Removing unnecessary complexity

When Trevor Russell first raised the topic of ‘managing complexity’ at the 2013 ICIS World Base Oils and Lubricants Conference he received some very positive feedback on his vision and honesty.

The premise of Trevor’s argument was that both ‘destructive’ and ‘valuable’ complexity exist in our industry and that our ability to focus on the latter is essential for our collective success. We need to examine the way we interact, the rules we set, and the processes we follow so that we can concentrate our energies on those things that are essential to our mutually safe and profitable operations.

The sustainable innovation challenge

Right now there is a significant amount of ‘destructive complexity’ in our industry – that which takes our attention away from technology innovation and reduces the resources we have available to deliver real value to our customers.

If destructive complexity is allowed to persist it slows the development of new products and specifications and has the potential to result in products that may not meet the needs of customers, OEMs or end users.

We are all aware that the lubricants industry is growing by only 1-2% per year. But, at the same time in the additives industry, technology investment costs are running at a significantly higher rate, with publicly reported annual increases of between 7 and 20%. It is clear that this situation is not sustainable long term.

The combination of low growth, rapid cost escalation and high baseline investment is a challenging mix that could ultimately push us back from the innovation we all desire.

Unacceptable profitability in the ‘90s/’00s resulted in a long period of relative investment inactivity. Whilst industry profitability has improved since that time, we are all taking on the challenge of concurrently delivering a new generation of passenger car and heavy-duty engine oils, at the same time as significant investment in new manufacturing facilities to service a wider global market.

These investments come with a substantial price tag, and we need to ensure the underlying industry financials remain robust for long term sustainability.

Destructive and low value complexity needs rooting out, and steps need to be taken by all industry stakeholders to make this happen.

Infineum has some specific suggestions here, but before I share them with you I want to make something clear.

The issue isn’t about investment level per se; it’s about ensuring that we invest wisely - channelling our efforts into tests and processes that reflect our stakeholders’ requirements.

This industry has proven, over many years, to be highly adept in delivering significant innovations of great value to the market.  For example, fuel efficient lubricants, low and mid sulphated ash, phosphorus and sulphur (SAPS) formulations and synthetic products of very high performance – and we simply need to ensure that we are structured in a way to allow this innovation to continue to thrive.

This will be increasingly true as emerging health and safety legislation begins to impact upon the industry’s ability to bring genuinely new components through to market.

Issues in specification development

For both generic industry and tailored OEM specifications we want to deliver the final specification, need or product as quickly as possible. However, we must also ensure it delivers tangible value that can be monetised.

This might be, for example, in the form of clearly improved fuel economy for
ILSAC GF-6, greater engine durability for PC-11, a specific engine need for an OEM, or a unique differentiable feature for a marketing hook. But, each of these specifications comes with its own set of issues.

Achieving alignment in generic industry specifications, which are supported by all OEM, oil company and additive company trade associations, can be challenging, and makes them slow and expensive to develop.

The final specification is a compromise of competing requirements, and ultimately may not meet all the stakeholders’ needs. This is often exemplified in the release of closely linked but higher performance OEM specifications.

If these industry specifications are truly focused on delivering a widely available lubricant that offers baseline but robust protection to consumers, let us make it that, and not something that aims to deliver the highest performance level possible within a diversity of competing needs. That way we can potentially reduce investment where it brings limited value and realign it where additional value is found, whilst still delivering on a key market need.

Of course, this may mean that additional OEMs wish to introduce in house specifications to deliver exactly what they desire. Infineum supports such an approach as it ensures the OEM and consumer are fully satisfied with the end result, and the investment supports value creation.

On this topic, OEM specifications, which are developed by and specifically tailored for an OEM’s own engines, can be developed more quickly than industry-wide specifications.

However, the development process needs to be well controlled and the tests properly monitored through referencing to avoid test needs changing over time. If not, the resulting oils may not always deliver the protection or robustness of performance the OEM requires.

In addition, scientific advances mean we are now able to measure a huge array of parameters. However, we need to be sure that these parameters are a true measure of real oil performance.

It is important that we do not include artificial, poor quality bench tests with no correlation to the field.

Whilst Infineum fully supports OEM specifications in delivering on specific needs or concerns, it is important that the tests underpinning these specifications are developed and run to accepted quality levels to ensure the robustness of the final products.

Simplifying specification development

I firmly believe that if we are to truly realign investments within this industry we must simplify the baseline performance specification development programmes.

We must reduce duplication, redundancy and wasted effort to drive down development times while ensuring quality is maintained.

In particular, I suggest that three key areas of ‘destructive complexity’ need to be addressed:

• Ensure specifications meet a clear field need. We must pay close attention to each performance category and to each test to ensure they reflect real life, with a clear and demonstrable correlation to real field performance. Whilst in principle this happens today, very often the connectivity is lost in the desire to demonstrate a particular issue, for example through artificially severe conditions. This in turn can lead to investment or formulation selections that are unnecessary for field performance.
  
  While we do not want to wait for field failures to occur before we start the lengthy process of test development, we must ensure that before development is started there is a clear demonstration of a real need for protection demonstrated under field conditions.

• Collaborate in early stage R&D. Multiple stakeholders are working on common industry issues in their early stage R&D, like fuel economy, emissions reduction and durability, which is expensive and resource intensive. For common industry challenges, collaboration is essential – for example through topic specific consortia.
  
  For clarity, this is only proposed for early stage R&D; it is fully recognised that all stakeholders wish to develop their own unique approaches, as products get closer to market.

• Drive out unnecessary, redundant, or inappropriate testing. Specifications currently feature many different yet overlapping performance tests or rated criteria, which results in duplicate assessments and potentially redundant testing. We also see an understandable interest in bench rig testing to assess performance.
  
  Although rig tests might be quick and relatively inexpensive to run, they do not always replicate what happens in the engine – for such tests we need to be even more rigorous in demonstrating their correlation with the real world.
  

  As an industry we must ensure that the tests we use are fit for purpose, not simply the most convenient, and that wherever possible we minimise duplication and redundancy.

Taking action in these three areas would reduce time and effort spent on lower value testing, improve industry agility and innovation, and through reallocation of resources enable us to invest more in the topics of highest, realisable value for all parts of the value chain.

Clearly the need to invest affects all industry stakeholders – oil and additive companies, OEMs and the engine test labs. With each having a very different business model, it is often hard to move together on the necessary investment, which can lead to bottlenecks.

This has been particularly evident in the availability of key tests, where the test labs need to build test cells and the OEMs need to supply the hardware – activities that are rarely in synch. This makes it even more important to ensure we do not waste test cell capacity on irrelevant, redundant or duplicate tests.

The way forward

In my view it is essential that at the start of a new specification development we all agree on our needs so that we can set out to meet them at the lowest possible cost.

Everyone I have spoken to agrees that there is a need for lubricant technologies to come to market more quickly. The North American ILSAC GF-6 and PC-11 category developments are current examples of how complexity can cause undesirable delay. Perhaps by removing one or more examples of ‘destructive complexity’ in these developments we could improve things for all stakeholders.

We all see and feel the impacts of unnecessary complexity within our own parts of the value chain, and I believe we need to start talking openly and honestly about these topics within industry consortia.

I hope this article will open the door to these conversations. I invite you to call us, talk to us, and with enough inputs we’ll be happy to run future follow-up meetings for stakeholders right across the industry. Infineum will be pursuing this agenda in industry forums, because we believe it is critical for the long term viability of innovation in our industry.

By changing the way we collaborate and by being realistic about the costs of change I believe we will be able to re-focus our energies on those things that are essential to ensure our industry continues to thrive.

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