In presenting recently to a large group of oil and gas executives on digitally enabled business transformation, I discussed how they, like other asset- and energy-intensive industries, were lagging in exploiting digital solutions to drive value. In an increasingly complex, competitive energy landscape, they asked: How can they maintain their traditional risk-averse approach of being a “follower” with these new, potentially disruptive digital strategies?
A recent global Accenture survey1 explored how companies deploy digital technologies and the benefits they derive from them. Given the focus of the survey, it is perhaps unsurprising that more than 97 percent of respondents2 said they were seeking to “lead in the new” through the application of digital technologies. The analysis identified that the energy companies can, on average, realize additional gains of more than US$16 million—in terms of market capitalization—if they combine digital technologies to drive new experiences and ways of working.
On the other hand, our research also highlighted key barriers to driving the digital journey over and above the investment cost—such as difficulty in articulating the business case; concerns about security of data; and ability to realign the organization to make best use of digital. In fact, only 13 percent of those surveyed said they are getting both cost-saving efficiencies and business growth from their digital investments. This low percentage indicates a failure to use technologies in combination with operational assets as the basis of the new business model we refer to as “Industry X.0”, that is the next evolution of industrial business with highly intelligent, connected systems forming a fully digital value chain.
Looking ahead, we see three actions that can help overcome barriers to starting the digital journey:
Destination and roadmap – The initial step is to develop a clear digital strategy that answers “Why?” and “Why Now?—together with the usual “What, How, etc.” questions. Our approach is based on, firstly, to Imagine the opportunities through collaborative ideation and design thinking techniques. The objective is to identify how digital can be applied to your business with a focus on driving significant business outcomes, which can be documented in a clear and succinct business case. Next, Invigorate these capabilities through defining a phased journey that recognizes the multiple digital solutions. These solutions can be delivered with clear stages of delivered benefits on route to the business transformation. Finally, Initiate the plan with clear governance and decision-making to maintain momentum across the initiatives. This oversight drive benefits realization and where necessary, spurs the capability to “fail fast” and move on.
Enabling infrastructure – Digital is not just a focus on new gadgets and gizmos; rather, it is about changing the way we work. However, technology remains a key enabler and we need to orchestrate the combinatory benefits of deploying multiple technologies while managing the key risks of security and data resilience. It is therefore critical to put in place platforms and operating models to address the consequences of digital convergence across: the business information technology applications and social media; the operational technologies of mission-critical control, automation and real-time systems; and the engineering data systems.
Organization and culture – In our experience, achieving business value is dependent on establishing the right behaviors across the organization. This includes developing new skills such as design thinking, agility and collaboration, as well as rethinking the approach to innovation with a reward system that gives “permission” to fail fast or, “adjust and scale-fast” once proven. Additionally, building a digital organization (including new digital hubs that are not constrained by legacy corporate rules) consists of new eco-systems that can exploit the value of digital through partnerships, alliances and sometimes even relationships with so-called “frenemies.”
It is these three key actions that leading oil and gas companies can use to start their digital journey. The world around us, in our day-to-day lives and across our peer groups, is moving to digital. And this move is only getting faster and faster. We cannot afford to wait and see… oil and gas companies need to start the digital journey.