For those in attendance, Knowde’s annual Executive Summit is an opportunity to hear how top industry executives are tackling the initiative on every chemical and distributor company’s roadmap this year: Digital Transformation.
In the transcript below, Lori Ryerkerk, President & CEO of Celanese Corporation, Joel Caracciolo, SVP Enterprise Data & Insights of Sherwin-Williams, and Paul Tayler, CEO of Nexeo Plastics join Knowde’s Co-Founder and CEO, Ali Amin-Javaheri to discuss how the industry is adapting to digitization.
Read the transcript below to discover what top industry thought leaders are saying about the future of digitization in the chemical and ingredient industry.
Ali Amin-Javaheri: This industry has been a little bit behind the times compared to where the tech world is. Some people say 20 years, some people say longer. Why do you think that is? Why are we behind the times?
Lori Ryerkerk: A couple of reasons. It is by nature a low risk industry. Think about it: the stuff we do is toxic, it’s flammable. The nature of what we make – and most of us start out as people who make things – are things that are very risk intolerant.
Unfortunately, what we see happen is that risk intolerance goes all the way through the organization. We should be risk intolerant when it comes to safety, and environmental and process safety. But that has also evolved into being risk intolerant on financial things, new technology, and use of data.
Quite frankly, it’s an industry mostly run by people who didn’t embrace technology early on. But that’s changing now. I think at the core it’s the risk intolerance – which has rightly been in the industry but has just extended to everything instead of where it needs to be.
Ali: When investors ask me this question I’ve actually never answered it that way because I think they won’t quite understand it. What I usually say is “your customers are now starting to force a little bit of change. Because they’re getting a lot of it. And they’re wanting to maybe engage differently.”
Do you believe that to be true?
Lori: Yeah – it’s not just the customers. Certainly on the commercial side, yes, our customers want something different. Everybody wants something different, right? We’re all really well trained by Amazon now. We want to be able to look things up at two in the morning, place an order, and have it show up on our doorstep. Commercial customers want the same thing. They don’t want to have to say, “I have to talk to a person. I have to wait until you’re at the phone.”
The other thing is our employees – so going beyond the commercial but to digital manufacturing – our employees now want the same thing as well. They want data at their fingertips when they go into the field. They want to be removed from the risk by being able to do things remotely. They want to be able to access their data more easily. They’re not going to be like we were, where you need to look at a long strip chart and somehow make sense out of it. So it’s not just our customers that are insisting that we become digital; it’s our employees as well.
Ali: That makes sense. Has your organization gotten younger?
Lori: Yes. For Celanese, I think the average age now in our company is 42. And I would say in our plants and things we’re seeing a big changeover, and in our commercial teams, we’re seeing a big, big turnover.
Ali: 42 is younger than I thought.
Lori: Yeah. It happened during COVID because a lot of older folks chose to exit the workforce and as we’ve brought people in that are in their early to mid twenties the age has come down quite a bit.
Ali: Joel, why do you think digital transformation is now starting to happen?
Joel Caracciolo: I think we’ve learned a lot from what we’ve gone through in the last few years in terms of supply constraints, volatile demand – and thinking back on some of those experiences and what we had to do to get answers to questions for our customers, for our suppliers – it was incredibly painful, especially if you’re not digital, right?
The resources, the hours, the lack of confidence you have because your data isn’t as clean as it needs to be or connected as it needs to be between businesses and with others in the industry – your peers and your suppliers – made the ability to serve really, really costly. So when we think about how the world seems to have these events more and more often as time goes on – there’s disruptors all the time – we need to be better prepared for that, and it’s a differentiator to be better prepared for it.
Ali: Why did Sherman-Williams create your role?
Joel: I can give a little bit of background – so my background is I’m really a finance/marketing/business guy. We did a data strategy last year and recognized that there are pockets of our business where we have really great data that’s first-party and parts of our business where we don’t. The unlock is connecting that data and understanding the insights across all of our different businesses, certainly on a supply chain basis, but also from a customer commercial perspective.
As we went through this strategy, our leadership wanted someone to run it outside of IT. So we pulled our data analytics team out of IT. IT reports to the CFO – we don’t have a COO, it would probably report to there if that was the structure. We wanted someone who – and it could have been me, it could have been a lot of other people as well – who understood our business, the industry, and the processes, and who wasn’t a technological person first so that as we were making data decisions we had value in mind first and foremost, and we had customers in mind first and foremost.
So this role was essentially created to stand up what’s more of a modern data organization versus, “hey, what do you want your dashboard to look like? What do you want your spreadsheet to look like?”
Ali: Who within the org championed this?
Joel: Our CFO originally. We have a Chief Technology Officer who is amazing and she was supportive from the beginning. I know a lot of people in her role and she had this responsibility amongst all other technology responsibilities. She was supportive as well because she knew that bringing it closer to the business is certainly the way to go for the future for what we want to do and do it quickly. There’s just credibility with having worked in the business before. And now I would tell you that it’s all the way to the board. We have support for this. If we go through a difficult environment, this project will not be cut.
Ali: Paul – Nexeo invested in data and platforms, probably earlier than anybody. Can you tell the group about what you guys know?
Paul Tayler: I think for us as a distributor – a global distributor – we have a very complex situation. We all manufacture, but it’s connecting all of our key strategic suppliers. With more than 10,000 different customers, we have more than 20,000 different products – you can imagine the SKUs are vast.
We actually had a very strong platform in terms of ERP and CRM already in place for many, many years that was connecting and capturing data, but we wanted to make it easy for our customers and their suppliers to do business because that’s the key for us, the distributor, to be successful. So we built a platform called MyNexeo.
We actually started it in 2017 just as a fairly simple reordering platform – but that’s just touching the surface. It’s hard to do anything, so we wanted to go as close as we could to the start of the decision-making process which is where you differentiate. It goes back to things like Amazon. Customers now expect to have access to information that’s useful to them at their fingertips, at a moment’s notice. With all of that information and data we’re trying to get out into the public, we built a system that actually connects the different systems together. So, yes, you can reorder, but we’ve taken it back now so people can actually do the search process in terms of what products are right for the right applications.
We also link it to our website so when somebody is interested in a particular product or maybe in a particular application, we link that to an action to one of our commercial sales account managers in the team. So they go in a much more targeted way now. They’re not just cold calling some of the charts you were showing there, PDF forms and stuff. It’s very much more targeted because for us it’s about building the pipeline of opportunities. We’re linking that from our CRM system, but we have to connect it to our commercial team and also back to our suppliers.
So we built that. We had the new MyNexeo launched about two years ago, so now people can search 24/7. They can check what inventory is available, they can order it online, they can even order it using a credit card if they wanted to. We also have separate sections for customers who are already registered and pre-approved, so you have confidential information protected between us and our customers or our suppliers as well.
They can get all the information you were talking about in terms of those PDFs at a moment’s notice and they have all the credit information there that they can track going back. We’re just trying to make life as easy as we possibly can for customers to do business with us, and also with our suppliers – they’re the lifeblood of a distributor. We have a very transparent approach with our suppliers in terms of sharing pipeline and what we’re doing, so we’re also being very efficient in the way that we work.
Ali: Yeah, Nexeo has been on the cutting edge for a little while. But there’s a journey to get there.
Lori: I was going to share our experience. It’s not just the customer – it’s your own sales reps.
18 months ago we paid 11 billion to acquire the mobility and materials side of DuPont, so our engineering materials portfolio doubled overnight. Now I had two sets of sales reps that didn’t know each other’s portfolios and had to do it. About two thirds of what we make is customized, and we’re talking, I don’t know how many discrete SKUs we have now for that business – probably 50,000 now. I mean, we make 23 discrete polymers. Every one of those has different grades.
So we found we actually went into this area more for our own sales reps and folks, and we built a great selection tool. We’ve now been able to put real language capability on it so you can go, “hey, I’m looking for the equivalent of X company’s grade in our grade and I want to find a good polymer to use for a 5G antenna.” Or you can say, “I need these characteristics in a polymer.” All real language.
Our sales reps have been using it internally now for almost a year and we’ve just rolled it out to our distributors. It’s AI-based, so we could train it. Those people who had all that knowledge could say, “well, it directed me somewhere it shouldn’t go.” So by having our sales reps and folks internally use it all the time, we’ve trained it to where we feel comfortable that it’s getting good enough data that we rolled it out to our distributors.
We’ll use it for them for awhile and then we’ll put it on the online platform. The intent is that we don’t have it connected to a “hey, go, you can order it now” because again, these are very specialized materials. We get enough information from someone asking it questions – and this is how we use it with our distributors – that we can hook them up with the right product specialist or whoever to help them make a final selection and make the final sales.
Paul: I’d back that up as well. In terms of our business, probably more than 70 percent is specified and more than half of it is actually technical polymers. And maybe surprisingly, more of the interest in terms of digital information and engagement is on the technical side rather than the kind of commodity/more basic products side.
I totally agree in terms of succession planning information. We are also using AI now with selected supply partners. We’re training it and we’re testing it – kind of piloting it, and we’re getting surprisingly good results in terms of the advice you would get from a trained application development engineer to what we can get more accessible across the whole organization now. We’re not going to go totally to non-human intervention. On MyNexeo we also have the option of talking to somebody online, an actual person on a bot. But in terms of sharing information and getting closer to what it is that you want, what’s going to work in your application, very technical applications, it’s proven very successful.
Ali: Joel, within Sherman-Williams, who’s driving digital transformation?
Joel: I would say all the executive staff is responsible for it, is how we view it. Digital transformation technically sits up through our CFO, and we have an ERP journey, we have a data journey that I’m responsible for, and more of a digital focused commercial side of the technology track as well.
The three of us – the three leaders – are joined at the hip and spend pretty much all day together working through these. We’ve divided up the work because it’s really complex and we need to be able to have the right amount of focus and apply that. But three years ago, four years ago, I don’t think we would have been able to do this. Right? I just don’t think we were ready for it. But, the industry is moving here. Our customers are asking for digital. The cost of not doing it is significant. And so as an entire leadership team, we’re running at this.
Ali: One of the things we track is how many Chief Digital Officers have been named in our industry. Back in 2017, the number was zero. Today, out of the top 40 Chem Cos, it’s about 50 percent with a named Chief Digital Officer. I’m not saying that’s the right answer, because every org is kind of different, but it feels like somebody’s now getting anointed to run these projects and prioritize the projects.
Joel: Yeah, we do have a Chief Digital Officer and she’s responsible for not just some of our digitization efforts, but also all of our technology team. Obviously, we work super closely on the data side and on the ERP side just to make sure that we’re aligned and working on the same goals. But she’s brought a totally different focus to our company. She’s from the outside and doesn’t have 25 years of Sherwin, which is a blessing and a curse for our company – we have a lot of long-tenured people, which is fantastic, but it also prevents you from kind of thinking about things in a new way at times. So she’s brought a fresh perspective to this along with some other leaders that we brought into the organization to help support all three of our digitization pillars.
Ali: Is there a challenge in connecting your CEO to the business?
Joel: No, no. Our CEO, Heidi Pest, has been in place since January. She was our Chief Operating Officer for a couple of years before that and she’s worked in all of our businesses, so she’s really well connected into the business.
I think what can be a challenge at times is connecting technology to the business and having it be outcome-driven and capability-driven as opposed to technology-driven. That’s a hurdle that we’ve been overcoming now for some time – trying to shift that mindset.
Ali: That’s a challenge we’re definitely seeing across the industry. Somebody owns the digital charter but it’s not as well connected to business as it should be. In other words, business is better guided. They’ve got to say, “look, I need to empower my sales team to be more productive in the field,” and be able to answer questions like that. Digital person, how do I enable that?
Joel: That’s what I mean by we weren’t ready three or four years ago for that. With everything that’s going on, not just in our industry, but across the world, and the capabilities that things like AI will bring to us at some point, we have to be prepared for that. And so the business wants it now.
Ali: When we were at ACC everyone talked about AI. It was wild. I assume Sherwin does.
Joel: Yeah, I’m responsible for our AI strategy.
Ali: How do you think through that?
Joel: Master data first. We have to say no a lot, because we’re just not ready, and a lot of the technology that comes to us isn’t ready. We have vendors all over the place saying “hey, I can do this for you, I can do that for you” but they don’t know that we have X number of ERP systems, that we operate in 200 countries, that we have all these different business units, and business units within business units.
The complexity is significant, and we know a lot of it. Speaking with some of you yesterday, you have similar complexity – so some AI tool off the shelf is not going to solve our problems. That’s the hardest part of my job: convincing marketing and commercial leaders that we’re just not ready for that, but we have this roadmap to get us to a place where we can unlock that value in the meantime – help us get our master data, particularly customer product data, in a position that will enable that, which requires a lot of attention from the business in cooperation. I can’t tell you what all the product domain attributes should be. I need the business involved in that and bought into that process.
So that’s how we’re trying to talk about it. That’s the strategy we have that’s bought in all the way up through our CEO. But there’s a lot of shiny objects out there, and it sounds really great, and some of them probably are. But we’re putting ourselves in a position to unlock the broader opportunity – not just little niche things.
Ali: Yeah. You guys spoke on AI initiatives.
Lori: I wouldn’t necessarily say an AI initiative. Talking about structure – so we don’t have a Chief Digital Officer, as you know, nor do we have a Chief Safety Officer, nor do we have a Chief Diversity Officer – because we think these are things that everybody is responsible for in their businesses – there’s not a single person. This is every leader’s responsibility and digital is on that same platform of things people are responsible for. I have a CIO. His job is to make sure everybody is enabled to do that. But the actual use cases, everything is coming from those leaders of the businesses.
Interestingly enough, we’re a single ERP and we just finished the upgrade – getting the big acquisition at DuPont kind of forced us. Everything is on a single ERP now. We’ve done a lot of work on our data. We bought a single system called Cognite for manufacturing capabilities so everybody’s putting information in the same platforms. We’ve cleaned up our data.
That had to come from the top, because it is costly to do this. So that was me saying, “we’re just going to get there, we’re going to do this.” Interestingly enough, all the use cases are coming from my operators and other people and sales reps. We’ve had to really educate the middle because the people who are dealing with things every day see the application, see the value, and see how it can make their lives better. It’s not always the managers in the middle, so I think the funding has to come from the top, the insistence like “we’re going to make this journey.” You’ll be amazed at how many people, working every day: in the plants, out with customers – will actually bring forward the use cases and then they get developed.
Ali: Makes sense. Hiring a CIO has its advantages and disadvantages. If you can ingrain that digital mindset to everybody, that’s the right answer. That’s for sure.
Paul, how do you think about that?
Paul: Pretty similarly. As a global leadership team, we talk about how we can, as I said earlier, engage as early as possible in the decision making process of our customers, how we can link more closely with our suppliers, and a very important point is the employees as well. One of the key things we discuss in weekly and monthly board meetings is how we can digitize and speed up – accelerate and transform – the experience we give customers and suppliers. So it’s also through the business. There’s not one person. There’s a group that we have that we connect globally.
We’re quite lucky actually in terms of our owners, One Rock Capital Partners, based out of New York. Across their portfolio companies they have experts looking at this whole area, so we engage very closely with them. I would say Nexeo is probably leading the way in terms of what we’re doing there and it’s something that can keep giving.
So, sustainability, ESG in general, is key. We’re looking at MyNexeo because it’s very complicated for people using plastic products. People talk about bio-based – they talk about reducing emissions through the application of plastics. It’s very complicated: regulations, different parts of the world – so we’re looking at how we can use our digital platform to actually train, to make people more aware of what’s going on. Particularly the small customers that we deal with – because most of the producers are dealing with the very large brands and OEMs – they get very confused in terms of, “okay, what should we be doing?” “What’s the CO2 impact of this product versus another product?” That’s kind of the next stage – we’re now looking at ruling that out. Our owners have been very, very supportive in terms of making investments in that area.
So I’d say it’s core. It’s not like table stakes. It’s getting more and more expensive. But for us, we have to stay ahead of the game.
Ali: I’m glad you brought up that topic because that’s somewhere that Knowde is starting to go and I’d love to hear everyone’s thoughts on it.
Historically when we thought about product data, it’s been the data that’s sitting in technical data sheets, marketing data, technical data, sales data, information in brochures, the information in SDSs, and all that. All of it. The noise we’re hearing in the industry around structure and regulatory data is getting really loud .I would imagine your customers are sending you questionnaires and saying, “fill these out so that we understand the footprint of our own problems.”
What Swamy, our Chief Knowledge Officer, is thinking through is: “how do we get you out of that mess?” Rather than receiving a questionnaire, filling it out, and manually handing it back to them, how do we get access to all the literature that contains this information, allow us to structure it in a database that you have, and then you choose what to share with what customer and do it automatically? Is that a pain point you guys are experiencing?
Joel: I can say it is for us. Particularly when you’re a public company with operations in Europe, you’re going to see a lot of changes in regulations, there’s going to be new chemicals of concern or what have you. And the ability for us to quickly identify that and react – sometimes you have plenty of time, sometimes you don’t. China is another great example. They can change regulations very quickly there and we’ve seen that happen with not a lot of notice.
You have to be able to understand what your footprint is and what raw materials you’re using, what ingredients you’re using, to answer those questions and comply with those regulations, and it’s all tied into your brand, right? You want to be leading in sustainability, regulatory, safety, and all of these things, so data is absolutely a core component of that.
Ali: Are your experts sending you questions?
Lori: Oh yeah, we get a lot of them. We have a CoPilot that’s just for our company, so we actually use that now to help fill a lot of these out. Interesting thing – it’s not just a burden now, because yes, we get a lot of “what is our carbon footprint?” questions. We’ve been working for several years now to calculate the carbon footprint of all of our products. We do it on a global basis because we don’t want people saying, “I want it from this plant or that plant.”
Now we make a whole line of low carbon footprint products out of our Clear Lake facility. We also make a whole line of bio-based products that we have available for customers. So it’s actually becoming an opportunity now. If someone says, “hey, I want to know the carbon footprint,” we can say, “well look, if you buy standard grade, it’s X. But, if you buy the Eco B version, which is bio-based, it’s Y, and if you buy the Eco C version, which is low carbon based, it’s Z.”
We’re actually finding it’s a great marketing tool. So yes, there is a regulatory burden, but as you introduce green products it’s actually a huge opportunity to educate your customers that you can help them for a small price to improve their carbon footprint as well.
Ali: Do they pay the premium?
Lori: Many customers do. It’s still a niche, but think about it: there are customers of ours that their reputation is – I can say these as examples because they let me – like Lego. They advertise they want to be fossil-free. We actually sell all the material that is made into little Lego hands. They make a lot of Lego hands, let me tell you, and it’s a bio-based product: it’s made from bio-based.
We have some customers like Ikea, that want to either have all recycled materials – we have several lines of recycled – or they’re buying low-carbon materials, because they want to say they have low-carbon material.
So, there are customers whose brand image is tied to either their carbon, or not using fossil fuels, and they will pay a premium for these materials.
Ali: Any final thoughts anyone wants to share about these digital journeys?
Lori: I have a thought. You asked earlier, “what’s driving this?” When we look at the digital journey, not only is it how we get productivity in the future, but we will not be able to keep up with our customers without digital.
We have built an AI based tool, Project Pipeline. Whenever a customer asks for something new, or a new application, or a sales rep identifies something, we put all of these in the front end. Then we decide which ones we want to support from a research standpoint and work. We have an approval process for that, but honestly, now the company is so big, we’ve doubled the number of these coming in, so how do we prioritize?
We’ve actually used AI to look at all of the last 20 years of projects that went into the front end of the pipeline and which ones made it out the back end and it gives a probability of success and a score, so we now use AI to determine which ones we’re going to pursue more aggressively.
That’s really important because the time for development of projects now has gotten so much less. Like automotive – we make a lot of products for automotive – about 50 percent of what we make goes into auto lightweighting. If you go back even just 5 years ago, we had 3 to 5 years to develop and sell a new grade for autos. That’s down to about 2 years. If you look at electronics, we used to have 1 to 2 years, that’s down to 6 months. If you look at some forms of electronics, it’s down to three months. We have to be able to get things through the development cycle and ready to put in a customer’s hand much more quickly than ever before.
If we didn’t have some of the AI tools, some of the digital tools, even for scheduling and things, we would not be able to keep up with the new expectations of our customers.
Ali: That’s amazing. Is this a topic in your shareholder meetings?
Lori: Our shareholders don’t understand the business model that well, so no. They just know our sales are growing and that’s all they care about.
Ali: I always wonder if the chemical companies that sort of speed up in digital will get a better valuation.
Lori: Those that grow fastest will get a better valuation, for sure. And this is how we grow faster.
Paul: Yeah, I think several people have talked about solving problems, but I think this is a huge opportunity for us. The speed is accelerating and I think AI is going to actually exponentially speed that up even further.
There is a balance touching on the subject of: do you do it yourself or do you do it with others? I think I’m a big believer in collaboration and working with the best. But you’ve got to have the whole business behind it, fully integrated into it. We have a very good team in Nexeo Plastics, and you and your colleagues work with some of them. They really understand the business very, very well – but we’re working with experts that can help us organize ourselves as well, and we look forward to further discussions with you guys.
Joel: I would just say that this is a differentiator: a solid data foundation and the digital platform. If you’re thinking about it, and your competitors are not, that’s an advantage that you have.
You have to do it right. You don’t want to just move with speed just to do it. Treat it as an opportunity. Everything that Ali said about how we’re 20 years behind, we’re not ultimately going to be 20 years behind – some of us are going to catch up, and the ones that catch up are going to expand market share and their profitability. And that’s ultimately what we’re all trying to do. So this is a great opportunity and we’ve just got to go seize it.
Ali: It’s hard, building tech for this industry is… a thing. It’s a process, just like us building our own company. We knew that nothing would be possible unless we could get the data right. Once the data is right, the possibilities all unlock. And we just happened to build an application that we put on your own website, or on the Knowde marketplace, where you can expose your catalog, you can generate leads, you can do request management, e-commerce, all of those sorts of things.
But it takes a while to get there. It takes a while. Everyone’s thinking, “how many leap frogs until I start doing e-commerce?” There’s a bunch of steps between there. We’ll keep building new features, but you’ve got to decide when to turn it on – and that’s a conversation we always have with companies. Always. Get the data fixed, that’s step one. Turn on the digital catalog, do lead management, do request management, get to e-commerce. And then once you get there – which shouldn’t take more than 2-3 years – you’re in the top 1%. Top 1%. And I’ve got to believe shareholders have started to pay attention to that.
