Generating ROI From Digital Transformation: Here Is What You Need To Know

There is widespread recognition in the upstream industry that digital transformation is critical for operators to survive and thrive (research by industry analysts IDC reveals that upstream organizations committed to spending an average of 3.7% of their 2020 revenue on digital transformation). However, few organizations have seen significant value so far from the digitalization initiatives they have undertaken.

What is preventing these companies from realizing ROI? In large part, the issue lies in the challenge of translating the strategy —which is set at the organizational level— into manageable initiatives and targeted deliverables that can be identified, operationalized and measured by individual teams and business units. Tackling digital transformation at the organizational level results in an unwieldy and overwhelming project, which encompasses everything and solves nothing. Ultimately, energy operators that want to see greater impact and ROI from their digital transformation programs need to make these initiatives focused, measurable and deliverable.

By following the four steps outlined below, upstream energy organizations can support and define a digitalization initiative that is achievable and designed to produce a measurable, positive impact on operational costs, efficiency and time to decision.

Step 1: Prioritize change management. Many digital transformation initiatives fail to gain traction because the project leaders do not take into account the magnitude of change required, and the energy and planning needed to manage the impact across multiple stakeholder groups. While technical considerations are important, so are communication and engagement strategies. Communicating the transformation imperative and translating organizational goals at the stakeholder level requires careful planning if the initiative is to earn the trust, engagement and commitment of the various constituents involved.

Step 2: Begin with data management. Before investing in workflow automation, make sure you have the tools, talent, and processes in place to manage your data. When data is not consolidated, validated and monitored, it is not capable of driving automated workflows effectively, which in turn reduces the effectiveness and ROI of these solutions. Despite widespread agreement about the importance of data management , only 27% of those surveyed in recent research by IDC actually practice master data management (MDM) to create a single source of truth. Without this foundational layer, investments in workflow technology cannot move operations forward effectively.

Step 3: Map the workflow. When IHS Markit supports a client in a digitalization effort, we start by taking a step back from the technology itself and focusing instead on the manual or hybrid workflow processes they currently have in place. We help them identify the most data-intensive workflows and map them out in granular detail, including the different functional groups involved, the applications used, the sources that the data is being pulled from, and the touchpoints and swim lanes that connect (and separate) people and data throughout the workflow. This step can be conducted internally or with guidance from a process management expert. Once the workflows have been mapped, they can be analyzed to determine where the greatest amounts of time and other resources are spent. Applying digitalization to these areas will have the greatest impact in terms of reducing time, saving costs or enhancing decision quality and speed.

Step 4: Quantify the value. Mapping the workflow in detail also enables a business unit to quantify the benefit of a digital transformation initiative in a tangible way and make a compelling business case. Once the workflow has been defined, the cost of the current manual or hybrid processes can be quantified in terms of personnel hours saved per cycle or per month and in terms of opportunities missed due to protracted decision times. This information can also be used to measure the success of the initiative against the expectations set during the planning stages. Being able to quantify the value and prove success in measurable terms will help to gain organizational buy-in and pave the way for future digitalization efforts.

As the upstream energy industry emerges from an eventful year, the need for digital transformation has never been greater. In the face of industry volatility and complexity, and a shift to remote work, the ability to streamline and digitalize operations will enable companies to continue to adapt and thrive. By focusing on change management, data management, workflow mapping and value quantification, the industry can put solutions in place that live up to the promise of digital transformation and deliver measurable ROI.

Read the full IDC research about digital transformation and data management.

Learn more about our workflow automation and data management solutions

Posted 04 January 2021 by Nathan Amery, Executive Director, Global Practice Head, EDM for Energy, S&P Global

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.