Amid recent announcements of mega projects and plans to transform the economy, what will all of this mean for the chemical industry in the Kingdom? Dr Abdulwahab Al-Sadoun of GPCA explains
In recent years, leaders from the chemical industry have been facing new forms of challenges. The business landscape is witnessing an unequalled degree of upheaval in the wake of new project announcements that are shifting geopolitical and economic conditions. Ground-breaking technologies and innovations are fundamentally altering our idea of the future as well as how we respond to it.
At the same time, factors such as disruptive technologies and market volatility are having a marked impact, rapidly pushing this need to transform. With both opportunities and challenges looming on the horizon, changing with the times will be the key to survival and the subsequent success.
Disruptive technology such as artificial intelligence (AI) is at the core of the recently announced $500bn NEOM private zone, which spans Saudi Arabia, Jordan and Egypt. The project, which will be built from the ground up, reflects diversification plans within Saudi Arabia’s Vision 2030, while potentially affecting several value chains of industry and technology.
Such a large-scale implementation of digital technologies will need the chemical industry to refocus its pace of innovation and identify new ways to serve burgeoning needs in record time across sectors that are currently being served – and will be served by the sector in the future.
To ride the wave, chemical companies should leverage the right strategic capabilities that support economic growth and differentiate them from their competitors to remain successful. As part of their strategic transformation, companies must actively work towards building a culture of innovation that permeates the entire organisation, aiming to deliver not just best-in-class products but services as well.
Organisations need to evaluate their day-to-day processes and approaches to customers as much as they analyse the external environment that has a direct impact on them – if not more. Long-term investment decisions must be shaped by partnerships that transcend conventional cycles. An increased level of collaboration will also be required to benefit from economies of scale in global markets.
The petrochemical companies in Saudi Arabia are predominantly focused on commodity production. However, a new transition to higher-margin specialty chemicals is coming into shape. This is especially true if companies are to build models that create value beyond basic chemicals.
NEOM, with its commitment to sustainability and regenerative use of energy, will have unprecedented opportunities for the sector. Unlike the commodities model which is based on feedstock cost advantage and volume, the specialty chemicals model involves a greater emphasis on innovation, in addition to closer customer relationship and services. Transformation needs to be powered by a rethinking of how the organisation operates, often requiring organisational rightsizing, portfolio adjustment and restructuring to ensure that the business attains its full potential.
The future belongs to those who are able to build a winning culture and can drive sustainable growth at a faster rate than their competitors. This, in turn, demands a new kind of leadership — a leadership that is not just directive but also inclusive and has an appetite for risk.
Now, more than ever, we need leaders who can deliver transformation that creates an immediate impact not just for our business, but for our customers, society, and environment. Despite the challenges, opportunities are available to leaders who understand the changes that are under way and who can convert them into positive momentum for their businesses.
A shift to high-margin segments and high-growth regions, however, does not happen overnight. It requires strategic planning, which takes both the internal and external environment into account. It requires business leaders to compete and cooperate in new ways. Only this can ensure that, despite challenging market conditions, the chemicals industry will continue to thrive and remain a cornerstone of our economy in the years to come.