Katz Students Address $200M Opportunity for PPG Industries

PPG Industries, a $15 billion global supplier of coatings and specialty materials, recently made an acquisition that opened up new opportunities in the potentially promising niche industry of liquid insulation materials. PPG wanted to better understand this market’s potential — specifically for high-temperature applications on the piping systems of petrochemical plants — so it ‘hired’ a team of students from the Joseph M. Katz Graduate School of Business and College of Business Administration to perform a consulting project. 

Over the course of 10 weeks in fall 2014, the team from Katz analyzed the market’s characteristics and then recommended a market-penetration strategy for PPG. The students completed this project for PPG as part of the Katz School’s three-credit Consulting Field Project course.

The students demonstrated that liquid insulation, while in the early stages of its technology adoption life cycle, holds several advantages over the current industry standard of mechanical insulation systems. 

For one, liquid insulation more effectively prevents a defect known as corrosion under insulation, which is an issue in temperature ranges in which water is changing back and forth between its liquid and vapor states. Second, liquid insulation reduces labor costs because the insulation is sprayed on versus being physically wrapped around the surface in multiple layers. Third, liquid insulation reduces inspection costs because the inspector has to only look for discolorations in the surface area versus having to remove the insulation layers to conduct the inspection. Finally, liquid insulation can be applied to hot surfaces, while mechanical insulation cannot, which means there is no need to shut down the plant’s equipment when it is being applied.

To assess the size of the liquid insulation market, students interviewed large manufacturers and industry groups. Next, they performed a SWOT analysis and the methodologies of Porter’s Five Forces and the Technology Adoption Curve. Students determined that a $200 million market exists today, and that the market has room to grow to $1.5 billion.

Sizing the market was only part of the students’ project. Next, they recommended how PPG could quickly gain a strong foothold in the industry. Step one would be to prove the reliability of liquid insulation, given it would be supplanting a more established technology.

Students recommended that PPG work with the American Society for Testing and Materials (ASTM International) to develop defined testing standards for liquid insulation in the petrochemical industry. Testing by ASTM International would require case studies from industry that validate the insulation’s fire and chemical resistance, corrosion under insulation, and thermal efficiency. To aid in the creation of case studies, PPG could create a beta test site. This would involve the participation of a large market player.

Step two for PPG gaining a foothold in the industry would be for PPG to target multiple stakeholders in the petrochemical industry. The students recommended that PPG target processing facilities in the U.S., as these have shown the most growth. No new refineries are being built in the U.S. Furthermore, PPG should also work with design engineering firms, as they would be the ones contracted by the plants for the maintenance work. Additionally, the students recommended that PPG work toward creating a national liquid insulation association, as the trade group can help build credibility and work toward industry interests.

The students completed their project for PPG as part of the Katz School’s three-credit Consulting Field Project course. As part of the course, students must participate in the school’s McKinsey Cup Competition. Here teams of students present their projects’ summary, findings, and recommendations to a panel of judges made up of Pittsburgh managers who, in turn, evaluate each presentation based on its analytical rigor and content. One winner is selected from the competition, and in the December 2014 competition, that winner was the PPG team.

The students who worked with PPG consisted of four MBA students and one undergraduate business student. They were Atcha Agbere, an MBA and MS in Engineering student; Juliano Fraga, a One-Year MBA student with an operations focus; Lynn Hartman, a Two-year MBA and Juris Doctor student with a finance focus; Alexandra Rhodes, a One-Year MBA student with a finance focus; and Olivia He, an undergraduate student from Pitt’s College of Business Administration (CBA).

Visiting Clinical Professor Bud Smith, who runs the course, says that since the creation of the Consulting Field Project course, more than 880 students have completed about 210 projects for 85 client organizations.