Why medium-sized specialty chemical companies – and not only them – are professionalizing their core processes to ensure the success of digital transformation.
Key Points
1. Digitalization Fails Without Process Maturity Most digital transformation projects in specialty chemicals don’t fail due to lack of technology or strategy — they fail because core processes are poorly documented, unstandardized, and opaque. Professionalization of key processes is the prerequisite, not a side task.
2. Specialty Chemicals Demands a Different Digitalization Approach Unlike automotive or mechanical engineering, specialty chemical companies deal with highly heterogeneous processes — each formulation, batch, and customer order can carry unique requirements around raw material composition, quality testing, and regulatory compliance. This makes standardized digitalization harder, but also far more valuable when done right.
3. Process Resilience Is a Competitive Advantage With European gas prices nearly four times higher than in the US, ongoing geopolitical supply chain disruption, and German specialty chemical plants running below profitability thresholds for four consecutive years, companies that invest in transparent and well-structured core processes gain three things rivals lack: speed of response to external shocks, a reliable data foundation for decision-making, and the organizational attractiveness needed to retain top talent.
The headlines sound promising: artificial intelligence optimizes production, digital twins simulate the entire supply chain, and data-driven decisions replace the gut feeling of experienced dispatchers.
But if you take a closer look at medium-sized specialty chemical companies in Germany, you will see a sobering pattern: Quite a few digitization projects fail not because of strategy, technology, or a lack of awareness, but because of unclear requirements, poorly documented, inadequately standardized, or non-transparent “uncontrolled” processes, especially in core processes. And this at a time when external pressure could hardly be greater.
An industry under multiple pressures
Small and medium-sized specialty chemical companies in Germany are currently facing a combination of structural and economic pressures that is almost historic in its simultaneity. According to the German Chemical Industry Association (VCI), German chemical production plants were only operating at 75 percent capacity on average in 2024 – and have thus been below the estimated economic profitability threshold of 82 percent for four years. Specialty chemicals recorded a decline in production for the third consecutive year. At the same time, according to the European industry association Cefic, gas prices remain almost four times higher than in the US – a structural competitive disadvantage that is unlikely to disappear anytime soon.
Added to this is a new geopolitical reality. Raw materials – from rare earths and basic chemicals to certain solvents – are increasingly being used as political leverage. Tariffs, export restrictions, and subsidies are distorting global supply chains to an extent that seemed unthinkable just five years ago. For a typical medium-sized specialty chemicals company with a diverse raw materials structure and specialized customer relationships, this means above all more fragile supply chains, more uncertain planning bases, and even greater volatility in costs and prices. In short, chemical companies are faced with the challenge of finding a balance between building resilient supply chains and maintaining short-term delivery capabilities.
What distinguishes specialty chemicals from other industries
Unlike automotive or mechanical engineering companies, which often work with standardizable products and clearly defined production processes, the specialty chemicals industry thrives on product diversity for a wide range of applications, constantly adapting process expertise, and product-specific fluctuations in demand. A producer of specialty lubricants, for example, does not supply a single product in large quantities, but rather dozens of tailor-made formulations for wind turbines, food processing machines, or high-temperature applications in the steel industry—often with regulatory safety data sheets, approval management, and customer-specific documentation.
The situation in the adhesives and sealants industry is similarly complex. According to the German Adhesives Industry Association (IVK), around 70 percent of its member companies are SMEs with fewer than 500 employees – and total sales of adhesives, sealants, cementitious construction adhesives, and adhesive tapes recently stood at around €4.2 billion. In the construction chemicals sector, on the other hand, medium-sized suppliers compete with global corporations such as Sika, Mapei, and Saint-Gobain Weber, which can leverage considerable economies of scale. According to Mordor Intelligence, the European construction chemicals market is highly consolidated, with the five largest suppliers accounting for 47 to 49 percent of the market share, while medium-sized companies try to score points in niche markets and with a regional focus.
The key difference to the manufacturing industry lies in process heterogeneity—every formulation, every batch, every customer order can have individual requirements in terms of raw material composition, quality testing, approval, and documentation. This makes standardized digitization more difficult—and at the same time more valuable.
The foundation: “professionalize” processes before digitizing them
This is where the blind spot of some digitization initiatives in small and medium-sized enterprises lies. Although more than half of managers are intensively engaged with digitization and its consequences for their own businesses, according to a study by the VCI, investments of over a billion euros are planned across the industry over the next two to three years. According to a study by the VCI, investments of over one billion euros are planned across the industry over the next two to three years. At the same time, the same study warns, not entirely unexpectedly, that strategies should be consistently geared toward added value for the essential value chains, not toward technologies or “me-too” approaches.
What does that mean in concrete terms? Every digitization initiative must be preceded by an honest assessment of the current situation: Which processes really add value—i.e., directly contribute to customer and product benefits? Although the specific answers to this question will vary from case to case, for a specialty lubricant company, this could mean formulation development, flexible raw material management, and customer-specific quality assurance. For a construction chemist, the focus is on rapid order processing, technical field service, and detailed production planning. For an adhesive manufacturer, it may be batch traceability and regulatory compliance management.
Initially, scoping—i.e., the conscious decision as to which processes will be the focus of digitization and in what order—is particularly important. It requires clear prioritization criteria (value creation contribution, risk assessment, and information transparency) and a consistent (!) commitment to questioning even cherished habits.
Prioritization should also be based on resilience criteria: Which processes are most vulnerable in the event of supply chain disruptions, raw material shortages, exceptional fluctuations in demand, or geopolitical upheavals? Transparent, well-documented, and highly standardized processes enable faster responses in terms of alternative raw material use, reprioritization of production, or dynamic pricing.
When it comes to implementation, the known methodologies for process optimisation and the associated data management are merely basic requisites, whilst the institutionalisation of continuous improvement is the real differentiator.
Why process maturity is a prerequisite for successful digitalization
The DECHEMA white paper on digitalization in the chemical industry emphasizes that clear process structures with standardized data interfaces are a prerequisite for modular, flexible value creation systems in the specialty chemicals industry. Without them, any digitalization initiative remains a point solution rather than a strategic investment. And point solutions do not scale—a disadvantage in a competitive environment where scalability is increasingly becoming a competitive factor.
The political and economic uncertainty of the coming years—trade conflicts, raw material nationalism, regulatory divergence between Europe and Asia—will not disappear, but rather intensify. Medium-sized specialty chemical companies that now identify their core processes, make them transparent, and gradually digitize them will gain three things: speed of response to external shocks, a database for better decision-making, and attractiveness to talented individuals who want to find adaptable yet predictable structures. This is particularly true for an industry as complex, knowledge-intensive, and dependent on customer trust as the German specialty chemicals industry.
The good news is that the industry’s innovative strength and customer expertise put it in an excellent position to emerge stronger from the digital transformation. Provided, that is, that it builds on solid foundations. Process maturity first – then digitalization. This is not a rejection of digitalization. It is the most important condition for its success.
Final Thoughts
Specialty chemical companies that take process maturity seriously now are not slowing down their digital transformation — they are making it irreversible. In a market defined by volatility, complexity, and margin pressure, that discipline is not a luxury. It is the only sustainable path forward.
Wolfgang Lechner
Senior Executive Advisor
Learn more about our Specialty Chemicals expertise.
