2020 has seen unprecedented disruption to the global, national, and local chemical manufacturing sector due to the COVID-19 pandemic. The sector was however facing several challenges prior to the pandemic and had already begun a process of response to the circular economy, the rise of digitization, and other global megatrends. The DCC undertook research in 2020, to discover the key growth drivers of large lead enterprises (LLEs).
Driven by global disruptors, megatrends and sector trend and growth drivers, global lead enterprises provide the following key lessons:
Co-Innovation and products specialisation
- Co-innovation and specialisation with key customers in key markets supports market differentiation, driving growth,
- Long-term commitment to focussed R&D, linked to customer needs drives growth
- New service-orientated models offer higher costing opportunities while also meeting other goals (sustainability, digitization)
Process innovation and green
- Integrated and optimised production drives cost saving
- Environmentally sustainable practices drives down resource use and associated costs
- Rapid growth can be enjoyed in a growing economy but should be combined with expansion into long-term sustainable markets
- Divestments, mergers and acquisitions have the potential to stimulate new growth in alternate markets
These global growth drivers set important trends in the industry, providing a flow, beginning with an increased focus on partnering with customers, leading to co-innovation and ultimately growth in the market. Green and sustainability, with customer demand, is driving product and process innovation.
How do chemicals manufacturers respond to growth drivers in a pandemic?
To survive the current pandemic crisis, a quick response is required to harness opportunities and drive growth in a very different world of manufacturing and doing business.
Local LLEs in South Africa can apply, realise and learn from leading enterprises globally in order to see growth. Key growth drivers and their implications for South Africa are presented in the table below:
|Implications for South African Chemicals Manufacturers
|– Fundamental shift in thinking around sales from “selling a product” to co-innovation and understanding customer needs and challenges
– Need to identify key markets and key customers within those markets, understand their needs and co-develop customised solutions to solve their challenges.
|– Explore different process models to meet consumer’s demand for innovative solutions on short lead times (utilising technology to enable quicker, more efficient processes where applicable)
– Distance between production and consumption needs to fall in order to support agility and customer response
|Green & Sustainability
|– Public and private ‘customers are expected to place increased pressure on green and sustainable products. Understanding their current and future needs remains highly relevant.
– The ‘willingness to pay more’ for green products is declining as increasingly green becomes the standard and alternatives less desirable.
|Product Innovation & Specialisation
|– Understanding very specific customer needs affords the opportunity to narrow product offerings and specialise in innovative product
|New Markets & Geographies
|– Partner with new customers in new geographies to realise and provide solutions to their challenges; the African continent, these present significant opportunity for South African manufacturers.
What South African chemicals firms can do now to ensure growth
Locally, South African chemicals manufacturers should be focusing on the following immediate interventions to react swiftly to these global trends, in order to survive the immense challenges of the COVID-19 pandemic:
- Meet with and partner with key customers to identify their needs and develop customised solutions to their needs
- Explore different process models to meet consumer’s demand for innovative solutions on short lead times
- The use of technology to enable quicker, more efficient processes should be explored; Digitisation and automation has the potential to enable enhanced operations end-to-end, from health and safety compliance management to complex material processing (digitisation is not only deployment of big data and machine learning, it can also be efficient automation of slow manual processes through software solutions)
- Local manufacturers should expect increasing consumer demand for green & sustainable products and a decreased demand for hazardous and single-use materials should be anticipated
- South Africa already exhibits strength in niche markets and small-batch innovative products. This is an emerging growth driver globally and should be exploited by local firms through customer and customers’ customer co-innovation.
- Explore emerging markets, such as on the African continent, these present significant opportunity for South African manufacturers.
- Partner with new customers in new geographies to realise and provide solutions to their challenges.