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Issue 207 July 2022 - Gas Analysis & Control
Gasworld US Edition, Vol 60, No 08 (August) - Helium
By Art Anderson 2022-07-08T08:51:00+01:00
This year has started out a bit differently than previous years because companies as well as countries forecasted a ‘fully-recovered’ pandemic environment, starting in the spring/summer timeframe.
More than a quarter into 2022, the forecasts have been challenged due to macroeconomic (inflation) and geopolitical factors (Ukraine/Russia war), in addition to existing challenges that have continued or accelerated for many sectors.
These challenges include continued supply chain disruptions, increased competition for talent, continued cost-pressures driving more automation and digitisation of operations, and increased pressure for more sustainable products and operations. All these business trends and challenges have affected how companies approach strategy, target growth and secure and retain employees.
This article discusses how these trends have affected companies’ approach to each of these areas, but also shares lessons and best practices from contributors across the industrial gas space.
At the start of 2022, this was the first time in more than two years when business leaders have not cited the pandemic as the top risk to growth in the global economy. However, geopolitical conflict now overshadows all other risks, according to a recent survey by McKinsey.
76% of all respondents cite geopolitical instability and/or conflicts as a risk to global economic growth over the next 12 months, and 57% cite it as a threat to growth in their home economies. In addition, there are ongoing trends that remain or may have even accelerated since the beginning of the year depending on the sector such as talent shortages, supply chain disruption and resiliency, the necessity for greater digitisation and automation, and the increasing pressure to commit to a sustainable future, among others. Let’s take a deeper look at each of these areas.
Supply chain disruptions garnered a lot of attention in 2021, and are still very painful for many companies. Congestion at ports continues to show no sign of abating and prices for a vast array of goods and services are still rising. “Supply chain challenges have been the big one for some time now,” states Freddie Briggs, VP, Strategy & Value Creation for PDC Machines LLC.
“It has impacted both raw material deliveries, as well as shipping/port congestion causing customer lead times to be pushed out. Even the lockdowns in China in Q1/Q2 2022 have had significant impact on supply chains.”
Most agree that answers and solutions will require investment, technology and a re-fashioning of the incentives at play across global supply chains. It will take more ships, additional warehouses and an influx of truck drivers, none of which can be summoned quickly or inexpensively. Many months, and perhaps years, are likely to transpire before the challenges fully subside.
Digital transformation continues to rank at the top of the list of trends with its countless innovations (industrial IOT, AI, e-commerce, intelligent automation) for businesses to explore and leverage across their enterprises. The pandemic has demonstrated the need for companies to adapt and accelerate their adoption of these technologies or be left behind.
“We are seeing increased pressure on cost control for our customers which is driving both the need for visibility and efficiency throughout their supply chains,” states Kevin Lynch, SVP of Industrial Gases at Anova, “as well as increased demand for remote asset monitoring & digitisation.”
The industrial gas industry has done a decent job in getting on the ‘digital bandwagon’ but there is still a large amenable market of late adopters. It is clearly understood that to remain competitive in this rapidly changing landscape, organisations must quickly adapt their strategies and embrace the changes that are most likely to impact their customer’s experience significantly.
“We are seeing increased pressure on cost control for our customers which is driving both the need for visibility and efficiency throughout their supply chains”
COP26 thrust the Net Zero transition onto the global stage, adding to momentum that had already been building. For example, by March 2021, more than 2,150 businesses had signed on to the United Nations (UN’s) Race to Zero initiative, placing themselves, as ‘early adopters’. As of April 2022, this number had grown to more than 7,100.
A closer look at the numbers reveals a few trends. Large companies are highly represented according to a recent PwC survey with nearly two-thirds of those with revenues of $25bn or more making the commitment, compared to 10% of companies with revenues of less than $100m. It also appears that public companies are more than twice as likely as the private companies to have made a Net Zero commitment. And the final perspective is that certain sectors are more active than others. As expected, energy, power and utilities are the most highly represented, reinforcing the fact that high-emitting (and hard-to-abate) industries are often front and centre when it comes to climate action.
Industrial gas majors (Linde, Air Liquide, Air Products, and Taiyo Nippon Sanso) have all made commitments, as well as many second and third tier players and suppliers to the industry. Rick Kowey, COO of Universal Compressed Air (UCA), one of the industry players, states, “We are noticing a major trend among industrial customers who are looking to minimise energy costs, reduce carbon footprint, and preserve capital by outsourcing non-core plant activities, such as compressed air generation – a pervasive application across industry and big consumers of electricity. For example, UCA develops and implements PIPELINE AIRTM solutions to meet accelerating customer needs for air ‘over-the-fence,’ guaranteeing customer savings, performance, reliability, and predictable expenses over the long-term.”
Every company has had their strategy ‘stress-tested’ over the last 2+ years (some more than others), forcing them to make some adjustments to longstanding business approaches.
“For PDC Machines, some short-term operational decisions may have changed,” states Briggs, “but our core approach to strategy has not significantly changed.” Existing business trends, along with economic and geopolitical factors, are continuing to challenge those recently adjusted strategies. As a result, there are some common themes emerging with how companies are approaching strategy:
The prevalent action taken by companies with respect to strategies is ‘doubling-down’ on customer-focus, to help better anticipate needs and the innovation required to stay ahead in the market. “Our customers are dealing with situations they have never faced before,” states Lynch. “They want more and more timely information, but are not sure what exactly adds value. We see our role as being a trusted long-term partner who really understands our customers’ business. We guide them to find valuable insight from the information that really matters.”
Source: Universal Compressed Air (UCA)
Kowey adds, “Our strategy at UCA has been to create an innovative and sustainable commercial business model, which can be extended beyond air-as-a-utility to other customer plant critical resources.”
“When we pair our versatile business model with our unique engineering and design strengths, we can readily adapt to the requirements and expectations of adjacent markets and applications.”
Ultimately, the true test (or results) of a good strategy is best seen in the marketplace and the P&L over time.
Companies that are able to grow their top-line despite the headwinds of currency fluctuations, geopolitics, and macroeconomic events, separate themselves from their peers.
So, how do those companies sustain growth in challenging and dynamic times like these? Some of the common traits include:
“There is pent-up demand everywhere from ~ two years of disruption, but not all regions have bounced back at the same rate,” states Kevin Lynch. “As a result, there is a need to target the right geographies with the right products, as well as taking advantage of some newly ‘discovered’ needs that resulted from the pandemic. In our case, this includes the remote monitoring of hospital oxygen tanks, which surprisingly has not been done everywhere, even in the major developed economies.”
There are obviously other sources of growth that these companies are employing such as mergers, acquisitions, divestitures (MA&D), and even leveraging external capital/support from private-equity, venture capital or other third-parties to accomplish some or all of the above. No matter the approach, it is clear that faster growing companies have made significant adjustments during and post-pandemic to bolster growth prospects.
The ‘war for talent’ is over, and talent has won. Now organisations are re-thinking and re-calibrating their relationships with employees.
“A company’s mission and culture are what gives it an identity,” states Lynch. “Together, they can become a source of pride and fulfillment for its people. A collection of individuals working remotely – rarely or never seeing each other in person – will struggle to form or partake in a culture. So, it is important to balance the cost and convenience of the ‘work from home’ era with the intangible benefits and efficiency of bringing people together in person – learning, collaborating, and bonding. And within the company, different teams will have different requirements for in-person togetherness versus remote working, based on the nature of their responsibilities and the degree of self-direction of their members.”
“The ‘One-size-fits-all’ approach will not work. Finding the ‘sweet spots’ that work for the company, the current employees and new talent is an evolving challenge.”
Anova team members at a recent team workshop (June 2022)
In global research from Boston Consulting Group, it found that 56% of knowledge workers are open to looking for other positions and 20% are already looking. The numbers are even higher for technology/digitally skilled talent. In addition, when CEOs were asked about the biggest challenge they face (in a Deloitte survey), nearly half of CEOs name challenges relating to talent (recruitment, development, workplace dynamics). In the same research 57% of the CEOs stated that attracting and recruiting was the highest talent priority.
So, how are some of the best-in-class companies adjusting to these challenges? A few of the approaches being utilised include:
“Hiring challenges are real. Recruiting efforts are taking a lot longer (especially for more skilled/technical roles), forcing us to become more creative and adaptable,” states Kowey. “However, because of our entrepreneurial environment and extraordinary existing team, we are attracting team members who are excited to become part of an innovative, growth-oriented company.”
“The talent landscape has dramatically shifted to where it moves faster and costs more to find a good fit,” states Sobia Chaudhry, Vice-President of HR at PDC Machines. “We are evolving into a recognised brand – an ‘employer of choice’ sheerly by word of mouth through experiences of current employees, and we are enjoying much lower attrition rates than the industry in a crazy market. No doubt the fight is still fierce, but we are lucky to be in good positioning for both growth and value as a company.”
Shanghai Chemical Industry Park Industrial Gases (SCIPIG), a subsidiary of Air Liquide, will invest over €200 million to build two hydrogen production units in Shanghai Chemical Industry Park (SCIP).
How infrared combined with thermal conductivity analyser technology ensures calorific values are maintained – a critical strand of the energy transition, discussed by ABB.
Unlocking sour gas reserves for the hydrogen economy, by Stephen B. Harrison, sbh4 consulting.
Aritas Cryogenics CEO Özlem Sivrioğlu talks leadership, empowerment and ‘crashing’ the glass ceiling in an interview with Rob Cockerill.
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