Nate Anderson: Accelerating Digitalization in Chemicals



Digital is changing how money is made in the chemical industry, and who is making it. Nate Anderson, a partner with Bain's Chemicals practice, explains that as executives plan their strategy for optimizing the digital potential, they should ask themselves these three questions in order to act quickly and be successful.

Read the Bain Brief: Accelerating Digitalization in Chemicals—Five Questions for CEOs

Read the transcript below.

NATE ANDERSON: Digital is rewriting the rules of who will make money and how in the chemical industry. As executives try to figure out how they're going to invest in digital, many of them have been overwhelmed with the number of options. One way to start to cut through that noise is to ask three questions. First, how are profit pools likely to shift in my industry?

One example is in agriculture. Equipment manufacturers have started to deploy precision farming equipment, which helps farmers optimize the amount of fertilizer they put down. This is great for the farmers, but for the fertilizer companies, this can mean less volume. And so, we expect, over time, to see some of the profit pool shift away from the fertilizer companies and towards the equipment manufacturers.

Question number two, what is my competitive advantage? It's critical that you continue to understand how you differentiate versus the competitors with your customers. One chemical company was investing heavily behind digital solutions to improve the customer experience. That's great, except their customers actually wanted low price. And so that investment was actually getting in the way of their ability to deliver the lowest cost possible.

And number three, have you created a compelling case for change? And particularly one that connects both the dreamers in your organization and the doers. When we look inside an organization, we see dreamers. They are the ones that view digital as a solution for the long term. They envision an industry that can look very different. The doers, they focus on how can I use digital today to make my business better in the near term.

We believe the best strategies are the ones that connect the best of both of these types of thinkers. As we talked to chemical executives today, we've noticed a lot has changed in the last year. Just a year ago, many chemical executives were still asking, "Is digital even important?" and certainly, "Where should I be investing?" Today, chemical executives understand the need to act now and the need to act quickly.

Read the Bain Brief: Accelerating Digitalization in Chemicals—Five Questions for CEOs