Chemical companies have passed the proof-of-concept stage and are now running pilots or beginning to partially scale up digital efforts
Chemical companies have passed the proof-of-concept stage and are now running pilots or beginning to partially scale up digital efforts.
On your marks. Reset. Go! This past year has brought many challenges, but it also marked an opportunity to adjust and rethink fundamentals as we go forward. Indeed, the World Economic Forum has called this era the Great Reset—and it is shedding light on how the chemical industry can use digital technology to move forward.
The pandemic caused many of us to rebalance our daily lives—to shift our focus down Maslow’s hierarchy of needs to the basics of food, shelter and health, and find ways to carry on in a dramatically changed environment. The chemicals industry, too, saw several fundamental challenges, and it faced a moment of truth when it had to rethink the way it operated. Fortunately, it showed that it could indeed adapt.
The industry demonstrated that plants can operate with fewer shifts and smaller teams—with some plants even achieving record production. Remote Marketing and sales became the norm. Greater cost efficiencies were achieved through reduced employee movements, having fewer contractors on-site, optimised supply chains and the increased use of collaboration tools. These changes were made out of necessity, but they helped define effective new ways of working. No one can imagine going back to the way we operated pre-pandemic. We now have new baselines for work practices, costs and efficiency that are being woven into the chemicals industry. These are driven by the technology-enabled abilities and insights that helped chemical companies sustain themselves through the pandemic.
The future of the industry lies in providing sustainable, secure, hyper-personalised interactions and experiences across the chemicals value chain, enabled by technology and the integration of processes, systems and talent. Competitive differentiation is moving beyond the traditional “economies of scale” in terms of IP ownership, horizontal and vertical integration and access to feedstock. Instead, it is now shifting to “economies of value”—that is, having the right ecosystem of partners, being agile, innovative and flexible, and delivering superior customer experiences. As we move towards the eventual post-pandemic recovery of demand, digitisation will play a central and indispensable role in realising these economies of value.
The chemical industry is no stranger to either digitisation or technology-led innovation. Indeed, the adoption of digital technologies in the industry has increased over the last three years. This can be seen in the growing use of robotics, remote operations centres, Industry 4.0/ smart plant twins, autonomous operations in warehouses and logistics, data-driven agribusiness platforms and digital supply chains—to name a few examples. Accenture’s research shows that the industry’s digital maturity index in 2020 stood at 42.2 per cent, compared to the overall manufacturing industry figure of 39 per cent. (In this index, 100 per cent indicates that all digital capabilities are being deployed and rolled out). This means many chemical companies have passed the proof-of-concept stage and are now running pilots or beginning to partially scale up digital efforts.
To understand the potential of the technology—and where the industry needs to go—it is useful to look at digitisation through four key lenses: customer expectations, new business models, cost efficiencies and business value, and the workforce of the future.
Chemical customers today demand a superior customer experience. Think of making purchases on E-commerce platforms—does today’s chemical customer get an Amazon-like buying experience? The new chemicals B2B world will entail a differentiated experience that leverages new interaction points and channels. It will provide almost immediate responses to technical as well as material-specific queries, seamless ordering and tracking, personalized recommendations on the packaging of chemicals, route changes, time of arrivals, and so forth. This is true not only for speciality chemicals but for the broader commodity chemicals today, as well.
Digital technologies will be at the heart of this experience, as companies leverage the power of technology platforms that are seamlessly integrated with customers’ systems and inventory data, and that deliver data-driven insights. The Accenture 2020 Global Buyer Values Study found that chemical industry customers believe that it is important to have digital interfaces and experiences that make interactions easier and more intuitive—and in fact, they are ready to pay more for a differentiated experience. However, the research also found that chemical companies underestimate the importance that customers place on digital interactions. Nevertheless, they do see value in it, and about one-third of the surveyed chemical companies believed that they could increase profits by more than 20 per cent by leveraging new technologies more extensively for customer-centricity.
That belief isn’t always translating to action. Early examples of successful digital channels at Dow Corning and Sigma Aldrich have not been broadly imitated across the industry. Instead, ecosystem companies such as Knowde and MOLBASE, distributors such as Univar and Brenntag, and established e-commerce giants such as Alibaba are setting the new standards for digital interactions. In India, the industry still has a way to go in creating its strategies for using digital technology to win customers, which means that a well-defined digital ecosystem will be essential to providing a superior customer experience.
New business models
For the chemical industry, new business models often focus on circularity, and there is growing interest in circularity—globally and in India. End consumers are demanding sustainability, and chemical companies are seeing a pull from downstream value chains for circular products and processes. This creates opportunity, but it also threatens to disrupt existing value chains and profit pools. Also, investors are increasingly likely to consider not only business performance but also a company’s positive impact on society and the environment.
Another emerging business model focuses on using hydrogen as a molecule for de-carbonization. The EU targets a reduction of CO2 emissions by 40 per cent by 2030 compared to 1990 levels, with the ultimate goal of reducing them by up to 95 per cent by 2050. Increasingly, there is a clear political will to build a hydrogen market, and significant public funding is being made available, which is helping to drive increased investment in hydrogen-related R&D, process and molecule innovation, and digital techniques.
Digital technology will play a critical role in these new business models. It holds great potential in areas such as carbon emissions capture; improving chemical recycling processes; tracking waste; machine learning (ML) based sorting of recyclables; digital passports for tracking circular products; using data science to increase energy efficiency in plants; monitoring the loss of water and other resources; understanding the impact of emissions on climate; and the tracking of key metrics to help improve overall yield/throughput, safety and sustainability in operations.
Cost efficiencies and business value
The search for cost efficiencies and increased business value is as old as the chemical industry itself, as companies have looked for ways to thrive in the face of industry cycles and demand-supply shocks in end-user industries. In the coming months and years, cloud, analytics and Artificial Intelligence (AI) technologies will play a key role on this front.
According to Accenture’s research, more than 80 per cent of chemical companies have started using cloud, IoT and data analytics technologies in the last three to five years. Almost 70 per cent of chemical industry leaders have invested significantly to build the in-house expertise needed to accelerate cloud Software-as-a-Service adoption in their organizations. Industry leaders such as Dow Chemicals have deployed data-driven cloud platforms to personalize their marketing programs and find innovative ways to collaborate with customers. Speciality chemical businesses such as AkzoNobel are building Microsoft Azure cloud-based IoT platforms to perform analytics in real-time. Service-oriented chemical businesses such as Ecolab are deploying cloud-based predictive analytics services for industrial water management.
Companies are doing more than “lifting and shifting” existing systems to the cloud—they are building new capabilities that let them take full advantage of data to drive business actions. For example, companies can use cloud-based data to speed up new product development and reduce the number of experimental iterations in R&D, or to improve yield optimisation using data lakes to support data-driven operational decision-making. The cloud can simplify M&A, as well, with the use of virtual private networks making it possible to more easily bring different clouds into one common account; or, clouds can be combined using a tiered parent company and child company approach. IoT, AI/ML and blockchain platforms hosted in the cloud can enable real-time updates for end-to-end visibility of shipments to make supply chains more resilient. And as the pandemic has clearly shown, the cloud has a central, vital role to play in remote working and business continuity.
AI has become a hot topic in the industry, and chemical companies recognize the immense business value it could bring in terms of yield improvements, profitability and margin management, cost optimization, and accelerating R&D, among other things. Recently, ADNOC formed a joint venture with the Abu Dhabi AI firm Group 42 to develop and commercialise AI products and applications for the oil and gas industry. In India, some manufacturers are turning to the Industrial Internet of Things (IIoT) and analytics to help drive growth. Case in point: Tata Chemicals, which is looking at modernising its plants with IIoT. The key question is whether the chemical industry is ready to scale up AI in its plants and operations. Beyond the AI tools themselves, effective AI depends on data and process readiness. It requires large blocks of accurate data and integrated processes to ensure that it is solving the right problem holistically, without working in silos. Thus, it is critical to establish the right data governance processes, culture and data strategy as a foundation for AI.
Overall, chemical companies that fail to make effective use of these technologies to run their enterprise will risk missing out, not only in terms of increased efficiency and business value but also in building the ability to keep their businesses running in the face of future disruptions.
The workforce of the future
Like other sectors, the chemical industry has been debating workforce topics such as the gig economy, digital natives, the need for new skills, and employees’ evolving expectations about roles and work. Today, we see chemical companies, including those in India, competing to find data scientists, innovation specialists, robotics engineers, and other technical specialists, which speaks to the need for people who can help implement digital technologies at scale. To encourage future generations to choose chemicals as a profession of choice, chemical companies need to give employees the same quality digital experiences that they have in their daily lives as consumers. That means providing collaboration tools, bring-your-own-device policies for non-hazardous areas in plants, and digital identities that streamline interactions, to name just a few. Digital technology will not only be important to chemical companies’ operations—but it will also be key to attracting talented people and empowering them to perform their roles with greater efficiency, velocity and tenacity.
Leading through technology
Many observers have noted that every business is becoming a technology business. The Accenture Technology Vision 2021 takes this a step further, saying that every leading company will be a technology leader, and a company’s technology architecture and capabilities will be the true source of competitive differentiation. For example, the use of massive, intelligent digital twins is ushering in new opportunities for chemical leaders to bring data and intelligence together, ask and answer big questions, and reimagine how they operate, collaborate and innovate. At the same time, we are seeing the “democratisation” of technology, as natural language processing, low-code platforms and robotic process automation are adding an embedded grassroots layer that enables and motivates every employee to become an innovator.
Technology-led digitisation in the chemical industry will play a pivotal role in driving the next wave of growth. But moving ahead will require more than asking “which technologies do I want to use?” Instead, companies will need to start by asking “what business problems do we want to address?” Once the business imperatives and underlying process improvement opportunities are defined, the key will lie in “technology unity”—the marriage of these digital technologies to provide a comprehensive approach to solving business problems. It is not cloud alone, AI alone or blockchain alone that will deliver significant business results, but rather a combination of technologies designed to help companies achieve new levels of growth and business value.
The path ahead is going to be complex because effective digitisation involves not just technology implementation, but also business transformation. It will require an overarching digital strategy that addresses culture, business process, technology and talent. It won’t always be easy—but for an industry with a long history of solving difficult challenges, it will not be insurmountable.
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