Managing Cyclicality in Chemicals with Agility

LATEST THINKING

VOLATILITY TO VALUE

With volatile customer demand, fluctuating raw material prices and a high-asset intensity, the chemical industry is affected more than most by economic cyclicality. Accenture Strategy analysis shows that chemical companies have experienced periods where revenues increased by 5 to 7 percent while their overall margin growth was only in the range of 1 to 2 percent—placing them firmly in survive, rather than thrive, mode. Creating competitive agility demands more dramatic changes in strategy and operations—and employing digital technologies can help find new sources of value to drive growth.

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KEY FINDINGS

RESILIENT-READY

New technologies and operating models are enabling new sources of competitive advantage and growth. But for the chemical industry, change is gradual. Operational behaviors, mind-sets and ways of working are deeply entrenched.

The technologies to drive resilience are available, but demand a break with established ways of working and fundamental changes in organizations.

ADAPT: Recognize that resilience demands more variability in fixed costs than cost cutting

of chemical companies’ costs reside in the production process
PIVOT: Manage the “flex point” between profits and growth by adjusting strategic, operational and execution levers

chemical companies do not demonstrate resilience—stable profits when sales decline and profit growth when sales grow
RELEASE: Holding onto a molecule mind-set is hampering the technology value agenda

chemical companies communicate a value-based technology strategy to shareholders

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RECOMMENDATIONS

ROTATE TO THE NEW — Steps to regain competitive agility:

Conduct a forensic review of the “as-is”

Break free from established beliefs with a new approach to strategy, operations and technology—adopt an “outside-in” view accounting for the behaviors and practices of other companies.
Remodel as a technology company

Adapt the molecule mind-set. Develop proprietary, leading-edge technology to add value to capital markets and be favorably positioned with investors and shareholders.
Break the traditional mold

Re-focus initiatives into five or six platform “bets.” Consider the value in technology-related improvements from automation, robotics, analytics, process technology and as-a-Service—and invest in user adoption.