Chemical suppliers from inhibitors to success factors

From inhibitors to success factors

After identifying these three major constraints, the final question is how to use them to map a successful digital journey. Does it make sense for chemical suppliers to wait for digital challengers and force them to respond?

Building digital technology. For chemical suppliers, the obvious first step should be to establish or acquire digital expertise, so as to have the ability to identify and evaluate digital opportunities. This needs to be owned by the organization's management and leadership team. Three main approaches have been identified. First, identify the employees with digital knowledge in the organization and give them room for growth and development. Secondly, it is necessary to introduce talents with improved digital knowledge into the organization. They can help develop new perspectives, assess and identify digital opportunities. Third, sustainable digital education is the key.

While the development of internal digital expertise will take some time, external consultants can help each company identify specific opportunities and facilitate the overall transformation process as needed.

Developing digital vision. Once companies develop digital expertise, they can better understand specific threats, but most importantly their business opportunities. Their next step is to formalize their digital vision, translate it into their overall strategy, and outline how digital technology and capabilities will bring value to their business and customers.

Embed digital projects and transformation efforts in the change management plan. The digital journey will affect most areas of the organization and many employees. It often has a profound impact on how things will be done and how they have been done. Therefore, its complexity must not be underestimated. In addition to resistance, there will be obstacles. It is not surprising that many of the constraints discussed earlier correspond to the eight actions suggested by John P. Kotter, which provide the best opportunity for the transformation project to succeed (leading change, Harvard Business Review, 2007). These actions include building and communicating visions, removing barriers and empowering others. Part of it is "encouraging non-traditional ideas, activities and actions.". Therefore, Kotter's framework deserves a detailed study of those who are facing challenges and need to navigate through a comprehensive change management process, including digital transformation.

prospect

The first chemical companies have recently developed a very sophisticated understanding of digital opportunities and launched comprehensive digital initiatives, especially since 2017. This is revealed through the in-depth analysis of the annual reports of chemical suppliers and the communication between shareholders. As a result, market pressure is slowly building up. To avoid accidents, it is recommended that all other chemical companies accelerate the pace of digital transformation and begin to develop digital expertise in their organizations. History shows that many established companies underestimate the emerging digital business model when targeting niche applications. Then, all of a sudden, they get attention exponentially, and the incumbents realize that it's too late. I encourage chemical companies to build in-depth digital expertise and embrace non-traditional ideas, innovations and new methods.

It's a challenge

One of the remaining challenges is the relatively low growth of the global chemical industry. Combined with margin pressure, abundant cheap capital and low level of innovation, this has led to significant consolidation of the industry in the past few years. More and more M & A transactions can be observed that the company's goal is to provide the growth of shareholder value through acquisition. Strict cost reduction plan is another common measure taken by chemical suppliers to improve operating profit and earnings per share. The challenge for executives is to find the right balance, on the one hand, to promote short-term shareholder value, on the other hand, to invest heavily in the development of digital strategy and the transformation of the whole company. It seems that most chemical companies are now putting more emphasis on short-term impact. Why invest heavily in unknown areas that may have an unquantifiable impact on the future?

One possible answer is that the journey of digital transformation brings various advantages. It increases customer engagement and helps increase revenue. While changing the company, significant efficiency can be expected. In other industries, EBITDA increased by 20%.