With the application of new technology, all industries are being reshaped and blurred. Your strategy today can be an obstacle to tomorrow.
The digital revolution will naturally push the chemical industry to a new business and operation mode, which is driven by the disintegration of traditional industries and the formation of a digital ecosystem of products and services driven by technology.
In the new ecosystem world, how you integrate and what role you play in which ecosystem are more important than your asset size. Equally important is how you can dynamically change, respond to and adapt to new market thinking, and how easy it is for your organization to follow or even lead it.
Recent trends in the chemical industry – such as digital supply chains, vertical and horizontal integration with everyone and things (such as the Internet of things), large-scale mergers and acquisitions, and downstream development of specialty chemicals – are important.
However, they are short-term amplification and optimization of the current operation mode. They will not ensure the long-term success of chemical companies, because they stay within the scope of current industry thinking: seeking new competitive advantages by establishing newer and stronger market entry barriers, whether it is low cost or unique value or service.
We envision 10 ecosystems that will combine the products and services of today’s diverse industries, such as agriculture, health and nutrition, energy and resources. For example, consider smart healthcare: identification of clinics and medical professionals, and the chemical industry can provide customized nutrition supplies based on clinical results. Combined with real-time wearable technology to track nutrition supply. These 10 ecosystems are:
Intelligent office and education
Intelligent retail, wholesale and distribution
Smart city environment
Intelligent production and storage
Smart construction site
Rethinking chemicals: the chemical world in 2025
In the future, most of today’s chemical industry players will be general purpose manufacturing industrial base enterprises, serving a variety of slave ecosystems. They will be in trouble, like telecom infrastructure providers, providing infrastructure for today’s hyper connected world, while other technology giants are making the most of the profits.
Based on a common production base, a large number of ecosystem businesses operate in dedicated ecosystems. Both of them are interwoven by the platform business of the third business type. The platform business may be decentralized and most of the work is automated.
The basic business includes today’s chemical value chain and intermediates. Just like the banking industry in the 1990s, chemical enterprises usually still integrate along the process chain (vertical integration). The forced integration of the production process at least reaches the final step of the intermediate process; once the process starts, it will flow, and it is almost impossible to stop it or other interactions.
This is also where most of the heavy assets are used for production, making it a perfect place for economies of scale. However, it is also an area that needs the least knowledge for production, where there can be no differentiation of products or services, which is why it is currently a commodity business driven by price. Integration beyond this is usually based on synergy, higher specialization and lower transaction costs.
With today’s technology, these transaction costs, especially between foundations and ecosystem enterprises, can be reduced by using market transactions rather than intra enterprise transactions. We are now able to effectively communicate and settle merchandise transactions.
You may ask, why now? As is often seen in other industries, today’s technology makes possible new modes of operation and interaction that were not technically and / or economically possible in the past.