Time to Rethink Your Digital Strategy?
Published on : Monday 30-11--0001
Trond Ellefsen elaborates upon the roadblocks faced by companies in the Digital Transformation Journey (DTJ).
“I tend to believe that the opportunities that are available to us in the hyper-connected world, are fantastic. However, those opportunities can only be unlocked if you realise that the world around you has changed fundamentally and that your actions go beyond incremental and shortsighted tactics…”
Based on our experience and research from the inside while working with both small and major E&P companies, ‘Digital Transformation’, or DT initiatives are now failing at an alarming rate. Over the past two years, we have consistently projected the failure rate for DT projects to become as much as 80%. Last week Harvard Business Review published supporting research by stating that 70% of digital transformation according to their research efforts don’t meet their goals. “83% of leaders struggle to make meaningful progress on their digital transformation,” according to Gartner. Of the $1.3 trillion that was spent on DT in 2018, it was estimated that $900 billion went to waste.
Both clients from across E&P operators and some of the largest management consultancy companies have lately turned to Invatare for strategic advice to re-shape their own attack vector towards an industry very few have a good picture of how to handle when it comes to successful digital transformation. What we discovered from working with clients that turned to us in need of a corrective path for their digital strategy was that their DT projects for the most were just small pointed patches applied on top of legacy technology. The projects did not change the culture or behaviour, did not give better answers, did not make it safer or provide a significant increase in the production throughput.
Opposite of everything that was expected and promised, many of the companies have spent millions of dollars without seeing any significant improvements in their corporate performance. It is safe to say that we are now moving down from the peak of overinflated expectations into the trough of disillusionment as Gartner Group describe so well in their "hype cycle". While many companies are still in denial from not failing fast enough, the early adopters are starting to recover from their first digital hangover.
Knock... Knock... Is now a good time to rethink your digital strategy?
The historical canvas
In some of my earlier publications and keynote presentations, I have often referred the Chinese General Sun Tzu (544 BC-496 BC) and his book ‘Art of War’ for supporting thinking and quotes to emphasise among others how short-sighted tactics can quickly erode your long-term objectives.
Overall, for decades most companies have been looking towards advances in new technology to help drive better margins. Digital technology advancements and innovation have, and still are identified as a core enabler across industry verticals to significantly transform a business’ competitiveness and boost the ability to increase profits far beyond what is possible with incremental improvements.
Up until about 2007, the velocity of the technology evolution happened along a controlled, almost linear and predictable path. Around this period a major technological pattern shift occurred. Multiple combined forces computing power, storage, collaboration networks along with companies such as Google and Apple opened up a new ripple in the fabric of the technology evolution. With global cross-pollination of knowledge, the forces that fuelled the old conventional thinking around how innovation happens was changed unorganised and from the outside of the average R&D establishment from compartmentalised and siloed research to more open self-fuelling processes of innovation and knowledge without borders. Questions without answers and solutions without questions were suddenly available to the global minds to solve. The birth, growth, and adoption of open-source software and collaboration platforms that have grown out of open source code management system such as Github (2008) are the best examples of this extraordinary pattern change that took place as little as 10 years ago.
Knock... Knock... Is now a good time to rethink your digital strategy?
A Reality check for the O&G industry
The digital transformation journey (DTJ) towards a new fully digitised paradigm, is often referred to in Europe and Asia (that is much further along with smart technologies) as Industry 4.0. While this started to take off for real about 10 years ago, it is only now in 2019 where we can see the first signs of mature technologies being adopted with impactful results. Despite substantial investments for O&G into ‘Digital’, the industry is mostly playing an experimentation catch-up game, testing out small components inside the boundaries of their traditional functional legacy silos and business architecture. The architecture that most companies run their business on was not wrong at the time it was built, and when the world was still moving slowly in incremental steps. However, in 2019 the existing foundation is just not adequate or architected for the data-intensive, hyper connected and cross-collaborative world that is fuelling the future of our businesses.
In the O&G industry vertical, we have had a disconnected and silo approach to solving connected challenges for decades. The reality is that most E&P companies are still highly manual business functional stovepipes with old school processes and governance structures that have not significantly changed since the early 1990s. Trying to add new digitally sophisticated components and solutions as a bolt-on to something that was never architected for being hyper connected can never be expected to be as impactful as a connected ecosystem purposefully designed for connection, analytics and speed. The best example of digital success is Amazon that seems to be running a very successful and massive global logistic machinery without having the ERP system that is the de-facto standard in O&G, and that is effectively preventing any efforts of progress.
At the deeper business machine level, work processes and how work is done for the most resembles how things were done 20-30 years ago despite massive investments in technology. Digital transformation resembles in many ways how people now are making attempts to make their homes smarter with small ‘intelligent’ devices. You can buy as many Nest, Google, and Alexa devices as you want but if your windows are old, your insulation in the walls, floors and ceilings are insufficient, new technology looks cool and you can access data about it from an app on your mobile device, but will only have marginal overall financial or environmental impact.
Knock... Knock... Is now a good time to rethink your digital strategy?
2019: Nothing transformational happening here yet.
Fast forward, with not much more than the word ‘digital’ in the toolbox, both the incumbents and a vast number of new businesses have since 2016 rolled up their sleeves. With polished PowerPoint slides and ‘Digital Transformation’ (DT) as if it was a working concept meant to be added to the legacy architecture, the speed of overinflated expectations of this new digital hoax went through the roof. With the early and unfounded promise that businesses would quickly with ‘digital’ gain the ability to continuously learn and transform new and legacy technologies and turn them into business value, we now see people waking up slowly to the reality that this is not quite that easy. The two worlds of digital hype and business reality abruptly started to collide in late 2018. The casualties are the many companies and investors that were backing premature platforms and analytical toolboxes not fit for purpose in O&G and that now are mainstream with Google, Amazon, and Microsoft. Many of these early adopters now find themselves locked into costly narrow vanilla flavour platforms and analytical solutions that actually prevents them from utilising an expanding map of AI, AR, VR opportunities.
Where O&G companies now seem to be failing the most is when building the architectural bridge using a complex matrix of different small vendors covering their separate views of the functional domain in isolation. All software, security, communication and hardware is likely to result in increased complexity and security resilience which again can lead to a reduced ability to reach the optimal objective and along the way increase the likelihood of major business disruption.
As previously asserted, the legacy operating model running on a business architecture foundation from the '80s with cemented ERP solution is just no longer fit for purpose in the hyper-connected world. Combined with a technological adoption rate in the businesses that in sum is negative, no technological attack vector exists if it does not also include a strategic re-shaping of the business architecture. Now with technology no longer being the big hurdle, the real resistance comes from the carbon-based elements of the business, the humans resisting change because many still believe that the hyper connected world is the same as the old industrial one where continuous improvement was fast enough.
Knock... Knock... Is now a good time to rethink your digital strategy?
What's next
It cannot be emphasised enough that DTJ or a digital transformation journey is to a far lesser degree about technology than most people might think. It is however mostly about how you are able to plan and orchestrate your DTJ without being distracted from your long term objective by ‘magic AI elixir’ dressed up as new shiny technological objects. We have listed a few of our checkpoints for digital success that came out of our research and work with industry clients:
1.Coherent strategic business and technology vision: Having a shared strategic vision, including possible industry pathways and architectural stepping stones about how the company, fuelled by new technology could be operating in 5-10 years is an absolute requirement to spend enough time on exploring and anchor at the executive level. The exercise is not to create a deterministic end state goal, but to create a common foundation of understanding of what opportunities, efforts, risks and also the associated financial commitment that required to make the needed digital journey a success.
2.Strategic match: Re-evaluate and consider stopping 90% of ongoing digital initiatives if they are not a full match to your company’s 5 year digital vision. Too many projects have been labelled ‘digital’, but are in fact just renamed legacy upgrades in disguise or functional baby-steps that is likely to make it even more complex to become successful.
3.People, processes, leadership, and change: In a digital transformation journey, the desired state is ‘Not Known’ at the beginning of the journey and will never be. The digital destination should be regarded as an emerging journey of managing continuously improved capabilities, and where the process for getting there evolves as leaders make best guesses, implement them, learn, course correct, make new best guesses again, implement those, etc. DTJ should not be managed or controlled by traditional command and control mechanisms which in itself can be a challenge for many traditional leaders. Digital culture and behaviour must be assimilated throughout the entire company while new coherent key performance indicators must be developed to drive the change from valuing siloed tactics to impactful strategic measures.
4.Technology: Be very deliberate about which area you invest your digital efforts. Most new solutions converge quickly into the mainstream (example: blockchain, platforms and analytical tools) and are being commoditised at an increasing speed. There is little to gain from even experimenting if the effort does not provide real competitive advantage or you do not have the internal commitment to maintain that advantage. Choose wisely where to lead and where to follow. Rethink and reshape your governance and data management from ‘closed by default and open by exception’ to ‘open by default and closed by exception’. Build optionality with an architecture of platforms, not a platform or a vendor. The most impactful long term two digital enabling factors for any company right now is to build organisational and architectural capability to in the not too distant future have full 360 degree access to all of your data without the constraints from any 3rd party vendors. This will ensure you will build the competency and data-foundation required harvest, combine, analyse, generalise and provide impactful answers with the best analytical tool of choice as they evolve in maturity.
Bottom line
Especially in industry sectors with mission critical real-time systems and dramatic consequences from a failure like in E&P, transportation and healthcare, technology and cognitive solutions will play an increasingly important role to drive performance, reliability and safer operation. Companies must prepare themselves to not be locked into small 3rd party vendors’ platforms and solutions, but ensure that have full and total control of their entire data repository to be able to use best of breed analytical tools when available without being limited by any vendor's lock-in tactics.
It is in this intersection between strategy, technology and organisation Invatare is now helping companies not only establish the cognitive systems to augment humans to run their assets better through full field automation. We facilitate the establishment of their digital transformation journey and help defining the required digital cornerstones in which they will grow their future success.
The purpose of Invatare AI and our cognitive systems is that we shall develop and apply our products, services, and policies around cognitive systems in such a way it augments human intelligence, extend human capability, expertise and potential while maintaining human control and accountability for our clients.
“I tend to believe that the opportunities that are available to us in the hyper-connected world, are fantastic. However, these opportunities can only be unlocked if you realise that the world around you has changed fundamentally and that your actions go beyond incremental and shortsighted tactics…”
As an accomplished global executive I leverage my talents and connections to effectively drive digital change, improve processes, reshape operational functions and help empower organisations to reach beyond incremental improvements.
Captions
Pix1: To hit the ground running – Credit: The Independent.
Pix2: The Gartner ‘Hype Cycle’.
Pix3: Github is one of the best examples of the extraordinary pattern change that took place as little as 10 years ago.
Pix4: Is now a good time to rethink your digital strategy?
Pix5: Facilitating the digital transformation journey.