Primary trends that will define the chemical industry's future
Market Expertz | January 02, 2020
For several years the global chemicals sector has been fighting decreasing margins, rapidly expanding competition in developing countries, product commoditization, and customers demanding more at lower prices. The narrative of how specialty chemicals and the fruits of innovation, which once commanded a finest, have slowly lost their luster in the recent decades is well told; indeed, in many of Strategy & annual analyses in the past few years, it is bemoaned these troubling circumstance and the frustrations that the sector faces in figuring out a way to deal with them.
As part of this rapid globalization, many new market entrants – from developing countries and adjacent parts of the supply – are rising with innovative business models, processes, and concepts. In turn, this drives shrinking lifecycles as well as quick commoditization of products as innovators quickly catch up with or even exceed incumbents based on the responsiveness and speed in which they are developing new products, services, and formulations. The development toward digitalization in the chemicals business goes hand-in-hand with globalization and the advent of a circular economy. A massive wave of digital innovation shows no sign of cresting this year. Current technological developments such as in-memory processing power, along with near-unlimited data storage capabilities at lesser prices, offer unprecedented levels of granularity, connectivity, and speed in accessing, analyzing, and processing huge amounts of data. New business models also are rising around operational excellence as well as business process automation.
With the aforementioned digital technologies becoming commercially feasible and scalable, companies can now comprehend concepts like “touchless order fulfillment” and “lights-out manufacturing.” For these ground-breaking new business models to flourish, companies will require a solid foundation that includes IT infrastructure and a fourth-generation platform for business processes, as well as a skilled workforce. Machine learning, blockchain, and IoT won’t succeed in a vacuum. They need to be embedded in our processes and our thinking.