WEBVTT NOTE This file was generated by Descript 00:00:03.699 --> 00:00:06.499 A key component of the modern world economy, the chemical 00:00:06.499 --> 00:00:10.039 industry delivers products and innovations to enhance everyday life. 00:00:10.559 --> 00:00:14.999 It is also an industry in transformation where chemical executives and workers 00:00:15.019 --> 00:00:18.639 are delivering growth and industry changing advancements while responding 00:00:18.639 --> 00:00:23.169 to pressures from investors, regulators, and public opinion, discover how 00:00:23.169 --> 00:00:27.019 leading companies are approaching these challenges here on the chemical show. 00:00:27.489 --> 00:00:30.829 Join Victoria Meyer, president of Progressio Global and 00:00:30.839 --> 00:00:32.259 host of the chemical show. 00:00:32.534 --> 00:00:36.734 As she speaks with executives across the industry and learns how they are leading 00:00:36.734 --> 00:00:42.314 their companies to grow, transform, and push industry boundaries on all frontiers. 00:00:42.654 --> 00:00:44.904 Here's your host, Victoria Meyer. 00:00:48.295 --> 00:00:49.765 Victoria: Hi, this is Victoria Meyer. 00:00:50.275 --> 00:00:54.385 Welcome back to The Chemical Show, where chemicals means business. 00:00:55.315 --> 00:01:00.535 As I record today's episode, we are in early second quarter, 2024. 00:01:00.745 --> 00:01:04.015 We started the year with a foggy outlook, according to Steve 00:01:04.015 --> 00:01:07.465 Lewandowski, who was our guest on one of the first episodes of the year. 00:01:07.495 --> 00:01:08.275 Go check it out. 00:01:08.725 --> 00:01:13.855 And since then we've seen some ups and downs and a sense of mild optimism. 00:01:14.645 --> 00:01:19.235 Not just because of the markets, although they certainly seem to be doing better 00:01:19.265 --> 00:01:21.425 this year than they were a year ago. 00:01:21.905 --> 00:01:26.555 But also because of the actions that companies have taken to be more 00:01:26.555 --> 00:01:32.045 resilient in these flat, challenging, foggy, and uncertain markets. 00:01:32.645 --> 00:01:36.665 We're in the early days of the first quarter earnings reporting season. 00:01:36.905 --> 00:01:41.225 Ooh, that's a tongue twister and it's a little too soon to tell, but some of the 00:01:41.255 --> 00:01:43.595 early reports are better than expected. 00:01:44.135 --> 00:01:47.555 And frankly, I expect some to be worse than expected. 00:01:48.005 --> 00:01:53.795 Um, the focus for this episode is on the strategic actions needed 00:01:53.795 --> 00:01:56.045 to ensure business resilience. 00:01:56.495 --> 00:01:58.145 During uncertain markets. 00:01:58.325 --> 00:02:05.735 Now this is a repackaging of episodes 120, 122, and 124 that I recorded recorded. 00:02:06.065 --> 00:02:07.685 Um, mid-year last year. 00:02:07.955 --> 00:02:11.645 When it was really apparent that there was a downturn in markets and 00:02:11.645 --> 00:02:15.695 companies were struggling and really needed to revisit their playbooks. 00:02:16.055 --> 00:02:18.965 And to ensure business resilience and longevity. 00:02:19.415 --> 00:02:24.155 Well, it is clear that some companies have done very well with this 00:02:24.155 --> 00:02:26.195 commercial discipline playbook. 00:02:26.555 --> 00:02:31.255 And others are still working to execute a few more plays.. 00:02:31.715 --> 00:02:35.105 So based on the discussions I've been having with folks recently, I thought 00:02:35.135 --> 00:02:38.965 it's a time to bring this back, um, and to focus in on these elements 00:02:38.965 --> 00:02:43.255 that's critical for companies to continue to take here in 2024. 00:02:43.775 --> 00:02:47.915 And so what you're going to hear is a replay of three episodes that were 00:02:48.395 --> 00:02:52.025 separate episodes back in last year, we've combined them into one this year. 00:02:52.275 --> 00:02:55.515 And the three elements that companies are really focusing on is 00:02:55.515 --> 00:02:57.465 number one, commercial discipline. 00:02:57.825 --> 00:03:01.125 And we talk about how commercial discipline and those elements of 00:03:01.125 --> 00:03:05.685 commercial discipline that companies are using to drive business resilience. 00:03:06.375 --> 00:03:09.705 The second aspect is customer centricity. 00:03:09.735 --> 00:03:14.895 And what I define as true customer centricity, not to be confused with 00:03:14.895 --> 00:03:18.255 customer satisfaction and oh, let me just keep my customers happy. 00:03:18.525 --> 00:03:22.905 No, it is really about driving true customer centricity, which is 00:03:22.905 --> 00:03:27.495 finding value for yourself and your customers and figuring out where 00:03:27.495 --> 00:03:32.565 the most valuable partnerships and opportunities are to ensure that 00:03:32.565 --> 00:03:34.335 business resilience and longevity. 00:03:34.855 --> 00:03:38.275 The third is diversification of customers and markets. 00:03:38.335 --> 00:03:42.265 And this is a play in the playbook that I see continuing to happen. 00:03:42.535 --> 00:03:47.345 In fact, recently I met with a couple of companies who talked about the fact that 00:03:47.765 --> 00:03:53.155 they are seeking new markets that they are developing and growing into new markets. 00:03:53.425 --> 00:03:57.205 One to manage the, the current market narrative, not just 00:03:57.205 --> 00:03:58.735 short-term, but long-term. 00:03:59.055 --> 00:04:01.665 And also just to build this long-term resilience. 00:04:01.935 --> 00:04:04.275 That's what we're covering today is those three aspects. 00:04:04.615 --> 00:04:08.095 If you want a download on commercial discipline best practices, we've 00:04:08.095 --> 00:04:09.685 developed a great download for you. 00:04:10.235 --> 00:04:13.035 Visit the show notes where there's a download link and 00:04:13.035 --> 00:04:14.925 you can get that information. 00:04:14.925 --> 00:04:17.475 And if you have any questions, again, just reach out. 00:04:17.775 --> 00:04:19.155 You can shoot me a DM. 00:04:19.185 --> 00:04:22.755 You can leave me a message on LinkedIn and we'll respond to get back to you. 00:04:23.115 --> 00:04:25.455 Now., onto today's episode. 00:04:25.721 --> 00:04:31.476 In episode 118, I shared Some insights from the second quarter, 00:04:31.486 --> 00:04:34.116 2023 chemical earnings reports. 00:04:35.686 --> 00:04:39.186 In that episode, I talked about kind of the themes that came through, which 00:04:39.186 --> 00:04:44.996 were flat markets due to inventory, de stocking sluggish economies and 00:04:45.076 --> 00:04:46.636 overproduction in some markets. 00:04:47.136 --> 00:04:51.786 And also highlighted three approaches that companies are taking to create 00:04:51.796 --> 00:04:54.556 business resilience in these markets. 00:04:55.056 --> 00:04:58.066 Those three approaches include commercial discipline. 00:04:58.646 --> 00:05:05.146 Customer centricity and diversification of markets and customers I'm going 00:05:05.146 --> 00:05:09.706 to be unpacking these approaches and sharing the approaches that 00:05:09.716 --> 00:05:12.016 leading companies are following. 00:05:12.626 --> 00:05:13.556 Commercial discipline. 00:05:13.626 --> 00:05:17.536 It means different things to different people in different companies. 00:05:17.576 --> 00:05:22.046 And so I thought it was useful to unpack some of those approaches that 00:05:22.046 --> 00:05:25.826 companies are taking that maybe your company is taking, or maybe it needs to. 00:05:26.246 --> 00:05:27.826 Get a little bit more focused in taking. 00:05:28.866 --> 00:05:33.126 During a down economy, companies often face challenges, and we've seen this 00:05:33.126 --> 00:05:38.376 chemical companies are facing challenges that require them to implement various 00:05:38.376 --> 00:05:42.896 strategies to help support business resilience for today and for the future. 00:05:43.886 --> 00:05:48.691 Applying commercial discipline involves making really informed 00:05:48.721 --> 00:05:54.791 and strategic decisions to optimize resources, control costs, and 00:05:54.801 --> 00:05:56.741 maintain strong market positions. 00:05:57.191 --> 00:06:01.011 And, you know, I talked about this in episode one 18 and it came through in 00:06:01.011 --> 00:06:06.471 a couple of earnings reports that I referenced, control what you can control. 00:06:06.531 --> 00:06:10.396 So to me, it's Some of this aspect of commercial discipline, as we 00:06:10.406 --> 00:06:14.556 see companies implementing it, is about control, controlling 00:06:14.556 --> 00:06:17.716 what you can control and clarity. 00:06:18.396 --> 00:06:21.306 And I'm going to get into that a little bit more as we go along here. 00:06:21.306 --> 00:06:27.056 So here are several ways that companies I've talked with are applying 00:06:27.076 --> 00:06:31.626 commercial discipline to create business resilience in a down economy. 00:06:32.366 --> 00:06:34.481 First of all, Cost optimization. 00:06:34.501 --> 00:06:39.051 I mean, this is a play playbook that we often hear. 00:06:39.601 --> 00:06:44.231 Companies focus really on identifying where they can control costs, 00:06:44.951 --> 00:06:50.031 um, and reduce costs without compromising essential functions 00:06:50.031 --> 00:06:52.191 without compromising their customers. 00:06:53.091 --> 00:06:56.421 Um, sometimes this involves maybe renegotiating contracts, 00:06:56.431 --> 00:07:00.091 streamlining operations, eliminating unnecessary expenses. 00:07:00.806 --> 00:07:04.066 To me, this is really about clarity on value. 00:07:04.286 --> 00:07:07.386 Cost optimization is not just about controlling costs. 00:07:07.466 --> 00:07:09.956 It's about controlling the right costs. 00:07:10.396 --> 00:07:11.766 How do you know they're the right costs? 00:07:12.146 --> 00:07:16.446 Because you understand the value that you're realizing as a business 00:07:17.286 --> 00:07:21.456 with your customers and in your bigger picture for your strategy. 00:07:21.696 --> 00:07:23.936 The second piece of this is clarity on costs. 00:07:23.986 --> 00:07:28.611 Um, and And it's really, when we talk about getting clear on your costs and 00:07:28.621 --> 00:07:34.031 getting that clarity, it involves getting to the real and the actual, not just 00:07:34.031 --> 00:07:35.551 using rules of thumb and assumptions. 00:07:36.111 --> 00:07:39.451 So one of the things I've talked with a leader recently, we talked 00:07:39.451 --> 00:07:44.891 about, um, margin management and getting really crystal clear on cost 00:07:44.891 --> 00:07:46.401 management and margin management. 00:07:47.201 --> 00:07:54.221 And in the particular instance, it was really about, um, moving from assumptions. 00:07:55.036 --> 00:08:00.166 In some of their cost basis, particularly in areas of logistics and transportation, 00:08:00.176 --> 00:08:04.616 where a number maybe got assessed for the whole year and plugged into the S. 00:08:04.646 --> 00:08:04.726 A. 00:08:04.726 --> 00:08:04.996 P. 00:08:04.996 --> 00:08:05.416 system. 00:08:05.466 --> 00:08:09.116 And then you're managing against that using standard rates. 00:08:09.301 --> 00:08:11.930 It is a simplification. 00:08:11.931 --> 00:08:13.041 Simplifications are awesome. 00:08:13.091 --> 00:08:18.281 And so many times, however, when you're really getting disciplined about your 00:08:18.281 --> 00:08:23.041 costs, when you have to get commercially disciplined to deal with these flat 00:08:23.041 --> 00:08:28.441 markets that we're seeing, you have to go beyond those simple rules of thumb. 00:08:28.521 --> 00:08:31.271 So getting more current with their real costs. 00:08:32.231 --> 00:08:35.831 The other thing I hear from leaders, and I hear this from business leaders who are 00:08:36.056 --> 00:08:42.666 You know, making decisions around pricing and margins, they are sometimes lagging. 00:08:43.016 --> 00:08:47.666 Their financial people, their finance analysts, or whomever is 00:08:47.676 --> 00:08:51.856 providing some of those cost data to them, um, are often lagging. 00:08:52.096 --> 00:08:58.096 Um, again, making assumptions using old data, um, around manufacturing costs, 00:08:58.096 --> 00:09:03.886 production costs, sales costs, what have you, when your information is. 00:09:04.491 --> 00:09:09.171 Not current, or when you're using rules of thumb, um, it is really 00:09:09.181 --> 00:09:14.271 difficult to effectively manage margins to set your prices, to reach 00:09:14.271 --> 00:09:16.561 your target margins and EBITDAs. 00:09:16.951 --> 00:09:21.061 Um, And, and get the business performance that you want without 00:09:21.131 --> 00:09:22.401 understanding those actuals. 00:09:22.761 --> 00:09:28.541 So my second point here is clarity on costs is critical and is a critical 00:09:28.561 --> 00:09:30.251 element of commercial discipline. 00:09:31.621 --> 00:09:33.321 The third piece is cashflow management. 00:09:33.491 --> 00:09:36.011 I think these one, two, three go together by the way. 00:09:36.031 --> 00:09:39.621 So you know, one cost optimization, two clarity on costs. 00:09:39.906 --> 00:09:42.586 Because it's tough to optimize if you're not clear. 00:09:42.926 --> 00:09:45.966 Um, the third is cashflow and cash is King. 00:09:46.046 --> 00:09:47.156 Um, I've said this before. 00:09:47.156 --> 00:09:48.536 You've heard this in other places. 00:09:49.126 --> 00:09:53.896 This involves really better control of invoicing collections and payments, right? 00:09:53.896 --> 00:09:57.326 I think that's where we often see this cash generation engine. 00:09:57.626 --> 00:09:59.886 I'm also hearing the pros and cons of this, right? 00:09:59.886 --> 00:10:03.916 So I talked to a leader recently who, who basically said there. 00:10:04.231 --> 00:10:06.761 Some of their customers have gotten extraordinarily 00:10:06.821 --> 00:10:08.561 nitpicky on invoices, right? 00:10:08.581 --> 00:10:12.641 So, there's a typo, there's something wrong and kicking 00:10:12.641 --> 00:10:13.951 it back to the beginning. 00:10:13.951 --> 00:10:15.931 So it's, it's delay. 00:10:16.111 --> 00:10:19.921 It's a strategic delay of invoice payment and processing 00:10:20.311 --> 00:10:21.981 to manage costs and cashflow. 00:10:21.991 --> 00:10:25.311 But it's also frankly, this goes on both sides of the equation, 00:10:25.491 --> 00:10:30.416 cashflow managing invoices, managing payables and managing where your 00:10:30.416 --> 00:10:32.596 cash is going is really critical. 00:10:33.286 --> 00:10:38.656 Hopefully you're doing it in a way that quite frankly is respectful of your 00:10:38.656 --> 00:10:42.876 business partners, customers and suppliers because everybody's in the same boat. 00:10:43.246 --> 00:10:43.696 I've seen it. 00:10:43.706 --> 00:10:48.136 You guys have seen it sometimes that the, you know, the 800 pound gorilla, 00:10:48.286 --> 00:10:53.046 if you want to use that term often has better and more stringent control 00:10:53.046 --> 00:10:55.136 on some of this cashflow management. 00:10:55.506 --> 00:10:57.116 But it's across the value chain, right? 00:10:57.116 --> 00:10:59.116 So cashflow management is critical. 00:11:00.356 --> 00:11:04.506 The fourth thing is business efficiency and optimization. 00:11:04.546 --> 00:11:07.466 So this falls into a couple of different categories. 00:11:07.486 --> 00:11:10.006 One is just automating and streamlining processes. 00:11:10.036 --> 00:11:13.646 So I have talked to a number of leaders who have said, we have, we 00:11:13.646 --> 00:11:19.646 are taking a really hard look at our business processes, making sure that 00:11:19.646 --> 00:11:21.536 they are streamlined and efficient. 00:11:21.716 --> 00:11:25.816 Again, one, why it takes costs and time out of the system, right? 00:11:25.816 --> 00:11:27.856 So time is one of these things that's. 00:11:28.176 --> 00:11:29.296 actually quite costly. 00:11:29.706 --> 00:11:31.596 But it's also the right way to do business. 00:11:31.606 --> 00:11:36.306 It allows you to be more efficient with your, your people with your finances, 00:11:36.316 --> 00:11:40.386 with your production and how you're moving products to and fro with your customers. 00:11:40.386 --> 00:11:44.906 So automating and streamlining processes, one element of this business efficiency. 00:11:45.251 --> 00:11:46.721 Optimizing supply chains, right? 00:11:46.721 --> 00:11:48.731 I think that's something that always happens. 00:11:49.371 --> 00:11:53.071 Taking a sharper look when you have clarity, as we already talked 00:11:53.081 --> 00:11:56.351 about clarity on what those real supply chain costs are, you're able 00:11:56.351 --> 00:11:58.651 to better effectively optimize. 00:11:58.671 --> 00:12:00.021 So that's one of these elements. 00:12:00.381 --> 00:12:02.791 And then the other pieces of aligning business systems. 00:12:02.801 --> 00:12:08.041 So I've heard from several leaders recently that they are taking this time 00:12:08.491 --> 00:12:10.811 when business is a little bit slower. 00:12:11.291 --> 00:12:15.881 They are taking this time to really align and combine business systems. 00:12:16.221 --> 00:12:20.171 This is particularly true of companies that have, formed 00:12:20.171 --> 00:12:24.161 through mergers, um, and maybe are operating several business systems. 00:12:24.421 --> 00:12:29.651 When you look at the activities of 2020, 21, 22, they were running and 00:12:29.651 --> 00:12:36.151 gunning, moving fast, didn't necessarily have time to focus in on business 00:12:36.161 --> 00:12:41.301 systems and business processes and efficiencies because they were serving 00:12:41.301 --> 00:12:44.671 customers and serving their business needs while there was that opportunity. 00:12:45.211 --> 00:12:49.501 As things slow down, they've taken that time and one leader in particular 00:12:49.501 --> 00:12:53.281 said, you know, we're working on inter internal processes and getting that 00:12:53.281 --> 00:12:58.551 fixed, slowing down so that when the market speed up, we can go fast, right? 00:12:58.551 --> 00:13:04.201 So that whole concept of slow down, fix it, and then go fast is absolutely. 00:13:04.536 --> 00:13:08.306 Essential and it's a critical part of this business efficiency and 00:13:08.326 --> 00:13:12.391 optimization and one element of commercial discipline that we're seeing. 00:13:13.051 --> 00:13:15.241 The fifth thing that I'm going to touch on and the final thing I'm 00:13:15.241 --> 00:13:19.601 really touching on today is around prioritizing and optimizing products 00:13:19.601 --> 00:13:22.481 and solutions, getting clear. 00:13:22.571 --> 00:13:27.151 So clarity on the most profitable products, services, and solutions 00:13:27.241 --> 00:13:28.761 that you're able to offer. 00:13:29.101 --> 00:13:32.121 So this aligns with two of those other topics we're going to be 00:13:32.121 --> 00:13:35.971 talking about which is customer centricity and diversification. 00:13:36.411 --> 00:13:41.021 So, you know, we're going to be getting into more depth there because obviously 00:13:41.291 --> 00:13:45.611 when you're prioritizing and optimizing on your best, and I'm going to use 00:13:45.611 --> 00:13:49.601 that term loosely and it gets defined differently in different places. 00:13:50.001 --> 00:13:53.091 Um, but when you're optimizing on that, you can't do it in a bubble. 00:13:53.341 --> 00:13:57.461 You have to do it in the context of your markets and your customers and the rest of 00:13:57.461 --> 00:14:03.121 the value that you bringing, but figuring out what those best or optimal products 00:14:03.121 --> 00:14:05.941 and services are and selling more of them. 00:14:06.721 --> 00:14:09.991 Is critical cutting the dead weight, right? 00:14:10.011 --> 00:14:14.061 So there are, we all know this in our business businesses, there are 00:14:14.071 --> 00:14:15.551 products and services that are. 00:14:16.681 --> 00:14:20.481 Um, less optimal that are not as profitable, not as effective. 00:14:20.931 --> 00:14:27.111 Um, and it's tempting, I will say in a down market, it is really tempting 00:14:27.121 --> 00:14:28.861 to do everything for everyone. 00:14:29.201 --> 00:14:30.411 Ooh, can you make this product? 00:14:30.451 --> 00:14:30.871 Sure. 00:14:30.941 --> 00:14:32.641 Can you do this service? 00:14:32.731 --> 00:14:33.191 Sure. 00:14:33.731 --> 00:14:39.041 However, commercial discipline basically involves saying no more often. 00:14:39.556 --> 00:14:39.906 Right. 00:14:40.476 --> 00:14:46.026 Um, you are really focused in on making the right decisions for your business, 00:14:46.126 --> 00:14:49.516 for your profits, for your people, for your customers and your suppliers. 00:14:49.526 --> 00:14:53.936 And that involves this whole aspect of prioritizing and optimizing products 00:14:53.936 --> 00:14:58.226 and solutions, cutting the dead weight, saying no, rather than saying 00:14:58.226 --> 00:15:00.016 yes to things that are suboptimal. 00:15:00.806 --> 00:15:04.076 Um, so those are my five things applying commercial discipline 00:15:04.336 --> 00:15:10.746 requires a combination of short term cost cutting, margin. 00:15:11.051 --> 00:15:12.731 Maximization measures. 00:15:12.791 --> 00:15:12.941 Why? 00:15:12.941 --> 00:15:18.131 That's a triple M's there as well as long term strategic planning. 00:15:18.131 --> 00:15:18.611 So right. 00:15:18.611 --> 00:15:21.671 So you've got to look short term and long term at the same time. 00:15:22.211 --> 00:15:25.851 Companies are really focused on effectively balancing those aspects. 00:15:26.596 --> 00:15:27.056 Okay. 00:15:27.326 --> 00:15:28.596 Customer centricity. 00:15:29.026 --> 00:15:29.416 What. 00:15:29.666 --> 00:15:30.206 Is it? 00:15:30.726 --> 00:15:35.066 Customer centricity is often confused with customer service and 00:15:35.066 --> 00:15:37.636 it aligns with customer experience. 00:15:38.086 --> 00:15:40.656 The reality is there is not one common definition. 00:15:40.986 --> 00:15:45.196 Gartner says customer centricity demands that the customer is the 00:15:45.196 --> 00:15:49.746 focal point of all decisions related to delivering products, services, 00:15:49.796 --> 00:15:54.446 and experiences to create customer satisfaction, loyalty, and advocacy. 00:15:54.756 --> 00:15:55.816 Oh, that's a long definition. 00:15:57.546 --> 00:16:02.986 I actually like to tighten this up because the reality is this is not 00:16:02.986 --> 00:16:09.436 about all customers or rather all customers are not created equal. 00:16:10.686 --> 00:16:14.356 And in fact, Wharton professor Peter Faber, who wrote a book 00:16:14.566 --> 00:16:18.026 called customer centricity, I'll link to it in the show notes. 00:16:18.286 --> 00:16:23.316 What he says is customer centricity is about focusing on the right 00:16:23.446 --> 00:16:26.096 customers to create strategic value. 00:16:28.426 --> 00:16:33.366 As I like to say, you can't be everything to everyone, right? 00:16:33.376 --> 00:16:36.376 So companies that try to be everything to everyone. 00:16:37.216 --> 00:16:44.156 It is a slow and painful, maybe not a death, but certainly not reaching the 00:16:44.196 --> 00:16:48.216 standards of business performance and business resilience you want, right? 00:16:48.226 --> 00:16:51.666 So you have to be able to say, no, you can't be everything to everyone. 00:16:52.086 --> 00:16:54.566 Customer satisfaction doesn't pay the bills, right? 00:16:54.566 --> 00:16:58.376 So again, customer centricity is not necessarily about having a 00:16:58.376 --> 00:17:00.116 high customer satisfaction score. 00:17:00.376 --> 00:17:04.516 You can have an amazingly high customer satisfaction score and have no customers 00:17:04.696 --> 00:17:08.876 or have very few customers and not not getting the right profitability, 00:17:08.876 --> 00:17:11.686 not getting the right value out of those customer relationships. 00:17:11.886 --> 00:17:18.006 So really customer centricity is really about serving the right customers. 00:17:18.546 --> 00:17:23.916 In the right way with the right products and services at the right time. 00:17:24.586 --> 00:17:29.316 One of the things that stood out in those second quarter 23 earnings reports 00:17:29.326 --> 00:17:34.336 and this came from Eastman CEO, Mark Costa, he, one of the comments he made in 00:17:34.336 --> 00:17:36.926 that report was we continue to benefit. 00:17:37.686 --> 00:17:41.396 From momentum in our premium products and markets, right? 00:17:41.896 --> 00:17:46.546 And the subtext in that as well is recognizing that those products are 00:17:46.566 --> 00:17:48.916 going to the customers that value them. 00:17:49.236 --> 00:17:53.406 And customer centricity is a whole lot about understanding 00:17:53.446 --> 00:17:56.486 and matching what you do. 00:17:56.956 --> 00:18:00.966 And how you serve your customers and putting the right customers 00:18:01.046 --> 00:18:02.286 at the center of your business. 00:18:02.776 --> 00:18:06.556 So key elements in this, you know, I actually think this is 00:18:06.556 --> 00:18:08.826 not an overnight exercise, right? 00:18:08.826 --> 00:18:12.106 So this is a journey that takes a couple of years really to get right. 00:18:12.446 --> 00:18:15.406 And part of this first piece is just phase one. 00:18:15.406 --> 00:18:18.036 I call part of discovering and understanding, right? 00:18:19.246 --> 00:18:23.116 The elements that that really you can focus in on when you're thinking 00:18:23.126 --> 00:18:26.566 about customer centricity and dry using it to drive business resilience. 00:18:26.576 --> 00:18:29.976 So first of all, customer lifetime value. 00:18:31.311 --> 00:18:35.381 Which is really the value that business relationships have over time. 00:18:35.391 --> 00:18:39.121 So, you know, thinking about value, I really think about this in terms of 00:18:39.151 --> 00:18:44.711 margin and growth and kind of the overall value you're getting with your business. 00:18:44.731 --> 00:18:46.431 You can measure it a couple of different ways. 00:18:47.001 --> 00:18:49.641 It is really forward looking, right? 00:18:49.961 --> 00:18:51.381 So if we think about. 00:18:52.461 --> 00:18:55.191 Projects, capital projects, innovations, et cetera. 00:18:55.441 --> 00:18:59.741 When you start looking back at sunk costs, some costs don't matter. 00:19:00.251 --> 00:19:05.041 I hate to say this, but in many ways that sunk business relationship, the 00:19:05.041 --> 00:19:10.771 relationship that's behind you, it matters, but it's not the primary focus. 00:19:10.801 --> 00:19:14.361 It is one element of assessing customer lifetime value. 00:19:15.021 --> 00:19:17.991 Customer lifetime value is forward looking, right? 00:19:18.431 --> 00:19:23.371 You are recognizing the value of that company of the business leader being 00:19:23.401 --> 00:19:25.101 okay with some ups and downs, right? 00:19:25.101 --> 00:19:29.091 Because we've seen in these last few years, there's been some great highs. 00:19:29.101 --> 00:19:32.881 There's been some great lows in business across the chemical industry. 00:19:34.356 --> 00:19:37.916 But it's really about looking at value, looking at cost to serve 00:19:38.276 --> 00:19:40.126 this customer and this relationship. 00:19:40.496 --> 00:19:44.016 Not just really in the ways that we sometimes think about it, which 00:19:44.016 --> 00:19:48.616 would be the cost of goods sold and just raw materials and looking 00:19:48.616 --> 00:19:50.256 at just a pure profit margin. 00:19:50.536 --> 00:19:55.666 But it's also resources, time, logistics, labs, innovation, understanding the value. 00:19:55.716 --> 00:19:57.806 And you know what, the value equation is two way. 00:19:58.936 --> 00:20:01.796 Let's be clear about that value is never just one way. 00:20:02.116 --> 00:20:06.256 It is two way and your customer lifetime value in thinking about. 00:20:07.386 --> 00:20:11.646 Those customers, your most strategic customers that create the most value 00:20:11.646 --> 00:20:17.576 for you and together you for them is critical and customer centricity involves 00:20:17.776 --> 00:20:20.046 understanding the right customers. 00:20:20.416 --> 00:20:22.446 Customer lifetime value is one way of doing that. 00:20:22.546 --> 00:20:25.086 The second piece of this is around strategic alignment, right? 00:20:25.086 --> 00:20:29.636 So that also aligns with customer lifetime value, but the value that you, companies 00:20:29.676 --> 00:20:32.096 that are strategically aligned to you. 00:20:32.876 --> 00:20:35.076 Value you and your services more. 00:20:35.206 --> 00:20:38.066 You are aligned in long term objectives. 00:20:38.096 --> 00:20:41.156 You're aligned in the ways of doing business, your strategies around 00:20:41.176 --> 00:20:45.066 growth, around customers, around markets, around other elements 00:20:45.066 --> 00:20:46.566 of your business are aligned. 00:20:46.716 --> 00:20:48.216 You have strategic alignment. 00:20:49.416 --> 00:20:51.716 Companies that you have strategic alignment with, they're better. 00:20:51.966 --> 00:20:56.386 Quite possibly a, one of your, you know, right customers, right. 00:20:56.386 --> 00:21:02.186 That you want to align to the third piece of customer centricity and really in this 00:21:02.186 --> 00:21:07.136 discovery phase of figuring out who are your key customers that need to be at that 00:21:07.136 --> 00:21:11.786 center of your business, um, segmentation and ensuring that you're doing the 00:21:11.786 --> 00:21:13.516 right things for the right customers. 00:21:13.786 --> 00:21:18.496 I actually talked a lot about segmentation and personalization in episode 110. 00:21:19.181 --> 00:21:20.901 If you haven't listened, go back and listen. 00:21:20.901 --> 00:21:24.771 We'll also link it to the show notes, but segmentation is critical because 00:21:26.051 --> 00:21:31.111 when you're using customer centricity and driving your business to creating 00:21:31.111 --> 00:21:35.061 a higher level of customer experience, a higher level of customer value, 00:21:35.616 --> 00:21:40.376 You need to know which segments of your customers are you achieving that 00:21:40.376 --> 00:21:42.436 with and are achieving that with you. 00:21:43.006 --> 00:21:47.246 And then the fourth thing really ties in with employee buy in. 00:21:47.246 --> 00:21:50.796 And I actually, I've lumped this here in my phase one discovery and 00:21:50.826 --> 00:21:53.866 the reality is this becomes of your part of your design and definition. 00:21:54.526 --> 00:21:59.376 Once you understand right, customer lifetime value, strategic alignment, 00:21:59.376 --> 00:22:03.716 your segmentation, you're able to take the next step and say, okay, now what? 00:22:05.391 --> 00:22:09.911 Who are the right customers that we need to put at the center of our business 00:22:09.911 --> 00:22:11.921 that drive the greatest strategic value? 00:22:12.221 --> 00:22:14.791 And again, I think of it like a bullseye target. 00:22:15.571 --> 00:22:19.451 You're not necessarily getting rid of customers, but you are understanding 00:22:19.491 --> 00:22:25.051 the most valuable premium customers, greatest customer lifetime value, and 00:22:25.051 --> 00:22:29.561 ensuring that you're getting the That you are serving them appropriately. 00:22:29.871 --> 00:22:34.261 When you think about your next year of customers, you might be serving 00:22:34.261 --> 00:22:36.071 them a little bit differently, right? 00:22:36.081 --> 00:22:40.581 So driving customer satisfaction, doing the right things for the right 00:22:40.581 --> 00:22:45.181 customers, being customer centric and putting your customers at the center. 00:22:45.756 --> 00:22:50.186 Of your business processes, your customer activities, but 00:22:50.196 --> 00:22:52.226 also prioritizing them, right? 00:22:52.676 --> 00:22:56.336 I'm going to go back to what Mark Costa said Eastman CEO, Mark Costa 00:22:56.336 --> 00:22:59.366 said, which is around, we continue to benefit from momentum in our 00:22:59.376 --> 00:23:00.646 premium products and markets. 00:23:01.046 --> 00:23:02.586 Customer centricity is key. 00:23:02.926 --> 00:23:04.756 I've heard this from a number of leaders. 00:23:05.126 --> 00:23:10.186 Customer and centricity is one of those key levers that we have to exercise. 00:23:10.626 --> 00:23:16.926 Um, you know, being customer centric requires clear understanding, strategy, 00:23:16.926 --> 00:23:20.136 decisions about your approach to customers, the customer experience and 00:23:20.136 --> 00:23:27.556 customer value, being the right supplier to the right customer at the right time. 00:23:28.646 --> 00:23:29.326 Today. 00:23:29.386 --> 00:23:33.456 I am talking about market and customer diversification and its 00:23:33.466 --> 00:23:38.386 role in creating business resilience during flat and inflationary markets. 00:23:38.876 --> 00:23:41.556 The events of the last three years have really highlighted the need 00:23:41.556 --> 00:23:46.096 for diversification, whether it be in your customer base, the End use 00:23:46.096 --> 00:23:51.936 markets, you're selling into geographic locations that you are, your customers 00:23:51.936 --> 00:23:53.626 are in, or your suppliers are in. 00:23:53.636 --> 00:23:57.436 And in fact, even just supplier diversification, just like we 00:23:57.436 --> 00:23:58.796 talk about in financial markets. 00:23:58.796 --> 00:24:01.926 And if you guys are investors and you're looking at your financial portfolios, 00:24:01.926 --> 00:24:04.806 diversification has long been critical. 00:24:05.076 --> 00:24:09.026 The same is true with chemical companies and across the chemical industry. 00:24:09.496 --> 00:24:13.111 So, Let's talk a little bit about just what is diversification? 00:24:13.211 --> 00:24:17.261 Diversification is really when companies change or expands their 00:24:17.271 --> 00:24:22.131 products, offerings, markets, both end use and geographic. 00:24:22.421 --> 00:24:28.001 And it was really first noted in the 1950s as one of four critical growth 00:24:28.001 --> 00:24:31.981 strategies by Igor Ansov, who's a mathematician and business manager. 00:24:32.261 --> 00:24:35.551 And if you want to go learn more about him and his theories, you can do so. 00:24:35.976 --> 00:24:37.746 Find a link and add it to the show notes. 00:24:38.146 --> 00:24:38.766 Often. 00:24:38.776 --> 00:24:39.556 It's interesting. 00:24:39.566 --> 00:24:43.976 He viewed it in a pretty narrow connotation, which I kind of find 00:24:43.996 --> 00:24:48.616 interesting and ironic because to me, diversification is about growing the 00:24:48.616 --> 00:24:50.996 pie, expanding your opportunity base. 00:24:51.326 --> 00:24:54.206 And yet he often talked a lot about products and services. 00:24:54.636 --> 00:24:58.946 I personally think it's really appropriate to think about diversification in the 00:24:58.946 --> 00:25:04.736 sense of geographies, manufacturing locations, your supplier base, 00:25:04.996 --> 00:25:06.786 your customer base, and more. 00:25:07.186 --> 00:25:11.806 Now, the reality is diversification is not a quick exercise. 00:25:11.816 --> 00:25:16.596 When you're thinking about diversifying your manufacturing locations, 00:25:16.781 --> 00:25:20.111 To create better resilience, better cost basis, et cetera. 00:25:20.891 --> 00:25:24.091 That's something that takes a couple of years to implement depending on the 00:25:24.091 --> 00:25:28.151 products and that you are servicing and the customers and suppliers you've got. 00:25:28.541 --> 00:25:33.791 And when I talk to leaders about business performance over the past year, some 00:25:33.791 --> 00:25:38.851 of the benefits of diversification are deeply rooted in the business decisions 00:25:38.851 --> 00:25:44.176 they've Already taken case in point in a global business leader at a leading 00:25:44.176 --> 00:25:49.586 materials company that I've spoken with has stated her business and her part 00:25:49.586 --> 00:25:51.526 of the business is rocking this year. 00:25:51.596 --> 00:25:57.076 Great performance, sales, exceeding expectations, consistent growth, which 00:25:57.076 --> 00:25:58.571 is a great counterbalance to her. 00:25:58.651 --> 00:26:03.771 Colleagues business, which focuses in a different market area, in his case, 00:26:03.791 --> 00:26:07.661 supplying products that go into a medical fields and medical applications, 00:26:08.051 --> 00:26:09.721 which is not meeting business plan. 00:26:09.801 --> 00:26:14.591 So from a leadership perspective, that diversification of. 00:26:15.116 --> 00:26:21.376 End uses of markets is really successful because when one business is doing 00:26:21.386 --> 00:26:24.676 great and the other business is not doing great, it provides balance. 00:26:24.976 --> 00:26:29.916 And that's certainly what we've really seen over the past year and really in 00:26:29.916 --> 00:26:33.446 many ways over the past three years, because the pandemic, the supply 00:26:33.456 --> 00:26:36.886 chain disruptions we've seen as a result of that, as a result of the 00:26:36.886 --> 00:26:39.766 Russia Ukraine war, as a result of. 00:26:40.276 --> 00:26:47.066 Energy prices as a result of what China is and isn't doing has really driven 00:26:47.066 --> 00:26:51.286 the need for better diversification and manifesting those results. 00:26:52.276 --> 00:26:54.036 Why do companies diversify? 00:26:54.286 --> 00:26:57.586 Number one, to beat the competition, doing something that the competition 00:26:57.596 --> 00:26:59.476 isn't doing so that they get a step ahead. 00:27:00.006 --> 00:27:01.116 Growing profits. 00:27:01.166 --> 00:27:04.886 And I think at the end of the day, every company exists to grow its 00:27:04.886 --> 00:27:07.666 profits, um, exists to create. 00:27:07.921 --> 00:27:13.261 greater value for its shareholders, as well as its employees and its 00:27:13.281 --> 00:27:15.301 customers and its business partners. 00:27:15.941 --> 00:27:18.021 It provides strength during downturns. 00:27:18.031 --> 00:27:22.671 And that's really the focus of where this highlight of the benefit of 00:27:22.671 --> 00:27:26.441 diversification of markets and customers and how companies are seeing real 00:27:26.441 --> 00:27:29.791 resilience in these flat and rocky times. 00:27:29.801 --> 00:27:29.861 Thank you. 00:27:30.061 --> 00:27:31.011 It's critical, right? 00:27:31.051 --> 00:27:33.061 It provides strength. 00:27:33.511 --> 00:27:35.001 It provides resiliency. 00:27:35.311 --> 00:27:38.511 And the fourth reason is really around navigating industry changes. 00:27:38.521 --> 00:27:42.681 There is no doubt in my mind, there's no doubt in your mind that the chemical 00:27:42.681 --> 00:27:48.041 industry, our customers, the markets that we sell into, consumer demand. 00:27:48.226 --> 00:27:55.816 Is changing as a result of economic shifts, as a result of net zero 00:27:55.896 --> 00:28:01.536 sustainability and ESG, which is driving us towards greater diversification 00:28:01.606 --> 00:28:05.126 away from perhaps some of the traditional chemical feedstocks that 00:28:05.126 --> 00:28:09.456 we typically see flowing through the value chain into more green and 00:28:09.456 --> 00:28:10.866 natural and sustainable products. 00:28:11.146 --> 00:28:14.666 How do we take advantage of diversification from where you 00:28:14.686 --> 00:28:18.716 are today and where you're going forward is really number one, 00:28:18.726 --> 00:28:20.356 assessing where that market is going. 00:28:20.716 --> 00:28:23.946 Where does your business fit in the future markets? 00:28:24.526 --> 00:28:27.836 Companies create success with flexibility. 00:28:29.426 --> 00:28:31.536 It's not about being everything to everyone. 00:28:31.566 --> 00:28:32.796 I've talked about that before. 00:28:32.796 --> 00:28:37.046 You're not going to be diversified to the point where it's disparate 00:28:37.086 --> 00:28:38.406 and it doesn't make sense. 00:28:38.796 --> 00:28:42.596 And in fact, the best opportunity for diversification, I like to think 00:28:42.596 --> 00:28:44.206 of it as a Venn diagram, right? 00:28:44.206 --> 00:28:47.056 So you guys are familiar with the Venn diagram where there's the. 00:28:47.426 --> 00:28:51.396 Two circles, let's just say market a market B and where the overlap is. 00:28:51.456 --> 00:28:56.836 You want to have overlap and synchronicity in your diversification because 00:28:56.906 --> 00:29:02.906 otherwise you're just assembling a business and a company that requires 00:29:02.936 --> 00:29:08.176 double the resources, double the products, double the efforts. 00:29:08.206 --> 00:29:15.236 And Effective diversification is linked linkages to existing products, 00:29:15.586 --> 00:29:21.216 linkages to existing markets and seeking out the greater opportunities. 00:29:21.316 --> 00:29:25.436 So you know, and this comes in supplier diversification, I've 00:29:25.446 --> 00:29:28.106 touched on that a little bit, customer diversification, right? 00:29:28.456 --> 00:29:32.336 So understanding what customer finds value. 00:29:32.611 --> 00:29:37.201 In your products, in your services, in your offerings and figuring out, 00:29:37.351 --> 00:29:41.231 well, what are the parallel markets that then find value in the same 00:29:41.311 --> 00:29:45.901 things and going after it, extending your reach and diversifying where 00:29:45.901 --> 00:29:48.461 you're going and geographies. 00:29:48.521 --> 00:29:52.781 So I think we're in a real interesting time right now, especially from 00:29:52.781 --> 00:29:54.361 a geographic diversification. 00:29:56.031 --> 00:30:01.211 The signs indicate that we are maybe shifting to more regional supply chains. 00:30:01.731 --> 00:30:04.671 which implies more regional business models. 00:30:04.681 --> 00:30:08.421 So you would say, does diversification still hold true? 00:30:08.801 --> 00:30:09.801 Yes and no. 00:30:09.851 --> 00:30:12.731 And it really depends on products, right? 00:30:12.731 --> 00:30:16.741 What we're seeing is that some businesses are a more local business and 00:30:16.761 --> 00:30:21.111 understanding where your local businesses are and how they tie together is critical. 00:30:21.111 --> 00:30:27.701 Global businesses, um, have a greater reliance on global 00:30:27.711 --> 00:30:29.271 markets, global suppliers. 00:30:30.361 --> 00:30:31.921 That's not always a great thing. 00:30:32.021 --> 00:30:36.191 Putting all your eggs in one basket in terms of where you're sourcing in 00:30:36.191 --> 00:30:42.261 terms of where you're selling creates risk and less business resilience. 00:30:42.271 --> 00:30:45.711 For me, this, this aspect of diversification and where companies 00:30:45.711 --> 00:30:52.446 are really finding value is when they are Taking the business they have today 00:30:52.636 --> 00:31:00.316 and looking at what's successful and then finding out the customers in the 00:31:00.316 --> 00:31:06.106 markets and the business opportunities that extend, that diversify so that 00:31:06.106 --> 00:31:09.316 they're not relying on the same basis and that take them to the new place. 00:31:09.576 --> 00:31:10.726 So that's it. 00:31:10.736 --> 00:31:14.756 This is a quick and easy snapshot of the benefits of diversification. 00:31:15.926 --> 00:31:21.146 There you have it folks, the three elements to ensure resilient 00:31:21.146 --> 00:31:22.916 companies and resilient businesses. 00:31:22.946 --> 00:31:23.546 They were true. 00:31:24.236 --> 00:31:26.486 In 2023 there too in 2024. 00:31:26.486 --> 00:31:29.246 And frankly they're true in pretty much all markets. 00:31:29.606 --> 00:31:32.486 Um, and those three things are commercial discipline. 00:31:33.056 --> 00:31:35.216 True customer centricity. 00:31:35.666 --> 00:31:38.516 And diversification of customers and markets. 00:31:38.666 --> 00:31:40.676 So I hope you enjoy today's episode. 00:31:41.396 --> 00:31:43.616 Leave me a message on LinkedIn. 00:31:43.676 --> 00:31:44.846 Go ahead and rate and review. 00:31:44.846 --> 00:31:48.326 If you are not currently subscribing to the chemical show, do it. 00:31:48.416 --> 00:31:49.646 Um, if you're on a. 00:31:51.116 --> 00:31:54.626 If you're on YouTube, I'm going to tell you to smash the subscribe button because 00:31:54.626 --> 00:31:55.916 that's apparently what I'm supposed to do. 00:31:56.186 --> 00:32:01.046 Um, and if you listen on apple, Spotify, or another podcast player, make sure 00:32:01.046 --> 00:32:04.166 you're subscribing because that is the way to ensure that you get the latest 00:32:04.166 --> 00:32:06.116 and greatest, as soon as we publish it. 00:32:06.656 --> 00:32:10.496 Um, remember we've got a great download for you today on commercial discipline. 00:32:10.496 --> 00:32:11.456 Best practices. 00:32:11.486 --> 00:32:13.016 The link is in the show notes. 00:32:13.286 --> 00:32:17.276 The link is also on this episode page on the chemical show.com. 00:32:17.696 --> 00:32:19.556 And thanks for listening today. 00:32:19.796 --> 00:32:22.136 Keep listening, keep following, keep sharing. 00:32:22.226 --> 00:32:24.356 And we will talk with you again soon. 00:32:28.717 --> 00:32:30.497 We've come to the end of today's podcast. 00:32:30.907 --> 00:32:33.457 We hope you enjoyed your time with us and want to learn more. 00:32:33.866 --> 00:32:36.126 Simply visit TheChemicalShow. 00:32:36.136 --> 00:32:38.886 com for additional information and helpful resources. 00:32:39.576 --> 00:32:43.626 Join us again next time here on The Chemical Show with Victoria Meyer.