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R&D Layoffs at Dow and DuPont Make Room for Agile New Competitors

Posted on May 5th, 2017 by in Chemical R&D

DowDupont merger

Two of the world’s largest chemical companies have significantly reduced their R&D staff and budgets. Former rivals Dow Chemical and DuPont announced their $130 billion merger in July 2016 – heralding massive layoffs for both parties. DuPont has since laid off more than 1,700 workers worldwide, while Dow is in the process of eliminating some 2,500 jobs.

Citing a need to “respond to business demands,” these chemical giants have made particularly deep cuts to their research and development branches – a shakeup that one analyst has described as “the death of innovation.” A report in Scientific American noted that the layoffs are “sending a chill” through the scientific community.

Even so, these cuts may hint at a silver lining for smaller chemical companies. Those with efficient research and production pipelines are likely to see emerging opportunities that may enable them to meet evolving demands and capture share in the market.

Converging factors

The merger, and the subsequent R&D cuts, were motivated by the same forces that have had an impact on other major chemical companies. As growth in the chemicals industry has slowed in recent years, investors are pressuring companies to sharpen the focus of their product portfolios. To this end, Dow and DuPont have announced that they will pivot away from open-ended R&D to focus almost exclusively on specialty chemicals, advanced materials and agriculture.

Similar mergers and changes are taking shape around the globe. ChemChina, China’s largest chemical corporation, recently proposed at $43 million merger with Swiss pesticide company Syngenta. Monsanto seems to be feeling the pressure too – the giant has recently been in talks to acquire agriculture units from Bayer and BASF.

But these new policies mark a striking shift away from long-time practices in the chemical industry.

A history of breakthroughs

Dow and DuPont both funded “flourishing” private R&D departments from the 1950s to the 1980s, offering significant contributions to scientific literature. Along the way, both companies funded the education and training of world-class scientists.

Still, cutting-edge discoveries don’t always translate into immediate profits. To close that gap, DuPont has laid off several hundred of its research scientists – with more cuts likely on the horizon – and rolled the remaining researchers into a “Science & Innovation” group, which will focus intensively on developing new market-ready compounds.

Many of the researchers laid off by Dow and DuPont have since moved to competing companies, or have leveraged their chemical expertise to launch their own startups. Many others are currently on the lookout for more promising career opportunities – and a significant number of them will soon be forced to transition to new roles.

Emerging opportunities

The layoffs at Dow and DuPont provide an opening in the market for competitors who can operate with lower overhead – and who, perhaps, can snap up some of Dow and DuPont’s departing talent. But this opening may not last for long. Some analysts have speculated that Dow and DuPont themselves may eventually begin hiring back the chemists they’ve let go if they’re able to achieve the short-term growth and stability their investors seek.

For the moment, though, these industrial giants are in danger of losing the very resources that helped them to stay ahead of the research curve for so many years. As Dow and DuPont – and other large corporations like them – focus exclusively on narrow, profitable areas of research, more agile labs may be able to corner markets these slower-moving titans have abandoned.

In fact, two long-time competitive advantages of these large companies – instant access to new research data and seamless sharing of that data across teams – are now available to labs of any size. Teams that can integrate the latest findings into their research, quickly pivot away from recently discovered “blind alleys” in research, and bring innovative new compounds to market on a rapid timeframe, may discover that the chemical giants just aren’t fast enough to keep up.

 


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All opinions shared in this post are the author’s own.

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