As one of the oldest business sectors, the paint and coatings industry faces a significant challenge: commoditization. It’s a difficult truth that groundbreaking scientific innovation (rubber and polyethylene, to name a few examples) is less common today. As a result, it should come as no surprise that companies operating in this segment are working hard to develop alternative ways to differentiate themselves from growing competition.

In fact, competitive differentiation is driving digital transformation efforts in nearly 58 percent of chemical companies globally, making the paint and coatings segment of the chemical industry a leader in digital technology implementation and predictive analytics that fuel sustainable competitive advantages. After all, commoditization challenges market players to take a holistic approach to innovation in the form of a service-oriented business model.

A complete digital transformation strategy for completing this goal is three-pronged: re-imagine business models, re-invent business models and empower a digital workforce to support this transition.

Re-Imagine Business Models with Digital Technology

Our outcome-based economy has significantly shifted the paint and coatings business landscape. Traditional product offerings – such as paint color and variation – are now considered table stakes in today’s marketplace. Now, the only remaining sources for differentiation are services and pricing, making business models based on value-added services bundled with products a premium for escaping price and margin pressures.

While digital transformation isn’t an easy process by any means, its value lies in helping a business transition to a value-added service model, which opens new, profitable revenue streams. For example, businesses whose core business operations are digitalized can generate real-time insights that deliver targeted products and promotions to individual customers based on their own unique preferences.

Case in point, India-based Asian Paints, whose customers receive recommendations and expertise that are relevant and helpful in making informed purchasing decisions. The result is a win-win: customers receive recommendations and expertise that help them make informed purchasing decisions, and Asian Paints gains better insight into sales patterns and customer behavior to adjust business decisions in real time.

Shifting the focus to an outcome-based business model establishes the foundation to initiate market differentiation and drive brand value. Successful players like Asian Paints have recognized that targeted product recommendations are only the starting point to drive brand loyalty and customer retention.

Enhance the Customer Journey

Examining the paint and coatings industry, market leaders are able to seamlessly integrate all aspects of the painting business chain into an end-to-end service designed for the end customer. They create the customer experience with advice and resources based on their customers’ needs and preferences – outcome-driven.

Rather than exist as a mere paint supplier, Nippon Paint, an industry giant in China and one of the oldest paint manufacturers in the world, has invested in transforming its distribution process to enable an optimized end-to-end customer experience. Nippon Paint operates hundreds of its service centers across China and uses advanced data analytics and real-time analysis to provide customers with top-of-the-line paint solutions and design schemes.

In 2011, Nippon Paint launched iColor, its multipurpose platform that allows designers to publish their customized color schemes and aesthetic styles for other users to browse for inspiration. As an added feature, iColor provides referral services that build upon Nippon Paint’s unique customer experience that goes beyond simple point-of-sale interactions.

Build a Digitally Empowered Workforce

In order to operate efficiently, a digitally optimized business process needs the complement of digitally fluent personnel to transform insights into action. Digital optimization creates leaner workforces and improves the way individuals are able to perform their daily work. For example, data insights provide managers with sales patterns, faster invoicing and quicker inventory turnover. Dealer performance reports assist decision making to optimize channel performance.

Besides empowering people to make better decisions, digitization at the core transactional level in back-office processes can have a substantial effect on a company’s bottom line. Access to real-time analytics has simplified repetitive and cumbersome steps in procurement, human resources, inventory management and invoicing with collaborative transactions that support role-based decision making.

Employees empowered with digital support systems in place are key assets to facilitating digital transformation within in the chemical industry. Their roles are evolving to adapt to technological change, and their importance to each partner in the network only continues to grow.

It is important to keep employees digitally engaged through seamless and mobile-enabled work experiences. Predictive models and simulations deliver actionable insight without forcing people to jump between applications or to deal with antiquated approval processes.

By design, a digitally fluent business is the ability to adjust course at any time, leveraging data analytics to maximize outcomes. Commoditization in the paint and coatings industry rewards market players who take a holistic approach from new business models, innovative business processes and a digitally engaged workforce.

Moving forward, targeted investments in data-harvesting technology, specifically those that enable businesses to operate using service-oriented business models, will continue to be prevalent. Businesses will continue shifting toward service offerings, and traditional supply-chain boundary lines will blur. Today’s paint and coatings companies may not be paint and coatings companies tomorrow; businesses will integrate toward a servicing-brand image and away from simply being paint suppliers. Companies that fail to develop and implement such disruptive business models and processes run a high risk of being disrupted by their competitors and the market.