In the Boardroom

In the Boardroom

Making the journey: Five questions for energy and mining executives

to ask about their organizations’ digital strategies.

By Andy MacRae and Brian Bayne

Energy and mining companies are among the early adopters of digital technologies. However, many organizations have only scratched the surface when it comes to harnessing the full potential of digital. The most important investment for companies looking to move from digital awareness to full digitization is finding the right executives to lead the transformation.

In Russell Reynolds’ “2018 Digital Pulse Survey,” 79 percent of the surveyed oil and gas and mining executives said that their digital strategy is not embedded across the organization. Canvassing the landscape of early adopters, most digitization efforts have related to improving operational performance and enhancing safety.

The next wave in digitization will focus on integrated process views, complex scenario-based planning and data pattern recognition at levels and speeds beyond human capacity. The industry will see vast improvements and transformative change across a number of areas, including real-time preventive maintenance, product and service digitization, supply chain integration and early warning systems for plant disruptions. Achieving these next-level results is not easy and will require significant focus and investment in new skills and capabilities.

Digital Transformation Leaders

Unlike other executives, digital transformation leaders have a very unique profile. Through in-depth analysis and research, we found that digital leaders are characterized by their disruptive orientation and their ability to approach the business in unconventional ways.

These out-of-the-box thinkers will challenge traditional approaches while infusing creative problem-solving and innovative solutions into the organization. They tend to be bold risk takers who persevere in the face of challenges and move optimistically into new areas. These “lead from the front” executives possess a relentless commitment to higher standards, and their resilience and determination will have a galvanizing impact on the broader organization and culture.

Every organization will make a different journey toward digitization; however, our conversations with senior industry executives revealed five questions that are critical in setting up for a successful digital transformation.

1. Where are we on our digital journey?

In our Digital Pulse Survey, 49 percent of the oil and gas and mining executives said their organizations use digital technologies but do not have an integrated, strategic approach to leveraging their value. Investments in automation and new ways to collect, store and leverage existing data have been the most significant areas of digital investment for natural resources companies.

These investments have allowed companies to collect more data and utilize the data to operate more efficiently. However, most companies operate in silos, and industry executives agree that the lack of organization-wide integration of digital limits their ability to more fully benefit from the data they collect.

2. What is our digital strategy?

Less than a third (28 percent) of oil and gas and mining executives in the survey reported that they fully understood their firms’ strategies and approaches to digital. A clearly defined digital strategy that aligns with the business strategy will facilitate an organization’s ability to realize its strategic goals and maintain a competitive advantage. An awareness of the digital capabilities in other sectors will be critical to the success of oil and gas and mining companies, as much of the improvement potential from digital/data can be realized by adopting proven capabilities from other industries.

3. Does our current digital organizational model align with our strategy?

Ninety-three percent of oil and gas and mining executives do not think their organization is structured effectively to optimize new opportunities that digital presents. The digitization of the industry will change the way that oil and gas and mining companies do business.

There are three main organizational models to drive digital business: centralized, decentralized and hybrid. Most organizations start with a separate unit to drive digitization and evolve into a hybrid model over time. The key to organizational success is first understanding the digital disruptors in the ecosystem and how they will impact the industry, and then creating an adaptable organizational model to capture the opportunities.

4. Do we have the right talent to execute our digital strategy?

Only 25 percent of oil and gas and mining executives strongly agreed that their organization has the right people to define their digital strategy, and only 18 percent strongly agreed that the organization has the right people to execute the digital strategy. The evaluation of organizational structure and its ability to execute against the digital strategy will expose talent gaps within an organization.

Beyond technical skills, digitization of an organization requires new sets of competencies from its workforce. Collaboration, openness, understanding the art of the possible, influencing skills and the ability to execute in complex structures should be prioritized competencies. Organizations will need to assess their current teams against new sets of digital competencies and skill-sets. We also expect company boards to add digital capabilities to oversee the strategy and transformation.

5. Does our company have a culture of adoption and integration?

Of the executives who participated in our survey, only 17 percent strongly agreed that their organization has the right culture to achieve digital strategy.

Ultimately, creating a culture that is conducive to constant change is key to a successful digital journey. Leaders, both at the board and executive committee levels, will need to become more digitally aware in order to focus on developing agile processes and cross-functional collaboration, building inclusive cultures and aligning succession plans with digitization strategies.

The best way to embrace this fast pace of change is to create a culture that encourages and rewards innovation and the testing of new ideas. This also creates a learning culture and one that will adopt new ideas and leverage the best from other industries and integrate them into their own company to drive results.

Although the trends and directions toward a digital enterprise are clear, it is important to emphasize that this journey is a multi-year process. Transformation at this level of complexity and of this duration are only successful when the right leadership teams are in place and supported by a culture ready to embrace the future. 

Andy MacRae is a consultant at Russell Reynolds Associates’ Calgary office and Brian Bayne is a consultant at Russell Reynolds’ Houston office.

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