Report of the Directors
Business Review

Our Business Model

Our
model...

is to create value from innovating world leading, high technology products that enhance quality of life.

Our business model is designed to deliver sustainable profitable growth. At Johnson Matthey we innovate, develop and manufacture or provide high technology products and services which we sell to industrial customers. We primarily serve the automotive, chemical, oil and gas and pharmaceutical sectors and our products are often designed alongside our customers to address their specific requirements. We strive for technology leadership, which we achieve through being innovative – the development of high technology solutions is our key differentiator and as a result we leverage high margins from products which help our customers add value to their own products and operations.

Sustainability underpins the way we do business and we are committed to building a sustainable business and ‘doing the right thing’. The majority of our products provide sustainability benefits for our customers, be it through reducing their environmental footprint, benefiting health and wellbeing or conserving natural resources. Through the action of our products in our customers’, or our customers’ customers’, applications, we ultimately enhance the quality of life for people all around the world.

There are three inputs to our business model:

  • Our people
  • Our operations
  • Innovation

These align with the five fundamental enablers of our strategy and support the long term creation of high technology products and services.

The outputs of our model are also threefold:

  • Sustainable profitable growth
  • Reduced environmental footprint – of our customers’ operations, as well as our own
  • Social and wellbeing benefits – from the action of our products

These all directly align with our Sustainability 2017 Vision and support our strategic intent.

Our people are vital to the long term success of the company. We rely on their ability to innovate and to collaborate with each other and our customers to develop and bring high technology products to market. We hire the best people with the right skills and support them with a culture that engenders innovation and encourages them to develop and grow. Our people are motivated by working for a company that is ‘doing the right thing’ – and this is an important differentiator in attracting and retaining top talent in an increasingly diverse business.

The way in which we produce our products or provide a service is an important element of our success.

In Johnson Matthey around three quarters of the value we create comes from physical products, such as our emission control catalysts or active pharmaceutical ingredients, that we manufacture at our facilities around the world.

Efficient and responsible manufacturing is critical to our economic and environmental performance and we have programmes in place to optimise our operations. Our Manufacturing Excellence programme is driving efficiency improvements and innovation in manufacturing. This is complemented by our Sustainability 2017 strategy which is focused on reducing emissions and minimising resource use. We invest in our manufacturing capacity to ensure we can meet customer demand and have the ability to flex our cost base if our markets slow. We demand high returns from our investments, with a target of at least 20%, which drives continued improvement in operational efficiency.

Approximately one quarter of the value we create comes from the provision of specialist services such as process technology used to design chemical plants or diagnostics that improve efficiency in the oil and gas industry. Collaboration and strong relationships with our customers are crucial in providing a high quality tailored service. Expertise and a reputation for excellence underpin success and we perpetually build on these through continued investment in R&D and our people.

For Johnson Matthey, innovation lies at the heart of sustainable profitable growth. Innovation fuels the continuous development of new and higher performance products and this, together with our know how and, where appropriate, intellectual property protection, underpins our ability to maintain technology leadership positions. We partner with our customers, industry experts and academics to further spark ideas. Innovation isn’t just confined to new product development; it is harnessed throughout our business processes. Our ways of working and culture encourage collaboration and innovation amongst our people, whilst continued investment in R&D provides them with the infrastructure and resources to realise the potential of their innovative ideas.

  • Profitable growth is the basis of sustained value creation. It is driven by technology leadership and our commitment to ‘doing the right thing’. These drivers differentiate us from our competitors and enable us to attract potential employees with the innovative flair that we require.
  • Profitable growth allows us to invest in R&D and manufacturing assets. These provide the conduit to turn our innovations into high technology products and services which meet our customers’ needs.
  • By creating high technology solutions for our customers we attain, maintain and grow strong market positions and leverage high margins. From these we achieve profitable growth which perpetuates sustained value creation.
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