Photochormic Dye Stabilization and Matrix Interactions

Commercialization of

Photochromic Dyes and Products

Timothy J. Homola

President & CEO

Color Change Corporation

1740 Cortland Court, Unit A, Addison, Illinois 60101 USA

Tim@ColorChange.com www.ColorChange.com

Background

While most people, including this author, hold quite optimistic views of the photochromic industry, very little commercial success has been realized. In Professor Giacomo Ciamician’s famous paper on photochemistry of the future, he predicted that photochromic clothing would be popular. It turns out that he was right. His paper was written in 1912 and photochromic clothing was not commercially successful until the early 1990’s. These optimistic projections are commonplace. Unfortunately, the commercial successes have not been rapid or frequent.

This paper is intended to address some of the critical success factors in achieving photochromic related profitability. The major ingredients of commercial success are an attractive industry and mastery of the specific critical business elements that lead to profitability in that industry.

Industry Model

A well accepted industry model was developed by Professor Michael E. Porter of the Harvard Business School and is presented in his book Competitive Strategy as shown below. The general analysis of this model will be left to anyone who cares to read his excellent work. The specifics of this model as they apply to a dye producer in the photochromic industry will be described.

The most attractive industry would have large barriers to entry, low bargaining power of buyers, no threat of substitutes, low bargaining power of suppliers, and little rivalry among existing firms. Such an industry should lead to extremely high rates of return.

Industry Competitors

Industry competition between the existing dye suppliers would be classified as relatively polite for the following reasons.

1. few, diverse suppliers вЂ" little face-to-face competition

2. high industry growth вЂ" easier to expand markets than to steal market share

3. significant product differences вЂ" switching costs and product differences weaken direct product comparisons

Potential Entrants

The photochromic dye industry has significant barriers to entry.

1. basic technology вЂ" the learning curve necessary to master the relevant chemistry

2. switching costs вЂ" a purchaser of dyes will usually need to re-stabilize their products when changing dyes

3. proprietary technology вЂ" patent protection is common

Substitutes

There are no good substitutes for photochromic dyes because of their uniqueness. Substituting one photochromic dye for another is sometimes possible but usually requires re-stabilization in the chosen matrix.

Buyers

Even though buyers consider the dyes to be an expensive raw material, they are in a weak position for the following reasons:

1. the dye is typically critical to final product performance

2. buyers usually face re-stabilization switching costs

3. there are few suppliers to choose from and they usually sell unique dyes

4. buyers pose little threat of backward integration

Suppliers

The suppliers have little power over dye producers because the raw materials used for dye synthesis are generally standard products that are readily available from a reasonable number of suppliers.

In summary, this industry is quite attractive due to high growth potential and beneficial industry dynamics.

Business Model

A well accepted business model also developed by Professor Michael E. Porter of the Harvard Business School and is presented in his book Competitive Strategy as shown below.

Each different business function is necessary but to varying degrees depending upon the specific competitive dynamics of the industry in which the business operates. In the case of a dye producing business serving the photochromic industry, there are three key competitive business functions, research and development, marketing, and sales. The sales and marketing functions will be combined for this analysis because they are strongly interrelated.

Research and Development

The research and development function is critical because of the profound differences in photochromic dye performance and the resulting overriding impact the dye has on the finished product. The three most critical areas that offer opportunity under research and development are those that effect the finished product performance to the greatest degree, specifically:

1. dye synthesis

2. dye stabilization

3. dye application

1. Dye synthesis

Dye synthesis usually has the strongest effect on the final product because the chemical structure defines the fundamental performance of the dye. Small performance modifications can usually be achieved using additional techniques, but large changes become difficult or impossible. For example, changing the dye absorption from purple to blue using an additive is often possible, but a change from purple to orange is quite unlikely. Through synthesis, a large color change (or any dramatic property change) is much more feasible.

There are four primary areas of opportunity to enhance dye performance through synthesis.

a. improve fatigue resistance