As industries move into the “post digital” age, radical change is inevitable. This is being driven by a fast-moving macro environment of new technologies, societal pressures, consumer demands, and business ecosystems. In the oil and gas industry, such challenges are being exacerbated by a different energy future. This future is being defined by demands for lower carbon energy system and is both changing energy demand patterns, and the beliefs and behaviors of its stakeholders. However, change also brings opportunity and the collision of these forces is now offering a kaleidoscope a new set of value propositions for oil and gas companies. (Figure 1)
Figure 1: The Oil and Gas Industry’s New Value Propositions
CLICK TO ENLARGE FIGURE 1
Digital is at the heart of making this transition a success. High-performance computing, big data analytics, and artificial intelligence are now allowing oil companies to address operational and competitive pressures, sustainability challenges, and better protect the health, safety and risk of their business. But there is some way to go.
The redesign of the oil industry for improved resilience, interoperability and security, while getting closer to zero-waste, zero-emission levels is still a big ask. Is it achievable? Some of the answer lies in further unlocking the potential of digital to reconfigure the design and function of oil industry operating systems. However, despite increasing investment into digital processes, new Accenture Research shows that oil industry returns from digital investment are still not apparent.
Our research shows that while the oil and gas sector has the highest proportion of companies that are considered “Champions” within their industry (those who are both successfully scaling digital proof of concepts as well as earning higher than average returns on their digital investments (RODI)1 (37%), the oil and gas industry, when compared to other sectors, has the lowest return on digital investment overall (19%) (Figure 2).
This is despite the fact that oil and gas companies have been employing digital technologies for longer than companies in some other sectors and are now showing some level of maturity in digital technology adoption around process control and automation solutions. The continued targeting of quick wins, associated with cost reduction and incremental efficiency gains, means that, while the oil sector has a larger share of Champions of any industry, their returns on investment are much smaller as they fail to drive top line gains from their digital innovations. This matters, as the energy transition and post digital age is creating even greater competition for market share.
Figure 2 –Champions Share of Oil and Gas Industry (37%) and Cross Industry Value RODI Comparison (19%)
CLICK TO ENLARGE FIGURE 2
Oil and Gas Champions - The Differences
Oil and Gas Champions are winning in the use of data and the Internet of Things for better cost control and efficiency but are still not scaling digital well to drive value out of established and new assets, services and products compared to other industries (a framework Accenture calls Industry X.0)
Our Research found that Industry Champions in other sectors are better prioritizing fundamentals around digital innovation scaling and return on digital investments – for example:
- How they scale digital proof of concepts (not how many)
- Finding the right pace to scale new digital innovation, so they neither miss their perfect moment nor over-extend themselves.
- Differentiating between digital innovation investment and costs. Champions view innovation as an investment—not a cost for cutting. Oil and Gas Champions are investing more (one in five invested more than US$500 million each) in digital innovation from 2016 through 2018, and while they are spending more time and money than their peers on digital innovation, they still lag every other industry measured in returns
- Making investments in growth levers to enhance productivity and agility. While other companies are continuing to work and collaborate in conventional ways to avoid cost increases, other Industry Champions are successfully prioritizing key areas which can drive growth (Oil and Gas Champions were differentiated from their peers in digital engineering design, data management and a focus on partnerships)
As the oil and gas traditional value chain pivots toward new products, processes and the next generation of workers ask to be more digitally enabled, oil and gas companies now need to fundamentally rethink their future operating models. Other Industry Champions are already positioning for success.
1 37% of Champions are scaling more than half their proof of concepts (POCs) and achieving higher returns on digital investment (RODI) as measured by how successfully they have scaled their digital proof of concepts (POCs) investments allowing them to earn higher-than-average returns on their digital investments.