The Long and Tough Road to Digital Transformation for Oil and Gas Companies (Part 1)

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The key takeaway for all of these is that oil and gas companies might find it easy to fail with their digital transformations, but that is to be expected.

In IT, there are times when the C-suite and other stakeholders try to figure out if something is worth doing. One of these areas is digital transformation. Evidently, the figures point to doing digital or dying out.

In fact, according to IDC, a good majority or 85 percent of decision makers agree that you only have two years to make digital transformation a reality at your organization, or you will seriously fall behind.

A third of all companies have successfully transformed themselves digitally, while more than four out of 10 companies have a digital-first approach for their customer experience. Around 56 percent of CEOs confirmed that digital upgrades have contributed to their bottom lines.

What’s more, research company Forrester has come out with a pronouncement that 2019 is the year when digital transformation crosses over from just aspirations and plans to practical actions. Forrester expects digital transformation to help companies address crucial issues such as data governance, aging brands, and technical debt.

Enter the oil and gas companies

Others may say that digital transformation is a must for every company, but there are industries where things may not be as easy as you would like it to be. For instance, the oil and gas industry surely needs help.

It has prompted some companies to ask whether all that effort, planning, and expense are going to be worth it in the long run. They do not see a tangible benefit at scale. But for those who have succeeded in implementing digital across their businesses, as opposed to those who employ it in single-use cases, they are now reaping the fruits of their hard labor.

For instance, digital has reduced data interpretation cost and time during the exploration period by anywhere from 50 to 60 percent. When it comes to field development, they have seen a maximum of 70 percent reduction in engineering hours.

Digital has also made it possible to accelerate drilling by anywhere from 20 to 30 percent, allowing these companies to find productive wells faster. Furthermore, these companies have reported a three to five percent increase in production, and 20 to 40 percent lower maintenance expenses.

Unique challenges

But why are oil and gas companies and every enterprises in the supply chain finding it challenging to go digital? The short answer is that there are challenges that are unique to this industry.

These companies are safety conscious, and frequently, they are focused on projects. This mindset has led them to value predictability and flawless execution. Even the higher-ups have a hard time implementing agile measures within the prevailing culture.

What’s more, a lot of these organizations think that they are already “modernized” and even digital. The reason for this flawed thinking is the fact that they have been using data processing and automation far longer than most companies. They have mistakenly thought that they were digital natives.

All of these realities have resulted in the industry having a slower adoption of digital technologies than other companies. This is especially true when oil and gas companies are compared to the finance and consumer goods sectors.

It’s not just the mindset that needs to change. The oil and gas sector is also plagued by a structure that does not embrace digital all too readily. These companies depend on other companies to do critical activities, such as oilfield services, engineering, construction, and procurement firms. As such, one company is interdependent on others.

This kind of interdependence makes it difficult for a company to change or transform. What’s more, you also have issues stemming from mergers, acquisitions, and decentralization such as legacy systems, localized management technologies, and others. All of these standalone, outdated, and proprietary systems make it more difficult for oil and gas companies to go digital.

The good news: Seven things that oil and gas companies should do to succeed with their digital transformation

Even with these challenges and problems that oil and gas companies have when they go digital, it does not mean that there is no way for them to succeed. They should still strive to implement digital solutions for every part of the business.

As such, they should treat it like how they would handle any significant business transformation. But first, the hard truth: Most digital initiatives are doomed to fail.

A somewhat recent statistic has shown that while digital transformation is the next big thing, and that companies are rushing into it, everything might not be as kosher as some people might lead you to believe. In fact, more than 8 in every 10 companies, or 84 percent, will fail at their digital efforts.

Seven things are common to all digital transformation success stories. These are:

  1. Creating a bold vision from the top down. The entire organization should be excited about digital solutions and how these can help meet your goals. But the initiative should come from the C-suite.
  2. Have a balanced digital plan that is owned by the business. You should have use cases, know which of these use cases are going to go first. What’s more, you should have big-value grand initiatives interspersed with smaller goals.
  3. Be holistic and pragmatic when it comes to IT and data. Utilizing your data first before you design and build your data platform helps.
  4. Focus more on change management to succeed in digital transformation.
  5. Understand that digital needs a different company culture and mindset. Make it a priority to encourage fast decision-making, fail-fast mentality, and agility.
  6. Look to the future and fuel your digital transformation with in-house talents. You should have in-house digital capabilities rather than being dependent on an outside company for your digital change.
  7. Encourage strong governance and value creation. If your uses cases fail, kill it immediately, while giving more time and resources to those that succeed.

* * *

In the next installment (second part of this article), we will be focusing on each of these seven imperatives in a more in-depth manner. The key takeaway for all of these is that oil and gas companies might find it easy to fail with their digital transformations, but that is to be expected.

These companies have their own unique set of challenges. However, success is not that far off with these seven musts for digital transformation.

Photo courtesy of BASF.


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