New report from Deloitte Global finds slow digital adoption in the chemicals industry

• Over 50 percent of chemical companies surveyed lack an enterprise digital strategy and transformation roadmap
• Without enterprise digital strategies, many chemical enterprises may miss critical opportunities for innovation, talent management, and value creation
• 5 enablers identified to possibly augment their existing digital agendas

Published: 7 March 2017

Increased competition, changing customer needs, an evolving regulatory environment, and dynamic cost equations weigh heavily on chemical enterprises today. In the face of this challenging environment, many chemical enterprises are focused on reinventing their business and operating models through transformational trends emanating from other industries. Yet, many are missing a critical opportunity as 52 percent of chemical enterprises surveyed lack a digital strategy and transformation roadmap, according to a new report “Digital Transformation: Are chemical enterprises ready?” jointly published by Deloitte Global’s Consumer & Industrial Products Industry group and China Petroleum and Chemical Industry Federation (CPCIF).

The report analysis is based on the collection of survey responses from 102 executives from more than 50 chemical enterprises with a balanced mix across North America, Western Europe and Asia. The data from the survey begins a multiyear research initiative to explore the opportunities and challenges digital trends present to chemical enterprises.

The survey uncovered that organizational agility (55 percent) and flexibility (39 percent) are challenges experienced by chemical enterprises that may limit a digitally-led business transformation. “While most of the responsibility to execute digital initiatives currently resides with the information technology or the newly created digital department, many executives believe that individual business units or functions should take full ownership,” said Yann Cohen, Digital Chemistry Leader, Deloitte Global.

“Putting it into China context, we observe that most Chinese chemical manufacturers are in the early maturity cluster in terms of digital adoption, despite that China is one of the most digitally mature market globally with its unique ecosystems,” said Jiaming Li, Chemicals & Specialty Materials Sector Consulting Leader, Deloitte China. “From the survey most senior executives of Chinese chemical manufacturers recognize a lack of transparency and communication about the digital agenda in their organizations. Beyond organization agility, one of the major challenges identified by Chinese chemical manufacturers is to scale up digital initiatives from pilot project to enterprise level. ”

CPCIF Chairman Li Shousheng said, “China's economy is currently under a crucial period of structural transformation and migration to different approaches. At the same time, China is growing from a strong country to a superpower for its chemical industry. 2017 is a critical year for the 13^th Five Year Plan, where the development of China’s chemical industry will continue to focus on eliminating inefficient capacity. Under the strategies of ‘Industry 4.0’ and ‘Made in China 2025’, a disruptive digital revolution will emerge to bring significant impact to the chemical industry. Digitalization has considerably helped to improve quality and efficiency and achieve upgrade for the entire industry. There are many successful cases of digitalization in chemical industry: from precautionary protection of equipment manufacturing to precision fertilization in agriculture and the application of large-scale RFID technology for smart logistics. In order to improve business performance in the increasingly challenging markets, chemical companies should not rely on traditional approaches, such as cost reduction and cleaning up of their balance sheets. Instead, these companies should explore other unknown business areas and predict the unexpected. Hence, digital transformation has become a must for the overall industry development. It’s not about doing it or not, but how to do it right. It's not a simple IT matter, but a matter of development strategy. ”

According to the report, there are five enablers chemical enterprises can consider to augment their existing digital agendas:

• Develop a robust business transformation process starting with a clear digital enterprise strategy
• Build a sustainable insight-driven advantage in the entire organization
• Identify and mitigate cyber risks in complex and dynamic ecosystems
• Establish agile operating models internally and externally
• Embed total innovation to encourage corporate collaboration, learning, and a cultural behavioral shift

“A clear digital enterprise strategy can generate significant value through business model innovation, customer experience enhancement, and operational excellence,” said Yann Cohen. “Senior leadership in chemical enterprises have a window of opportunity to proactively drive a culture combining digital and innovation, which could likely enable a business transformation led by total innovation and focused on talent management and shareholder value creation.”

Deloitte Global Consumer & Industrial Products Industry group

The Deloitte Global Consumer & Industrial Products Industry group (Global C&IP) comprises more than 22,000 member firm partners and industry professionals in over 45 countries. Deloitte member firms provide professional services to 84 percent of the C&IP industry companies on the Fortune Global 500®, making an impact that matters in business sectors representing the entire value chain from raw materials to the end consumer. The group brings deep industry knowledge, service line experience, and thought leadership to solving complex business issues in every corner of the globe. Deloitte member firms attract, develop, and retain the best professionals, and instill a set of shared values centered on integrity, commitment, and serving clients with distinction. Sectors served include aerospace and defense; automotive; chemicals and specialty materials, including metals, forest, paper and packaging; consumer products; industrial products and services; retail, wholesale and distribution; as well as travel, hospitality and business services.

For more information about the Global C&IP Industry group, please visit www.deloitte.com/manufacturing and www.deloitte.com/consumerbusiness.

About China Petroleum and Chemical Industry Federation

China Petroleum and Chemical Industry Federation (CPCIF) was established on April. 28, 2001. It is a non-government, not-for-profit organization consisting of companies, institutes, sectional associations and local associations in the petroleum and chemical industry on the voluntary basis. CPCIF is the umbrella organization that provides service and implements certain administrative functions within this industry on the national level. Currently it has over 400 direct members, which covers all fields of China's petroleum and chemical industry. For more information about CPCIF, please visit www.cpcia.org.cn.