Chemistry and Advanced Materials: at the heart of the Fourth Industrial Revolution
The industry allows other sectors to turn innovations into sophisticated products that enable digitalization.
The Fourth Industrial Revolution combines advanced technologies in innovative ways, dramatically reshaping the way people live, work and relate to one another.¹ As in previous industrial revolutions, the Chemistry and Advanced Materials industry is playing a major enabling role. It is largely through the industry’s contributions that other industries can turn their ideas and innovations into sophisticated products: touchscreens, rechargeable batteries in portable devices, organic light-emitting diodes (LEDs) in flexible electronics and lightweight materials used to build drones, among many other examples.
Chemistry and Advanced Materials: enabling the digital revolution
Source: Cisco; Fraunhofer Institute, IDTechEx; International Energy Agency; MarketsandMarkets; Navigant Research; Radicati
At the same time, the Chemistry and Advanced Materials industry is itself being transformed through digitalization. The industry has embarked on the digitalization journey, broadly seeking opportunities to benefit from digital technologies in areas such as operational excellence or the extension of traditional product offerings with digital components. The sector is closely monitoring pockets of digital disruption, including digitally accelerated biotech enabling the direct-route production of chemicals, or disintermediation by platform or marketplace players. Although the timing and scale of disruptive impact are hard to predict, the industry is aware that these developments could fundamentally change the sector and its rules of engagement.
Our research identified three digital themes that are expected to have a profound impact on Chemistry and Advanced Materials companies, as digitalization transforms the industry over the next decade:
|Digitalize the enterprise|
Digital technologies are already making the industry’s operations more efficient. Advanced digital technologies, such as the Industrial Internet of Things (IIoT), automation, analytics and artificial intelligence, will take core operational functions, including R&D, manufacturing and supply chain, to the next level and will augment workforce capabilities.
|Go beyond the molecule|
Digitalization presents the Chemistry and Advanced Materials industry with opportunities to launch new digitally enabled offerings, create outcome-oriented business models and improve customer interaction.
|Collaborate in ecosystems|
Accelerated innovation cycles will drive the industry to build flexible and interconnected innovation ecosystems. Intense collaboration and data sharing along the value chain will help to better address customers’ requirements and manage volatility.
Calculating the value of digital transformation
To estimate the value of digital transformation, the value-at-stake methodology was applied. This methodology assesses the impact of digital transformation initiatives on the industry, customers, wider society and the environment. It provides value estimates of global industry operating profits at stake from 2016 to 2025, and the contribution to societal value that digital transformation can make in that time frame. The key findings from the analysis of the Chemistry and Advanced Materials industry include:
- Across value migration and value addition to the industry, the estimated cumulative economic value for the period 2016 to 2025 ranges from approximately $310 billion to $550 billion.
- In terms of non-economic benefits, digitalization has the potential to reduce CO2 emissions by 60-100 million tonnes, save 20 to 30 lives and avoid 2,000 to 3,000 injuries over the next decade.
Chemistry and Advanced Materials: value at stake for industry and society (2016-2025, by digital initiative, $ billion)
Source: World Economic Forum / Accenture analysis
Case study: unlocking societal value through digital plants
Further digitalizing assets and equipment with, for example, smarter sensors, allows companies to monitor asset condition, process quality, throughput and emissions continuously. Assets can send signals on their status and performance, which, in combination with real-time analytics and in-memory computing, enables immediate intervention to prevent equipment failures and breakdowns. Combining real-time asset condition information with predictive analytics enables companies to predict the likelihood of asset failures and plan maintenance accordingly. This initiative can generate significant societal benefits, including reducing CO2 emissions by up to 100 million tonnes.
The primary aim of the value-at-stake framework is to highlight trends and areas where digitalization can make an impact, rather than provide precise value estimates. It is important to understand that value estimates relate to future developments and are based, with varying degrees of certainty, on assumptions about technology adoption curves, benefit ranges and several other parameters. The goal is to initiate a multistakeholder dialogue and trigger engagement around the societal impacts of digital technology in order to build a digital revolution that serves us all.
Challenges to digitalization
Digital leaders in the industry do not generally feel hindered in designing and implementing their digital transformations. Nevertheless, common challenges related to digital implementation exist:
Workforce, organization and technology
Competing in the digital era requires complementing workforces with digital skills, and managing changes in working style and the type of work performed by the existing workforce – across all levels of the organization. Internal competition with current business priorities, data management and the integration of information technology and operational technology are examples of organizational and technological challenges to be addressed.
Managing cybersecurity is considered an imperative – and a challenge. Digitalization heightens vulnerability to cyberattacks, and protecting a growing array of connected hardware, software, networks and platforms is becoming increasingly complex.
Digital leaders need to address concerns about intellectual property protection, data ownership and privacy to access the full power of ecosystem collaboration.
Key considerations for a successful digital transformation
Unlocking digitalization’s full potential requires resourcefulness, creativity and a willingness to embrace constant and rapid change. Our research highlighted key areas that leaders should consider as they shape and implement their digital transformation journey:
Prepare your organization
Driving and implementing a digital strategy, with direct support from board-level executives, are key to successful digitalization. Digital transformation is not just about the technology; digital leaders should consider and manage it as an ongoing culture change effort, across all levels of the organization. Companies should also rethink their competency requirements and supplement their workforce with digital skills.
Due to the increasing threat of attacks, appropriate attention should be paid to cybersecurity, and it should be firmly included in digital strategy roadmaps. Further, it requires bolstering with sufficient investment, skills and capabilities.
Define your role in ecosystems
Chemistry and Advanced Materials companies should work on identifying and understanding network partners, dynamics in the network, and the role they want to play within the relevant innovation, supply and distribution, and offering ecosystems. Digital leaders should instil appropriate governance for ecosystem collaboration to balance steering, privacy and collaboration requirements.
Develop and launch digitally enabled business
Creating new digital business models or digital offerings is considered one of the more challenging digital initiatives. To accelerate the development and launch of new business models, an improved strategy toolkit – including build, buy, partner, invest and incubate options – can help. This is especially valuable in embracing and getting ahead of disruption, in acquisitions or when moving into the disruption space.