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PwC | EEC Accelerating tangible innovation | 1
Digital crossroads:
How can energy companies accelerate innovation with more impact?
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The digital crossroads Growing pains and a sense of urgency
We believe the oil and gas sector is at a critical juncture in terms of digitization.
Most energy companies have developed to some degree a digital vision, strategy and roadmap. Larger energy companies have also delivered technology-driven pilots, but scaling up these initiatives while maintaining ongoing operations is challenging. Most mid-sized energy companies are now initiating proofs of concept in digital, documenting use cases, building momentum and preparing for scale with much smaller budgets.
Yet, despite the widespread knowledge of technologies and use cases, and some successful pilots, little has been scaled up and applied to the field worker and back-office employee across assets and geographies. Energy executives are asking initiatives to be tangible, concrete and deliver a bottom-line impact quickly. So how should smaller energy companies convert this “tsunami” of use cases into practical applications at scale?
For those companies at this crossroads, they need to find solutions to develop and scale up digital solutions quickly and successfully. Over the next few years, only time will tell whether energy companies, especially the mid-sized ones, can successfully move from strategy to deploying digital solutions at scale with the promised and measurable benefits. We also observe that there is a significant learning potential from the digital front runners, such as Equinor and AkerBP. Based on these learnings mid-sized energy companies now have the opportunity to “leap-frog” the early stages of evolution, and rapidly secure value realization from their digital initiatives.
This paper offers companies a “hands on” approach to delivering digital and is aimed particularly at the mid-sized energy companies.
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The digital playing fieldsWe see the execution of digital as a journey from strategy and core business problems to bottom-line value realization. The following framework allows digital leaders to map out the playing fields of digital. We can summarize the key areas as follows:
Strategy: A process to identify business value and core improvement areas
Discovery: A process to take those improvement areas, identify root causes, ideate solutions and prototype, test, discard and validate concepts
Development: A process to take validated concepts into digital products and pilots
Scale: A process to take pilots and realize value across assets and geographies
Enablement layer: A foundation to digital transformation, including leadership, operating model, data management, IT infrastructure and digital competence, among others.
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We believe that the “battle” for value realization is being played out by many players at the digital crossroads. The digital crossroads refers to the stage between a successful pilot and a full implementation at scale with value realization at the bottom-line.
We see three major themes that typically prevent a company from passing the digital crossroads:
The wrong value proposition
We have seen over the last few years, many teams starting with a solution and releasing a product after a long development period… just to realize that the end user did not want the product.
Taking a step-back and making sure we are executing on corporate strategy and the right business and user needs will ensure users are on-boarded and longing for their preferred solution and the minimum set of specifications remains unchanged.
Lack of focus on scale mechanisms
Many leaders think that the major costs incurred for digital solutions is during the development phase. At PwC, we believe development time can be drastically reduced through the use of data contextualization and low-code platforms, by this we mean user interfaces that generate code by just “drag and drop” both software components and data. However, the effort required in changing work processes and ways of working to adopt new digital workflows cannot be underestimated.
The role of change management is fundamental here. Change managers and leaders will require resources and longer timelines to be able to integrate these new digital workflows, sometimes completely substituting existing processes.
With the adoption of digital solutions at scale, also comes the cost of running and maintaining new applications, as well as supporting the new workflows through customer service and new feature requirements. DevOps (Development & Operations) can be a nightmare for IT managers without exposure to SaaS (Software as a Service) offerings. However, new low-code frameworks and digital platforms for customer servicing will enable full scalability of digital solutions without exponentially increasing IT and service costs.
Weak digital foundations
Last but not least, leaders must continue their work on the digital transformation, including critical parts like data management, the journey to cloud, organizational structures, a digital operating model, IT transformation, and digital upskilling, among others. The lack of these foundations will slow down the speed of adoption and success once companies reach the digital crossroads.
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The innovation factoryInnovation journeys PwC has leveraged its understanding of clients’ challenges, proprietary frameworks and a physical space, the Energy Experience Center, to help our clients deliver accelerated and tangible innovation.
Over the last years, lessons learned from fast-growing technology companies have paved the way for an entirely new understanding of how to innovate and scale innovation into competitive advantage. Here there are the six principles we believe in to execute and scale digital.
Shifting the mindset Large-scale innovation and digitization require a paradigm shift in leadership, culture and work processes. Senior management needs to adopt a new mindset and a strong frame of reference. Leaders must master the ability to provide vision, trust and communicate to teams what creates value.
They should also be patient, let go of control and accept the fact that teams will perform experiments, which includes failing in “controlled tests”. They should also master storytelling to communicate success, keep stamina high to endure uncertainty, and manage the complexity of stakeholder management, existing corporate structures and operating model.
Ultimately. top leaders must wear different “hats” or mindsets across the value chain, enabling a portfolio of risk behaviours, and structures around them.
Aligning the digital portfolio Managing innovation is about solving problems that generate business value and competitive advantage. Corporate strategy should drive the agenda to focus on the most value adding activities and key bottlenecks.
Once we have an array of areas to explore, digital leaders should start acting more like venture capitalists, investing small amounts of money on promising concepts, and evolving them over time through a series of decision gates. Innovation accounting is a powerful tool. It allows executives to stop initiatives not worth pursuing as early as possible, saving resources for the initiatives that can scale and create the most value.
Shifting the mindset
Aligning the digital portfolio
New ways of working make
progress tangible
A mandate for multi disciplinary
teams
Accelerating through technol-ogy and change
management
Leveraging the ecosystem
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New ways of working make it tangible Executives are starting to understand the power of new ways of working like design thinking and ‘agile’. Design thinking focuses on finding the right problem-solution fit, and tangible prototypes to test with employees. Agile focuses on team building and communication, and it can deliver quickly a solution with the minimum requirements to start running a pilot, and prove that the concept has potential for scale.
The concept of “Minimum Viable Products” and launching small pilots in the organization is central here, building momentum and success stories. This paves the way for scaling up with concrete implementation plans, change management and product roadmaps.
A mandate for multi disciplinary teams It is critical to give a clear mandate to teams, giving them 100% of their time to innovate and not be crippled by typical reporting and work processes. This does not mean being isolated, in fact, ring-fencing can make distance between the digital team and the actual business and user needs.
Digital leaders must also ensure disciplines from business, technology and user-experience are all present, as innovation happens when different perspectives come together.
We observe that these teams require skills and competencies that are often not available in-house. Therefore, accessing, and acquiring talent on-demand is essential for innovation success.
Accelerating through technology and change management We see that corporations should spend more time on strategy, problem definition, prototyping and testing, and leverage change management and the latest technology and automations to speed up digital product development and operations maintenance.
According to Gartner (2019), “By 2024, low-code application development will be responsible for more than 65% of application development activity.” That is why PwC has partnered with OutSystems to accelerate production and reduce the cost on application maintenance.
We believe also that data contextualization platforms like Cognite are well positioned to feed quality-assured data to low-code platforms, making it an attractive value proposition for rapid development.
Last but not least, the role of scale strategies, change management, roadmaps and program roll-outs are more critical than ever to realize the value potential earlier.
Utilize the ecosystem Setting up ecosystems for topics like data, innovation and digital adoption is uncommon, but promising. The Norwegian Continental Shelf is an example of how to leverage an ecosystem for innovation and establish collaboration between energy companies. Leaders must be open to industry collaboration, external digital expertise and open-data schemes. Mid-sized companies can benefit from cooperation, even venturing and risk-sharing schemes, as others are facing similar problems.
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The innovation factory: the Energy Experience Center The concept of innovation factory is delivered through The Energy Experience Center located at PwC in Stavanger. Almost three hundred square meters of prime space including three sprint rooms for innovation workshops, and a development space for agile teams. The Energy Experience Center is also intended to act as hub for the ecosystem, hosting talks on success stories and different technology developments. The shared innovation factory generates a lot of learning, which PwC captures in blueprints, libraries and software components to be shared across the industry.
Over the last year, The Energy Experience Center has proven its value with a wide variety of clients, from mid-size oil and gas companies to fintech startups. We believe in the principles stated above and in The Energy Experience Center, as an innovation factory that can deliver accelerated tangible innovation “on-demand”, for large, but especially for middle-sized energy companies without the luxury of resources to spare.
“We are bringing energy professionals and multiple companies together in our innovation hub, because we believe there is a huge potential in co-innovation. Not only within a company but also crossing organizational boundaries solving challenges with peers, JV partners and competitors,”
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Eirik Rasmussen is a partner with PwC Norway and is based in Stavanger. He has more than 25 years of experience as a strategy and business advisor. In recent years, he has been working with national and global oil and gas companies as an advisor and subject matter expert on business management system and governance projects.
Contact Eirik Rasmussen
Partner, PwC Norway + 47 9526-1193
Martin Gallardo is a senior manager and innovation lead with PwC Norway and is based in Stavanger. He has over 9 years of experience working with data and business advisory in the energy sector. Over the last years, he has been focusing exclusively on innovation and delivering digital transformations, digital experiences and new ways of working. He has been working as an advisor for the Digital Center of Excellence in Equinor, and now spends his time running innovation workshops and digital projects across sectors.
Martin Gallardo
Eirik Rasmussen
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