In our last blog, we discussed the role digital technologies have played over time within the energy industry, and why they have not yet achieved full acceptance and utilization. The Covid-19 pandemic has pushed industries to accelerate digital transformation faster than anyone expected, but can leaders make these initiatives stick after the crisis has passed?
Based on our experience deploying digital solutions in the energy industry for more than a decade, here are four themes we suggest leaders focus on:
Business transformation is the strategy, digitization is the tactic. Companies on a “digital transformation journey” often confuse strategy and tactics. A strategy is a company’s long term goal and the high-level plans for achieving that objective. Tactics are the specific means by which the goal is achieved. Digitalization is not a strategy, it is a means to an end.
For example, an operator might have a goal of reducing unplanned downtime at its facilities, a strategy of achieving that by improving quality assurance of safety-critical work activities, and the tactic of implementing a cloud-hosted, IoT solution to monitor work quality in the field. Following implementation of the new technology, management will be able to draw a straight line from the tactic of implementing the digital solution, to the strategy of improving quality assurance, to the business objective of reducing unplanned downtime, and evaluate the success or failure of the initiative accordingly.
By contrast, if digitization is treated as a strategy, employees are incentivized to implement new technologies for their own sake, not because they drive business results. Once the initial excitement has dissipated, management will be unable to discern the ultimate business value, which will inevitably result in the abandonment of the initiative.
A single implementation is not a transformation. Too often, leaders are quick to celebrate a successful digital transformation after a system is implemented a handful of times. The sponsors of the technology quickly ride their success into bigger and more visible roles, and further replication of the technology becomes someone else’s responsibility. Companies should discourage this short term thinking by not placing too much emphasis on early successes. Digital transformation is a marathon, not a sprint. Incentivize a culture of long-term planning and end-to-end ownership that makes a full enterprise deployment more likely.
Reward responsible risk-taking. Process industries are inherently risk-averse, usually with good reason since the consequences of missteps can be severe. Yet this conservatism often stymies digital transformation initiatives by making managers feel they are risking their careers by trying something new. Trying something new does not necessarily mean being irresponsible. Operators should recognize and reward managers who try new things in a responsible way, regardless of the ultimate success or failure of the attempt. Reward the effort, not only the outcome.
Empower the front line to try new things. Technology initiatives are often jealously controlled by central IT and innovation departments who are disconnected from the day to day challenges of the front line. In our experience, end users in the field are underutilized advocates for change. Skilled craft workers want their jobs to be safe and efficient and are keenly aware of the problems that get in their way. Give them a budget and corporate air cover to try new things. You will be surprised by their ingenuity and openness to change.
Framing digitization in the proper strategic context, creating the right incentive structure, and empowering end-users to try new things will make digital transformation stick and help our industry come out of the Covid-19 crisis safer, more efficient, and stronger than ever.