Signal strength: Predicting change in oil and gas

As oil and gas companies look to navigate the energy transition, they face a set of structural shifts that will permanently change what they do and how they do it. Competition from new energy sources, market volatility, environmental accountability, talent scarcity and investor apathy are all on the rise, with no signs of slowing. In this environment, most companies have accepted the fact that they need to undertake big changes to achieve profitability and relevance in the years ahead. In Necessity is the Mother of (Re)Invention, we explained why change—even big change—will not be enough. Radical reinvention is needed.

Accenture’s Business Futures 2021 report not only confirms the reinvention imperative, but also highlights the trends that are reshaping organizations globally. These trends—or Signals of business change—emerged during the pandemic and will have the greatest impact on companies over the next three years. Several of these signals have a direct bearing on the energy sector, both in terms of the challenges oil and gas companies face and the opportunities they can pursue to achieve true reinvention.

Learning from the future

In an ideal world, energy companies would see change before it happens. Imagine if they could accurately predict swings in energy demand, extreme weather events, the profitability of their assets over time, or the timing and impact of carbon regulations. Today, they can’t. But soon, they will.

Energy executives, like so many leaders in other industries, are recognizing the limited predictive value of historical data. The overwhelming majority (88%) believe that using forward-looking data sets and analytic approaches will be important to their organizations’ ability to predict and respond to future events. Importantly, they are taking action. Seventy nine percent of energy companies have increased their use of both internal and external sources of real-time data over the past 12 months.

Despite this step in the right direction, only 29% of energy executives are confident in their ability to foresee and respond to behavioral changes that affect demand. Why? Our research suggests several reasons. Only 43% of energy companies report that people across their organization consistently use real-time data in their day-to-day work. Only 51% believe they have sufficient talent (e.g., data scientists) to support the ability to understand the future. And only 64% have invested in the technical infrastructure necessary to support new data management capabilities.

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Business Futures 2021: Signals of change

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Pushed to the edge: Decentralizing decision-making

The Accenture Business Futures report also highlighted the fact that the global pandemic has made markets much more fragmented, resulting in distinct regions with their own governance systems, economic models and fast-changing consumer behaviors.

For energy companies, the move to localized operating models is not a new concept. Energy markets and supply chains have become more fragmented and localized in the past decade. And geopolitical agreements are pushing countries to implement strategies and policies aimed at reducing the impact of climate change, which have a direct impact on energy companies’ local operations. In fact, 95% of energy companies agree that markets will become even more segmented in the future.

In this environment, more than half (51%) of energy companies are recognizing that global, centralized decision-making and governance are outdated. They are, instead, moving to operate as broad federations and pushing decision-making authority to the edges of their organizations—to their people in local markets. This is a trend that is gaining significant traction. In fact, we found that 86% of energy executives believe that a federated operating model will characterize the future of their organizations and be a key driver of their success.

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Importantly, industry execs are also realizing that a new approach to decision-making requires a new approach to learning. Specifically, organizations that shift from experience-based, top-down decision-making to data-driven, bottom-up decision-making will need to have the right talent in place and ensure their employees can augment their judgment and intuition with algorithms’ recommendations. Seventy nine percent of energy companies have already scaled up or are currently scaling up programs to attract people with diverse skills, who can be productive in dynamic and varied environments. And 78% say they have scaled up or are currently scaling up programs that promote a mindset of continuous learning.

Embracing the new scientific method

The pandemic has shone a spotlight on scientific innovation, putting it at the top of the business agenda. Over the past decade, nearly every energy company became a digital company. In the coming decade, every energy company will need to become a scientific company. That means applying advanced science and technologies in new ways to accelerate and compress their transformations, profit from the next wave of innovation and successfully tackle the energy transition’s fundamental challenges.

The good news is that 89% of energy executives agree that an increased scientific capability is critical to their future competitiveness. Nearly two-thirds (65%) have created or are currently creating a reliable and resilient technology infrastructure. Even more impressively, several energy companies are investing in cutting-edge technologies that will enable their reinvention and drive productivity and profitability.

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Signals of change

Although the industry is undergoing constant disruption and being squeezed by multiple forces, 92% of energy executives say they understand the challenges they face today. Insights from our latest Business Futures study provide an even clearer sense of the hurdles that lie ahead—and the initiatives organizations can undertake to successfully reinvent. Making better use of real-time data, decentralizing decision-making to identify the “crown joules” of the energy industry and doubling down on change-enabling technologies will create the future-ready organizations they need to be.

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.

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¹Original response wording across industries: "factory automation"