Since Dr. Bernd Elser began lead­ing Accenture’s chem­i­cals and nat­ur­al resources strat­e­gy prac­tice in 2011, momen­tous change has swept across the chem­i­cal indus­try. Demand for clean ener­gy tran­si­tions and enter­pris­es imple­ment­ing cir­cu­lar econ­o­my prac­tices have intro­duced entire­ly dif­fer­ent sets of busi­ness process­es, while mar­ket volatil­i­ty has sig­nif­i­cant­ly impact­ed the indus­try in recent years, impact­ing the speed at which prod­ucts reach consumers. 

As chem­i­cal com­pa­nies con­tend with these chal­lenges, mod­ern IT solu­tions are quick­ly becom­ing a neces­si­ty in the indus­try. Giv­en the new sets of process­es and stan­dards, lega­cy ERP solu­tions are not equipped to enable orga­ni­za­tions to over­come cur­rent hur­dles. As the indus­try has changed, the tech­nol­o­gy process­es chem­i­cal com­pa­nies once relied on sim­ply have not kept up. 

How­ev­er, automa­tion presents excit­ing oppor­tu­ni­ties for chem­i­cal pro­duc­ers. These solu­tions can dra­mat­i­cal­ly reduce man­u­al process­es, cut­ting down on time-inten­sive labor and enabling employ­ees to focus on val­ue-added tasks. To enable automa­tion, enter­pris­es’ cloud ERP plat­forms are col­lect­ing and pro­cess­ing huge swaths of data. Break­ing data out of cost­ly silos is a crit­i­cal focus for enter­pris­es run­ning automa­tive process­es and angling to embrace inno­va­tion through dig­i­tal transformation. 

Dr. Elser and Accen­ture are keen­ly focused on design­ing automa­tion process­es and help­ing cus­tomers embrace the full val­ue of cloud ERP. Accen­ture helps its clients with SAP S/4HANA trans­for­ma­tions and even pro­vides com­ple­men­tary technologies. 

In con­ver­sa­tion with ASUG, Dr. Elser dis­cuss­es the impor­tance of an inten­tion­al cloud ERP and how to effec­tive­ly lead through dig­i­tal trans­for­ma­tion and embrace automation. 

This inter­view, which you can also down­load, has been edit­ed and condensed. 

Q: What is your assess­ment of the cur­rent state of how chem­i­cal and nat­ur­al resources com­pa­nies are doing in embrac­ing mod­ern­iza­tion ini­tia­tives that com­bat issues relat­ed to frag­ment­ed sup­ply chains and out­dat­ed ERPs? 

As always, indus­tries move at dif­fer­ent speeds. If you look at chem­i­cals, one-quar­ter to one-third of the com­pa­nies have moved into a mod­ern, dig­i­tized, cloud-based plat­form with all the advan­tages that brings along. It’s amaz­ing to see in chem­i­cals that there was a clear pref­er­ence to break with all the lega­cy ways of work­ing — like heav­i­ly cus­tomized sys­tems which are hard to main­tain and hard to update — and move toward stan­dard processes.

If you look at oth­er indus­tries, there’s more hes­i­tan­cy to break with these heav­i­ly cus­tomized process­es. Very often, there are risks; degree of change is very often cit­ed. They move slow­er, but also not with that ambi­tion to tru­ly trans­form, rein­vent and change exist­ing ways of work­ing. If you look at min­ing and met­als, they’re the first movers who have real­ly made that step. There’s still work to do to trans­form these com­pa­nies and make sure that they’re not los­ing their com­pet­i­tive advantage.

Q: Do you see that com­pet­i­tive spir­it as one of the rea­sons that lead­ers are so ahead of oth­er indus­tries in their think­ing around dig­i­tal trans­for­ma­tion initiatives?

The chem­i­cal indus­try is famous for inno­va­tions. Look around at foams, col­ors, plas­tics, insu­la­tions. If you go back 100 years, it was all about inno­vat­ing mol­e­cules, then find­ing new appli­ca­tions for exist­ing mol­e­cules, then opti­miz­ing process­es. But all these inno­va­tion waves some­how plateaued. It became hard­er to innovate. 

Com­plete­ly untapped is the pool of dig­i­ti­za­tion, extract­ing insights from data. There’s a com­plete­ly new set of com­pet­i­tive advan­tages in this abil­i­ty to inno­vate. That’s why com­pa­nies are so eager to tap into that pool and break with the lega­cy approach­es, in which they couldn’t access data because of siloed oper­a­tions. They haven’t been able to work end-to-end because process­es run over mul­ti­ple systems.

That’s the next lev­el of com­pet­i­tive advan­tage and why there’s that big push towards a break with lega­cies. The gold stan­dard is to pick cer­tain areas to inno­vate and then also invest in ana­lyt­ics, AI, and gen­er­a­tive AI to make sure that you extract full insights from data.

That might be spe­cif­ic to the chem­i­cal indus­try. If you look at min­ing, there is still immense val­ue to be found there; you can get the lucky drill and hit an ore reserve no one’s found before, right? There’s still the oppor­tu­ni­ty to dif­fer­en­ti­ate and suc­ceed with­out that lev­el of excel­lence – or excel­lence in a dif­fer­ent area, to be precise.

But, here too, the pic­ture is chang­ing if we look at the chal­lenge for the ener­gy tran­si­tion to pro­duce nick­el, cop­per, and all these new ener­gy mate­ri­als. You’ve got 2% or 3% cop­per in what you drill and dig out. Extract­ing that 2% or 3% is impor­tant. And again, you’re talk­ing then about a chem­i­cal process, where­in process opti­miza­tion uses data ana­lyt­ics to extract as much cop­per as pos­si­ble from basic ore.

That’s a big chal­lenge, and it’s why we will see more change and will­ing­ness to invest into data, dig­i­ti­za­tion, dig­i­tal core, and a prop­er end-to-end integration.

Q: In work­ing with lead­ers across these sec­tors, when you’re think­ing about out­side of the indus­try-spe­cif­ic chal­lenges, what busi­ness issues do you see with­in orga­ni­za­tions that com­pli­cate these ini­tia­tives to move towards dig­i­tal trans­for­ma­tion, mod­ern­iza­tion of tech stacks, and process reinvention?

If you start dis­cussing this in a client work­shop, you will get a very long list: tech­nol­o­gy-relat­ed issues, lega­cy restric­tions, data migra­tion inter­face lim­i­ta­tions. Then you’ve got all the process issues and ways of work­ing that need to be changed. You’ve got peo­ple, skills, and change man­age­ment issues. From my per­spec­tive, that is a very long list.

Unfor­tu­nate­ly, there isn’t a sin­gle root cause, a sin­gle com­pli­ca­tion. But in the end, it requires the expe­ri­ence and the tools and meth­ods to, first of all, struc­ture the pro­gram in a way that these very fore­see­able and well-jus­ti­fied com­pli­ca­tions are addressed in a prop­er way.

What’s also often under­es­ti­mat­ed is that pos­i­tive spark. If you cre­ate excite­ment in the begin­ning, that you can take the com­pa­ny through to the next lev­el, that there’s a ben­e­fit for the indi­vid­ual as well, that is very often a game chang­er, which cuts through that long list of com­pli­ca­tions, chal­lenges, or road­blocks, cre­at­ing pos­i­tive momentum.

Bring in peo­ple to work on the change. Make them not ​“some­one who needs to be changed” but ​“an inte­gral part of change.” These are the accel­er­a­tors — the cat­a­lysts, in chem­i­cal terms; the pos­i­tive sparks — to make sure that we are not only not see­ing com­pli­ca­tions, but that we are also see­ing the ben­e­fits of change for the com­pa­ny and for the individual.

Q: When you’re think­ing inter­nal­ly about what works for com­pa­nies, how do you see lead­ers bal­anc­ing what to pri­or­i­tize with­in a busi­ness transformation?

There are two aspects to that. Often, we’re talk­ing about sub­stan­tial invest­ment from a com­pa­ny per­spec­tive. Often, the per­ceived trade-off is to either invest in the new plant or in dig­i­ti­za­tion, in a dig­i­tal core, SAP S/HANA, you name it. 

From my per­spec­tive, it’s not an either/​or. We all know that if you extract bet­ter insights from data, you can run your demand plan­ning more effec­tive­ly. Have clar­i­ty on the val­ue case: that dig­i­tal­iza­tion impacts core busi­ness para­me­ters, like out­put, qual­i­ty, win­ning addi­tion­al demand and addi­tion­al cus­tomer orders in the mar­ket. Hav­ing that clar­i­ty takes the whole val­ue case to a more com­pre­hen­sive per­spec­tive. That’s the first aspect.

The sec­ond aspect is there are obvi­ous­ly many ini­tia­tives in flight. It’s easy to look at ini­tia­tive after ini­tia­tive and say, ​“We’ve got too many ini­tia­tives.” Com­plete­ly under­es­ti­mat­ed are the ben­e­fits you can cre­ate if you com­bine these ini­tia­tives in a syn­er­gis­tic way. For exam­ple, if you want to dri­ve cost effi­cien­cy, you’re often start­ing with insuf­fi­cient automa­tion, and there’s still a major effort required to extract data. If you dig­i­tize and cre­ate a dig­i­tal core, you see busi­ness ben­e­fits on the oth­er side.

Q: Accen­ture has worked with SAP to cre­ate indus­try-spe­cif­ic capa­bil­i­ties with­in SAP S/4HANA, for the chem­i­cals indus­try. Can you explain what those capa­bil­i­ties entail, how that work has been under­tak­en, and what that does to com­pound and accel­er­ate the effects of dig­i­tal core and digitization?

It’s been easy, in the past, to think about ERP sys­tems as approach­ing resource plan­ning as a back-office sys­tem, and to believe that all back-office process­es are the same. This is mis­lead­ing; if you take a clos­er look, it becomes very obvi­ous that they’re very indus­try-spe­cif­ic process­es. Also, the rig­or with which one must man­age these process­es dif­fers very much between com­pa­nies and industries.

Think of a ship­ment of a haz­ardous or explo­sive good. Giv­en spe­cif­ic require­ments for each ship­ment, such as that they have Mate­r­i­al Safe­ty Data Sheets (MSDSs) or EU REACH SDSs, much work is required to make that indus­try- spe­cif­ic. If you look at what is required to steer a com­pa­ny in a giv­en indus­try in a dif­fer­en­ti­at­ed way, it always comes back to spe­cif­ic areas that have influence.

In chem­i­cals, plant avail­abil­i­ty is vital. If one piece breaks down, it may bring a stand­still to the old plant. That means pre­dict­ing avail­abil­i­ty, and pre­dict­ing unplanned down­time, is an extreme­ly spe­cif­ic chal­lenge for the chem­i­cal indus­try. This is why those lead­ers focus on plant main­te­nance and the func­tion­al­i­ty relat­ed with plant main­te­nance; it’s a big issue. Oth­er indus­tries have dealt with this chal­lenge, but it’s not that crit­i­cal if you’re not in an asset-inten­sive industry.

If we look at what’s hap­pen­ing in the steel indus­try, we used to have iron ore and coal, and we used to pro­duce steel in a blast fur­nace. We did that for 2,500 years. Now, we bring in cir­cu­lar solu­tions; we use scrap steel and elec­tric arc fur­naces. All of sud­den, your whole mate­r­i­al flow changes. You get a wide mix of scrap met­al, which you have to ana­lyze to make sure that you get the right steel qual­i­ties. You’ve got a com­plete­ly dif­fer­ent inbound logis­tic and dif­fer­ent mate­r­i­al han­dling qual­i­ty man­age­ment; a typ­i­cal inbound logis­tic mod­ule would not cov­er that. 

We need indus­try speci­fici­ty to make sure that each area fits the needs of a com­pa­ny, but also that each area pro­vides the oppor­tu­ni­ty to build com­pet­i­tive advan­tages, to dif­fer­en­ti­ate and extract addi­tion­al value.

Q: When you think about and you talk to orga­ni­za­tions in these sec­tors that are mov­ing ahead with SAP S/4HANA, what do you advise them to focus on? What do you see as those fac­tors or best prac­tices for success?

From my per­spec­tive, it’s eas­i­er to have that as a tech­ni­cal dis­cus­sion. In sim­pli­fied terms, SAP ECC is run­ning out of main­te­nance, so there’s a need to move to a new plat­form. But that sim­pli­fied response com­plete­ly miss­es the opportunity. 

There are the oppor­tu­ni­ties to dif­fer­en­ti­ate and cre­ate val­ue in both the exist­ing busi­ness and the future busi­ness. Think­ing about future-readi­ness, I men­tioned steel. If you know that you will have to migrate towards elec­tric arc fur­naces, man­ag­ing scrapped met­al, and more, it gives you a com­plete­ly dif­fer­ent per­spec­tive of what’s required in the future than to sim­ply say, ​“I need to tech­ni­cal­ly upgrade.”

The whole val­ue case, to put it very blunt­ly, is crit­i­cal. The val­ue case for today’s busi­ness must also encom­pass the future val­ue and future require­ments to sup­port the busi­ness. Once there is clar­i­ty on that, typ­i­cal­ly, it pro­vides a light­house to steer your trans­for­ma­tion and clear guardrails to then go in and solve for all the required trans­for­ma­tion. There are tech­ni­cal aspects to this. But, very often, trans­for­ma­tion also requires changes in ways of work­ing and changes in skills. 

Get clar­i­ty on the change, and link the val­ue to the required changes on the lev­el of indi­vid­ual SAP users, so they can pre­dict their role and how it will evolve. Invest and dou­ble down in these areas to train the peo­ple, to onboard them, to make sure that they use the full new func­tion­al­i­ty and extract the value.

Get­ting that link from val­ue into required changes on the peo­ple side, also linked to that change for SAP user roles and changes in tech­nol­o­gy, those are the three mag­i­cal com­po­nents that make up a recipe for success.

Con­nect with Dr. Bernd Elser on LinkedIn.

Q: In look­ing at sus­tain­abil­i­ty as a poten­tial val­ue dri­ver for com­pa­nies, in addi­tion to a required change, what should busi­ness lead­ers be think­ing about?

Often, if you talk about sus­tain­abil­i­ty, every­one thinks about reg­u­la­tion, green­house gas, gas prices, and new report­ing require­ments. What is com­plete­ly miss­ing for peo­ple, though, is that this is what con­sumers are ask­ing for. They have a clear and increas­ing pref­er­ence for sus­tain­able and envi­ron­men­tal­ly friend­ly prod­ucts. What is also amaz­ing to see is that their will­ing­ness to pay for those prod­ucts is increasing.

That means there’s a fun­da­men­tal mar­ket oppor­tu­ni­ty out there. And if you look into all the cus­tomer indus­tries- –for met­als, min­ing, and chem­i­cals — all of them have their com­mit­ments out there. All of them have prod­uct devel­op­ment, prod­uct inno­va­tion pipelines, which address all these con­sumer pref­er­ences. These are the com­pa­nies best suit­ed to pro­vide the prod­uct and also sub­stan­ti­ate their claims of sus­tain­abil­i­ty. Bring­ing proof to that means that, for each prod­uct, you need to have the green­house gas foot­print, the prod­uct car­bon foot­print, the tox­i­c­i­ty foot­print, etc. You need to be able to track that through­out the val­ue chain.

There is a huge oppor­tu­ni­ty out there, fun­da­men­tal­ly dri­ven by con­sumer pref­er­ences, but that also brings a whole new set of require­ments for how you man­age enter­prise data, for your open­ness towards oth­er indus­tries, and for your abil­i­ty to pro­vide trans­paren­cy into your prod­ucts and process­es. It’s a huge oppor­tu­ni­ty for com­pa­nies that also are will­ing to dis­rupt, to a cer­tain degree, the ways of work­ing and the exist­ing tech­nol­o­gy base to make sure they’re in a posi­tion to cap­ture that opportunity.

Q: What do you advise for orga­ni­za­tions look­ing to opti­mize their abil­i­ty to inte­grate SAP S/4HANA with oth­er sys­tems and max­i­mize the val­ue of that investment?

From my per­spec­tive, there’s a fun­da­men­tal change. Typ­i­cal­ly, you would design with the ambi­tion of a tech­nol­o­gy being future-ready. Unfor­tu­nate­ly, I think that’s not pos­si­ble any­more. Exter­nal volatil­i­ty and uncer­tain­ty always require that you adapt your func­tion­al­i­ty, that you bring in new functionality.

From a reg­u­la­tor and cus­tomer pref­er­ence per­spec­tive, if you look at the last cou­ple of years, there was a huge evo­lu­tion with cus­tomers ask­ing for what end con­sumers are inter­est­ed in: for foot­notes, ingre­di­ents, and vis­i­bil­i­ty across the val­ue chain. The whole con­cept that you can design your enter­prise archi­tec­ture in one go, and get it right in a year or two years, is not pos­si­ble anymore.

The whole con­cept of hav­ing a dig­i­tal core with satel­lites around it — with the flex­i­bil­i­ty to add func­tion­al­i­ty, to replace a satel­lite, to opti­mize the satel­lite and to be more agile and flex­i­ble in respond­ing to new require­ments and new busi­ness needs — I think that will make the dif­fer­ence. That will also basi­cal­ly enable respon­siv­i­ty to fast chang­ing growth oppor­tu­ni­ties, to changes in com­pet­i­tive pres­sures, and — last but not least — to cus­tomer needs and preferences.

Q: When you’re think­ing about the pos­si­bil­i­ties in the cloud, what excites you the most about the oppor­tu­ni­ties to unlock?

If you look at all our expe­ri­ence from 30-plus years of over­see­ing imple­men­ta­tions in chem­i­cals, plus the same amount of time in min­ing and met­als com­pa­nies, there’s a com­mon theme: 50% of the val­ue is based on bet­ter insights and data for deci­sion mak­ing. You get your hands on 70% of your enter­prise data; all of a sud­den, you can man­age all the chal­lenges in a bet­ter way.

You can use your data to pre­dict demand and increase your fore­cast accu­ra­cy. That means you can set bet­ter inven­to­ry lev­els. You can reduce your net­work and cap­i­tal. You can be smarter in pric­ing, val­ue-based pric­ing, and dynam­ic pric­ing. That’s not fea­si­ble if you’ve got siloed data.

Q: When we’re talk­ing about cir­cu­lar­i­ty and mov­ing towards a cir­cu­lar econ­o­my, what else will be required for these busi­ness lead­ers with­in their trans­for­ma­tions to achieve that vision of a cir­cu­lar economy?

As always, if you talk about sus­tain­abil­i­ty, there are dif­fer­ent ele­ments to get right. One is cir­cu­lar­i­ty, from a mate­r­i­al flow perspective. 

For a steel pro­duc­er, to pro­duce the steel end-of-life cycle, you’ve got scrap, which you can reuse the scrap and bring back in. This already shows us that you need vis­i­bil­i­ty and track­ing across the full life cycle — of what the use is, to whom you’re sell­ing it — trans­paren­cy into the end of life point, and the abil­i­ty to close it from a logis­tics perspective. 

This shows that the net­works, and your frame of man­ag­ing, extends way beyond the bound­aries of your indi­vid­ual com­pa­ny. That means part­ner­ing with oth­er com­pa­nies. That cre­ates a new open­ness, but also a require­ment for new data exchanges. That’s num­ber one. 

Num­ber two is every­one is ask­ing for a net-zero prod­uct. That means the abil­i­ties to opti­mize your ener­gy con­sump­tion and to opti­mize your pro­duc­tion process­es are crit­i­cal­ly impor­tant. Again, we are talk­ing about price resource plan­ning. You can break them down into bill of mate­ri­als, online track­ing of ener­gy con­sump­tion, batch- based green­house gas­es, etc.

The third ele­ment is the require­ments of the future, and the abil­i­ty to inte­grate new require­ments in an agile way — not hav­ing anoth­er 10 peo­ple with exit sheets try­ing to cal­cu­late impact. I think that will make an enor­mous dif­fer­ence going forward.

Q: What else excites you around com­pa­nies look­ing to rein­vent right now?

If you take a very sober look at the sit­u­a­tion of chem­i­cals, met­als, min­ing, and for­est prod­ucts, 80% is trans­ac­tion­al work. Only 20% is tru­ly dif­fer­en­ti­at­ed, val­ue-added, insight­ful work. If you then over­lay what per­cent­age of data is actu­al­ly used, depend­ing on how pos­i­tive and bull­ish you are, it’s some­thing between 10% and 20%. If you take these two data points, what does the future look like?

We will aim to auto­mate all the trans­ac­tion­al work, dig­i­tiz­ing it, but this means that we will have to trans­form 80% of today’s work. And, on the oth­er hand, we have to extract insights from 80% of the data we are not even tap­ping into right now.

If you look at that from a busi­ness per­spec­tive, the chal­lenge of tack­ling 80% of trans­ac­tion­al work, and of unuti­lized data, that path is emerg­ing clear­ly. That’s why I think lead­ers in the indus­try are so eager to jump on that and say, ​“This is exact­ly what I want to do. I don’t want to have my peo­ple do repet­i­tive, trans­ac­tion­al work that needs to be auto­mat­ed and dig­i­tized. On the oth­er hand, I want them to learn new skills and be able to work with all the advanced tech­nolo­gies to make sure I extract the full insights from my data, and ide­al­ly also all the insights from my busi­ness net­work, so that I can real­ly build these cir­cu­lar busi­ness net­works, that I can win the demand out there from con­sumers pre­fer­ring sus­tain­able, envi­ron­men­tal­ly friend­ly products.”

Vision is very key; as always, it’s a time-based com­pe­ti­tion, so speed is of utmost impor­tance. The one who will have these capa­bil­i­ties in place first will have sig­nif­i­cant com­pet­i­tive advan­tages. What is also impor­tant is — in the end, from our per­spec­tive — rein­ven­tion in a cou­ple of dimen­sions. One is get­ting your data right. Sec­ond is get­ting your ERP to work cor­rect­ly with work­flows right. Third is the ways of work­ing, the roles, orga­ni­za­tion structures.

We are still ful­ly com­mit­ted to tech­nol­o­gy-based trans­for­ma­tion. Even if you change ways of work­ing, roles and orga­ni­za­tion­al struc­tures, you will only tap a minor share of the over­all val­ue; and peo­ple will still do trans­ac­tion­al work if you don’t auto­mate and dig­i­tize the work. The dig­i­tal core of cloud-based data and dig­i­tized work­flows is a crit­i­cal enabler to get the whole trans­for­ma­tion going.

Q: Is there any­thing that we haven’t talked about yet that you would like to mention?

There’s always that fear that these SAP S/4HANA migra­tions are lengthy and nev­er-end­ing trans­for­ma­tions, based on the expe­ri­ence of ERP migra­tions 10 – 15 years back, where it would take four years or more to get some­thing done. If you’re clear on your val­ue case, and if you’re clear on what you want to do, if you’re clear on the changes of indi­vid­ual peo­ple, there are new ways of imple­ment­ing that, so that you get it done in two or three years, avoid­ing a lengthy journey.

Vis­it the Accen­ture website.