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September’s article examined some of the most successful plastics applications in history. This month, we examine some failed applications and identify how not to make the same mistakes.
The most dangerous way to fail with new plastics is to build production capacity without achieving adoption—as with the exploding nitrocellulose billiard balls of the early 1900s, or, recently, aliphatic polyketones. Not only are these failures financially devastating to innovators, but they can also stall further innovation by scaring investors. Fortunately, we can learn to minimize similar mistakes in the future.
Because of the enormous upfront investment necessary to produce a new plastic, success comes only if a material is adopted soon after commercial launch and maintains its application position for many years. In light of these requirements, there are at least three categories of application failure (see figure 1):
Complete failure: A material enters an application but never penetrates—and is eventually abandoned—because it fails to live up to performance promises.
Short-lived success: A material gains early traction in an application but fails to grow because it is displaced by another material.
Belated success: Growth is delayed so long that the profitability of the investment is eliminated, even though the material is eventually adopted.
A study of examples of each of these failures shows that the best way to avoid them is to use strategic application selection—carefully choosing which applications to attack, and when. This tool is especially important for processors, since they play a critical role in application selection…and its results.
Complete failure: DuPont Corfam
DuPont may be the finest polymer innovator in history, but its excursion into patent leather in the 1960s stands as a spectacular failure. After a major development investment and construction of a costly production facility, DuPont launched Corfam in 1964 as a synthetic leather replacement. Because its superior gloss, durability, and water resistance seemed to make it better than leather for shoes, Corfam was launched to tremendous fanfare. This helped Corfam enter the high-end shoe market in its first few years, but it quickly gained a reputation for being too stiff and too hot for most feet. Penetration never came, and in 1971—after reportedly losing over $100 million on Corfam—DuPont sold the brand and assets for pennies on the dollar¹.
Lessons learned: In hindsight, it is clear that DuPont committed the cardinal sin of materials commercialization: It failed to meet key performance expectations set by the incumbent material. DuPont did not overstate Corfam’s qualities, but its launch fanfare led consumers to assume that Corfam would be better than leather in every respect—an assumption that was quickly proved false. Innovators should carefully pick the applications they choose to attack, and their product must at least match incumbent performance along dimensions that matter to buyers.
Short-lived success: ABS pipe
Although PVC goes into 20 times more pipe than ABS today, ABS pipe (launched in 1957) was the early winner. Early ABS pipe found quick adoption in mobile homes because its low weight and toughness vs. iron pipe made it perfect for long-distance trailer transport. Although the mobile home market was much smaller than stationary housing, it was critical for ABS because it provided a testing ground for code boards to observe. This helped ABS gain quick code approval and stunning initial growth, being installed in over 4 million stationary homes by 1967! However, this growth slowed in 1968, when PVC was code-approved: although PVC was less durable than ABS, it was tough enough for stationary homes—and its lower price made its value proposition superior to that of ABS, which lives on today only in niche applications that demand its extra durability.
Lessons learned: Short-lived success is most often caused by competition, and is painful because new plastics require large investments and demand both volume and margin for many years to be attractive. ABS pipe is a vivid example of the lowest-cost perfect-match principle of materials competition: the material that perfectly matches the consumer’s needs at the lowest cost will always eventually win. A lower-cost product that underserves customer needs will lose, as will a higher-cost product (such as ABS in pipe) that overserves customer needs. ABS pipe targeted the incumbent material, but did not respond to the larger threat of PVC. Innovators must be constantly aware of their market, and should target applications where their materials offer unmatched value versus both incumbents and upcoming innovations.
Belated success: PVC pipe
PVC pipe—one of the biggest plastics applications of all time—beat ABS, but still deserves mention in our examination of failures because it grew very slowly, particularly in the U.S. Had U.S. PVC suppliers focused all of their efforts on pipe (which they didn’t), they would have likely gone bankrupt: PVC pipe took nearly 15 years to reach reasonable volume. PVC pipe was introduced in North America (as corrosion-resistant pipe for pickle factories) around 1952, yet widespread use in the all-important housing market didn’t occur until at least 1965.
Although PVC was less expensive and adequately durable versus other options, it still faced penetration delay because of two barriers in the plumbing value chain: pipe distributors and plumbers. PVC pipe threatened both groups: plumbers because it simplified a major portion of their hourly work, and distributors because it was much less profitable than incumbent options. These groups fought hard to keep it out, harrying PVC with code battles, bogus tests, and propaganda campaigns. The effect was a major delay in important code approvals, which didn’t come until 1965-1968—several years after PVC was ready for market insertion.
Lessons learned: PVC’s tremendous value to homeowners and its much lower total cost of ownership were trumped by formidable value chain barriers. In this, PVC is not unique—materials companies have always underestimated the staying power of value chain players who stand to lose from a new material. In fact, belated success is the most common failure mode for new plastics. Today’s innovators should avoid it by choosing markets with few value chain barriers before attempting to engage those with more challenging obstacles. They should also delay capacity investments until barriers are solved.
Conclusion
These failed applications show the importance of strategic market selection when launching new plastics, and the importance of matching capacity to potential. Whether choosing applications that outperform incumbents on key features (as Corfam should have done), targeting applications where the material offers unique value versus both incumbents and entrants (as ABS did in mobile homes but not in stationary homes), or finding applications with low value chain barriers (unlike PVC in pipe), application market selection is a key weapon in the materials innovator’s arsenal. However, even the best strategic market selection will fall short if innovators overbuild production or processing capacity; new materials cannot immediately fill large plants.
Aggregating this lesson to the lessons from successful plastics as discussed in September yields three key actions that will help processors and materials producers succeed with new materials:
Aim wide in development—develop a broad range of properties to find a broader range of markets
Develop strategies to actively manage—and even control—the value chains of potential applications
Gain advantage from strategic market selection—target applications with simple value chains and beatable incumbents
Be reasonable with capacity—materials must be adopted, and are bound to fail if early volume requirements are too high
About the authors: This article was written by Christopher Musso, Jason Grapski, and Bob Frei, all of business consultancy McKinsey and Company.
1 “Requiem for a Polymer”, Time, March 29, 1971
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