Digital Transformation = Analysis Paralysis, A Tale of Most Industries

Alberta and the Oil and Gas Industry (Low Hanging Fruit)

The recent drop in oil prices has caused an economic upheaval in Alberta, and although the low commodity prices benefit some industries, O&G producers are tasked with reducing costs and increasing operational efficiencies. Manual processes should be streamlined and automated, systems should be integrated, and human capital should be utilized efficiently by handling core value-add activities that have a direct impact on the company growth and strategy.

Although volatile commodity prices are always expected in the O&G market, it is now clear that to be, and remain competitive companies must undergo a Digital Transformation. Companies should focus on long-term sustainable changes vs. temporary fixes.

"The energy sector has many drivers. These drivers include but are not limited to the need to grow profitability, ability to manage volatile commodity prices, and a capacity to manage a depleting underlying resource base. In recent years, these factors have been amplified as Capital costs have risen due to new technologies (horizontal drilling and multi-stage fracking) along with production decline curves increasing dramatically for the first two years. Daily production can drop as much as 50-75% from the first 30-day production levels over the first year. Growing reserves and production requires highly skilled technical workers who are competent in finding, exploiting, and producing these new reserves as well as optimizing the production from existing reserves while always ensuring that they have the cash flow to fund their capital expenditures.

Our experience has been that most companies work in silos and information is kept exclusively within these silos or shared at a very high level causing inefficiencies in collecting, disseminating and recording data. The larger the organization, the more complicated and challenging this becomes.''

Lory Troche

Digital Transformation, the concept is simple; the execution is not, or is it?

Time and time again companies try to use "robust' ERP systems to drive their "Digital Transformation" roadmap. ERP systems are not only ridiculously expensive (not aligned with keeping costs down) but also extremely ineffective. ERP systems tend to be rigid, hard to integrate with, and are unable to meet between 20-30%+ of the business functional requirements; nevertheless, companies' op to implement "best in class" solutions and are required to find workarounds to close remaining gaps. Workarounds are an oxymoron if companies are committed to driving a lean and digital organization.

Workarounds are nothing but manual processes that consist of a legion of Excel spreadsheets, e-mails, documents and hundreds of non-value add/administrative tasks. It is now common knowledge that your company data and your human capital are your biggest asset. Data that resides on formats such as Excel spreadsheets, e-mails, word documents is not able to be utilized to gain valuable company insights which are critical to "stay competitive."

Captain-Obvious observations

• Electronic invoices are NOT PDF files sent via e-mail

• Receiving invoices electronically that must be coded by your company and manually released to a workflow for approval are of "Zero" value in the context of digital and lean transformation

• Team collaboration is NOT getting a response via e-mail, interoffice envelope or water-cooler chit chat

• Systems are NOT integrated if "integration" is accomplished with the use of "queries" or any non-scalable/sustainable and supported process such as API's, micro-services, and others.

• Business intelligence/predictive analytics should be 100% automated and driven by predefined business metrics/drivers relevant to YOUR organization. A legion of Business Analysts manually massaging data from different sources to produce relevant reports is NOT business intelligence

• Companies should be able to scale their costs on demand and pay only for what they need when they need it vs. license seats that are typically tied to a contract.

• Companies need to think outside the box by considering SaaS products that allow them to reduce upfront capital spend, allows them to be agile and that are flexible enough to evolve with the company as the processes change over time.

• People, processes change, and your systems should be able to evolve as well with minimum disruption/cost

• Companies should start managing their business proactively by having access to real-time metrics which will allow them to apply corrective actions BEFORE not AFTER the fact. Enough with the lessons learned. Also, it is not a secret that most companies do not enforce accountability resulting in a repetitive negative pattern.

• If any of your systems requires a full-time administrator, get rid of that system

• If your business is not able to analyze unstructured, dark data, you must find ways to harvest the data.

• An Access DB is NOT an acceptable option in the digital transformation journey

• Keeping costs down, improving efficiencies and maximizing capital is not just an O&G industry problem. Nowadays, all industry verticals are facing similar challenges. Law firms, property management companies, retail, manufacturing, construction to name a few, are all being challenged by the fast-paced digital era and the need to stay relevant.

Are you on the right track Quiz

• Are you able to scale your business on-demand without having to increase your G&A?

• Do you have standard processes?

• Are you only paying for what you need, on demand or are you bound by contracts, license fees, higher than required volumes?

• Are you extracting your data from primary source systems and effortlessly distributing it as needed?

• If your company is like most with a plethora of systems to manage the day to day operations, are you able to view a single version of the truth where all the critical KPIs from multiple sources are easily displayed without the need of a data warehouse?

• Are most of your processes fully automated?

• Do your current systems meet over 90% of your business needs?

• Are you able to implement controls proactively vs. reactively?

• Can you implement system changes with minimum cost/effort and in an expedited manner?

• If you are using a SaaS provider, do you know where your data resides? Is it in Canada?

• Are you able to drive your business by having access to real-time data and insights without manual intervention?

• Can you accurately quantify the Financial and HSE risk of potential trade partners, suppliers, buyers? or are you limited to the typical bank references, customer references, self-disclosure?

If you answered "NO" to any of the previous questions and you are well on your way to "digitally transform your business" STOP!!! and re-asses your approach., but if you are yet to embark on the Digital Transformation journey, consider the following:

1. Think outside the box and look for solutions that are agile, flexible, scalable and why not, CHEAP

2. Your data is your biggest asset and the best part; it is free. USE IT.

3. If you select a SaaS provider, do not allow the company to keep your data, your data is your data.

4. The customer is ALWAYS right. You are the customer. Do not compromise. Customer service excellence should not end when the contract is signed (I particularly despise this one!)

5. Do not become an unwilling hostage - Due to complex and costly implementations, many service providers over promise and under deliver, they can get away with this because they know that customers are unlikely to walk away as walking away = time and money., in other words, you are stuck. Being stuck and unplanned surprises are especially true with big ERP implementations (It would be very hard to justify to the board and shareholders a multi-million-dollar mistake)

6. If you are considering an ERP solution and can afford it, understand beforehand that implementing the solution is like a marriage of sorts "until death do us part."

7. Be inquisitive, conduct the proper due diligence (not limited to RFP), research, research, research…

8. If your selection makes it difficult for your company to "walk away" regardless of the long-term outcome, then stop and make a choice that does not keep you hostage. Nothing is forever. The service provider must earn your business every single day.

9. When researching potential service providers do not limit the search to "big names" or "best in class, market leaders" as many of the big companies are not as hungry, flexible or willing to accommodate your business needs. In other words, bigger is not always better.

#digitaltransformation #albertaoilandgas #oilandgasindustry