In this opinion piece, it is asked: What can be done, to bring Digitalization more up to speed for the Chemical Industry? The focus is on us – the people who try to “sell” digitalization to the industry. Much to often we do not speak the language of the decision makers or experts in chemical industry. We fail to define a valuable business case for the Digital Transformation or sell mainly on a “cost saving” case. The article evaluates the mistakes and proposes a better approach: curating the digital tools and supporting our clients in Chemical Industry to transform their organizations into a digital, data-centred culture.
Repost of my article in HPC Today 6 (Nov/Dec) 2019.
Interesting times are ahead for the Chemical Industry. Many changes will impact the future of their business model: shifts and therefore insecurities in raw material supply, new competition from near- and far east, increased regulation. On top of it, the Digitalization catalyses a new industrial revolution. Insecurity rises. What will be the impact on our industry? What is real, what is hype? Innovative and adaptable as it has always been, the chemical industry takes this challenge and puts the Digital Transformation on its strategic agenda. The way to Digital Transformation for incumbent organizations has to be one that combines evolutionary approaches with opening the organization for identifying and taking disruptive opportunities. Consequent digitalization of the processes and operations is one key initiative in the transformation process. But much too often, the industry is still hesitating. Necessary transformation projects kept on hold or are stalling. So what can be done, to bring Digitalization more up to speed for the Chemical Industry?
MISTAKES WE MAKE
There are many pitfalls and roadblocks in the way to a bright digital future of the chemical industry. Parts of these derive from conservative structures in the industry itself. But another part is on us – the people who try to “sell” digitalization to the industry. We have clear vision and also good intentions in mind. Hence, often we just don’t talk the right language. Therefore we get lost in translation between Keynotes and Whitepapers and the reality in the industry. I will point the attention to the most common mistakes and then suggest a different approach that will work better in our industry.
The translation issue
Many consultants, mainly if they come from a Digital Start-up, IT Company or similar background do not speak the language of the decision makers in chemical industry. I do not refer to their English but to a general understanding what is chemical industry about. The core of our industry is the transformation of matter. In a long and complex value chain, we take crude raw materials from the nature – oil, gas, coal, oxides, minerals, or in a more sustainable way: cellulose, lignin, carbon dioxide, industrial waste – and transform them into materials that keep our daily life going. The core of the chemical industry is therefore the “production unit” – sophisticated equipment in which this transformation happens. We move matter. This equipment is expensive and has a long depreciation cycle. Often, we still use apparatuses that were installed decades before. Therefore, change is slow and need to be rooted in this backbone from steel. So, in „selling“ a digital Project to the chemical industry it is important to gather an understanding of the real problems of our business. The more we understand the chemistry value chain and the specific pain points of our clients, the better we can offer a solution. Most likely this solution includes some element of digitalisation.
The business case issue
Along with this comes, that digitalization is often “sold” as a technology push. We have to do “something” with Big Data or Blockchain or Virtual Reality. But: what of my client’s problem is solved with this technology? What pain is relieved? What benefits will be gained? If we start to sell digitalization based on the unsolved problems, issues, or challenges the chemical industry faces which cannot satisfactorily be addressed with the current tools we are on the fast lane. So, what are the frictions in chemical industry? It is a commonplace that the business environment became more volatile, uncertain, complex and ambiguous. Global shifts in supply and demand structure, changing customer values as well as singular political changes, like BREXIT, impact the chemistry business as any other one. More specific, the chemical industry is burdened by high capital investments and long cycles (which disadvantages it in this VUCA-world), a shift in the raw material base to more sustainable ones, increasing regulation and a rather dried out pipeline of breakthrough innovations. In general: the chemical industry is facing a high level of complexity and uncertainty. The tools of the digitalization, from Big Data and Artificial Intelligence to concepts for more agile structures will be very welcomed to provide innovative solutions to that challenges.
The cost saving trap
In the chemical industry, we are masters of process efficiency. From Six Sigma to Lean , from Kanban concepts to process innovations – we always think cost first. So it seems obvious to “sell” digitalization as cost saving initiative. Google “IoT and Chemistry” and for sure you will find an article about “predictive maintenance”. But digitalization is so much more. Digital Transformation is rather defined as leveraging digital technology to drive strategic improvement across an organization. Digital transformation doesn’t cover just IoT, Artificial Intelligence, Predictive Analytics, or Virtual and Augmented Realities. These are tools, as it is the new E-Commerce platform. Digitalization is about transforming a whole organization. It changes the culture, the workplaces, and the ways employees, customers or partners interact. When we fall into the trap to sell Digitalization as cost saving project, than we get measured in the framework of the above-mentioned methods. How fast does this project save how much money for how much cost? Certainly, a cost saving project can be a good entry gate to start digitalization, to demonstrate its worth, to acclimate the people to the new tools. But we need to make clear that Digitalization is a change project. It will take time and it will be an on-going effort. It will change the company at its core. And this is what we need to tell our customers.
The silo trap
When we watch out for Lighthouse Projects for Digital Transformation in the chemical industry, we often read that an organization is ‘digitizing its supply chain’ or applying Big Data in Manufacturing or implementing an E-Procurement Platform or whatever. When we approach specific silos in the current organizations with digital transformation projects we often have quick win but in the long run we end in disappointment. First, like the proverbial ‘paving the cow paths,’ taking something that is analogue and simply making it digital often perpetuates existing issues. Digital Transformation is a good opportunity to review, revisit, and redesign existing ways of doing things. Attempting to force legacy mindsets and processes into new technologies will be the route to failure. Second, silos are often part of the problem, not the solution. Digital tools and technologies can and should work across silos. Indeed, a successful Digital Transformation requires a cross-functional approach. For example, E-Commerce requires a tight integration between Production, IT, Marketing, and Supply Chain, all of which necessitates some degree of digitization. Also, approaching just one silo fails to represent all stakeholders in requirement-gathering, technology selection and design. Resistance will grow and initial failures be welcomed as reason to refuse the initiative as “not invented here”.
Want too much too fast
Finally, we trap into over-promising and under delivering. Digital Transformation is continuous, often slow process of culture change. It will not disrupt an entire business right away. Change grow first steady, than exponentially. The value preposition of the chemical industry is bound to the matter they transform. Even a complete re-invented Digital Chemistry Corporation will most likely not reach profitability of the GAFA and other technology leaders. So, when we sell our projects we should be honest and manage expectations. This is even truer, when we promote Digitalization in chemical industry, with our Research Reports, Whitepapers, and Keynotes. Also, often the industry is not prepared (yet) for the digital transformation. For an AI supported Big Data project, one needs good data. A digital mind-set and a data-centred culture are the fundament for data driven approaches, not only in chemistry. But a digital, data-centred culture needs to be implemented and grown first. This needs changes in the workforce overall and in the approaches of every single employee. Change is rarely easy. For many, the rise of the digital tide has created fear for human workers, as they believe technology, such as intelligent automation, presents a threat to their careers and livelihood. Much to often, the silent (or not so silent) resistance of the work force smashes digitalization projects before they fly. Topics of data security, the risk of cyber attacks, or the fear of loosing control over an intelligent algorithm are brought up to defend legacy structures against the digitalization effort. But the real reason is fear. Only when we address these issues and include all stake-holders right from the start, we can navigate through these fears.
WE CAN DO BETTER
So, how can we help our clients in chemical industry to be successful in their Digital Transformation? Not making the mistakes is a good start. Here are two more key factors to consider:
Finding the right approach
When we define Digital Transformation as a cultural transformation for the whole organization we need to ask ourselves how we can help our clients to navigate through this change effort. Guidance is probably more important than specifications of the tool or methods we try to sell. We need to help to get the value preposition straight. Which problem will be solved when this specific piece of Digital Transformation is implemented? How will the organization be different? How do we need to address the different stakeholders? Helping our clients to find the right leadership approach through the upcoming Digital Transformation will make the difference. A strategic tool, evaluating the current state, the strength and weaknesses, the potential opportunities and threats, helps to look at the bigger picture. A digital transformation requires companies to re-examine where they are and build a road map of where the organization needs to be in order to thrive in the long term. Starting small and building wisely works, but it’s also important to not become lost in the process. Also, it is worth to consider that not everything needs to be transformed. We can help our clients to navigate through the different offers, tools, and methods. Our job as a consultant is to curate. A curated offer, tailored to the customer’s real needs will sell on its own.
Digital transformation cannot be just an “IT thing.” It affects the entire organization and completely changes how business gets done. But mainly it changes the internal company culture. A company launching a digital transformation must therefore begin with an evaluation of the stakeholders. Which groups will be impacted by the technology? How will they react? The new – digital – company might not be organized around the classical silo structure. Hence, we need to be careful and sensitive in the changes we make. We need to help our clients to keep their workforce on-board for the change project. Much too often the people affected are worried. Therefore the way we sell the project also impacts the level of acceptance (see point 3: The cost saving trap). Digitalisation need a change in the mind-set of the people. Digitalization is founded on a data-centred culture. This culture is there in the Digital Giants and Start-ups, but not necessarily in the incumbent corporations in our industry. But we can help our clients to create this new culture, by train or mentor employees, by helping to recruit “Digital natives” and by leading by example when we execute the Digital Transformation projects.
The digitalization as a potential transformation project reached the Chemical Industry. The awareness that there is a potential for new business opportunities – and a thread when staying passive – is raised. Hence, much to often consultants, start-ups and digital solution providers don’t speak yet the same language. When we help our clients to define a good business case and the right strategic approach, when we curate the plenty of offers into something that fits the chemical industry and when we help to create a new, digital culture in our client’s organizations, we will do much better “selling” Digitalization to the Chemical Industry.
Dr. Alexander Madl is a polymer chemist, thinker, explorer and expert in innovation. After serving more than 13 years leadership positions in the chemical industry, his mission is now to help this industry to focus innovation processes on future growth topics and to make them more effective and efficient with the help of digital tools: Transform Chemistry Innovation.