BASF: Everything Old Is New Again

Last week, I discussed how Google, Genentech, and 3M (NYSE: MMM  ) all sought to bolster innovation by encouraging employees to spend a portion of their time pursuing independent projects. Earlier this week, BASF (NYSE: BF  ) announced plans to spur its own innovation in an entirely different way. The giant German conglomerate aims to generate annual sales of more than $5 billion by improving products that have already been on the market for five years or more. In short, it wants to make old products better.

The company intends to do so by devoting nearly $2 billion to cutting-edge research in five different areas: energy management, raw material change, plant biotechnology, white biotechnology (also known as industrial biotechnology), and nanotechnology. The strategy shouldn't surprise careful observers. Earlier this year, BASF announced that it would invest more than $200 million into nanotechnology and open a new nanotech research facility in Singapore.

This R&D will not only strengthen many of its existing nanotechnology partnerships, but should also complement some of the company's recent acquisitions. BASF has been purchasing nanoparticles from Nanophase (Nasdaq: NANX  ) for a number of years, incorporating them into everything from sunscreens to automobile paints. It also has an agreement with a small British-based nanotechnology company, Oxonica, which is using nanoparticles to help diesel fuel burn cleaner and run more efficiently. To the extent that BASF's in-house R&D team can create new nanomaterials and nanoparticles, a number of its existing products should be dramatically enhanced.

On a separate front, BASF acquired Engelhard this spring, in part because of the company's strong presence in the field of catalysis. Engelhard supplies proprietary nanoscale catalysts, both for catalytic converters in motor vehicles worldwide, and for the reduction of nitrogen oxide emissions among petroleum refiners. By combining its scientific know-how with Engelhard's, BASF should be able to improve any number of existing products.

Amusingly, this initiative might also add new life to the company's old slogan. For the longest time, its tag line has been, "At BASF, we don't make the products you know; we make the products you know better." If this new initiative bears out, there should be no need for the company to adopt a new slogan anytime soon.

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Fool contributor Jack Uldrichdoes not make your investment decisions, but he likes to believe he helps you make the investment decisions you make better. He owns stock in Google. The Fool has a strict disclosure policy.


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