How long before the digital disruption reaches the chemical industry? How long before the digital disruption reaches the chemical industry?

By Frank Jenner

EY Global Chemicals & Advanced Materials Industry Leader

Visionary in markets and business development for the chemical industry. Enjoys race boarding in the mountains. Enthusiastic golfer.

6 minute read 8 Apr 2021

The evolutionary development of digital transformation is diminishing. Chemical leaders expect a digital revolution within the next three years.

In brief
  • The number of chemical executives who see a digital revolution or disruption ahead more than doubled in 2020, to 66%.
  • A majority say that when the revolution comes, no business function will be left behind.
  • Asia-Pacific executives are more confident that their companies are making good progress with digitization.

Digital transformation got off to a leisurely start in the chemical industry, with no major shocks to existing business models. However, that may be about to change; in our 2020 survey of industry executives, two-thirds told us they expect revolutionary changes as a result of digitalization in the next three years. Ninety percent agree that some change is on the way, and most think it will be dramatic.

EY DigiChem SurvEY reveals

66%

of respondents see disruption within three years.

These numbers represent a sharp increase from one year ago, when just 31% of executives polled for our pilot DigiChem SurvEY in Germany, Switzerland and Austria saw a revolutionary or disruptive change ahead in their industry’s future. In this year’s first global edition, 66% of the 369 survey participants see revolutionary or disruptive change within the next three years.

What impact do you expect digitalization will have on your company in the next 3 years

Executives told us that digital technologies are having a growing influence on their company’s strategic and operational positioning. A majority now believes that no function will be left behind.

Importance of digitalization grows

In fact, some of it is beginning now. In our latest DigiChem SurvEY 2020, published in CHEManager International 4/2020, EY, together with an independent market research institute, reported that many medium-sized and larger chemical companies are already using digital technology to make profound changes to their existing processes and structures.

In particular, executives told us that digital technologies are having a growing influence on their company’s strategic and operational positioning. A majority now believes that no function will be unaffected. These industry leaders expect that digitalization will affect their innovation and development (56%), customer interface (56%), processes and efficiency along the value chain (55%), logistics and distribution (62%), sales and order management (59%), and customer service (58%).

So far, 51% of executives say cost savings have been the biggest dividend of their digital experiments, but faster throughput times (47%) and more customer-centricity (43%) have run a strong second and third.

Another benefit many have noted was the relative ease with which their firm adapted to the COVID-19 lockdown. In a very short time, a majority of companies were able to switch to remote work and remote customer service, and to digitize processes that had previously been physical.

Looking back, 57% of those surveyed say their company turned out to be either well-prepared or very well-prepared for the pandemic. Now, as they look ahead, executives say they hope that before the next crisis they will be more transparent about changes (73%), able to formulate clearer rules about responding to emergencies (70%), and able to facilitate easier digital access to information and documents (69%).

How well prepared was your company at the beginning of COVID-19 crisis regarding remote work

In the 2020 survey, many medium-sized and larger chemical companies were already using digital technology to make profound changes to their existing processes and structures.

More optimism in Asia-Pacific

Not only do Asia-Pacific participants feel they are making more progress on their digital journey, they seem to be getting progressively more convinced of its value. In fact, Asia-Pacific executives rate the impact of digitalization on corporate strategy, portfolio, business models and value creation more highly than do their colleagues in Europe and North America. Also, Asia-Pacific participants rate and appreciate market and customer access and ecosystem buildouts much higher than do their competitors in Europe and North America.

European and North American executives may want to think about what these regional differences signify. As important as digitization is for driving greater efficiency, the Asia-Pacific responses suggest they should not overlook the potential for the technology to encourage growth as well.

Which benefits of digitalization have already been realized in your company?
  • About the survey

    After a successful start in 2019, EY conducted the DigiChem SurvEY for the second time in 2020 in cooperation with an independent market research institute. Designed as a long-term study in the chemical industry, this survey focuses on the implementation progress and added value of digitalization. The global study looks at the last three-year review and next three-year outlook, with 369 participants from the main business segments, regions and size categories of chemical companies. Around 46% of the participants come from European companies. To address the special effects of the COVID-19 pandemic, a follow-up survey was conducted in the middle of the year.

    Study approach

Summary

The DigiChem SurvEY results suggest that digitization is accelerating in the chemical industry generally. Only 10% now believe it will have no impact; 90% see either evolutionary, revolutionary or disruptive change ahead.

About this article

By Frank Jenner

EY Global Chemicals & Advanced Materials Industry Leader

Visionary in markets and business development for the chemical industry. Enjoys race boarding in the mountains. Enthusiastic golfer.