Analytics And Big Data: Driving Agility In The Chemical Industry

Michael Laprocido

How important are concepts like Big Data and analytics to the modern enterprise environment? In a word: Very. One study estimates there are currently six million developers all over the world currently working on Big Data and advanced analytics projects. To put that into perspective, that’s about the size of the populations of Houston and Los Angeles combined.

Spending on Big Data tech is expected to reach $57 billion by the end of the year. The business intelligence and analytics market worldwide will be worth about $18.3 billion by the same time. But the true strengths of concepts like Big Data and analytics comes by way of their symbiotic relationship. As the quality of data improves, so does the value of the insight generated by sophisticated analytics solutions.

This is particularly true in the chemical industry, where many companies are currently using Big Data and analytics to support a bold new level of strategic agility that has not been available until now.

Dynamic visibility empowers dynamic resource allocation

Resource planning and allocation have always been critical processes in the chemical industry. Until the somewhat recent past, changes both upstream and downstream from the chemical manufacturer evolved more slowly and predictably. Analysis of markets and competitive position in target segments performed either as a one-off annual or even biennial exercise were adequate to enable a chemical company to have the requisite amount of agility to compete successfully.

Today, complexity and fundamental change are increasing exponentially due to the impacts of globalization, the rapidly shifting center of gravity for demand towards the rising middle class in Asia, the unprecedented influence of US unconventional oil production on raw material costs and global competition, the ongoing compression of product lifecycles experienced by their customers, and the speedy adoption of technology to evolve business models. Thus, analysis must be continually rendered as events and change unfold to be effective in responding. In fact, agility is becoming increasingly important as a source of competitive advantage as the pace of change accelerates making the attainment of an agile culture a board-level imperative.

Unfortunately, being agile is particularly difficult for chemical companies given the breadth and scope of their target markets. Specifically, the challenge lies in the ubiquitous application of their products (in that they are sometimes applied in many industries and in millions of uses) and that the industry is usually at least one step (sometimes several) removed from the ultimate consumer. Thus, chemical companies must be agile on many fronts to be successful. This requires a thorough understanding of the dynamics associated with the value chains for each major product/application/market combination they serve – no small feat given the complexity associated with a single value chain in today’s reality! If attained, this level of insight will not only ensure that chemical companies are providing the appropriate level of resources to support these target segments but that they are focused on the right ones to begin with.

This segues into the true value of Big Data and analytics in this context. Capacity, capital, and skilled people are hardly abundant. It is senior management’s responsibility to ensure that these critical resources are applied to the firm’s best prospects in the light of their strategic objectives. Leveraging Big Data and analytics will allow senior management to guarantee that these finite resources can accomplish both current and future goals at the same time. Not only can organizations put themselves in the best position to maximize shareholder return through action today, but they can also build a bridge to profitable and sustainable growth in the long term.

To become agile, you need to glean insight from data generated both internally and externally. Leveraging internally generated data can help companies see how well they are making use of their available resources today. Layering in external data allows you to get a better understanding of how a chemical business needs to allocate their resources in the future so that it can then better position itself in the direction that leadership wants.

Case in point: Big Data and analytics are invaluable when examining something like growth versus share. Tracking changes in growth and share dynamically based on analytical data gives leadership an almost real-time view into how things are changing, how well the business is positioned to address that change, and the strategic implications of it. Important metrics like profitability, cost to serve, and competitive position are added into the mix, generating an additional level of context to this data to help quickly discern potential opportunities and threats that may be emerging. Use of predictive analytics can lead to strategies to capture or mitigate these under any given timeframe by identifying trends and patterns in things like short to mid-term inflections in demand that might have otherwise gone unnoticed.

Over the longer term, having a dynamic capability to analyze markets in real time will also let you examine things like potential structural market changes. The ability to consider how your competitive advantage will change given the potential for things like competitor capacity addition, supply disruption, and more gives you a much more dynamic ability to understand your business in the context of your target markets. Applying these scenarios in your planning will provide the ability to perpetually allocate scarce resources to provide the greatest return under any condition at a moment’s notice.

It may not be possible to see into the future, but the insights and projections generated by analytics and Big Data may very well be the next big thing. This is certainly true in the chemicals industry, where organizations are struggling to stay malleable and agile amidst ever-changing market conditions.

Using the path to build the future

In the end, it’s important to understand that the true pathway to strategic agility for chemical companies begins with possessing a capability to make sense of the flood of data that is both inside and outside its walls. Insights derived from real-time Big Data and analytics is the key to realizing a dynamic ability to understand your business as it exists in the current context of the market, and can make it easier to take advantage of strategic opportunities as they arise. By gaining a superior level of visibility into both the state of an organization as it exists today and a forward-looking view of their future markets, leaders have the best and most accurate information to work from when making decisions that affect things tomorrow, a year from now, and beyond. You can reallocate scarce resources to provide the best return for any set of conditions, which is what strategic agility is really all about.

Hidden inside your organization’s data is the key to remaining nimble moving forward. Analytical tools let chemical companies go beyond that data, extracting the valuable insight and narrative hidden underneath. That narrative then lets organizational leaders write the future of the company on their own terms.

Learn how to innovate at scale by incorporating individual innovations back to the core business to drive tangible business value: read  Accelerating Digital Transformation in Chemicals. Explore how to bring Industry 4.0 insights into your business today: read Industry 4.0: What’s Next?


Michael Laprocido

About Michael Laprocido

Mike Laprocido serves as a Strategic Industry Advisor for SAP. He is responsible for developing thought leadership and driving SAP solution adoption in the chemical and oil and gas industries. With over three decades in various executive roles at BP Oil, BP Chemicals, Kuraray America, Panda Energy and IBM prior to joining SAP, Mike has gained a broad and deep industry knowledge base that he leverages to help his clients to innovate and transform their business through the application of digital technology.