This article originally appeared on Forbes.com.
As chemical companies look for new opportunities in 2018, some of the greatest potential will come from digital technology. In chemicals, as in other industries, there is no shortage of ideas for new initiatives. But if executives allow themselves to become overwhelmed by the vast array of options, they may overlook the few initiatives that could scale and make a signiﬁcant difference. They need to ﬁnd ways to ﬁlter out the noise and channel their efforts to the most promising digital initiatives.
Before chemical companies can map out their most promising digital initiatives, they need a clear understanding of their point of departure, their position in the industry and their unique advantages and capabilities. Here are ﬁve questions chemicals leaders should ask themselves to help focus the journey.
- How will digital shift profit pools? Digital innovation is changing the rules that determine who makes money and how. In fertilizers, for example, the rapidly evolving market space around precision agriculture creates new opportunities and threats for chemical producers. New players could easily capture the potential revenue streams from platform solutions, and, more generally, volumes could come under pressure from more efﬁcient fertilizer use. Chemical producers, particularly those with diversified portfolios, need a clear understanding of where they make their money, what generates profitability and how the innovations of digital technology could change the equation.
- What's your true competitive advantage? Even more important than understanding where you make money is understanding why you make money. Strengthening those areas through digital, and homing in on opportunities where digital can deliver differentiation can help companies make the most of their investments. One chemical producer was investing heavily to improve customer experience, even though it had a captive base that valued low prices. By focusing on improving its commercial capabilities, the company was actually diluting its true competitive advantage and creating an opening for other companies to move in. Don't become so focused on the range of digital opportunities that you lose sight of what really matters: the competitive advantages that set the company apart from the pack.
- Are you a digital leader or fast follower? Both strategies offer advantages, but each carries a different level of risk and return. Investing in disruptive change costs more and takes longer, but can deliver greater rewards. Adopting a more cautious tack—embracing innovations rapidly as others demonstrate their value—may take less time and stave off competition, but it's unlikely to move you ahead of the curve. In fact, in an industry like chemicals, where years-long lead times for investments are common, a fast-follower strategy can still be expensive and risky. Either way, standing still is not an option.
- Is your digital starting point clear? Developing a clear overview of a company's initiatives helps executives understand what the company is doing right and where it needs to redouble its efforts. That in turn helps clarify priorities and bring discipline to the company's digital investments, focusing on those that will have the most impact. Starting with small, discrete successes, which can then be scaled across the organization, is generally more effective (and less risky) than launching "big bang" efforts that try to change everything at once.
- Do you have a compelling case for change that connects the vision of the dreamers with the day-to-day reality of the doers? Most leadership teams have both doers and dreamers, and both perspectives are valid—indeed, critical—for success. Yet if left in opposition, the tension between these groups can paralyze initiatives. Successful CEOs tap the energies of both types, striking a balance between the doer and dreamer perspectives. This balance should blend a practical set of near-term, high-impact initiatives with a bold vision for how the company will keep pace as digital innovation reshapes the industry over time.
Answering these five questions will help executives articulate a clear digital strategy and direct resources to a prioritized set of digital opportunities. As they begin to put those insights into actions, focusing on three key areas can help accelerate their digital initiatives, bringing about small wins that build momentum.
Align the operating model to support digital ambitions. Since operating models serve as the blueprint for organizing and distributing resources to get work done, adapting the model is the most effective way to shape the business and determine how people work together within and across boundaries.
Define an integrated roadmap for your digital initiatives. Digital leaders set bold ambitions and build the capabilities necessary to achieve them. Investing in analytics capabilities and IT architecture enables them to develop rapidly and draw meaningful insights from data. In some cases, partnerships will be the best way to acquire the necessary capabilities.
Accelerate outcomes. Finally, if digital initiatives get bogged down, one way to restart is to narrow the vision to one or two initiatives that can be achieved rapidly. Quick wins generate momentum and serve as models for future initiatives. Among those capabilities, teams should developing the ability to work in a series of Agile sprints, breaking complex problems into smaller modules in order to make progress and demonstrate success.
As recently as a year or two ago, many chemicals executives were still debating whether and how to advance on digital initiatives within their companies. This is less true today: Nearly everyone we speak with now recognizes the opportunity and potential value at stake in the broad digital transformation underway in the chemical industry and wondering how they can realize results quickly with smart levels of investment. The most urgent tasks for senior executives today are understanding their point of departure, setting ambitious but realistic targets and moving quickly to capture advantage.
Nathan Anderson and Peter Guarraia are partners with Bain & Company in Chicago. Both work with Bain's Global Chemicals practice.