Strategy & Management

Navigating in the VUCA Business Environment

Changing Value Creation: The Chemical Industry between Product Innovations and New Business Models

27.02.2018 - Times are changing, and we are changing in them. An old saying that goes back to Ovid - but still true today. The business world has become more VUCA (volatile, uncertain, complex, ambiguous) than ever.

Just look around - changes wherever you look: globalization, digitalization, circular economy, commodization of knowledge. How are we to meet all these challenges?

By adapting to new markets, developing new businesses, inventing new products – by changing, but in a way that creates value – in short by innovating. But not only by innovating on the product side - also in the area of business models. Often more value is created by new business models than through great product improvements - think of Google, Facebook, Uber...

How can chemical companies turn these challenges into business opportunities? What are the best ways to do this? What can the chemical industry learn from other industries?

These and other questions were the main theme of the recent conference on the topic ‘Wertschöpfung im Wandel’ (Changing Value Creation) organized by the Association for Chemistry and Industry (VCW) on January 26, 2018 at the Campus Kronberg near Frankfurt, Germany.

VCW is a network at the interface between chemistry and business within the German Chemical Society. Together with the conference’s sponsor Accenture the VCW organized a forum to share learnings and experiences. The delegates discussed issues with and answered questions of over 100 participating researchers and executives from the chemical industry on new ways of value creation. The discussions quickly centered on a couple of key themes: Artificial intelligence (AI) and its future role in the chemical industry, digitalization, (big) data, and company culture and its impact on company performance. Some insights I took away:

  • AI is not a hype. AI is coming to the chemical industry – may be more slowly than in other industry sectors but nevertheless. Many chemical companies however still sit on the fence adopting a wait-and-see attitude, in particular business leaders. That’s a risky position to take because the AI trains are leaving the stations everywhere. AI opens new business dimensions in particular by learning and improving business and technical processes as you run them rather than by analyzing past performance and implementing learnings in the future. The chemical industry needs to not only play to learn the use of AI but fight the must-win battles before other players - most likely not from the chemical industry - can gain a lasting competitive advantage on them.
  • Data is the new oil. The chemical industry is slow in comprehending that they produce two very different outputs: materials and data. They know how to sell materials but are not leading the way in marketing data. If they wait for too long to take a lead here, others will step in and do it for them and cash in.
  • Digital performance pays. A recent study by Accenture demonstrates that companies versed in digital business aspects and commanding digital capabilities deliver significantly better business performance than digital laggards.
  • Company culture is a critical success factor. Culture eats strategy for breakfast!’ That’s for how strong the famous economist Peter Drucker estimated the power of culture and its potential impact on business performance to be. Because culture provides a strong frame for the mindset of an organization which enables them to focus but limits them to look sideways. But that’s where most of the new business opportunities can be found.

Navigating in the new, VUCA business environment is hard work. This was succinctly summarized by one speaker quoting a Swiss poet: ‘There is no elevator to success. We all have to use the stairs.’ It takes long-term commitments and persistent and consistent leadership to succeed. Let’s move faster!


GDCh - Fachgruppe VCW (Association for Chemistry and Economics)

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