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Three Ways That Digital Technology Can Help Chemical Producers

Three Ways That Digital Technology Can Help Chemical Producers

Chemical companies are awash with data that can help them understand their customers, improve operations and create new products and services.

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Three Ways That Digital Technology Can Help Chemical Producers

This article originally appeared on Forbes.com.

Chemical producers were among the first industrial companies to deploy digital technologies extensively, using digital sensors and controllers to optimize production and control plant operations. More recently, however, the chemicals sector has slowed its pace of digital innovation while other sectors, such as retail, banking and telecommunications, have taken the lead, embracing digital innovation in such areas as customer engagement and operations.

Now some chemical executives are innovating again to find new value through digital technologies. As traditional sources of competitive advantage (access to feedstock, scale assets, process technology and market access) become well established, these executives are looking for ways to adapt their business models. Bain’s research on digital technologies in industrial applications suggests that there are specific and imminent opportunities in three areas in particular.

Customer engagement. Web and mobile interfaces are allowing chemical companies to reimagine the customer relationship. Online transactions provide more and better data about how customers research, shop and order products—which can be analyzed to provide insights that can lead to better products and services. Interestingly, use of new technologies varies by factors like geography. Bain’s recent research found that UK coatings customers use online channels primarily to research colors and pricing, whereas Chinese customers are more interested in design ideas and suppliers’ ratings.

New products and services. Digital technology opens the way for new products and services. At its most basic, the rise of digital technologies creates demand for associated chemicals, such as ultra-pure chemicals used in electronics production, battery chemicals and the filaments used in 3-D printing. But these new technologies are also leading chemical producers into completely new territories, such as software as a service (SaaS), which they bundle with products to help their customers offer consumers more comprehensive solutions. For example, a company supplying oxygen cylinders to patients at their homes could use digital technologies to collect data on these distributed cylinders, allowing the company to anticipate replacement cycles and perhaps develop related pharmaceutical products.

Core operations. Although chemical companies have used sensors and remote communications technologies for years to optimize their plant production, the number of those sensors and the amount of data generated by them are increasing by orders of magnitude. Companies now have more data than ever that helps customers improve yield and product quality while reducing costs.

Maintenance engineers can see when equipment shows risks of failure, and they can monitor a plant’s operations to make sure it is running within its design parameters. They can use this information as part of an enhanced root cause analysis to improve a plant’s reliability.

While the opportunity to improve operations grows, so does the challenge of extracting meaningful information from volumes of data. Chemical producers need to develop new analytic capabilities to draw meaningful insights, and a whole industry of third-party solution providers that can help make the most out of their data has risen up. Already, those insights are helping producers make better decisions about when to perform maintenance or to replace parts or equipment. Increasingly, these insights will help them monitor the production of chemicals in real time, offering recommendations or even adjusting processes to optimize the mix.

To seize these opportunities, companies need a comprehensive digital vision that is supported by new capabilities, platforms, data analytics and changes in the business and operating model. A key first step is deciding on the priorities, the sequencing and the pace of the digital transformation—a strategic exercise that executives should base on the goals of each business and the sources of its competitive advantage, rather than on the availability of technology solutions.

For some, the top priority may be to change the way they work with customers. By using data analytics and digital technologies, companies can sharpen customer segmentation, enhance value-added customer solutions and change customer-interaction models. Others may find greater opportunities from improving plant operations. Connected sensors and the ability to analyze and automate responses to sensor output allow companies to build smart ecosystems, which minimize downtime and speed up processes. Yet another option is to invest in end-to-end digital technologies and interfaces between steps in the value chain. Data and analytics help producers recognize patterns and specific events, and they can apply these findings through mobile apps. These apps can provide better information in sourcing and production, or to members of the salesforce who can use the data to tailor offers more specifically to individual customers.

Finally, digital transformation offers a massive opportunity for chemical companies, but success will require a significant investment in new talent and capabilities, as well as careful prioritization. Senior executives must be deliberate about picking opportunities for their market and regulatory environment. As with all large transformations, they should think of this as a multiyear journey, even though, in this case, one of the most important aspects of the change will be acquiring the skills to innovate in short cycles and deploy new products and services more rapidly.

Mark Porter is a partner with Bain & Company in London. Nathan Anderson and Peter Guarraia are Bain partners in Chicago. Francesco Cigala is a partner in Bain’s Kuala Lumpur office.


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