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An innovation formula for the chemicals industry


How chemicals companies can act as ideas incubators

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Changing times for chemicals companies

Their customers, armed with access to information, are more empowered and have much greater expectations of their supply base. Customers want a direct say in when, where, and how they purchase products and services. As a result, the market has evolved to a state of individual centricity, in which chemical companies are delivering tailored and customized products and services.

In addition, rapid technological change is enabling companies to produce in accordance with fluctuations in customer demand. The proliferation of connected devices and Internet of Things (IoT) technologies is creating new partnerships.

New distribution channels are connecting suppliers and customers.

Innovation is one big answer

These disruptive forces require chemical companies to reshape their enterprises and transform the markets in which they compete. Innovation will be the key differentiator.

To understand how chemicals companies fare in facing these changes, the IBM Institute of Business Value and Oxford Economics surveyed 350 chemicals leaders in 25 countries who are involved in defining or executing their organizations’ innovation strategies.

Thirty-eight percent of the 350 chemicals executives surveyed tell us that innovation is important to the success of their organizations today. And that number is expected to double to 77 percent in three years. Innovation is not just about creating differentiated products. The chemicals executives we surveyed indicate innovation is also needed to improve efficiency, enhance workforce skills and productivity, and improve brand reputation. Over the next three years, they say their organizations will drive innovation to improve efficiency in operations and optimize asset availability and use. They expect these changes to enhance the bottom line and drive agility and responsiveness.

The chemicals executives we surveyed indicate innovation is also needed to improve efficiency, enhance workforce skills and productivity, and improve brand reputation.

But it may require a cultural change

While the focus on innovation is evident, the execution is not. Nearly two-thirds of the chemicals executives surveyed told us that their organizations’ innovation activities are only on par with other similar companies or that they are a market follower. Only slightly more than one-third of the respondents say they are executing an innovation strategy, which translates to gaps in the effectiveness of their most important type of value.

These effectiveness gaps could be attributable to underlying organizational capabilities that survey respondents said are not in place to execute and deliver desired outcomes.

It appears that the chemicals organizations surveyed not only don’t have the cultural environment to make innovation thrive, they also lack the processes to convert ideas into results. The respondents tell us that leadership (cited by 69 percent of respondents) and teamwork (named by 64 percent) are the most critical success factors, but only about half (51 percent and 52 percent, respectively) view those areas as a capability strength. These organizations are also challenged with encouraging innovative behaviors through knowledge sharing as well as through measuring innovation.

In addition, companies are driving innovation in isolation. But that needn’t be the case.

The latter actively encourages new ideas from outside the organization and embraces open mechanisms such as crowdsourcing. Seventy-four percent of leaders engage in open innovation, compared to just 40 percent of their peers. This openness is supported by the leaders’ engagement of multiple channels to conduct innovation.


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Meet the authors

Dr. Viswanath Krishnan

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, Executive, Chemicals & Petroleum CoC, Global Business Services


David Womack

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, Global Director of Strategy and Business Development, Chemicals and Petroleum industry


Spencer Lin

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, Global Research Leader, Chemicals, Petroleum, and Industrial Products, IBM Institute for Business Value



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