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The chemical industry: Learning to live with disruption

Deepening alliances with customers and other companies means disruption won’t be faced alone.

As technology-driven innovation has taken on a central role in business, so too has disruption, and new ways of doing business are constantly changing the landscape. As a result, says a recent Accenture report, about three quarters of today’s S&P 500 companies are likely to disappear by 2027.1

That report—entitled “Thriving on disruption: How to become fearless in the face of devastating innovation”—draws on a survey of hundreds of chief strategy officers (CSOs) from a variety of industries. A full 80 percent of chemical-industry CSOs said that new technologies have changed their industry over the last five years, and 93 percent expect that trend to continue in the next five years.

Although disruption has become increasingly familiar, many are still unsure just what to do about it. In the chemical industry, only 13 percent of the CSOs said their companies are well prepared for disruptions. When one chemical company CSO told researchers that his company was ill-equipped to deal with sudden change, he added that its likely response would be “having a meeting.” Beyond that, he said, “I don’t really know.”

To help chart a path forward, the researchers looked more closely at those companies whose CSOs do feel prepared for disruption—and a clear theme emerged. In general, these “prepared” companies have been more focused on building partnership than other companies, and they intend to make collaborative partnerships a much higher priority over the coming five years. As the report notes, there is a new mantra—“partner or perish.”

So what do CSOs mean by partnering? For one thing, the prepared companies tend to collaborate with partners on a wide range of activities. For chemical company CSOs, distribution, design services, manufacturing, product quality and customer relationship management topped the list. In addition, 53 percent said they collaborate on innovation and R&D activities—and 92 percent of those said they had seen improved performance as a result.

The prepared companies are also more likely to be investing in “platforms”—that is, in infrastructure that facilitates external links with partners. Those that have had significant success with their platforms have tended to shift their strategic focus beyond their core industry. Sixty-nine percent of the prepared chemical companies CSOs said they are pursuing new revenues in new businesses. Half or more pointed to activities such as investing in outside assets and even partnering with direct competitors.

Finally, prepared chemical companies are not just reaching out to partners. They are also making concrete changes to internal operations and business models—basically changing themselves to build the flexibility needed to work effectively in a partner ecosystem. About 7 out of 10 of those CSOs said they were integrating their offerings into a larger network of offerings; bringing new technologies and knowledge into the business; or recruiting from other industries.

The good news in all of this is that chemical companies don’t need to face technological disruption on their own. By deepening and broadening alliances with customers and a diverse array of companies—in and out of the industry—they can position themselves to truly thrive in an era of disruption.

Footnotes:
1 Nunes, Paul F., Joshua Bellin and Ivy Lee. “Thriving on disruption: How to become fearless in the face of devastating innovation,” Accenture, 2016, https://www.accenture.com/us-en/insight-thriving-disruption.aspx.