The consumer side of the equation will matter more and more

All too often, large industries, like chemicals, mining, metals, pulp and paper and electric power, see the world from a producer’s viewpoint. What matters to them is low cost production. It is safe to assume that the habits of six and a half billion consumers worldwide will stay roughly the same. Over the medium term demand trends will always be maintained. Or will they?

There are signs in both the power and the chemical markets that big industrial consumers are starting to harness technologies to disrupt the markets, in much the same way as they harnessed IT to disrupt office life just a couple of decades ago.

Take a look at the power markets. As part of their sustainability drives, big companies, like Wal-Mart, GM, Ford, Apple and Verizon, are building renewable generation capacity at their facilities. Each announcement might look small, but taken together they could cause a rethink of the old supply-demand models on which generation companies have relied for decades. Add in the effects of big military installations going off-grid in order to reduce costs and protect themselves against catastrophic failures in the system (e.g. hacking attacks), and the effect could become very significant.

The same is true of chemical industry players. It matters to the supply-demand equation if Coke and Pepsi change their bottle requirements from PET to a renewable feedstock-based product. It matters if consumers reject plastic bags at supermarkets.

I believe that the effects of these disruptions over the next five years will be greater than industry players are expecting. It is time to re-examine business models that have stood the test of time before they become less accurate as predictors of the future. The adjustment will be painful for many, but will lead to a more agile, more sustainable relationship between producers and consumers. It all starts with a focus on the consumer’s behavior as well as the production costs.