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Perspectives

Unlocking growth in the chemicals and special materials industry

Commercial Transformation 4.0 operating model provides a competitive advantage

Find out how Commercial Transformation 4.0 can help companies embrace complexity in the marketplace and unlock profitable growth through the creation of an integrated operating model.

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The challenge today

Chemicals and specialty materials companies face several challenges when it comes to growth. End-market-demand uncertainty, oil price fluctuations, overcapacity, sustainability, the rise of protectionism, and other factors are having significant impacts on success. Margins, despite reaching all-time highs, have stabilized, and companies are looking for the next lever to pull. We are also entering a new era of low capacity utilization, as new build-ups come online, likely resulting in excess capacity in the future. While near-term demand outlook is optimistic, long-term projections are less so, due to a slowing Chinese economy and continued end-market uncertainty in automotive and construction.1 Merger and acquisition activity continues to be robust, but high multiples and a limited number of buyout targets are constraining options.

In the face of these challenges, and given new operating environments, it has become apparent that the chemicals industry cannot rely solely on historical approaches to doing business: it must find new ways to drive growth.2

Commercial Transformation 4.0

The growth opportunity

Everyone wants strong growth, but few can achieve it. In challenging environments, many chemicals and specialty materials companies will focus on what they can most easily control, such as managing manufacturing operations to eliminate complexity and reduce costs. In the short term, this may bring better returns and a healthier bottom line, but it does little to promote the medium to long-term, top-line organic growth that they want and have promised to their investors.

In the era of Industry 4.0, Commercial Transformation 4.0 allows companies to embrace complexity in the marketplace and unlock profitable growth through the creation of an integrated commercial system. From initial strategy to final execution, this system grounds itself in a business’s strategic growth choices. It is enabled by building an operating model where those choices naturally flow across specific capabilities and are further reinforced through recurring management routines. This enables business strategy to be linked with market outcomes and thereby improve the company’s ability to drive organic growth.

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Where to get started

There is no one-size-fits-all approach to Commercial Transformation 4.0, as each business may look at its segment strategy differently, depending on the value proposition of its product and the business models of the customers it’s looking to grow. However, the execution of that strategy is crucial across the board.

Companies should consider starting with their customer, with special attention to the end-to-end buying process. They should look for opportunities in that journey to deliver a targeted customer experience and create sustainable returns. Companies should be grounded and driven by a common vision, but should build and deliver targeted offerings through an agile, test-and-learn methodology that reaches across capabilities and stages of maturity to realize the desired outcome. Challenges such as data structure, data access, and cybersecurity must be tackled early to lay a foundation to build upon.

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Endnotes

1 Deloitte Development LLC, The chemical multiverse 4.0, June 2017, https://www2.deloitte.com/us/en/pages/ manufacturing/articles/chemical-industry-trends.html.
2 Ibid.

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