The New Business Development

The New Business Development is a division of a Dutch globally operated chemical company that does research and commercializes new technology innovations. Each project realized by NBD divisions goes through the Stage-Gate process, a roadmap for moving an innovation from idea to launch. Stamypor is a project taken up in 1995 and is today approaching the end of the 2nd stage of its development. A large amount of money has already been invested into this project, but it still requires €16 million to be continued. If the company decides to stop the Stamypor resin, further expenditures won't be necessary, and DSM will move on without wasting money. It is also essential to determine whether Stamypor's market potential is enough to justify such expenses.

So far, the project has been really expensive for the company. It has generated several issues that can be reported by Rein Neiland to the DSM board.

The company has to deal with direct competitors that offer similar products but all have specific advantages such as Montell that has a strong patent position or Brugg Compound that has competitive prices. Indirect competitors also do exist and offer processes for mixing resins with additives. Improving DSM's production process is also essential to keep competitiveness but it requires important investments. Moreover, Stamypor's future is uncertain as its main client, Ciba, has lost interest in the project.

Thus, Stamypor has a small market potential and has to face an increasing competition. As the project requires high investments to compete the market, it is probably better for DSM not proceeding into the third stage of development.

How does the company could have avoid these issues? What are the main mistakes that have been done? What could be learned from the past and what should DSM do today?

The root of all problems is the lack of analysis, both in terms of Stamypor's market and development. The beginning of the stage gate process is essential to the implementation of a product as it identifies the market's needs. DSM botched this step, which has been fatal. Instead of making market research, the company has purchased a patent and tried to create a need for its product. Such operation was a real bet as the company has ignored Stamypor's potential competition. It would have been less risky to do the other way around and launch a product depending on the market needs.

The company has realized important risky investments without understanding its market. DSM predictions of the future were maybe too optimistic as the project's profits were not high enough to justify such investments. The company should have previously performed an analysis of the market needs, evaluate future benefits and identify potential competitors. This would have helped to avoid today's issues and allowed the money spent on Stamypor to have