By: Andrew Smart, Global Energy Industry Managing Director, Accenture
The digital transformation spans the whole of the value chain as well as encompassing the entire front, middle and back office of every step in the chain; so could not be broader. This is because we have the chance to consider how decision making can be improved and positioned from the edge of the digital network to the centres of command, and in so doing optimising and reintegrating our decision making frameworks based on improved data availability and real time analysis.
While an ever broadening range of technologies are more readily available, scalable and affordable than ever before, the rate limiting step is to accelerate the improvement cycle or clockspeed of our organisations and operations to take advantage of these new realities. For this you need to syncronise the digital or technology deployment cycle with your businesses ability to reengineer and improve. This may involve a variety of wavelengths to enable both incremental and step change improvements.
Linked to the change of pace is the ability to define the units of business around which these improvement cycles will be developed, tested and scaled. While standardisation always appears to offer economies of scale, simplication and pace are far greater value drivers in the context of digital deployment. As such the governance and trade offs of cost, risk and value need to set around units where the clock speed, operating models and value drivers can be aligned; for example the clock speed in retail should be much faster than in refining or upstream field development.
Another key aspect of the transformation is to both define the ‘Top of the Mountain’ or where you would like the digital transformation to take you, as well as the ‘Base Camp’ from which you are going to mount your ascent. Without both this vision and the clarity on the capabilities, governance and investment framework that need to be in place to move towards that vision progress is likely to fitful and fragmented.
To succeed in the new energy world, oil companies will need to reinvent to better exploit their assets, leverage value from their expertise and ecosystem investments, and reduce risks while continually optimising performance. They can do this by configuring their operating models for future agility and hyper-relevance, enabling them to better respond to changing market dynamics, adapt to consumer expectations; and meet stakeholder demands.
Organisations will also need to deliver not just personalised, but also individualised experiences to meet changing consumer expectations, as consumers become more “digitally mature”. They’ll have to adopt new capabilities, including becoming more “modular,” for example, giving employees space and permission to test and learn from new ideas and partnerships. They’ll also need to become more “human-centric,” with the aim to be an employer of choice for a new generation of talent, with strategies connected to a greater purpose.
To date, the digital transformation of core oil company capabilities has been largely disconnected and focused on improving efficiencies, but not generally at full scale. However, some technologies have now shifted from silos to the core of the business and given the collective prioritisation of digital technologies, every energy company will eventually converge on the same turning point—one where digital-era technology, which began as a differentiating advantage, is something expected from every business.
Much progress has been made and it is fair to say the desire to embrace new technologies and allow the organisation to trial and test them, has resulted in considerable value being identified and proven. That said it is also fair to say, few organisations have managed to embed agility and digital deployment into their on going operational improvement cycles.
The next era will be characterised by massive pressure as customers, employees and society make the need for agility to increase to respond to their fast evolving expectations. But it will also provide tremendous opportunities for those companies to maximise new digital technologies to enhance their decision making, making their operations more efficient and delivering the appropriate product, services and experience when it is required.
In the latest downturn, the industry lost hundreds of thousands of jobs globally with the oilfield services sector particularly impacted. Heavily dependent on engineering skills, oil and gas is a mature industry where the average employee is more likely to be older. What’s more, an Accenture report focusing on the topic of trust in the oil industry revealed that fewer than one in 10 recent college graduates want to work for energy companies, with sensitivity to environmental issues a growing concern for recruiters.
While oil companies might think they are making progress on their societal positioning, they still need to address trust and reputation issues. They need to wholeheartedly put society and citizens at the heart of their purpose, to help sustain their own workforces, attract new talent and ultimately lead the rotation to a new, more socially responsible energy system. Without this their role in this new system will be much smaller or not exist at all. While retooling the future oil company requires new skills to equip an efficient modern workforce, this is a big challenge as they seek to adopt new data and digital capabilities to enhance labour proficiency and optimise productivity.