Oil and gas companies continue to invest in digital technologies and demonstrate gains. A 2016 Accenture survey looking at investment upstream by oil companies, for example, found digital technologies help to reduce costs, make faster and better decisions, and increase productivity. Barriers remain, however, to delivering greater value.
New Accenture research* on digital high performance spotlights how companies across industries translate investments into new growth and value. While the oil and gas sector adds value, it continues to lag other industrial sectors. In fact, of the 44 oil and gas companies Accenture measured in the sample, only 7 percent stand out as digital high performers.
Accenture’s research looks at performance in four categories (the percentages of oil and gas companies are reported in parentheses):
Digital High Performers (7 percent) achieve strong digital and financial performance.
Digital Leaders (16 percent) have progressed in digital but fail to translate their investments into improved financial performance.
Business Leaders (18 percent) have strong financial performance without prioritizing digital.
The Rest (59 percent) survive without building up digital.
Digital High Performers deliver where it counts: in good financial outcomes. They do not limit the focus to efficiency and cost savings, but are willing to alter established business models to capture opportunities for top-line growth and sustainable financial advantage.
Companies were scored on digital capabilities across dimensions—plan (strategy), make (production), sell (customers) and manage (corporate). Overall, oil and gas companies gained points for plan and make activities. Integrated oil companies were scored higher in sell than pure exploration and production, and oilfield service companies. This finding makes sense given the stronger downstream presence, and closer connections to wholesale and retail customers.
Digital advances help organizations facing cost challenges in the short to medium term (lower oil prices), and efficiencies are on the rise. However, companies that are disrupting the ecosystem are altering business models, changing customer experiences, and finding value in the “new,” thereby securing alternative routes to revenue growth despite prevailing industry conditions.
In the oil sector, Digital Leaders, for example, had significantly weaker and more volatile financial performance compared with Digital High Performers, despite similar levels of digital engagement. The leaders lagged particularly in ability to grow revenue and maintain consistency in performance, and also showed relatively weak profitability. Accenture Digital Performance findings reveal opportunities for oil and gas business leaders:
Act decisively, identifying digital as a growth and value lever by proactively planning strategies and committing investment. Many oil companies and oilfield service players are undertaking major digital transformation programs to drive efficiencies in core operations. Most are focusing on technologies such as analytics, cloud, big data and mobility, with increasing interest in technologies that enhance collaboration. Artificial intelligence (AI), in the form of robotic process automation (RPA) and virtual agents, is likely to be a future value lever. AI will be used to boost efficiency in RPA, making operations more efficient and freeing up workers for analytics insight-driven work. Virtual assistants are also likely to become more common; for example, providing an operator with access to hundreds of years of data rather than relying the experience of individuals.
Innovate by leveraging digital platforms to streamline and automate operations and workflows. With oil prices low and margins tight, it becomes hard to focus on growth and new business development. However, new products and services built with digital technologies can benefit the business, particularly in regard to innovation, and research and development. High performers understand the need to expect similar value from software and analytics as they do from the core oil and gas business itself.
Develop insight on customer preferences and differentiate services using digital channels. Shifting the balance of power is a challenge. Customers want personalized services and seamless experiences that enhance convenience, choice and price. The best digital performers are learning to focus more on the customer experience across the wholesale and retail parts of the business. Digital will also be increasingly important in supply chains, enabling companies to create more efficient processes using digital technologies and platforms, as well as tapping into an ecosystem of new players.
Change the organization to help execute new business models. Oil companies are investing in systems to handle huge volumes of data in fast, secure and flexible ways. High-performing companies are managing the convergence of information technology with operations technology (where the underlying technology, such as platforms, software, security and communications, is becoming more like IT systems) and adapting their organisational models accordingly.
Oil companies need to be ready to respond to digital disruption. Most are finding some value in digital but find it challenging to release further value from their existing business as well as from new markets and products. Future business performance will be influenced by their ability to respond to the change.
*The Accenture Digital Performance Index (DPI) is a cross-industry survey of 343 companies. Conducted in 2016, the survey was conducted by Accenture Research and is based on a comprehensive review of company data from investor materials, articles, interviews and corporate websites. For more information about Accenture’s Energy Research please contact email@example.com.