Special report: Commercial excellence for customer growth

John Baker

27-Jan-2017

Image Source/REX/Shutterstock

Image Source/REX/Shutterstock

Companies need to focus on the best ways to improve customer relationships

Chemical companies are searching for new avenues to growth, but have been slow to implement leading digital technologies for customer interactions and new selling models.

According to a recent survey of ICIS readers, carried out by ICIS in association with Accenture, over three quarters of companies see finding new growth strategies as their top strategic priority over the next five years, reflecting the current state of the global chemical market.

But to fully succeed companies could use ideation techniques and accept some risks to implement new technologies and methods of customer interaction and innovation, says Paul Bjacek, Accenture’s chemicals strategic research lead, commenting on the findings of the survey.

After growth, the survey reveals that other key strategic priorities are improving customer interaction processes – identified by 38% of respondents as a top three priority – and reducing the impact of volatility and unplanned market events (35%).

In terms of operational priorities, opinion was less decisive, but the top two concerns focused on increasing efficiency and reducing costs in the areas of procurement and plant operations.

Says Bjacek: “The past few years of low economic growth globally have challenged producers to create value via revenue and profit growth. This has made them focus hard on becoming more efficient, especially in procurement and plant operations, with 46% and 43% in our survey selecting those areas as being among the top operational priorities.”

 

When asked to select a single top overall priority, however, respondents overwhelmingly answered “finding avenues to growth” (with 39% selecting this out of 24 possible choices). The next highest was reducing plant operations costs (8%).

ROOM TO GROW

In this search for top line growth, companies are focused on improving customer interactions, with 46% identifying “meeting customers’ needs for superior customer service” followed by “growing market share/revenue growth” (40%) as their main motivations for improving customer interaction.

This, says Julian Short, managing director, Accenture Strategy, indicates that they are linking customer satisfaction to growth, with slightly less emphasis on adding new products and services.

It appears companies are struggling to determine the best avenues to improve customer relationships and are focusing on the basics, without committing funds to newer, possibly more impactful approaches. It should be noted that 74% of respondents indicated that their customers are other industrial customers; that is, their relationships are mostly business to business.

avenues

These companies, adds Short, seem to be focusing on boosting their impact in the selling process by focusing on the “operational” aspects of selling. The top areas noted were improving sales efficiency (52%), selling a more profitable mix (47%) and increasing profitable volume per sale (37%).

Most respondents are using digital technologies for their internal processes, with the highest areas of activity being business intelligence (61%) and pricing analytics (55%). This corresponds well to the focus on efficiency and profitable mix and volume, where analytical tools provide improved business insights.

CHANGING THE FOCUS

However, chemical companies are still focusing on the traditional means of gaining value through customer interactions. Top responses include the need for more in-person customer interactions (40%), increasing technical service levels (37%) and increasing research and development (R&D) spending (32%).

When asked what percentage of their customers are approached via digital channels, the mean average answer was approximately 35%, with over 25% of respondents indicating they approached none to 9% of their customers this way. Only 30% could claim they interacted with over half their customers via digital channels. And this is despite over 25% saying the integration of digitalisation is a very important or even critical part of their strategy. Some 47% rated it as “relatively/modestly important”.

digital

The reason companies have not fully embraced digital solutions goes back to the business environment of lower growth and operating margins, where companies are, naturally, cautious about investing in the unknown, explains Bjacek.

“As a matter of fact,” he noted, “when asked about the largest barriers to achieving commercial excellence, the top three answers indicated by respondents were ‘competing with other areas for investment’ (37% selected among their top three choices), ‘lack of funding’ (26%) and ‘management not being convinced of value’ (21%).”

These were followed by lack of talent and marketing/sales organisation initiatives, among a broad set of 14 options.

InnovationWhen asked about innovation, respondents confirmed the strong competitive pressure to innovate, with 62% selecting the need to innovate to stay ahead of competition. This was followed by the need for higher margins (34%) and to reduce costs (30%), verifying the objective of revenue and margin growth.

The most important innovation areas were new improved products and services (53% and 36%, respectively) – traditional avenues of focus. The next three highest areas were new/improved supply chains (25%), new products with functional chemical technologies (24%) and improved business models (19%).

TACKLING INNOVATION

To achieve innovation aims, respondents indicated that they mostly collaborate with customers (65%), followed by other chemical companies (46%) and their own machinery suppliers (32%). However, only 18% indicated that they innovate with their customers’ machinery suppliers, representing a large missed opportunity, Bjacek indicated.

Often customers and their equipment suppliers must tackle the innovation required by accommodating existing materials offered by chemical suppliers, instead of all parties collaborating to solve the puzzle. In other words, accommodating the material to the machine as much as the machine to the material, explains Bjacek.

Most innovation collaboration currently happens via frequent meetings (71%) and conferences/forums (53%) – again reinforcing the fact that companies are still using traditional face-to-face along with digital interactions.

Only 28-30% selected social listening, surveys and digital platforms as ways to collaborate. The interesting aspect of this is that digital solutions can help cover some of the interpersonal interactions needed for innovation, while reducing costs, both goals of the survey participants. “We expect this area to grow as awareness of and experience with digital solutions builds,” says Bjacek.

In its , Accenture outlines the idea of the “outcome economy”, where chemical companies can sell outcomes, instead of products and services. This could mean providing seeds, fertilizers and pesticides to deliver a guaranteed yield on a given area of land. Similarly, it could mean delivering plastics that guarantee freshness in food packaging.

desire

Digital technology should make it possible to identify, measure and target customers’ desired outcomes. However, this selling of outcomes idea is still embryonic in much of the chemical industry. Interestingly, 61% of the respondents believe that there are such opportunities in their segments.

Participants were allowed to write in possible outcomes. Many comments clustered around improving customers’ efficiency (with better products and services) and helping to achieve customer environmental and circular economy targets.

Still the top three inhibitors to selling outcomes were lack of obvious applications (16%), the high level of risk (14%) and the desire to continue selling products as commodities (14%).

Much of the survey demonstrates the need for initiative and creative thinking in the chemical industry.

“One path to achieving these new ideas is the use of tools such as design thinking to tap the creativity and knowledge of internal and external experts and designing fact-based business solutions,” Bjacek concludes.

ICIS/ACCENTURE SURVEY
HIGH LEVEL RESPONDENTS’ PROFILE

Over 1,000 people responded to the global ICIS/Accenture survey on commercial excellence. Nearly 20% held vice presidential posts or above, with a further 27% being general managers. The majority were active in the petrochemical and polymers sector (47%), with specialty chemicals second (16%) and supply chain third (15%).

When it comes to where they do business primarily (selecting up to three regions), Europe was given by 47% of respondents, with North America second at 35% and Middle East/Africa and southeast Asia both at 21%. In terms of company size, 22% of respondents represented companies with turnover in excess of $5bn, while 50% were in firms with less than $500m of sales. Some 30% were thus in the range $500m to $5bn. Average revenue was $3.2bn.

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