Digital is all around us.The onset of the pandemic only accelerated the expansion and progress of digitization in almost every industry years ahead. Still, not all of them are making the most out of it just yet. The chemical industry’s love-hate relationship with digitization is founded on its belief in human-to-human interaction. However, we shouldn’t let that hold us back from the innovations that only aim to improve business processes and outcomes. In this episode, your host Victoria Meyer shares the many ways the chemical industry is embracing digitization and explains why executives should start seeing it as a value-creating investment. Tune in and learn the impacts and benefits of digitization.
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The Impact Of Digitization In The Chemical Industry And How Companies Benefit From It
This is the second in a series of the show where I'm going to be sharing how leaders in the chemical industry are responding to some key trends, including sustainability, digitization and supply chain disruptions. These are things I've been talking with my guests about and I'm going to be using these solo shows to distill some of those learnings as well as bringing some additional perspectives. In the first episode of the series, we talked about sustainability. This episode is focused on digitization. Digitization is a topic I love. We're living in a digital world. We all recognize that whether it be in the devices, streaming, podcasts, Zoom and all kinds of things. Digital is all around us. Certainly, from a personal perspective, we've experienced tremendous amounts of digital innovation over the years.
Let's be honest, chemical companies are not necessarily rushing or hadn't been rushing to embrace many aspects of digitization. There's a certain part of the chemical industry that has a love-hate relationship with digitization. We love data and technology. We are a data-driven industry and a technology-driven industry so we've brought those aspects of digitization into our world from manufacturing processes. I think about things like statistical process control and all of the control mechanisms that we have at many of our manufacturing sites. Digital technology is advanced and powerful. We are embracing data and technology in making our decision-making when it comes to financial and operational decisions.
On the other hand, there's a bit of a love-hate part of this. The hate is in the sense that we're a relationship-oriented business. We've been pretty slow and reluctant to replace what has traditionally been person-to-person interactions with the digital interface. Whereas in our personal life, we're very accustomed to getting on an app, getting on the websites, making reservations, ordering dinner, etc. In our business life in the chemical industry, we're a little less excited, in many cases, about taking the person-to-person sales relationship, customer relationship, internal business relationships and moving it to a digital platform. As one of my guests said, "The time is now. We've got to move."
I've been doing digital things for many years. I still remember years ago, implementing one of the first eCommerce solutions at Shell Chemicals. It was a front-end interface. not a pretty website that had a lot of manual backend on it, to place orders, get information and shaped to order tracking, things like that. A decade later, I went back and was managing that group and come to find out the front end and the customer interface hadn't changed very much although the backend had changed quite a bit. It was more sophisticated and more connected to the systems. Fast forward now in what we're doing on the front end is not substantially different. Some companies are still working to land robust digital platforms and portals that their customers connect to.
We've got this whole realm of an early adopter, fast follower and late follower when we think about what the chemical industry is doing in terms of digitization and digitalization, which people tell me are two different things but digitization is easier for me to say so we're going to stick with that. It's the things along the eCommerce routes and how we're working inside of our businesses, etc. One of the things that I found is that one of the biggest challenges that chemical companies have and chemical executives face when we're talking about digitization is, in some respects, we're thinking too small. Executives are viewing digitization as a defensive and even value-protecting mechanism, an activity rather than a value-creating investment. When you think small, it's pretty hard to identify the ROI for the investment. Are you selling more products? Maybe not. Are you creating value? Maybe. Are you substantially reducing work? We don't know. You have to think differently about how you're measuring returns on this, what your objectives are for it, and think more innovatively about how do you apply digitization into your business, your business processes, the way that you engage with your customers and suppliers and the way that you're engaging with your internal teams and decision-making.
If the industry doesn’t embrace digital, it risks becoming less relevant.
In many cases, digitization is about enhancing the customer experience and the employee experience. When we think about it, as individuals, stakeholders of all types whether they're your customers, employees, investors, suppliers are comfortable in digitizing all facets of their lives. I think about my ring doorbell and my home control system for my AC and heating, they're digital platforms. Lots of home management, we talk about the internet of things is real and it's coming to a home, business and whatever is near you. When we apply this to chemical companies, many have been slower to embrace digital but it's accelerating because the industry doesn't have a choice. If the industry doesn't embrace digital, you risk becoming less relevant to your customers, suppliers, investors and employees, especially thinking about employees, the new generation coming in has grown up only knowing digital. To walk in the door of your company and not have robust digital tools, web-based tools, handheld information, etc. is not going to be attractive and we risk a lot.
When I talk with Jay Bhatia who is deeply embedded in this with his company, Agilis Chemicals, one of the things he said with digitization is there's an evolution on the positive return for the enterprise. It's not just a financial return, it's a social aspect and there's a sustainability aspect when we think about digital and digital solutions for the chemical industry. When we're thinking about that, we're focusing on, many times, digitizing existing business practices so this is awesome. We need to do that but we also need to be looking at digitization as an opportunity to innovate, leapfrog the competition, and that's what leading companies are doing as we look ahead over the next years. In fact, I know there have been statements and statistics saying that during the pandemic, digitization, digital business processes, digital activity and companies of all varieties leapfrogged by several years over the course of a couple of months. We've hit an acceleration point that's even as we come out of the pandemic and go back to our "normal ways of working" is not going to change.
Let's talk a little bit about how the executives and the chemical companies I've been speaking with are approaching digitization. Where are we? What's the progress we've been making? For the most part, digitization has followed four areas. One is ways of working but I'm not going to touch on that. This is obvious to most of us. The fact that we've spent most of the past year sitting at home, many of us are behind a desk, behind a computer screen, still tightly accessed and tightly connected to each other to our data, our systems and our information, we know that digitization in the sense of how we are working together is here. The other three areas are around looking at digital and digitization in the sense of data and the data platform. How are we sharing information, creating and utilizing big data to increase the speed of decision-making? That's one area. The second area is around digital delivery channels. I've touched on that a little bit. This is around how do we engage with customers and suppliers. This is taking roots now and we're seeing this with a lot of companies in ways that it hadn't taken root in the past. The third way that companies are embracing digitization is harnessing innovations to solve problems, change the way we work, start leapfrogging and getting creative with doing business in all its various shapes and forms.
Optimizing Data Platforms
Touching first on the data platform. This often is the most obvious place and sometimes we don't even think of this as digital. Many companies have been living with SAP Systems and there's this deep backend of data and processes that connect and digitize but the evolution in some of this is around big data as they like to call it. There are millions of pieces of information that exist in many companies. Everything from manufacturing and all the different data elements that might arise in your manufacturing site safety and all the aspects about your people, customers, customer insights, business and operational processes. I think about these data platforms that are getting put in place. SAP has been there for a long time. In other cases, when I talked to Joey Gullion, one of the things he talked about was that the SI group was focusing on was implementing a global operating platform so they have real-time information sharing and better and faster decision-making. This is still critical especially when we see all the M&A, the combinations and recombination of businesses. Getting onto a single global platform is powerful. That's the start of this big data transformation and it's about how do you harness this information.
If we think about going back a decade or more ago, our use of data was pretty crude. You had the data in the system, you'd dump it into a spreadsheet and you do an analysis, maybe a pivot table. Sometimes I still have problems figuring out those pivot tables but I love them nonetheless. It was pretty crude but we're looking about the digitization of that data of that business information stream not from a data perspective but from analytics. Thinking about how do you use analytics, AI and smart development to change how your business performance or manufacturing performance? Manufacturing has been digitized from a data perspective for years. We now have greater capability to do more analysis, predictive analytics and even things we talk a lot certainly in the personal space. I hear a lot about Facebook's algorithms and what they're pushing out, Google, LinkedIn and there are pros and cons to all of it. The reality is being able to figure out what those algorithms are using them to transform your business and your business performance is where companies are starting to focus.
Digital is all around us.
Increasing the speed of decision-making when we talked with Pat Ropella, one of the things he said is the big companies have figured this out. What he said is the mid-size companies are heavily focused on digitization and bringing talent into their organizations to support this. That's where a lot of this activity is and the reason is large companies already have people and strategies in place. We put this in the context of an early adopter, fast follower, late follower concept here. In many cases, some of the chemical majors or group people into that like Dow, BASF, Shell and others have been working on big data for years. AI and algorithms are harnessing the power of all the various bits and pieces of data in their system. It's the mid-sized companies that are starting to invest the time and the resources to find the right talent inside the chemical industry and outside the chemical industry. I think that's pretty interesting. That's one of the pieces that Pat Ropella shared about. He's looking and bringing a lot of people from outside the industry into the industry to help companies with this digitization, big data and big analytics pieces of it. That's one aspect.
Digitizing Delivery Channels
The other aspect that people are still focusing and spending time on is around digitizing delivery channels. How do you engage with customers and suppliers? What I think is interesting with that is in many ways in our personal lives, there's a continuous evolution of these digital delivery channels. When I think about delivery, let's even get to something like Instacart. How do you get your groceries delivered and how do you engage with your retailers and your local vendors? Local is far away. Digitizing the delivery channels is an ongoing evolution in our personal life and it's a focus in many companies. It's eCommerce and digital delivery but it's not just about sales. Sales is one piece of it. Certainly, bringing more of our business transactions into a digital platform is critical but we're also looking at people focusing in much more on a portal approach. This was something that when I spoke with Ron Zmich. He talked about Palmer Holland is focusing and their customers are interested in a portal approach, access to orders, invoices, tracking information, order tracking and other stuff so bringing all this information into one place.
Here's the reality with the challenges in our personal lives. You've got seven million passwords to remember and you're working this with all of your customers and all your suppliers potentially. There's got to be some solutions. I'm certain if I were to bring Jay Bhatia from Agilis Chemicals back on, he might have a solution to talk about this and we can talk more about how you coalesce some of this portal effect into one. What I think the challenge is this is important, it's critical and it's about the experience and the customer experience but it's not moving the needle. When we think about it, it is specifically focused on digitizing existing practices, processes and business relationships but it's not necessarily moving the dial. It's innovative but it's not pushing the needle and it's not ultimately creating revolution or innovation and helping us to leapfrog. That’s one aspect of it.
Harnessing Innovations To Better Adapt Work Processes
The third aspect and final aspect that I want to talk about is about harnessing innovations to change the way we work. I loved the example and other people told me that they loved it as well. When I spoke with Brad Beauchamp and he talked about during the pandemic, they acquired eyeglasses with cameras in it so they could do remote monitoring and diagnostics. Whereas they may be normally would send a technician from one of their labs, other operating sites and onto a site to help diagnose an issue to witness a plant trial, etc. It wasn't feasible to do so. If you think about the early days of the pandemic in 2020, we were locked down, people were not traveling and not visiting other sites. In fact, I hear some of the same things in 2021 that people are getting out and about and starting to meet business partners more often but it's not often onsite. Many office locations and sites are still on lockdown from bringing in third parties. Nonetheless, when I go back to what Brad talked about the eyeglasses with cameras in it so the person sitting behind the computer thousands of miles away could see what his or her colleague was seeing. It's like something out of a movie from many years ago. These days these movies move faster but it's interesting. It's bringing these innovations to changing how do we work. My guess is this is an innovation that was opportunistic but it's going to change that business approach in the long-term.
The other thing we've seen, we've been seeing this for several years already is, using drones to do tank inspections. It's a huge safety opportunity going into close tanks, as we all know, is a potentially hazardous activity. There's a lot of policies and procedures around it to make sure that the person that's doing it is safe while they're doing it and not going to be in harm's way. Being able to use drones to do that is taking something from personal life, frankly. People buying drones and fly them around their neighborhood to check things out and putting it to practical business use. That's going to reap rewards. It is reaping rewards. It drives long-term benefits. We're seeing that as one of the innovations. That's changing the way we work. Improving our safety profile. That's allowing people to stay connected, creative and being able to solve problems without having to be there in person.
I think this is where some of our leapfrogging may take place. Innovation with a purpose is what I call it. There's a real need and there are solutions elsewhere in our ecosystem whether they be in the chemical industry or personal lives. Other industries and chemical companies are finding those innovations, bringing them in, using them to solve challenges that they have in the moment and creating some opportunities in that space. One of the quotes I threw out to my notes here that reminds me of is, this is a bit of Schoolhouse Rock. When I was a kid, I loved Schoolhouse Rock. Every Saturday morning, I wanted to make sure I was sitting in front of the TV and watching Schoolhouse Rock. I might've memorized every episode and all the songs. I think about where we are sitting here in 2021 and looking at what the industry is doing and across a variety of aspects as digitization and its Mother Necessity. If you remember, it's Mother Necessity. Where would we be without the inventions of your progeny? That's where we're at. Digitization is here and it's evolving. We heard some great stories from my guests on the show that we've had as we've talked about what they're doing from a digital perspective and a digitization perspective in their company.
What do you think? Let me know. I'd love to hear your feedback in terms of, where is your company? Are you guys early adopters? Are you moving ahead of the game and implementing things that others aren't yet at this point in time from a digitization perspective? A fast follower, a late follower, where are your chemical companies and where do you see chemical companies going next when we think about innovation and digitization. Send me a message on LinkedIn. Shoot me an email. I'd love to hear your thoughts on that. Thanks for reading. If you enjoyed this episode, please send me some feedback. Also, go and do a rate and review. More importantly, share it with a friend and colleague. It's an opportunity for us to keep getting the word out and sharing our great stories about the chemical industry. I appreciate you participating and reading The Chemical Show. Thanks.