Major Trends for Chemical Industry in 2018

As we approach April, it is time to look into 2018's trends and drivers for the chemical industry. Here are three major trends that will drive the chemical industry in 2018:

1. Accelerated globalization. Supply centers are shifting due to the advent of shale gas in the U.S. or coal to olefins in China. Also, demand centers are shifting thanks to a rapidly growing middle class in the emerging countries. In addition, new market entrants drive shrinking lifecycles and rapid commoditization of products.

2. The circular economy. Key raw materials are getting scarce. Regulatory requirements exponentially increase as the environmental impact of emissions and waste becomes more and more evident. Chemical companies are in the driver’s seat to respond to this, and some are already extending their ecosystems with the purpose to establish end-to-end concepts.

3. Digitalization will drive a tremendous wave of innovation. Recent advancements in digital technology offer unprecedented levels of connectivity, granularity, and speed in accessing, processing, and analyzing huge amounts of data. Besides mobility, cloud and in-memory computing, the Internet of Things, machine learning and blockchain will start acting as game-changers in the chemical industry.

All three trends are coming together to challenge existing strategies and create a perfect storm for the chemical industry. Customer and feedstock proximity, intellectual property, and technology know-how may no longer secure a sustainable competitive advantage. Early adopters of innovative business models have the unique opportunity to act as game-changers or digital disruptors.

Emerging business models

What innovative business models are emerging for companies in the chemical industry?

First, companies will start to adopt strategic agility. The need to rapidly transform product and service portfolios in response to dynamically changing market and stakeholder needs will continue unabated in 2018. Preparing for ongoing mergers, acquisitions, and divestitures will be a critical success factor.

Second, we’ll see more companies going beyond their traditional value chains and start competing as entire ecosystems. Such ecosystems are presently built around hot topics like precision farming or the “circular economy.”

Third, we’ll see companies become more customer-centric and focus on selling business outcomes instead of products. In that context, think about delivering first-pass quality products instead of paints, coatings, or reactive resin components.

Fourth, companies will get another push towards operational excellence and business process automation. With digital technologies becoming scalable and commercially feasible, companies can now realize concepts like lights-out manufacturing and touchless order fulfillment.

However, to enable these innovative business models, a 4th-generation platform as foundation for business processes and IT infrastructure, as well as the right skills in your workforce, will be pivotal to success.