Chemical Week’s Podcast: The Differences of Digital Channels in the Chemical Industry With Jay Bhatia

In recent days, Agilis CEO Jay Bhatia sat down with Chem Week’s Vincent Valk to discuss the various attitudes and methods towards digital commerce in the chemical industry.
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Vincent Valk: [00:00:10] Hi and welcome to the latest edition of Chemical Week’s podcast, I'm Vincent Valk, and my guest today is Jay Bhatia, founder, and CEO of Agilis. Hi, Jay.

Jay Bhatia: [00:00:20] Hi, Vincent, how are you?

Vincent Valk: [00:00:22] Good, how are you?

Jay Bhatia: [00:00:24] Great. Thanks for inviting me.

Vincent Valk: [00:00:26] Yeah, and thanks very much for coming on the podcast. I know Agilis is doing some interesting things in sort of the e-commerce space, and we're going to talk a bit about that. And I know you have a long background as an industry veteran. Before we get into the meat of our discussion, Jay, I wanted to ask you if you could tell us a little bit about your background and about Agilis.

Jay Bhatia: [00:00:51] Yeah, sure. Thank you, Vincent. So as a background, I'm a chemical engineer and chemical industry veteran. I've spent 20 odd years in the industry working with the opportunity to work with large global producers like BASF and Shell Chemicals. I spent twelve years with BASF and six with Shell, all in commercial roles in marketing, business, P&L leadership, and sales roles. So I'm intimately aware of this industry.

Vincent Valk: [00:01:27] And how did you know, how did you kind of go from that to founding Agilis?

Jay Bhatia: [00:01:33] So that is interesting because I think no matter where I worked large or small companies, the pain points on getting access to information were pretty similar. And so I told myself that: look, this is the state of the industry with the large enterprises, industry leaders. You can only imagine how the whole industry is functioning. And at the same time, the technology is evolving and a lot of other industries are changing. So this is I see this as a real great opportunity to bring the latest digital technology to this industry and help my fellow professionals to improve their work-life, but also make their customer's life easier.

Vincent Valk: [00:02:20] And you know, we'll kind of get into some of that in our discussion, but I also wanted, you know, if you could just give us kind of the elevator pitch for Agilis. You know what you guys do - what differentiates yourselves from other players and sort of the digital space.

Jay Bhatia: [00:02:38] Yeah. So Agilis is a digital commerce platform built specifically for the chemical industry. We offer an enterprise commerce solution on a software as a service model. So what it means is that chemical producers and distributors can build their own branded digital commerce portals with our ready to deploy white label solution. So we started this journey four years back, in fact, we just celebrated the fifth anniversary on January 1st and today we are proud to say that we are several industry leading players, including BASF, Evonik, Westlake, Vinmar are already using our platform to launch their own digital sales and marketing channel for some parts of their business.

Vincent Valk: [00:03:31] So it's a kind of off the shelf software platform that a chemical maker can can use to create a digital commerce portal.

Jay Bhatia: [00:03:42] Yes, everything that we have built is built for the chemical industry. Right from the way we structure the product database to the transition workflows, to all the nuances of the chemical industry built in so that in most cases, producers don't have to do any customization. I mean, it would would meet 90 to 95 percent of the requirement for most distributors as well as producers.

Vincent Valk: [00:04:10] That's interesting. And I can I can see where that that would differentiate what you're doing in this market. You know, and with that in mind, I mean, you've got sort of an interesting take on digital in the industry. And you know, one thing that I had wanted to ask about because I had seen some, some material that that you had written on this subject and you kind of had what I thought was a good call it a heuristic for thinking about digital implementation in chemicals, and it was kind of the three options for digital channels that chemical makers can employ and it's, you know, build it, buy it and share it. And I wanted to ask you, what do you mean by that and what are the positives and negatives of each of those options?

Jay Bhatia: [00:05:09] Yeah, thanks, Vincent, for remembering that. So literally, there are three options to launch a digital channel build it - where a supplier, either a producer or a distributor can build their own customized solution on top of ERP or CRM software, they are already using it. So this would be from generic software providers like SAP or Salesforce, or whatever is your legacy system. This is more often the most common way that suppliers think about launching a digital channel. And while this approach sounds plausible, given the complexity of portfolio and the business processes, it is also very difficult and super expensive to build, maintain, and scale this approach. Technology moves very fast in this space, so unless you're a software company, it is hard to maintain a competitive edge with the homegrown solutions. So the second option is for chemical suppliers to buy a software subscription on a pre-built hosted e-commerce solution. This approach offers a lot of flexibility and scalability. However, most software as a service solutions available in the market are generic. They are designed for B2C industry on a direct to consumer model and designed to sell shirt or a book or a shoe. You again face a lot of constraint in making those solutions work for the complex business of chemicals. However, there are specialized platforms like Agilis that can help here because, as I described, our solution comes ready to launch, requiring minimum customization and it can be deployed with minimum disruption to existing business processes. Then the third option is it. This is your marketplace option - an Amazon approach where suppliers can build their storefronts on a marketplace, which would also invite customers to browse their product catalogs and hopefully do transactions. This approach may help with brand visibility, but it also runs the risk of driving commoditization of products. Plus, chemical trades are inherently complex and nuanced. This is not a space where one size fits all approach can work. In our conversation with chemical buyers, they want to do transactions directly with the producers or through a trusted distribution partner, not on a third party marketplace.

Vincent Valk: [00:07:59] Mm hmm, so do you think there's a different role for each of of those options, where one option might work better in a certain kind of situation and another option might work better in another kind of situation?

Jay Bhatia: [00:08:18] That's a very interesting question. I think yes and a lot of suppliers are also taking that multichannel approach where they would list their product on the marketplace. But they will also work on building their own solution or buying a hosted solution from providers like us or a number of other options available. So it depends on your business objective, right? If you are just trying to get a flavor for how the digital channel works, you may choose to launch one product line on a hosted solution or sometimes just list the products on a marketplace. But generally, what we have seen that marketplaces are helpful on driving brand visibility and getting the eyeballs to your portfolio. But when it comes to real transactions, both suppliers and buyers prefer to do it on either on a branded supplier's branded portal where they could be either hosted or homegrown.

Vincent Valk: [00:09:26] Got it. Got it. So they want to. Even if they're doing it digitally, they want to deal with the suppliers or the distributors that they know directly. And you know, I mean, I know disintermediation is is seen as a big risk for for moving towards digital sales and e-commerce, whatever method you may use in the industry. And what would you say? The the risk of disintermediation is for a for a chemical maker.

Jay Bhatia: [00:10:05] I think in our our assessment with my 20+ years of experience in the industry and talking to literally hundreds of producers, end users, and distributors, we see the risk is very low and here is why. So look, the market marketplace concept is not new. They have been around in the chemical industry ever since Amazon was launched in mid 90s. You would remember the dot com era where there were more than a dozen marketplaces. So there is a reason why marketplaces haven't taken off in the chemical industry. The number one complex supply chain and logistics. It's one thing to buy a book or a shirt from a marketplace. It's another thing to order hazardous, often regulated chemical product. There are huge safety and security risks involved that no producers want to leave it to a marketplace who will not own the inventory or has no experience or track record in moving chemicals. And in fact, if a marketplace gets into owning the inventory and moving chemicals, then technically you are a distributor. But that we haven't seen happening because the venture funded businesses don't want to get into the ownership of chemicals. So that is number one. Number two, the chemical products are technical products often requiring testing, formulating, providing technical services and help with the application development. Distributors provide that critical role to small and mid-sized customers, so they are not just a reseller or a middleman that you can disintermediate with a website and some venture money. Therefore, I see the risk of disintermediation is low in the chemical industry. Now having said that, I'm not proposing that there is no scope for digitalization in the chemical distribution. Absolutely. In fact, distributors should be the first one to adopt the digital technology because marketplaces essentially are a major risk for distributors more than other than a producer. But as I outlined, the risk of disintermediation is low given the complexity of the trade and the ingrained relationship and the technical nature of sales.

Vincent Valk: [00:12:27] So just because of all of that - the relationships and the trust are obviously still just going to be extremely important. Whatever the role of digital might be, that's not going to change.

Jay Bhatia: [00:12:45] Absolutely. Again, at the same time, we have seen the trust factor is also going digital. There are ways of building trust digitally as well. My point is given the complexity, the digital technology absolutely is critical for trade in the chemical industry. However, it has to work with the existing value chains where distributors have a critical role rather than just disintermediating distributors, because someone has to take care of the complex logistics and testing, formulating, and providing tech services. Producers can do it, but it's more expensive for producers to do it themselves for all customers, rather than doing it through distributors who have already built the trusted relationship and the logistics and they are also solving the last mile problem for the industry. So, given those factors, the risk is low.

Vincent Valk: [00:13:45] We were emailing back and forth a bit prior to this conversation and the one thing that you had written in an email that I thought was interesting was, and I'm quoting you here: "Chemical producers need to rethink the way they implement digital commerce. Treat this as a business solution rather than a large scale IT project." Maybe this is journalistic sense going off. But I read that and I thought, 'OK, well, what do you mean by that? And what is the difference between a business solution and a large scale IT project? Because, you know, if I think of those two things, I don't think of them as necessarily being different from each other. What is it that you mean and what? What do you see as sort of the distinguishing factors between those things?

Jay Bhatia: [00:14:35] You're right. An IT project is also, at the end of the day, the business solution. However, my point is, when you are doing an ERP or CRM implementation, this is an IT solution for your internal users. You can figure out what your users want and ask your IT department to implement it and enforce it on employees to use it. However, when it comes to digital commerce, it's a sales channel where customers are a big part of the user group. How do you know what customers want unless you offer them some experience, get their feedback and then I trade your solution until it meets the requirements of all stakeholders. So my point is if you are taking that as a monolithic IT project implementation where large producers will buy a software license and customize it over 18 to 24 months, then launch it, hoping that everyone will use it. This approach does not scale for digital commerce because number one, it's very costly and resource intensive that only a few large enterprise producers can afford it. And it does not scale because the technology moves in this space so fast that by the 18 to 24 months you take for an implementation, a lot of new technology would have come in the market already. We have talked to dozens of producers, and they would admit to this fact. So today's software gets built deployed user feedback is obtained and new features are built in a matter of days, not weeks or months. Digital technology is advancing so fast that it is hard to maintain a competitive edge with the monolithic solutions installed in a traditional way. But that is what I mean by distinguishing it between a business or sales solutions vs. a large scale IT project.

Vincent Valk: [00:16:49] Ok. So I mean, it sounds like to me, the difference is an internal focus versus an external focus, right? If you're talking about digital commerce, your main user base, as it were, obviously is going to be your customers rather than your employees.

Jay Bhatia: [00:17:08] Yes. So that is one. And secondly, it also how the solution is deployed. Any software solution that requires a lot of iteration and speed of implementation, you are better off using cloud technology anyway. Everything is going cloud and you are better off using a hosted solution with an expert provider rather than doing it yourself because you can never catch up with a software company who has hundreds of software engineers focused on building that particular part of the of the software.

Vincent Valk: [00:17:47] That makes sense. One other thing I think you had mentioned over the course of our email chat was the idea of a technology that can preserve industry workflows. So how does a technology vendor focus on preserving industry workflows and what is the advantage of that?

Jay Bhatia: [00:18:14] First of all, we firmly believe that one cannot disrupt a five trillion dollar industry with a website and some venture money. As a software provider, I would rather focus on how I enable this industry rather than disrupting. We firmly believe that there is nothing to disrupt - the trade pattern in this industry, the role of distributors - it's evolved and and time tested over the 150 years. So, I would rather focus on how do I make my software work for the way the industry is working today, rather than hoping that industry players will change the way they do business to suit my software. It's just not my software. I think traditionally whenever people talk about digital commerce, they immediately go on to a marketplace concept. That, in our view, is not suitable for for the chemical industry, for the reasons I described and therefore, as a software provider, I would rather focus on building solutions that help deal with the complexity exist in the industry because complexity is inherent in chemical trade. That is not going away just because you launch a digital channel. Rather, you configure your software to deal with the complexity. So that is that's how we see it.

Vincent Valk: [00:19:35] Mm-hmm. You can't just iron the complexity out, so that's definitely a good point.

Jay Bhatia: [00:19:42] So to that, let me add you, we are the only software digital commerce platform that enables producers to invite and integrate distributors on their portal or you can connect producer and distributors to commerce portals to make the customer experience seamless for all customers, not just direct customers. And at the same time, still protect the data privacy for both parties.

Vincent Valk: [00:20:12] Mm-hmm. Just to clarify what you said there, if I'm a producer and I've got a key distributor that I might have a long standing relationship with, maybe some kind of exclusivity agreement or whatever, I can invite them onto my portal for that product and from the customer point of view, it'll operate in the same way.

Jay Bhatia: [00:20:35] Yes, so what we have, we call it a channel partner workflow where you can configure every distributor by geography, by product line, by SKU and the put the business rules to route customer requests. So if it is a non-direct or distribution customer, you can literally configure it to wherever that distributor is based be it in China or India or within the country. That way it creates a seamless experience for customers. It takes care of risk of disintermediation and all the panic and anxiety over it, and at the same time, both producers and distributors can focus on growing the business rather than worrying about how am I going to make my digital channel configure?

Vincent Valk: [00:21:22] Hmm. So I'm glad that you you kind of mentioned the distinctions between producers and distributors because that brings us to my final question here, which we've been using the term somewhat interchangeably through the course of this conversation. But as anyone who knows the industry would obviously know, they're quite different. And Agilis, I know, carried out a survey of attitudes towards digital among chemical producers and chemical distributors. How do the attitudes and motivations of distributors and producers, with regard to digital, differ from each other, according to some of those survey results? I know there were some differences.O

Jay Bhatia: [00:22:03] Over the past 40 years, we have talked to hundreds of producers, distributors, and users. We start every meeting with our prospective customers by asking some basic questions on their motivation for going digital or implementing digital commerce channel. While by and large, both producers and distributors want to go digital to improve customer experience, drive sales growth, drive sales efficiency and get insights from data, there are slight differences with each stakeholder. For example, in the way they view the digital priority - distributors by and large are motivated for driving sales growth and improving customer experience and sometimes motivated out of fear of disintermediation or the producer or their principals are pushing them to launch a digital channel. When it comes to producers, they are motivated by all of this. In addition to sales growth and customer experience, they are also motivated by driving efficiency, automation, leveraging data and experimenting with new business models.

Vincent Valk: [00:23:24] So the producers have a slightly different take on it. And I guess they've also got a lot of other digital experiences with digital facilities and stuff like that too that maybe could come into play.

Jay Bhatia: [00:23:44] Yes. Obviously producers have a broader view of digital channels and opportunity that arises from the digital channels, but getting insight from the data is a big part because believe it or not, chemical industry is one of the largest data generating industries and that we hear from the venture capital firms. It is also the industry that wastes the largest amount of data. So that is there, and producers have done a pretty good job on using leveraging technology and production and to some extent in supply chain functions and now their focus is shifting towards the more frontline operations that is sales and marketing.

Vincent Valk: [00:24:30] Got it. They definitely are very interested in big data. I've seen that myself. All right. Well, thanks very much for your time, Jay. Certainly enjoyed talking to you.

Jay Bhatia: [00:24:47] Thank you, Vincent. Thank you for inviting me and giving me an opportunity to share my views.

Vincent Valk: [00:24:52] Great. Thanks again. And this is Vincent Volk signing off for Chemical Week.

To learn more about Agilis or see a demo of our eCommerce solution purpose-built for the chemical industry, please visit https://www.agilischemicals.com/request-a-demo today!