When it comes to operational excellence, hazardous industries say: Let’s get digital

Special from Sphera

illustration: Sphera
illustration: Sphera

Operational Excellence & Digital Transformation Strategies in Hazardous Industries
2018/19 Status Update – Operational Excellence Index.

As our third-annual Operational Excellence Index shows, digital transformation is upon us. As companies look for new ways to keep their people safe, their operations productive and their products sustainable, being able to tap into and monitor data from Industry 4.0 solutions will be a major differentiator for organisations looking to separate themselves from the competition. It’s not surprising that 90 percent of the people who responded to this survey agree that digital technology will accelerate Operational Excellence. We couldn’t agree more. Sphera believes digital transformation is the wave of the future for Operational Risk mitigation.

Paul Marushka
Sphera President and CEO

Now in its third year, Sphera’s annual OEI survey of hazardous industry professionals looks at changing attitudes to operational excellence (OE) and measures progress towards its adoption. This year’s findings reveal how senior leaders are deploying technologies to support their OE initiatives, where they are coming up short, and what they could do to improve.

Scott Lehmann
VP, Product Management, ORM for Operations

It’s clear: digital is the future
There is no doubt digital transformation is fuelling operational excellence. 90 percent of industry leaders agree digital transformation will accelerate their ability to achieve operational excellence – not just as a one-off target, but as a sustainable way of doing business. This is a stark increase from 2017, when 73% of leaders reported the same.

What’s more, the main objectives for digital transformation are fully aligned with widely recognised business objectives within the industry: 73 percent of this year’s survey respondents cited operational excellence as the key objective of their plans for digital transformation, with 55 percent aiming to reduce or manage operational risk, and a further 55 percent aiming to improve asset availability and uptime.

In other words, digital transformation and OE are acknowledged to be intimately connected to the bottom line, and long-term efficiency and profitability.

As a recent report from Accenture Strategy on the oil and gas industry acknowledged: “The right digital approach can produce an EBITDA improvement of 30-35 percent*.”

  • 90% – Industry leaders agree digital transformation will accelerate the ability to achieve operation excellence
  • 73% cited operational excellence as the key objective of their plans for digital transformation
90 percent of industry leaders agree digital transformation will accelerate their ability to achieve operational excellence
90 percent of industry leaders agree digital transformation will accelerate their ability to achieve operational excellence (photo: Sphera)

It’s all about the insight from across the organisation
It is also recognised that digital insights will, in effect, become the feedstock of operational excellence of the future. Looking at the way technology is leveraged today; 58 percent say it delivers key performance indicators (KPIs) and metrics that reflect the operational reality. A further 45 percent say it improves prioritisation and planning, while 44 percent say it delivers predictive analytics that keep assets up and running.

  • 58% say it delivers key performance indicators (KPIs) and metrics
  • 45% say it improves prioritisation and planning
  • 44% say it delivers predictive analytics that keep assets up and running

Looking to the future, 75 percent say it will create new, insight-driven business processes across various functions. More specifically, 70 percent say digital twins will enable modelling that simulates what-if scenarios for better planning and informed decision-making.

Nearly the same number – 69 percent – say it will connect disparate data as well as separate systems that will create truly actionable insights. Meanwhile, 65 percent say technology will provide advanced analytics that will enable them to better understand where to make operational improvements.

  • 75% say it will create new, insight-driven business processes across various functions
  • 70% say digital twins will enable modelling that simulates what-if scenarios for better planning and informed decision-making
  • 69% say it will connect disparate data as well as separate systems that will create truly actionable insights
  • 65% say technology will provide advanced analytics that will enable them to better understand where to make operational improvements

But – confusion and contradiction still prevail

Survey respondent insight:“Companies must first understand what digital transformation means before investing in implementing it wrongly!”

The future certainly looks bright. Nonetheless, there are hurdles to overcome. Operators are moving slowly and still trying to figure out the path they need to follow: indeed, 69 percent of survey respondents said that their company is only just starting or is currently implementing digital transformation projects, while 53 percent believe their company is still trying to figure out what “digital transformation” means to them.

Again, this reflects Accenture Strategy’s report, which stated that: “58 percent of energy company leaders – the highest percentage of any industry group – admit that they don’t know how to keep pace with technology innovations.”

  • 69% of survey respondents said that their company is only just starting or is currently implementing digital transformation projects
  • 53% believe their company is still trying to figure out what ‘digital transformation’ means to them
illustration: Sphera
illustration: Sphera

Some ambitions are unclear
This is perhaps to be expected when digitalisation and digital transformation can be interpreted in different ways. There can be a disparity of perspectives within an organisation as to what its digital ambitions are – or should be. For some, digitalisation involves tweaking at the edges and automating standard, paper-based processes (the paper-on-glass approach). For others, it’s a far more disruptive force that will impact the entire business and operating model. For many, it is something in between.

This may account for the relatively low seven percent who suggested they were securing sustained return on investment from their digital transformation projects: firms that are still to establish what digital transformation means to them are unlikely to see long-term results.

Nonetheless, all this points to a wider issue: the starting gun has been fired on the race to second place. The earliest adopters have taken the risk and are learning lessons.

Digitalisation is no easy feat, but no one wants to be the last out of the gate – that’s a possibility a significant number of firms across the hazardous industry sectors are facing.

Survey respondent insight:“When it comes to digitalisation across industries – it can be compared to a marathon. There are frontrunners (pioneers) and plodders (denial and resistance). There are those that “get it” and those that never will … until it becomes the norm.

* Oil and Gas: Moving from high hopes to higher value. Accenture Strategy, 2018.

Read part two of this analysis at Digital transformation in the hazardous industries: A holistic approach is key

View the full report and results from the 2018/2019 Operational Excellence Index.