Digital technology could boost value of chemical sector by $4.4 billion
Chemical companies that leverage the right combination of digital technology could increase their market capitalization by $4.4 billion, but the industry continues to lag other sectors, an industry analyst told Petrochemical Update.
Chemical companies could realize additional cost savings of $91,261 per employee if they leveraged the combined effects of technologies such as AR/VR, autonomous vehicles, big data analytics and digital twin technologies.
“The lifeblood of any effective digital strategy is data, and while ironically the chemicals industry has collected vast amounts of data over the years, today the chemicals industry is not as advanced as some of the other industries,” said Ojas Wadivkar, Managing Director at Accenture and Chemicals Lead — Southwest.
Accenture recently conducted a study across multiple industries to come up with the Digital Performance Index (DPI), which ranks various industries on their level of adoption of the latest digital technologies within their value chain.
The chemicals sector is in the lower half of that group. Leaders are the media and telecom industry, retail industry, and banking. In the Resources sector, utilities are ahead of the pack and the construction industry is behind chemicals.
Accenture points out that the industry has made significant strides in the last year or so, most likely a result of all the capital investment in this sector.
“I am pleasantly surprised with the aggressive move of chemical companies to explore and start on this journey over the past 12-18 months,” Wadivkar said. “We are seeing more and more companies launching their digital strategies, conducting proof of concepts and incorporating digital within their operations including within supply chain.”
Industry 4.0 is a name given for the current trend of automation and data exchange in manufacturing technologies coined by the World Economic Forum (WEF).
It indicates the next evolution of industrialization which will leverage the latest digital technologies such as cyber-physical systems, the Internet of things, cloud computing and cognitive computing.
The petrochemical and oil & gas sectors fell behind on these initiatives as the industry wrestled with volatile oil prices, decreases in productivity and changing labor demographics.
These sectors could now benefit strongly from implementing a digital transformation program, according to industry executives.
“We call it “Industry X.0” to recognize that “4.0” is just the beginning,” Wadivkar said. “The chemicals industry is also impacted by this trend and has the potential to really extract real value from combining all these technologies.”
Industry X.0 is how Accenture defines the digital reinvention of industry, when businesses use advanced digital technologies to transform their core operations, their worker and customer experiences and ultimately their business models.
Chemical companies could realize additional cost savings of $91,261 per employee if they leveraged the combined effects of technologies such as augmented reality/virtual reality (AR/VR), autonomous vehicles, big data analytics and digital twin technologies, according to Accenture’s research.
The optimum combination of blockchain, AR/VR, autonomous robot, big data and artificial intelligence (AI) technologies could help chemical companies raise their market capitalization by $4.459 billion.
“More than just transforming into digital businesses, companies must completely reinvent their operating models, production and value chains to create more value with digital,” said Pete Frandina, Managing director and lead for Accenture’s North American Industry X.0 practice.
Success of implementing these programs comes down to leadership and priorities, according to the Accenture team.
“The scale of improvement will depend on the adoption and exploitation of these technologies,” Wadivkar added.
Many of the major chemical companies have started to realize the potential of leveraging digital technologies and have started on their digital journeys in some form or the other. However, Wadivkar says that many of these companies look at digital as a “thing” to have or do, such as sensors or predictive analytics, or robotics or robotics process automation (RPA).
Too many companies are more concerned on the “what, how and where” rather than starting with the “why” question, or “why do I want to leverage digital in my business and what is the benefit?”, according to Wadivkar.
“The leaders who are doing it right have had that vision and strategy laid out. They have determined the why and have clarity on what it means for them to become a digital chemical company,” Wadivkar said. “This allows them to be more focused and deliberate on their what, how, where and when.”
“They have a roadmap and they realize that the combinatorial impact of these technologies across the entire chemical value chain is what will provide the greatest value over time and their roadmaps reflect that,” Wadivkar added.
Accenture’s research revealed a key challenge that will hinder the ability of businesses to innovate with connected and intelligent products. There is a shortage of digital skills among their workforces of at least 29% that is preventing them from innovating with connected and intelligent products.
“Most of the business leaders we work with understand the power of digital. They see the potential for digital technologies to bring about transformation and growth and are making big investments in a variety of leading technologies,” said Dave Abood, senior Managing Director, Resources, Growth & Strategy.
“Unfortunately, many aren’t getting the most out of their digital investments. The challenge is that to do so requires a careful balance of transforming core businesses while scaling new ones, which demands new talent, new skills and new competencies in managing the pivot,” Abood added.
The research indicates that deployment of connected and intelligent products, systems and plant will lead not only to the addition of new responsibilities to existing roles, but also to the creation of entirely new roles.