This OODA special report focuses on the Materials Sector.  It is written both for firms that are in the sector who are seeking competitive advantage and for firms in other sectors that can use this awareness for strategic planning (all our market based special reports are available on our OODA network resources page).

As a market-based assessment, this special report will be of most use when read in conjunction with the functional and technical research we provide OODA network members, and we provide contextualized recommendations for related research throughout this report.

The Materials Sector encompasses a wide range of commodity-related manufacturing industries. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, and metals, minerals and mining companies, including producers of steel. Very few firms in this sector are widely known, since most are producing product for other businesses and they focus their marketing on places that target their particular niches. However, some have developed well known brands, including Dow Chemical, BASF, Alcoa, DuPont, Owens Corning, Rio Tinto, US Steel, Bechtel.

Innovation in the Materials Sector:

Innovation drivers for many in the materials sector has been reduced cost of production and now many are re-tooling to reduce pollution and become more green. There is also a growing demand for higher-value materials with less weight and for materials with new applicability in construction.

• The materials sector has a reputation for being very slow to leverage digital innovation. Most firms in this sector take very systemic approaches to business and investments and this approach has led to success so will probably not be changing. However, growing demand for higher-value materials has been accelerating innovation of late.
• Most larger firms in the sector have already started leveraging digitization to upscale their operations and gain end-to-end financial visibility into supply chains, production, sales and distribution.
• Digitization has improved visibility into supply chain in ways that enable planning for coming issues.
• Digitization is already helping accelerate the return on R&D investments, enabling the more rapid design and fielding of new offerings and solutions. This is helping bring new products like sustainable plastics or high strength/low weight construction materials to market faster.
• Digitization is also already connecting the producers of this sector with businesses that consume products and materials in other sectors. This provides visibility into future demand and, at times, an opportunity to watch for future disruptions in the market.
• An exemplar in chemical materials is BASF, which is known for using computer modeling to reduce waste and energy use.
• An exemplar in mining innovation is Rio Tinto, which has developed a reputation for automation of mining operations and their pioneering work involves a masterful use of robotics and automated trucks with well instrumented mines and remote human operators.

Cybersecurity in The Materials Sector:

Successful digitization requires appropriate cybersecurity. Materials sector efforts in cybersecurity are uneven. Larger, well resourced firms may have mature efforts with multiple layers of defense and an ability to detect issues and respond appropriately. Many mid-sized firms and most smaller firms have room for significant improvement.

Our recommendations for cybersecurity in the materials sector:

• Establish a relationship with the appropriate cybersecurity information sharing organization for your firm (an example is the Chemical ISAC (learn more about ISAOs here). If there is not a clear choice for an ISAC for your business, consider joining an ISAC for your geographic region. ISAC membership will enable sharing of information on threats but also provides a venue for exchange of best practices in cybersecurity.
• Larger firms can aid in improving the security of smaller firms and their entire supply chain by advocating for use of common cybersecurity frameworks and taxonomy’s, like the NIST Cybersecurity Framework (which we review here). Smaller firms can proactively show how serious they are about security by adopting this framework.
• All businesses in the sector should ensure executives in the business have a baseline understanding of cyber threats as well as geopolitical threats and technological risks. We provide a plain english daily threat brief designed to improve this awareness. Sign up at The Daily Pulse
• Think through your nightmare scenarios. In this sector it could include theft of intellectual property, ransomware attacks, malware attacks that disrupt production or distributed denial of service attacks that break connectivity with suppliers or clients. Thinking through nightmare scenarios will help you plan to mitigate risks and prioritize resources appropriately.
• All firms, large and small, should leverage outside experts to evaluate security. This type of external assistance can include review of plans, policies and architecture. External red teaming efforts should also be leveraged as an independent way of evaluating comprehensive security programs. Contact us for more insights into all aspects of assessments including red teams.

Enhancing Innovation in the Materials Sector:

• To accelerate digital transformation in the materials sector we recommend assessing current state of digitization efforts, defining a desired future state, and then mapping out actions to ensure success.
  Some of the greatest gains in innovation for the materials sector in the next few years will come from continuous automation and robotics in manufacturing and chemical processing. The immense global competition in this sector is ensuring that digitization will continue to focus on productivity gains.
• The success in improved R&D through digitization means all firms should consider ways to continue to enhance R&D through solutions like modeling, VR and AR as well as analytics.
• Improvements to supply chain management are already helping reduce costs by providing transparency into coming issues. We expect improvements like these to continue.
• Mining automation is the clear trend. Every mining firm should follow the Rio-Tinto lead in automating mining, just to keep up. To out-automate them may be hard, but those that are starting now can benefit from new generations of technology that are even more precise.
• Most firms in this sector should invest heavily in transitioning legacy IT enterprises to cloud based enterprises, moving as much workload as possible to the cloud. This will enable enhanced agility, optimize IT spend, and enable appropriate (and in most cases enhanced) security.
• Another key area of productivity in the near term is enhanced analysis of data to optimize decisions, especially decisions around market forces and future customer needs. Analysis over data will include enhanced use of artificial intelligence.
• Disruptions in the construction industry, agriculture, automotive and industrials create opportunities and challenges for the materials sector.
• Although fully functional quantum computers are many years off, some of the key use cases being explored by researchers including the ability to better design materials for production at scale. The time to consider the impact on your strategy is now.

For Businesses Seeking To Serve the Materials Sector:

• Executives in this sector stay very busy. Do your homework and prepare prior to any discussion so you never waste their time. Understand as much as you can about their needs before any meeting. Also understand what you can about their clients and supply chain since increasingly these are topics on the mind of corporate decision-makers.
• Every publicly traded company in the energy sector provides an annual report that captures specifics on their market and approach which includes intentions for the near future. These are available on corporate websites and should be one of the first documents read before any sales call.
• Be fluent in the technologies of high interest in this sector including Cyber Security, Cloud Computing, Quantum Computing, Quantum Security, and Artificial Intelligence.

These are additional references that can help accelerate digitization in the materials sector:

AI Topics:

• AI Security: Four Things to Focus on Right Now – This is the only security framework we have seen that helps prevent AI issues before they develop
• A Decision-Maker’s Guide to Artificial Intelligence –  This plain english overview will give you the insights you need to drive corporate decisions
• When Artificial Intelligence Goes Wrong – By studying issues we can help mitigate them
• Artificial Intelligence for Business Advantage – The reason we use AI in business is to accomplish goals. Here are best practices for doing just that

Quantum Computing:

• The Executive’s Guide To Quantum Computing: What business decision-makers need to know now about quantum superiority
• The Executive’s Guide To Quantum Safe Computing: Take these steps to make your enterprise quantum proof
• Is Quantum Computing Ushering in an Era of No More Secrets?: Context from OODA’s Matt Devost on the very near future of quantum computing.
• What To Do About Quantum Uncertainty: Guess what, besides uncertainty at a quantum level there is great uncertainty among business and policy makers regarding Quantum Computing.

Cybersecurity Topics:

• OODA’s Cyber Threat Analysis Report : OODA’s Cyber Threat Analysis Report provides the “so what” behind the news and events we track on a daily basis.
• A Traveling Executive’s Guide to Cybersecurity: No-nonsense actions to take to reduce risk for executives on the go
• Best Practices for Agile Cybersecurity: Kickstart your cybersecurity improvement program
• Essential Management Strategies for Cybersecurity: Management lessons learned and essential actions to mitigate risks

OODA network members can find these and all other research reports at our OODA Network Resources page