The Advantages Of Digital Technology In The Chemical Industry With Sebastian Brenner
Another great conversation here with Sebastian Brenner. First of all, I want to let you all know that The Chemical Show was ranked in the Top 10% of podcasts globally. Thank you for reading and sharing the show and keep doing so. Another thank you that I need to get out of the way first is I want to thank Siggi Hirsch. Siggi recommended that Sebastian come onto the show and provided that introduction. Siggi, thank you. It’s really appreciated.
In this episode, I’m talking with Sebastian Brenner. He is the Managing Director for CheMondis, the leading digital marketplace for chemicals in Europe, with over 7,000 companies participating. He led the corporate-startup from concept to realization, helping form the legal entity and built it up to a high-performing, industry-leading team of 50 employees and growing. Prior to starting CheMondis, he held leadership roles at Bayer, Syngenta, and LANXESS.
Thank you, Victoria, for the intro. I’m delighted to be here.
First of all, tell us a little bit about CheMondis.
You have already brought some of the key facts up in the intro. CheMondis is a corporate venture. We were founded out of the chemical industry with the vision to bring digital support to the chemical industry. Most of your readers would know the chemical industry is a $5 trillion industry. It’s a massively large industry. It’s a global industry but at the same time, when you look at the sales and marketing processes, digitization has not yet found its way into this industry’s broad scale.
We started in 2018 with the vision and ambition to bring the digital world into the chemical industry. What makes us unique is that we are a blend of people who come out of the chemical industry like myself. I had roles in the leading industry at plays before leading CheMondis but at the same time, we have plenty of expertise from other industries that have undergone this digital transformation already. Also, the tech talent that we have attracted to work in the industry that has built our product. We are going to talk into more details but that’s in a nutshell of what we have heard over the past years.
How did you get started in this B2B digital space? Did you have digital experience before you started working on CheMondis?
Frankly, I’ve got infected with the digital virus when I was introduced to the idea. To be honest, in my past roles, I would ask myself the question, “While I’m using in my private life those platforms and tools to a very large extent, why is that not in business life a case?” I’m one human being. I’m not shutting down my business laptop, and then going back home and using Amazon, eBay, and all of these platforms like, “Why is that not the case in the B2B environment that I have been growing up with?”
That’s pretty much how I’ve got infected with the idea and the vision to ask the question of, “Why should that not be possible in the B2B environment?” A couple of things work differently. A couple of things are obviously much more complex and involve significantly more people. You have to take decisions but at the end of the day, the basic principles of a platform or marketplace can apply equally in the B2B world as it is in the consumer world. That is how we’ve got started.
Digitization has not yet found its way into the chemical industry on a broad scale.
I have long-held that same point of view like, “If we can do all these amazing things on a handheld device, whether it be an iPhone, Android device or whatever, why aren’t we doing this in business?” The chemical business has been a bit slow to adopt this. Maybe all traditional businesses have but that’s how we accelerate, improve business, and continue to attract talent, which is so important. How does CheMondis work? It’s a marketplace. Am I right?
Yes. The MVP, the Minimum Viable Product that we started with was we wanted to prove that we can be an online matchmaker for the supply and demand side and that this adds value to both parties, the buyers and suppliers, to use online trading. Since then, we have developed significantly. We have built around this core functionality of the marketplace to bring the buyer and supplier together.
We have built a whole portfolio of services. You can not only match, negotiate and close a deal online. You can do this, for example, now for recurring business. You can also agree to long-term agreements, which is the vast majority of the business relationships in the chemical industry. The buyer can call off these agreements that you have done.
We provide services, for example, when it comes to logistics, insurance and payment. We have developed largely into also the more efficient handling of these orders. We all know how much manual work is involved in getting orders from an email or a telephone conversation that you had into your ERP system, and then also getting information back from the ERP system to your customer. Now, this is all largely done on the phone or via email.
We have built integrations into the ERP systems of our suppliers. That allows for these orders to be automatically transferred into the ERP system of the suppliers. Equally, other status updates can be automatically transferred back to the buyer like, “Your order has been accepted. Here’s your invoice document. Here’s your shipping information.” We are bringing a whole lot of efficiency into the process but also an entirely different customer experience, which is close to what we are familiar with from the consumer platforms that we are all using.
What is your typical customer profile? Are you working with very large companies or is it small companies? Is it a cross-section? What makes somebody a good fit for CheMondis?
I’m convinced that to make this a success, we need to be inclusive of all of the participants of the industry. We took that right from the beginning to the decision that we are a platform for all professional suppliers and buyers of the chemical industry. We are working with traders, distributors, and manufacturers at the same time. What we have seen is we were able to convince manufacturers and the distribution logic to join us together in a joint approach to go online with their portfolio.
This is working out nicely because if a lead comes in, the distributor and manufacturer built on the platform have full transparency of what’s happening and what’s coming in, and they can then decide based on location, volume or whatever they have decided to either take up the lead with their distribution partner or with the manufacturer directly. It has been our approach right from the start.
It puts a lot more choice in the buyer’s hands.
It does put a lot of choice into the buyer’s hands but also it generates a lot of potential for business opportunities with the seller’s side, either distributors or manufacturers. In Europe particularly, for example, we still have to a large extent, distributors that are focusing on only one particular geography of Europe. Let’s say a country. This is a web offer, so we are worldwide accessible.
We are generating business opportunities for these distributors to go beyond their home turf, expanding into other geographies. We are an online partner to the buyers. They are looking for transparency, a choice, compare offers, and find new supply partners but at the same time, we are partnered to the supply side for the reasons that I have mentioned.
Has Brexit affected that significantly from what you can tell or is it not an issue for you?
To be honest, Brexit didn’t have any impact on what we have built. It also doesn’t have any impact yet on the way that chemicals are traded in Europe, from what I see at least. To answer your question straight out, no, I have not seen any impact out of Brexit on our business model.
One of the things that’s interesting is you guys have gone from a well-backed startup and you have grown significantly. There are a lot of people and companies that are always trying to figure out, “How do they grow? How do they get new customers? How do they enter new markets?” What was your strategy or approach? How did you approach and think about markets, growth, your strategy to go-to-market and build that business?
I cannot answer this in all details simply to keep this inside the company. I’m not telling any secrets if I tell you that the chemical industry is massively complex in terms of the products now but also in terms of applications, markets and industries. For Europe alone, it’s more than a $600 billion industry a year. There are more than 20,000 to 23,000 companies. It’s so highly fragmented here.
What we had to do was to focus on certain industry verticals and geographies because there’s always this question when you start a platform of, “How do you get supply and demand growing at the same time?” You need to be attractive for both, the buyer side and the supplier side. We were able to do this by very clearly focusing on certain industry verticals, and then growing out of these industry verticals into others. That was one thing. A clear focus on where we want to be and where we want to play.
The second thing is the sales approach. We have learned quickly when we started that it’s not enough to put some Google Ads up. The traffic is going to come from search engines. That’s not going to work because our industry is not there. Our industry is still on the phone, email and office. It’s in the pre-Google age. We had to take them from where the industry is and that means it is a very old-school sales job.
It means we’ve got deeper into our team. Usually, that’s a tandem of two. One from the chemical industry and one from a more software as a service background. Those guys calling are attending trade shows, visiting our customers where they are, and convincing them of the benefits of using this new online channel. Behind this, it’s a lot of old-school sales activities, to be honest.
It’s a personal sales approach.
To be successful, we need to be inclusive of all of the participants of the chemical industry.
This personal interaction is not going to go away. This is also something that we hear quite a lot.
People fear that digital is going to replace all the people.
I’m convinced it doesn’t because we are selling complex products, specialty chemicals, and products that find their way into other via formulations into other products. We have to have a deep understanding of what this product is, how it works, what it does, and how it performs in the product that I’m selling. This is not going to go away. This is far too complex.
There is a whole lot of repetitive ordering. Once you have done this job, there is no need for people to be on the phone to be ordering another container, truckload or IBC full of exquisite where they know precisely what they need and prices have been negotiated. There is no need for this to happen every time on the phone. There’s a massive opportunity for bringing benefit with digital. This personal interaction is not going to go away.
Do you see that as the biggest challenge? What do you see as the biggest challenge with digital adoption?
It’s seriously to convince people of the benefits and to try it. I have to talk about COVID because it has been a fundamental shift for us, where years ago, there was very little pull from the market for digital tools. It was a lot of pushing us into the market. This has changed dramatically. Everyone in the industry now understood that, number one, where’s the value? Number two, that this is something to stay and it’s not going to go away but it’s rather something that is going to help them accelerate to unlock new markets, find new suppliers, etc. It’s rather now people embracing this change. This has changed entirely the dynamics in our industry.
We have seen a lot of supply chain disruptions. It has been hard to get certain products. I’m hearing in Europe, there are certainly some production issues related to a variety of factors, natural gas being one of them. Has that helped drive some of that growth because people are seeking more options?
Very much. More than 50% of chemical manufacturing is happening in China. Now, the logistics shortage has put a lot of stress on the global supply chain. We’ve got a whole lot of activity at the moment of our customer base trying to find local alternatives. We can’t do magic but within our network, usually, there’s a good chance to find a product. From what it looks, it’s not going to go away too soon. It’s certainly something that has helped us on the buyer side to generate a lot of traction and leads for our customer base. It’s another factor contributing to the rapid adoption of our platform.
The other piece that people fear is that using a digital platform reduces loyalty and continued relationship. You mentioned that once people have reached an agreement, they maybe have negotiated, then they can certainly be calling off a certain pattern. There’s always some concern in people’s minds that going to a digital marketplace, it continues to commoditize the chemical business and the relationships. Do you see that?
I would disagree, to be honest. Every professional Purchasing Manager in our industry would be going to look for alternatives before cutting into a deal. They would not be working professionally if they wouldn’t be doing it. Maybe in the old world, they would be doing this on trade shows, the phone or whatever their preferred medium is.
Especially with generation change, I would assume that there is going to be the need for digital platforms to play a role in this comparison as well. It’s not dramatically changing this. It’s just a different medium that people will be using in the future or are increasingly using already now compared to the options they had before.
Once the deal is done, it’s anyhow repetitive business. It’s anyhow in an existing business relationship, people are in these relationships for a good cause because you are not switching your supplier from A, B to C opportunistically. Those products find their way into other products that are in the formulation. There are certain technical limitations. You are not going to risk the quality of your final product just by switching opportunistically your supplier base. It’s not as easy as that in our industry.
I’m going to turn a little bit back to you personally, Sebastian. Let’s talk about leadership. I would imagine that leadership inside of a digital business, where you have some very distinctly different people than you might have in a traditional chemical business, could be a bit different. What have you found from that perspective? What have you found to be successful for yourself?
One of the most fundamental differences is working in a chemical corporate company compared to the environment I’m working in now. Number one, one of the reasons is that you are bringing so many different domains into this company that no one can be the expert or the master on all of these topics.
Number two, we have to establish an environment and culture that embraces change, and that embraces taking chances and trying out new things. In a chemical company, there is the R&D word where you are experimenting, trying to build new things, and going down new routes. If you look towards the manufacturing side of things, you do not want to risk that base. You are very much down to don’t make any mistakes in running that plant, for example.
The management of the change process in manufacturing is designed to minimize change.
I need a team here that is full of creativity, energy and bringing up new things. I learned quickly that this works only if I’m basing my leadership on trusting each and everyone in this company. I need to be in a relationship with my team to trust them to do their best in their area of responsibility. We are defining clearly what our targets are, where we want to go, and what we want to drive this company towards.
Making mistakes is part of building a successful product.
We have to have a clear idea of where the company is going. We have to break this down into objectives. How are the teams and each individual is pursuing to find the best solution towards tackling that particular issue? That is something that I rarely get involved in. That is something that I trust the team to take on as much as possible within their own area of expertise. This is something where I strongly believe in that creativity. The solutions will be better if it comes out of the team, and everyone being self-motivated to find the best solution.
Coming back to my earlier point, simply because the span of topics and be it from tech to product design, to customer experience, to our sales and marketing processes, etc. It’s too broad and specialized. To have the illusion of being the master of all of those things is not reasonable and also not productive in leadership. That’s a key thing. If you ask me personally, that’s one of the most dramatic differences from my early career.
Coming from maybe more of a control culture to more of true trust and leadership culture.
For example, we are openly talking about when we make mistakes. We all make mistakes but it’s part of building a successful product and platform. We have to try out stuff. If it works, great. We learn why it worked and do all of that. If it was a mistake, we find out why was it a mistake and, “Is this something we need to tweak to make it a success or do we just drop it?”
We are working in small iterations in all of what we are doing. We are investing a week a maximum tool into developing something before we try to find out if it works or it doesn’t work. If we found that it doesn’t work, we have invested a week or two but not more. It’s not a massive fee, a costly mistake. It’s a small bit where we find out, “It just doesn’t work.” We take it back and work another route.
The other thing is we are working closely with our customer base. Our customer base is with more than 7,000 companies. It’s a wealth of inspiration. It tells us where to go, what to do, how we can improve maybe small things and larger ideas, and continuously feed our product development cycle. We are consuming this systematically and this is reducing your chance of failure significantly. If you are carefully listening, be on the spot on how to implement certain new ideas. We are doing this thoroughly.
It’s also hard to listen to 7,000 customers, I would imagine.
You can’t listen to all of them at the same time. We are in, for example, frequent touchpoints with our sales team. That’s a source of information. We are gathering input from our product team, the systematic customer development dialogues that we are holding, and also via our web pages. Its simple things like you can make suggestions on our page. It’s on various channels. We are not jumping onto a topic just because one particular company or person mentioned something but if the topic is popping up not 1 time but 2, 3, 4 or 5 times, there must be something behind this. Let’s follow up and see if we can make something out of this.
One of the benefits of a digital business is that you can iterate more quickly and it’s more accepted. Inside of a traditional chemical company, it’s hard to iterate sometimes.
To immediately see on the product if customers are using it or not, you can measure any interaction with your product. We see immediately, “Is that your button clicked or is it not clicked? Is that the new journey that we have designed? Is it working?” Hosting conversion from A to B to C, you can measure pretty much anything. That’s what is fascinating to me.
It’s a big learning journey from where you were before, I would imagine.
For many reasons, it is. I have learned a whole lot in the past years and I’m very grateful for that.
What’s next for CheMondis?
CheMondis is in a rapid growth phase. We were focusing on certain geographies and verticals. We are growing and expanding into new market segments. This might lead us to new geographies that we are facing.
Even if you’re confident that your product is industry-leading, keep up the development.
It’s still inside of Europe, though. Are you continuing to keep a European focus?
The platform that we have built is catering to Western professional buyers and suppliers. There are options for us also to expand outside of Europe with little adjustments on the product. We are continuing to develop the product forward. We are confident that our product is industry-leading but we have to always continue to keep up the development. We’ve got a pipeline of new product ideas that we are aiming to implement shortly.
Sebastian, thank you for joining me. This has been a great conversation.
Thank you, Victoria, for the invitation.
Thank you to everyone for reading. Keep reading, keep sharing and enjoy the journey.
About Sebastian Brenner
Sebastian Brenner is Managing Director of CheMondis, the leading digital marketplace for chemicals in Europe with over 7000 companies participating. Sebastian led the corporate start-up from concept to realization, formed the legal entity and built up a high-performing and industry-leading team of 50 multi-disciplinary and multi-national employees. Prior to starting up CheMondis, Sebastian held leadership roles at Bayer, Syngenta, and Lanxess.