Lost In Transformation

Cutting Through The Noise: How BASF Makes Digitalization Tangible Across The Business

July 21, 2021 MING Labs Season 2 Episode 39
Lost In Transformation
Cutting Through The Noise: How BASF Makes Digitalization Tangible Across The Business
Focus on solving real problems for users and deliver in an agile way
Just do it: Aim to show successes early on
Drinking your own Kool-Aid: Decentralize digitalization and spread responsibilities across the business
BASF "Intelligent Mine": Frontier technology for the mining industry
Learn to discover and build on your strengths, and set your company up for agile processes
Priority as a key to success in any project
Continuing to go digital: Providing exciting experiences and greater value to BASF's customers
Lost In Transformation
Cutting Through The Noise: How BASF Makes Digitalization Tangible Across The Business
Jul 21, 2021 Season 2 Episode 39

"You need to have a hunting attitude, a business entrepreneurial attitude. You're going to need that growth mindset. Then you can really take the opportunities of digitalization." 
Learn more about what it takes to drive digitalization from Thomas Gottschalk, Head of Digital at BASF Performance Chemicals. Find out how BASF as a large established corporation started transforming their company, moving from bureaucratic processes to agile working.

Show Notes Transcript Chapter Markers

"You need to have a hunting attitude, a business entrepreneurial attitude. You're going to need that growth mindset. Then you can really take the opportunities of digitalization." 
Learn more about what it takes to drive digitalization from Thomas Gottschalk, Head of Digital at BASF Performance Chemicals. Find out how BASF as a large established corporation started transforming their company, moving from bureaucratic processes to agile working.

Thomas: (00:02)

Really, really future-oriented and driving our business out over the next couple of years. I think that's also the kind of mindset you need. You need to have a hunting attitude, a business entrepreneurial attitude. Otherwise, you can forget about all that. So you're gonna need that growth mindset, then you can really take the opportunities of digitalization.

Christine: (00:25)

Welcome to the Lost in Transformation podcast series dedicated to the complex world of Digital Transformation. We feature guests from large corporations, start-ups, consultancies and more, to shed light on the success factors around Innovation, Transformation, and adjacent topics.
We share first-hand insights and inspiration from experts for all the intrapreneurs, entrepreneurs, and anyone curious about Digital Transformation.

Christine: (00:54)

Thomas Gottschalk is the Head of Digital at BASF Performance Chemicals, responsible for digitalization and IT with a lot of expertise working in China and Germany. He’s been a part of the digital transformation of BASF and shares his first-hand view of that experience and what it takes to successfully transform a big corporation. We hope you enjoy this episode.
Christine: (01:19)

Hi, Thomas. I'm very happy to have you on the podcast today, on Lost In Transformation, and I'm very excited to have you on and thank you so much for taking the time. You are the Head of Digital at BASF Performance Chemicals, also with a lot of experience in the field of digitalization and innovation, and also a lot of experience in China and in Europe. Very exciting. And today we're going to have a closer look at the digitalization journey at BASF and how you're also driving these efforts in your role. So, to begin with, I'm happy to hear more about yourself first to get to know you a bit better. Can you share more about your background, your experience to help us understand more about you and your work in general? 

Thomas: (02:04)

Absolutely. Thanks for being here. Thanks for the invitation. My name is Thomas,  Gottschalkand I work at BASF, which is a chemical company, as some of you may know. Myself, working at a chemical company, I'm a chemist originally, a Ph.D. degree in chemistry in Switzerland, and started in BASF working on R&D for nutrition, interestingly. Over time, then moved more and more into the digital sphere. And now since last year, I'm running the digital team in one of the 11 operating divisions, which is called Performance Chemicals, a very B2B industrial chemicals business, that is actually very diverse. For example, we're selling plastic additives, everything that you need to really make plastics, for use a blended industrial scale, selling chemicals for the mining industry. We're selling chemicals for the automotive industry and for lubricant solutions. So very diverse, very interesting businesses, B2B industrial with a few small exceptions. Very, very dynamic. And I think a very interesting part of the company.

Christine: (03:09)

Interesting. Yeah. Also great for me to learn more about what you're doing in more detail in the B2B space, and you have been with the company in different departments and in different locations and have experienced the whole world basically before the transformation journey that we're going to talk more about today. Um, could you explain a bit how things used to work at BASF before the change and the transformation took place?

Thomas: (03:35)

Absolutely. I can explain my personal journey in our digitalization endeavors, which has been going on now for six years or even longer. In 2014, I was actually at the time in China, part of building up our R&D campus. The second-largest R&D location outside of our home campus and I was responsible at the time for building up a mathematics team there. So, I realized there was a lot of demand for services that today you would probably call it digitalization a bit, like how do I design my experiments in R&D so that I get to the best results, or how do I optimize my supply chain network to be able to deliver to my customers in the right the best way, or how do I understand my business data better, which today you would probably call it business analytics or business intelligence. And all those kinds of things were happening, I think in 2014, looking back, but very, very small scale, I think very, very scattered.

Thomas: (04:39)

And I think in large parts also, we didn't have the means, I think, to bring that technology in a user-friendly way to the employees or even to our customers, we were good at dealing with the mathematics. We were not good at making the user experience that in a way that it's really attractive and it's really spreading across the company, and spreading out into our customers' sphere, of course. In 2015 then I think a big change happened in that, our CEO at the time said okay, there is this digital thing. Are we doing enough? Are we using all the opportunities it has for us? He said he suspects, it's probably a big opportunity for a company like us to do more in digitalization. So he founded a team, that was tasked with dealing with digitalization, and not just building a plan, but implementing this essentially.

Thomas: (05:34)

And I became part of that team. And, the first five who joined that team were people I think from different domains, who were very respected in their respective fields, I would say. So we had one from manufacturing, for example, who was really seasoned when accepted manufacturing leader, we had someone from a business who was running a whole business in North America, very respected people. And, with all of that, we did try to shape a point of digitalization for us. We tried to figure out how could we make this actually to meet the CEO's expectations, to make this a big opportunity for us, in the end, to get out the most from this. And, I think in the beginning, this was 2015, this was a world of a lot of hype, I would say a lot of useless information.

Thomas: (06:27)

I think a lot of consultant blah, blah, blah, you know, blockchain here and this and that. It was very, very hard, in the beginning, to cut through the noise and to understand what does really makes sense for us now? How do we really make this an opportunity for our company and not just blind decidedly, jump on the platform, blockchain, whatever hype, and do very technology-driven things that at the end of the day, though, don't make a business benefit? But I think we managed to work towards this by focusing on real results on a very small scale early on. I think that that was probably the approach we took at the time. We said, okay, we don't want to make any big PowerPoint presentations about blockchains or to go with that example.

Thomas: (07:14)

We want to take benefits, and one of our first projects, for example, was with a valley of various seasons and a well-accepted plant manager or operations leader. He was even more than a plant manager in one of our really basic chemicals operations. So at the heart of the company, and that guy came and said, you know, guys, I think that I can have a lot more uptime in my plant, and less downtime if we just use the modern technologies that are available by analyzing the data properly, by making sure we understand if certain equipment degrades, by predicting operations status a few hours or a few days ahead. And, that would cause millions and millions of operational profits for BASF every day, essentially. So, that would be a huge huge opportunity.

Thomas: (08:06)

So that was one of the large first projects we started. And I think we were quite successful relatively early on because we really focused on solving that problem. And, we saw what kind of technologies came out of that. And we had a couple of those kinds of projects in different domains. And I think that that was what carried us through the first two years to get also a certain acceptance in the company is that we were solving problems and really contributing in a way that people could see it. And not writing theoretic dissertations about platforms, but let's say, make sure we deliver a very, very tangible and feelable benefit now that other people can really feel this in their real life.

Christine: (08:48)

Really interesting to hear from the very beginning of how you mentioned, Okay, it was very mathematical at first and then you really wanted to cut through the noise and make transformation also more tangible, really solve problems. I think, early on probably this was something very big to take on, especially in such a big corporate. And, then you were mentioning, you were part of that digitalization or digital transformation team, and really tackling this firsthand. And could you tell us more about the start of the transformation journey? Could you tell us more about any of the first approaches to solving problems that you mentioned?

Thomas: (09:28)

I think at the beginning we started with problems and did not know how to solve them. But I think that was also within insights, probably the benefit in that we weren't looking at this from an overly technology-driven perspective. One of my first approaches, for example, in a certain field of innovation for pears, I was responsible for the innovation topics in that team, we felt that we had a tremendous amount of data. It was catalyst research, but let's say the leaders in that field felt that it was not used to the way it could be used. So that's at the end of the day, the efficacy, the performance of that research was hindered by not having enough data transparency and not using the data in the right way.

Thomas: (10:18)

I think we tried many things in the beginning and some didn't work. I think that's very clear. So we brought in different people who were specialized, for example, different kinds of databases, data management. And there were a few approaches that were just extremely complicated and just didn't work. But that was fine because I think we tried several things at the same time. So, after a couple of weeks, something sticks to the wall and we saw, okay, if you do it like this, it's working, I think it was with graph databases at the time, something they probably don't do if you plan this too much, but this work, and we could show really nice results relatively early on in that. We could more easily select good candidates in that research from bad candidates, good research samples from bad research samples much, much faster than this was possible before.

Thomas: (11:12)

That is of course fantastic. If you do innovation, if you know earlier which of the samples will carry a success. And, I think that was an important step that people saw these results. And how did we get there? I think it became also there because we combined this at the time new database technology that was new for us at the time with very established know-how. And we took on board also the really, really experienced guys who have been doing, for example, mathematics on R&D topics for decades, or who really, really knew about these catalyst systems. So, we try to make this not a separate thing, but we try not to say, okay, here is the new shiny digital world of catalyst research, and there is the old part. But that we take some of the people that were from the old world, and make them also really, really important in the new world.

Thomas: (12:06)

And that was, I think, decisive for the success of these early projects because these people really knew what they were doing. They just didn't have maybe the means to perform, to bring all their competencies to a higher level of effect also because there wasn't the infrastructure at the time and everything. So I think by combining the new technologies with the old knowledge and with the old experience and understanding, I think in this field we drastically moved forward I think. It's the same in the topic of the operation, of course. Now, if you want to know how to prevent or how to predict if a heat exchange would fail you better have someone on board who really knows about heat exchangers. It definitely pays out to do that. So that I think was good in the beginning.

Thomas: (12:46)

And, the fortunate thing was I think that we could show the successes relatively early on. I think that was also a function of just doing very, very few projects. If we had there a lot of projects here and there, and many, many, many projects, then I think none of them would have come to an extra result. And that was certainly a success factor. So that was important for convincing others. And I think we also realized only later, let's say the whole delivery capabilities. If we talk about software that we need, it just isn't there at the beginning. I think we didn't know this in the beginning because we didn't really know what we were missing a part. I think we saw that things only started working once we got a software delivery, a bit under control, where we found certain partners to help us with that, where we really got more understanding of how to develop software in an agile and iterative manner. I think that was really, really important, but it was a difficult and hard chore. There was no fun in our cases. So that was I think a big part of the first two years to actually start building software. I think that we didn't really do that before in many cases. So that was a very, very big change. And, I think also in my personal experience, it just was really, really difficult. 

Christine: (14:07)

But it sounds super exciting. And I think like, as you mentioned, combining the best of both worlds, you know, the new technology and then also experienced people with a lot of know-how, that sounds like a recipe for success. I think it was really exciting to be part of that from the very beginning on. And now I'm looking at where you are right now, looking at your current position as being a Head of Digital at BASF Performance Chemicals. How did that change happen or how did you know where to go, where you are right now? Or could you let us know in a bit more detail what you're doing in your role and which problems you're tackling there?

Thomas: (14:46)

Absolutely. I think over time then say five years down the road, we were at a point we realized that the time of running this as a central project is kind of over, this didn't make really much additional sense. So the important thing was to spread this out and bring the responsibility of digitalization to the businesses. We have 11 operating divisions, more than 50 businesses, and they need to digitize their own businesses. Essentially the capabilities are there now, I think. So I'm responsible for every operating division to just do this and execute this and taking advantage of the opportunities. And, of course, the saying is "Drink your own Kool-Aid", so of course, joined or was it the path that we proposed and I became Head of Digital at one of the operating divisions of Performance Chemicals. My job now is I think to drive and to kind of help the operating division to go down that path of further digitalization, and to adjust, make sure we are moving ahead at the end of the day. And making sure we develop these capabilities to bring, for example, really exciting experiences to our customers that make them buy more and more often, or buy solutions that they otherwise wouldn't necessarily buy from us. Also to simply build our capabilities of doing that kind of thing. I think one of the biggest changes in digitalization is moving from a world of planning and making large IT projects with large project descriptions.

Thomas: (16:21)

And then that kind of thing that you then send out to service providers. So to move actually to a doing a mindset, to just do things and then execute them right away, iteratively, in an agile and agile manner, so that when you see okay, our customers, we think they need some sort of technical advice over the internet, let's just build it. And then let's put the next version on the internet next week and see how it works and improve that on a day-by-day basis. I think to come to that kind of capability, that's certainly a big part of my job. But I'm happy because I think I have leadership that definitely sees the opportunities of digitalization. And, I think we are following already really, I would say transformational initiatives for the industry where we're selling to, like for example, we're working with a startup company on an offering that is called the BASF intelligent mine.

Thomas: (17:17)

The business's key offering is digital solutions that increase the productivity of a mine in a way that is unheard of before. I mean, you can imagine it's very difficult to run a mine because the material you put into your processing plant changes all the time, the stone changes all the time, it's not homogeneous. So, the old-fashioned way of doing that is you had an operator sitting in that processing mine, and trusting this all the time. And then of course you would never get that really perfect. But with this digital solution [...], offering to the market, you can run a mine close to like an industrial plant run. I would say it's a really, really high performance continuously over time.

Thomas: (18:02)

You can increase, of course, the safety of your operations here just have much, much higher productivity from your assets. And that's a really, really big step. And I think there, we are really proud of that because we found that startup, and we have a big technology advantage in that. We have definitely for sure the most advanced solution in that space by far. And we're combining that with what BASF brings, which is a deep understanding of the mining industry, decades of experience, and a deep understanding of how the chemicals work. That is integral to processing orders and bringing that knowledge that we have, and this market intimacy together with the power, the delivery power, the speeds, the AI capabilities and the software capabilities of that startup. I think that can be really transformational for the industry.

Thomas: (18:53)

So, I think that's a really, really big thing for us in the market. And so you see that that kind of dynamics is I think what I really like in the place where I am now because we also have business leaders who think in that way now, who think, okay, of course, we got into say mining chemicals now, and it'd be not going to stop that. How can we also build up the second business next to the mining chemicals that are really, really future-oriented and driving our business out over the next couple of years? And I think that's also the kind of mindset you need. That's you need to have a hunting attitude, a business entrepreneurial attitude. Otherwise, you can forget about all that. Now you can maybe digitize a few cost forms, but then you're done. So you're gonna need that growth mindset, then you can really take the opportunities of digitalization. 

Christine: (19:44)

Definitely. I think it's super interesting to hear also the tangible examples of what you're working on, and I think it makes a lot of sense. Also, you saying that the company does tackle the whole transformation process as a central thing, but actually spreads out the responsibilities. And as you were mentioning, you are much closer to the market. You understand the industry a lot better in the different divisions. So, that's very exciting. And I think then you're very hands-on on the individual problems and can really tackle them with the know-how that you have. And, I think with the whole journey that you also touched upon, where you were saying started back then in 2014/2015 with the first approaches. And now looking at where you are today I think you probably learned a lot along the way, too. What would you say all in all is your biggest learning or takeaway from the journey, any tips you would like to especially highlight for the listeners?

Thomas: (20:42)

Yeah, absolutely. I think that there are quite a few. I think for us, it was important to build on our own strengths and to shape offerings for the market that just works for us and for our customers, also really get a benefit from our legacy. Now, I think that we did that in many businesses in India, the catalyst business, the automotive coating business, now the mining business. I think it's really a differentiation if someone comes into the automotive coating business and then tries to offer a digital solution. Now that improves something there, but has no idea about automotive coatings is probably not going to work. So I think that's where we can really win as an established corporate in let's say having a lot of industries where we have a very, very, very high understanding of what's happening at the customer end then adding digital technology to the mix and offering, making offerings that are really, really attractive and really work for the customers and do great things for them.

Thomas: (21:44)

So, that was, I think in my opinion, the strongest point that we have. And, I know if I can recommend this to everyone because I think everyone has to find this for themselves are the strengths to build upon, but I think it's where we can compete the best. I think the second part of the learning for me definitely was, you should never underestimate the changes in mindset that are required to deliver that kind of stuff to get into this agile mode. And I think that often agile, I think is misused and use too much in a superficial and process-oriented manner. So, actually is not about running design thinking workshops. That's not the point. I mean, you guys know this, design thinking workshops are our tool, but it's not agile.

Thomas: (22:34)

Agile means that what I described before, now that you're tackling a problem, you bring up a solution relatively early on, you wait for the feedback from the customers. You changed the solution according to the feedback you receive, you have delivery capabilities in your own shop, or together with partners that allow for that kind of work. I think none of that is there or was there in 2014 because we had a very, very bureaucratic project planning process that just wouldn't allow for that kind of work. We didn't have the people who were able to make these changes and these iterations quickly, because we hadn't hired such people in the decades before, because there was no need. I think the mindset of the people, there's a traumatic change needed, that you don't see an agile way of working as a [...] playing around now because it's not. It's serious software development or serious development of solutions that are actually superior in certain types of projects at least. Getting to that mindset, I think required for us, people seeing that now seeing is believing, is getting to that point where you only have these really high speeds and you really can deliver stuff that customers really like and give really good feedback. But of course, it's needed to overcome that first barrier to get to that. That was certainly one of the most, or that is still one of the most decisive things to tackle, the ability to deliver in an agile manner.

Christine: (24:03)

They're also really cool hands-on tips what you were mentioning to figure out what are your strengths and then really building on them and also focusing on the customer and building those solutions that really put them in the focus. And, I think that's super interesting. As you mentioned, this is something that you also learned along the way, that wasn't there like six, seven years ago, so having that experience and going through all of this by yourself really helps to learn that. And earlier you were also touching upon a couple of mistakes. You said like, obviously this is not successful from the start and you have to make the mistakes to learn from them. Do you have examples of mistakes that you did where you can say, okay, this is something you can share for people to avoid them, perhaps. 

Thomas: (24:52)

Good question. If it can avoid them, but I think we had a lot of projects that just didn't work for various reasons. And I think if I look back what was the biggest predictor for failure? I think it was always a priority simply very simply. Virtually all projects fail when someone was doing that with like 5% of their time, in addition to what's other things they are doing, a 100% failure rate the thing. And that means you can only do very few projects. It's very clear if you don't have this as a priority because these things start small, but they all become so much work and so much effort and so much time and all the money that needs to be invested to make real solutions that work for the customer, that you really need to take that as a priority. And then if you don't have this priority, don't do it. And for us, this was always fine because it was better to have fewer projects with a higher priority than more projects with a lower priority. And that was probably my biggest learning over time that all of these projects where someone was half interested in, they didn't work.

Christine: (26:05)

So to really put in that commitment and really prioritize what you're doing to see the best results as well. I think those are great takeaways as well. And now that we've talked a lot about your journey with BASF over the last couple of years, or a lot of years that you've been with the company, now we want to look ahead and kind of look into the future. Also in your role as Head of Digital there, is there anything that you are especially looking forward to or anything you're excited about that's coming up? 

Thomas: (26:38)

Absolutely. I think it's that enabling our operating division also to have a much deeper and better relationship with our customers, to provide really exciting experiences for them also on the internet. So, be also a company that provides more and more value to our customers, also through using digital tools. I think that's extremely exciting. And I think just seeing how much digital is becoming an integral part of the core business essentially, and the core business is becoming modern and also increasingly having new offering is as a consequence of digital. I think steering to it it's a very continuous process, so I'm really happy to be a part of that journey.

Christine: (27:22)

I think like totally, as you were mentioning, it's a continuous journey. We're still on it. And I'm also really curious to see where this will go in the next couple of years and also really exciting to hear about what you have already accomplished so far. Really inspiring. I think that's also like an exciting outlook for the future that you just mentioned. 
Tomas, thank you so much for sharing all about the journey of digital transformation and change at BASF or basically your journey with it and for sharing all of the tips and the mistakes along the way. I think it's really inspiring to hear how the company started its journey and to see then how far you've all come and where you're also heading in the future. It's been amazing having you here on the show and thank you again. 

Thomas: (28:07)

Thank you very much.

Christine: (28:11)

Thank you for listening to this episode of Lost In Transformation. If you enjoy our podcast, please subscribe to our channel and leave us a review on iTunes. Join us next time for another episode of our podcast. 

Focus on solving real problems for users and deliver in an agile way
Just do it: Aim to show successes early on
Drinking your own Kool-Aid: Decentralize digitalization and spread responsibilities across the business
BASF "Intelligent Mine": Frontier technology for the mining industry
Learn to discover and build on your strengths, and set your company up for agile processes
Priority as a key to success in any project
Continuing to go digital: Providing exciting experiences and greater value to BASF's customers