Digital Transformation Will Affect $500 Billion of Global Chemicals, Materials Industry

The chemicals and materials industry has mostly seen only incremental innovation in recent decades, with growth coming primarily from expansion into new geographic markets and very little from product innovation. 

At the same time, there is additional pressure on the industry with consumers demanding increased personalization, sustainability, and efficiency, which has forced the chemicals and materials industry to innovate its business practices.

In the new report “The Digital Transformation of Chemicals and Materials,” Lux Research outlines use cases already in practice in facets of the chemicals and materials industry and a vision for how digital technologies will reshape the chemicals and materials landscape in the coming decades.

“The era of business process-driven innovation is one of tight competition, and not just in the characteristics of the products themselves – chemicals and materials companies are also competing on the customer experience and their ability to keep prices low by improving their operations,” said Katrina Westerhof, director of research at Lux. “Digital transformation can not only strengthen a company’s position in product, customer experience, and profitability but also unlock new capabilities that completely change the nature of what a chemicals company is and does.”

Over the next 20 years, more than $500 billion of the $2.8 trillion chemicals and materials market will transition to outcome-based business models. Digital technologies like sensors, computer vision, analytics, and robotics will be key enablers of that transition.

“Four key areas emerge as focal points for digital transformation in the chemical industry: product development, supply chain, manufacturing, and sales or post-sales support,” said Shriram Ramanathan, Ph.D., director of research at Lux and a key contributor to the report. “Use cases in product development include identifying innovation trends, designing new materials or synthesis pathways, and lab automation.

“For example, AI can be used to design new materials formulations or chemical structures that can speed up product development, or identify new synthesis pathways that enhance the sustainability of materials,” Ramanathan continued. “Automation can streamline and speed up research, all of which adds to both top-line and bottom-line growth in this highly competitive industry.”

“We predict that over the next few years, digital transformation in the materials and chemicals industries will pick up quickly, leading to a large increase in use cases. In the short term, those use cases will exist in pockets and will largely focus on improving operational efficiencies, such as via lab automation, production optimization, asset tracking, and digital sales platforms,” Ramanathan concluded.