2024 is the second year I’m writing about my predictions for the Chemical Industry. If you want, you can read about my 2023 predictions here and look at how I think I did here. Predictions are tough to get right, especially when you have no idea what the year is going to bring. The big thing I didn’t expect in 2023 was the rapid rise of artificial intelligence (AI). The rate of change within the AI space was startling and a bit like watching your first rocket launch into space and thus we get to my first prediction for 2024.
For those who want to double click on these topics keep your eyes open in the coming weeks where I’ll attempt to expand on why I think these things are so important right now.
Artificial Intelligence Will Pervade the Chemical Industry
Artificial intelligence has a few different avenues to get into the chemical industry and it’s going to reshape the industry.
The first has to do with software as a service companies like Salesforce and SAP. There is already and enormous amount of data stored and managed in software that is ubiquitous in the chemical industry and I predict that AI will help the chemical industry make sense of this data and operate with more efficiency. There will probably be an AI plugin that helps make inventory, scheduling, and quality control more efficient. Customer interactions logged in Salesforce will help automatically drive R&D projects and identify trends across customers that used to be the responsibility of a sales team talking to the R&D team. The other area I see obvious for AI is in the electronic laboratory information management systems. You might be familiar with start-ups like Dotmatics or Benchling that help manage and log all of the work the R&D team performs. I can see how the use of an AI will allow for better visualization of data, making sense of historical data, and perhaps even putting together large models on proprietary data sets (e.g., design of experiments). I think this has currently been the purview of Citrine Informatics and maybe they also succeed here. Either way, I think AI in 2024 is going to be employed in the spirit of doing more with less people.
Private Equity Needs More Than Roll Ups and Leverage
Private equity operators focused on chemicals (e.g., SK Capital) are going to have to start thinking about really rebuilding companies and forcing them to go digital (see above prediction).
Historically, the way private equity has operated in the chemical industry has been to buy up a bunch of chemical companies, stick them together into a diverse conglomerate, and the increase in shareholder value would be through cutting costs and efficiency (e.g., Six Sigma). Recent trends have suggested that diverse conglomerates don’t really make sense and investors would rather have “pure plays,” where the company is focused on a single end market or a single type of chemistry. With the highest interest rates in the last 20 years, the methods of rolling up a bunch of chemical companies and removing costs while also borrowing high amounts of money to facilitate it all do not seem like a winning strategy to me. Instead, private equity operators will have to start figuring out how to rebuild companies completely from the ground up to be more efficient vehicles for returning capital to their shareholders. I think digital tools like AI will be part of it, but so will distributed front offices across the world, and cultures focused on the idea that employees will not be there for their whole careers.
Anyone else have any predictions for this year? Let us know in the comments.
I heard through the grapevine that last week paint company Kelly Moore fired/furloughed/let go 700 people, including the entire R&D department. This seems like a target for PI too buy and turn around. https://www.dallasnews.com/business/local-companies/2024/01/08/california-transplant-kelly-moore-lays-off-700-halts-d-fw-paint-plant-operations/
The Self-driving labs hype will continue to grow and establish itself as an alternative paradigm to current classic RnD workflows.