Digital transformation in the hazardous industries: A holistic approach is key

Special from Sphera

illustration: Sphera
illustration: Sphera

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

In this second part of the highlights from the Sphera survey, the path forward, towards digital transformation, becomes more clear.

There are very real challenges to overcome

Survey respondent insight:“[Digital transformation] requires support from the highest levels with a vision and willingness at all other levels to be part of the solution and support.”

This year’s survey also highlighted what senior leaders believe to be the major barriers to advancing digital transformation projects. Nearly half (47 percent) say it is the corporate culture, for 38 percent it is budget or investment priorities, while 31 percent say it is due to a lack of digital expertise within the organisation. For 28 percent, effective leadership is missing.

As these numbers indicate, there is something of a vicious circle at play here. Without digital expertise, for example, the culture is unlikely to change. Survey respondents believe stakeholders, across the board, need to get involved in digital transformation, with the greatest need coming from regional head(s) at 55 percent and frontline operations and maintenance at 60 percent. But without a changing culture, digital expertise is unlikely to be hired or new budget allocated. All of which points to the absolute necessity of effective leadership as the cornerstone of digital transformation projects.

And culture and technology are intertwined

Survey respondent insight:“Technology is a distraction. Many organisations are held back by the terminology and lack of a plan that is relevant to their specific goals.”

A deeper dive into the survey responses shows two distinct areas of concern that reflect these top line responses. The first is working culture. Only 37 percent believe organisations are fully integrated units and that people are generally able to work in a cross-functional manner. The fact that 57 percent also say operational decisions are made with single-function decision-support data is further evidence of the ‘silo’ problem that afflicts many organisations.

The second issue is approach to technology. Only 17 percent of respondents say they have embedded operational best practices into a cross-functional enterprise management system. The remaining 83 percent appear to correspond with Accenture Strategy’s report that 82 percent of oil and gas players still rely on legacy systems to improve their business agility. Either way, the lack of digital expertise – as distinct from IT expertise – is being felt directly: the marginal gains to be had from piecemeal implementations or from pushing existing technologies to the limits of their capability have been all but exhausted.

The OE survey also shows that only 41 percent have an enterprise-wide view of their digital transformation strategies, and according to 52 percent, evaluation and deployment of new technologies is still conducted at the level of an individual plant or asset, or on an ad hoc, case-by-case basis. The technology story reflects the cultural problem: siloed thinking, information, and decision-making has been enabled and driven by siloed systems.

  • 37% believe organisations are fully integrated units and that people are generally able to work in a cross-functional manner
  • 57% say operational decisions are made with single function decision-support data is further evidence of the “silo” problem
  • 17% say they have embedded operational best practices into a cross-functional enterprise management
  • 83% appear to correspond with Accenture Strategy’s report
  • 82% of oil and gas players still rely on legacy systems to improve their business agility
  • 41% have an enterprise-wide view of their digital transformation strategies
  • 52% of new technologies is still conducted at the level of an individual plant or asset, or on an ad hoc, case-by-case basis

Survey respondent insight:“In most cases, analysis is done separately, and outcomes are discussed separately. This limits the horizon of prediction and results are not long lasting.”

The good news: The path forward is clearer

Survey respondent insight:“Lasting results are best achieved by integrating the practices and processes into the enterprise system.”

There is a strong sense coming through from this year’s survey that the industry is on the brink of a major step forward when it comes to achieving operational excellence through digitalisation
There is a strong sense coming through from this year’s survey that the industry is on the brink of a major step forward when it comes to achieving operational excellence through digitalisation (photo: Sphera)

There is a strong sense coming through from this year’s survey that the industry is on the brink of a major step forward when it comes to achieving operational excellence through digitalisation. Digital integration is almost universally seen as the new baseline, and many of the building blocks are in place – data, systems, and business processes.

What’s more, there is growing recognition of what needs to be done to achieve these ambitions. With plenty of data now available, turning disparate information points into valuable insight is becoming a priority, and 75 percent of senior leaders now believe that creating new, insight-driven business processes across functions is key to OE.

On average, an impressive 94 percent believe digital transformation requires the integration of multiple disparate systems and tools. Above all, new cross-functional business processes are seen as fundamental: on average, 98 percent believe functional business process collaboration is essential for delivering operational excellence.

  • 75% of senior leaders now believe that creating new, insight-driven business processes across functions is key to OE
  • 94% believe digital transformation requires the integration of multiple disparate systems and tools. Above all, new cross-functional business processes are seen as fundamental
  • 98% believe functional business process collaboration is essential for delivering operational excellence

From here to there: A holistic approach

Survey respondent insight:“When considering how quickly technology is becoming available, it is important for companies looking to invest to understand how it will benefit the entire value chain, i.e. don’t restrict the business case to a single functional discipline.”

A joined-up approach that first looks at and reimagines business processes is essential for enabling digital insights that can power cross-functional working. The evolution of technology is accelerating, creating new possibilities for operators, and making it clearer what tools are most likely to be adopted as hazardous industries move towards their new future.

Digital insight will be powered by technology in key areas. Among senior industry leaders, the anticipated growth rate for predictive analytics is 211 percent. For Industrial Internet of Things (IIoT) platforms the anticipated growth rate is 363 percent; while the anticipated growth rate for digital twins is an impressive 440 percent. All of which point to a far more integrated, cross-functional future – and better decision-making from board-room to front-line.

  • 211% anticipated growth rate for predictive analytics
  • 363% Industrial Internet of Things (IIoT) platforms anticipated growth rate
  • 440% anticipated growth rate for digital twins

Survey respondent insight:“The best approach to digital is not to use technologies to close gaps that you know already exist. Rather, start with a blank sheet of paper and define what you need – and then assess the available technologies.”

Industry representation

illustration: Sphera
illustration: Sphera

Petrotechnics, a Sphera company, conducted the survey between October and November 2018, collecting 116 responses from a broad representation of functions, demographics and industries across the hazardous industries, including: oil, gas, chemicals, manufacturing, utilities, mining, engineering, and other sectors.

Over a third (38%) of respondents represented the upstream industry, 25% downstream and 13% petrochemicals. Midstream and chemicals accounted for the remainder. The survey also included respondents from each major region – specifically North America (32%), Middle East (27%), Europe (22%), Asia Pacific (12%), Africa (3%) and South America (3%).

Of the job functions, the most prominent was health and safety executive (15%), followed by operations (13%), asset management (9%), operational excellence (9%), planning & scheduling (7%) and data & information management (6%), executive management (6%), project management (4%), reliability (4%), strategy (4%), audit, risk & compliance (3%), maintenance (3%), plant management (1%), other (16%).

Read part one of this analysis at When it comes to operational excellence, hazardous industries say: Let’s get digital

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