our most successful current projects: pacemaker. With its excellent forecasting accuracy, the tool addresses the problem that suppliers often keep material in stock "on spec" in order to be able to deliver. This material is not called off completely, but generates costs at the manufacturer or in the warehouse.

With pacemaker, we have succeeded in solving a challenge faced by numerous industrial customers with pinpoint accuracy – by focusing on customer needs. And this is precisely where we benefit from our in-house innovation process Sherlock, which accompanied us step by step during development and showed us the way: from a prototype to a pilot – a so-called minimal viable product – to scaling the solution. Today, pacemaker has become a new company, a corporate venture: thyssenkrupp Materials DataflowWorks.

What makes our innovation successful?

Of course, not every idea is successful and not every promising approach becomes a corporate venture. But the basis for successes like pacemaker is a structured innovation process that involves early evaluation of ideas and constant alignment with our strategic goals.

Ultimately, the key to successful innovation is the ability to identify new ideas while managing the risks associated with implementing new ideas. In addition to Sherlock, we particularly need to be in touch with our customers, the collaboration, expertise and perspective of our employees, new skills in the digital service area, and an eye for the most promising opportunities. Last but not least, it's also about having the courage to make mistakes in order to learn from them and do better next time.

That's not easy. But a company like Materials Services has been around for over 120 years for a reason. Anticipating the needs of our customers and not only meeting but also shaping the framework conditions of our business is a matter of course for us. Today we have a process to help us do just that.