A new twist on an old story
In the energy sector, survival is the name of the game today. Bankruptcies, M&A deals and divestitures of segments... For many oilfield equipment and services (OFES) companies these activities aren’t new; they have sold off parts of their businesses, transformed or restructured recently.
But this time feels different. We can already see them shift toward the future through clean energy initiatives, digital transformations and a renewed focus on innovation. Two recent examples come to mind:
- TechnipFMC’s ESG announcement targeting 50% reduction in Scope 1 and 2 emissions by 2030 and citing biofuels and hydrogen projects as a key growth enabler1
- Halliburton’s launch of an innovation lab to accelerate clean energy development2
The future-ready operating model
Delivering on these promises will not be easy. OFES companies are required to take on entirely new capabilities, rely on new partnerships to push innovation and work with customers in different ways than in the past. They will need to examine their existing operating models with a fresh eye to determine whether they are still fit for purpose. Kates Kesler, a leading organization design consultancy that is now part of Accenture, has created a simple model for understanding the seven operating model design components: operating framework, organization capabilities, organization model, enterprise roles, function blueprint, decision forums and guidelines and horizontal networks.
Of these components, I believe three are particularly relevant for OFES companies to consider.
1. Organization capabilities
Many OFES players have identified the key capabilities needed for the path forward. These include “green” technology, innovation and product management. Two capabilities requiring a fresh look are customer centricity and digital enablement.
- Customer centricity. The role of the OFES sales manager hasn’t changed much over time. But a shift in focus—to green solutions and greater industry consolidation of exploration and production (E&P) companies—will lead to an evolution of customers’ needs. That, in turn, requires a new approach to sales among OFES businesses. With green energy, for example, relationships will need to be built from scratch as new players emerge or traditional operators foray into the green space. Additionally, the consolidation of assets and changing strategies of E&P companies will require OFES companies to move beyond traditional relationships. What’s needed now is a proactive, data-enabled and customer-centric approach to solving the problems that are top of mind for customers—whether traditional oil and gas (O&G) players or green energy startups.
- Digital enablement. Nearly every OFES company has embraced the notion of becoming “digital.” But not all have made the progress they desired. There are many possible reasons including unclear ownership of the digital transformation, gaps in the right roles at the right level to support deployment or the lack of expertise and partnerships to create effective use cases. Diagnosing the cause of the inertia is the first step to overcoming it. There are still many untapped opportunities to build muscle in areas such as asset management, operations planning, supply chain management and back-office optimization.
2. Enterprise roles
OFES companies would benefit from a re-evaluation of the enterprise roles tasked to shepherd the execution of the needed operating model shifts. Some questions to ask:
- Have we created the right balance of focus between strategy and execution? In some cases, leaders focus too much on execution and not enough on formulating a forward-looking strategy.
- Do our decision-makers have the right authority? For example, a company may want to be strong in green innovation but doesn’t allow the team leader to make decisions around investment priorities.
- Is it clear who “owns” different aspects of talent management? Many companies may find there is a gap in ownership of talent strategies for the new skills or competencies that are required.
Ensuring roles are configured in a way that enable success across new ways of working and new portfolio areas such as green energy will be essential.
3. Horizontal networks
More than ever before it will be paramount for OFES players to create networks across segments, product lines and divisions. Leveraging scale, collaboration and best practices doesn’t always require the creation of a complex, matrixed organization. There are more informal ways to ensure the right connections and conversations are happening.
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Many OFES companies want to move up the “ladder” to assume complex integrator roles without fully understanding what is required to successfully execute. More isn’t always better. Taking a fresh look at culture, focusing on connection points and assessing where collaboration adds value for the client can help guide what makes sense from a lateral integration perspective.
The million-dollar question(s)
OFES companies need to ensure their operating models will adequately support a different future. We’ve looked at three operating model components, but there are more that can (and should) be re-evaluated when it comes to activating a new business strategy. It all starts, as Kates Kesler explains, with asking tough questions:
- How integrated does the overall organization need to be (given our portfolio)?
- What are our critical capabilities and where are they “owned” (enterprise or business or function)?
- What is the basic shape of the organization model? How will we run this business?
- Where should accountability for different business results be placed in the organization?
- What are the roles of business units, functions (operating and enabling) and markets?
- What is the right balance of power across those components? How will key decisions be made?
- Where do we need more integration across lines of business, functions and markets?
OFES companies must ask themselves such questions if they want to position themselves for growth in the future. There’s not a moment to waste. The future is fast becoming the now.
1. ESG and TechnipFMC presentation, 9 Nov 2020, http://www.technipfmc.com
Disclaimer: The views and opinions expressed in this document are meant to stimulate thought and discussion. As each business has unique requirements and objectives, these ideas should not be viewed as professional advice with respect to the business. This document may contain descriptive references to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.