The chemicals and materials industry has mostly seen only incremental innovation in recent decades, according to Lux Research, with growth coming primarily from expansion into new geographic markets. The industry is simultaneously facing additional pressure as consumers demand increased personalization, sustainability, and efficiency, which has forced the chemicals and materials industry to innovate its business practices.

“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.”

In a recent study, “The Digital Transformation of Chemicals and Materials,” Lux reports that more than $500 billion of the $2.8 trillion chemicals and materials market will transition to outcome-based business models over the next 20 years. 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. 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.”

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