A Framework for Digital Transformation in Oil and Gas
by Adam Hutchinson, Special Contributor
Heightened interest exists in Digital Transformation across all industry sectors. This is certainly true for Oil and Gas, where there is a strong consensus among operators, vendors, and consultants that Digital Transformation is nothing less than a business imperative. Ironically, there is less agreement as to what Digital Transformation is, why operators should pursue it, or even what it might look like when you get there.
In this blog, we'll address some of these basic questions. We'll lift the veil—at least partially—on the concept of Digital Transformation. My goal in the process is to offer a framework for creating and executing a Digital Strategy.
What Is Digital Transformation
Google “digital transformation” and you’ll find a slew of definitions. My personal version is this: Digital Transformation is the application of information technologies to create or alter business processes, culture, and user experiences to drive greater profitability, efficiency, and transparency.
The first word, "digital", appears to put the greatest emphasis on technology. But I believe the second word, "transformation", is the key to the concept. Digital Transformation is not necessarily about new technology or technology swaps or implementations. Rather, it’s about changing the organization incrementally, over time, and for the better.
The best way to look at Digital Transformation is as a positive organizational change: a conscious, fundamental shift that impacts your culture, your data (structured and unstructured), your systems, and your processes (both business and technical).
In fact, perhaps a better way to think about Digital Transformation is to mentally replace the word "digital" with the word "business". In other words, to transform digitally is to transform your business. More important, transformation is an ongoing process. It’s really about setting a direction for a long-term journey.
You might be thinking that all this journey talk sounds great, but where are the practical benefits of transformation? Here are a few of high-level strategic objectives that justify setting out on a Digital Transformation journey:
• Ability to make more informed decision-making quicker
• Reduced dependence on support organizations
• Process optimization throughout the well life cycle
• Creation of a self-empowered, data-driven culture that drives innovation
Of course, strategies will vary from company to company, and each strategy will generate quantifiable objectives. But what is important is to craft these high-level goals upfront, to evangelize them across your organization, to monitor and evaluate your progress regularly, and to be open to making adjustments.
Here are the specific questions I ask my clients to consider before embarking on a Digital Transformation journey:
• Do you know the maturity level of your process, data, technology, and culture?
• Do you understand how your data flows across the organization?
• Does your essential data match across systems?
• Does your culture embrace change and innovation?
• Do you have the right organizational alignment to support a digital initiative?
• Do you have a strategic plan that has been communicated, understood, and supported?
By assessing your levels of readiness upfront, you’ll be able to build a better overall go-forward plan. Remember that the goal is to build a digital plan based on defined priorities, so that you have less risk of trying to do too much or “boiling the ocean.” And keep in mind that Digital Transformation is a journey--a process. A quote by the great college basketball coach John Wooden can easier be applied to your digital strategy: “Be quick, but don’t hurry.”
The Essentials for Your Digital Journey
The first thing my clients typically ask me about Digital Transformation is where to start. I recommend creating a planning framework made up of three core action items.
Create your vision. Having a strategic roadmap built on a shared vision ensures that all stakeholders—from the corporate office to the oilfield—are on the same page and marching towards the same North Star. Your vision-driven mission will encompass the entire organization ecosystem, i.e., people, process, data, and technology. It should be driven by a cross-departmental, executive sponsorship team. This structure helps ensure that no one is left out. Plus, it serves as a constant reminder of why you are on this journey.
A word to the wise. Developing a strategic roadmap sounds scary and cumbersome. It is important to break it down into bite-sized chunks. This effort is typically a multi-year approach, so we should prioritize as such.
As an example, let’s say you break up your journey into three phases using a house-building analogy. In phase one, you establish your digital foundation by focusing on getting your data management house in order. In phase two, you build your house by optimizing processes and creating standardization where possible. For phase three, you water your yard by focusing on specific high-value areas and capabilities.
The house analogy works because it focuses you on getting your digital data foundation built first, then following your digital blueprint in a logical order. We don’t want to be watering the yard before we’ve even backed the concrete truck up to build the slab. If we do, the odds are we will just have to redo the landscaping.
Execute your plan. As we’ve discussed, your digital plan involves all parts of your organization: people, process, data, and technology. Keeping tabs on each area will involve developing an Organizational Change Management (OCM) competency.
For instance, for your people, your digital plan should take organizational alignment into account. This could be in the form of new or repurposed teams with responsibilities around data governance, data quality, or innovation. For process, you will need to understand what your new business processes will look like and provide training. As for data, you will begin to create data quality standards, rules, and metrics, and then define your business critical data and data ownership. From a technology perspective, this could mean new system implementation for master data management, analytics and dashboards, new integration methodologies, or perhaps moving data and processes to the cloud.
Evaluate your progress. As you complete each item on the roadmap, you must sustain it and keep the momentum going. You will need to be able to measure via metrics and KPIs. Focus on tracking only the metrics that matter, as well as those that are easily understood by all across the organization. By asking the proper questions while assessing early in the journey, it will make it easier to quantify during sustainment.
Remember that Digital Transformation is a program, not a project. You should expect to need to make adjustments as you govern the initiative and monitor outcomes. Plus, as new technologies and capabilities change and increase, you should continually look to improve your technical tool sets.
It’s About Making a Commitment
Remember that the goal of your Digital Transformation initiative is to transform your culture. To be clear, we’re talking about a fundamental change in your organization’s DNA. Changing an organization’s behavior takes time.
The key is organizational commitment to your digital strategy. Truth be told, you will likely second-guess yourself along the way. That’s a natural occurrence, and it’s probably a good thing as it keeps your mind open to new possibilities. The important thing is to keep moving ahead, even if it’s only small steps. For my clients, I often use words of encouragement from Rocky Balboa in the movie Creed: “One step at a time, one punch at a time, one round at a time.”
Good luck on your journey!
About the author: Mr. Hutchinson is the President of Stonebridge Consulting, a next-generation consulting services firm dedicated solely to the energy sector. The company , a subsidiary of Sierra Digital, enables upstream, midstream, downstream, utilities, renewables, and field services companies to get lean and stay lean in today’s dynamic energy market. Adam has 20+ years of data management experience in the oil and gas industry. In his current role, he specializes in developing data management strategies and plans to aid companies in a successful digital journey.
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