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In 2022, the energy industry experienced a surge in record profits, as top Western oil companies distributed an unprecedented $110 billion in dividends and share repurchases to investors, setting a new record.
However, despite the windfall, industry leaders are well aware that commodity price surges have no bearing on future success. Uncontrollable variables and unpredictable outcomes are inherent aspects of operating in this volatile sector.
As a result, amidst the backdrop of acute geopolitical and macroeconomic fluctuations, leaders are progressively increasing investments toward strategies aimed at securing longer-term value from controllable elements. The primary candidates this year include mergers and acquisitions, along with targeted initiatives to enhance operational performance.
Let’s take a closer look at the latter.
A shared goal among energy leaders: Horizontal value creation
In many ways, the COVID-19 pandemic was a double-edged sword for energy companies. While it triggered an era of unparalleled disruption, it also gave businesses a significant push to liberate their front line and automate key processes. For example, many had to mitigate the impacts of reduction in force by learning to do more with less, leading to a steep rise in automation investments.
Now, with healthy investment budgets, and seeing the successes of peers who adeptly navigated the challenges posed by the pandemic, at least 60% of O&G Chief Information Officers (CIOs) and technology executives say they’re dialing up investments in solutions that can help accelerate progress in these areas, such as business intelligence (BI) and data analytics initiatives.
Leaders have also rebalanced insourcing and outsourcing, taking more non-core processes back in house so they can increase control while improving their process understanding and data-integration capabilities.
But what’s the ultimate vision now that the pandemic has subsided and staying afloat is no longer the top priority? As per the prevailing trend among energy leaders this year, it revolves around “alignment between people, assets and processes to deliver operational improvements and drive business value.” That entails establishing a framework where operational insights are not only reliable but also easily accessible and actionable. Such a setup aims to generate immediate cash impact across departments and reveal new ways to meet longer-standing energy objectives, from delighting customers to reducing emissions.
This is what is meant by horizontal value – the kind of value that’s generated when previously siloed functions become connected by a common language — in this case, process data — revealing new ways to align and take action to improve the things that matter, like liquidity, productivity and revenue.
This connective tissue between functions and departments is what energy leaders believe will secure sustainable value for their businesses.
The problem: Creating horizontal value is notoriously difficult
Although the push to increase investments in BI and data analytics has gained significant momentum this year with the price surge, the general push to transform digitally has been ongoing for almost a decade. In fact, many energy companies are already several years into what would be considered more advanced digital transformation initiatives such as cloud-based ERP and have seen minimal returns — even with the addition of new digital solutions (BI, RPA, BPM) that promise to increase ROI.
The problem is, it’s hard to identify exactly which operational initiatives will generate reliable returns. One half of the energy solutions market is saturated with products and services that can help companies generate more process data — but can’t tell them what to do with it. The other half is saturated with solutions that can help organizations run automations — but can’t help them analyze or improve the processes underlying them.
In short, there’s no lack of process data in energy, but actionable insights that lead to fast value and continuous improvements are vanishingly scarce.
This scarcity is even more acute in companies grappling with legacy systems, complex infrastructure, historical data and organizational silos — and that’s leaving aside the renewed IT dissonance that comes with each new acquisition or merger.
So, the question remains, how can energy leaders hope to generate more value from their operations? Which strategies for creating horizontal values will bear fruit?
Process intelligence: The key to horizontal value creation
Earlier this year, Celonis conducted an independent global survey involving over twelve hundred leaders across various industries. The findings highlighted that an overwhelming 99% of these leaders are already cognizant of the pivotal role process optimization plays in achieving organizational objectives. This awareness has propelled the increasing adoption of process mining over the last few years, as leaders seek out more advanced ways to optimize their processes compared to more traditional strategies like process mapping or Business Process Management (BPM).
But even process mining solutions can significantly differ, particularly when applied to a complex global energy operation. In such intricate business environments, characterized by multiple departments and functions, each of which has different goals, languages and underlying systems, the degree of value delivered by these solutions may vary considerably.
On the other hand, a process intelligence platform offers a fusion of the best attributes from both worlds: the rapid process analysis of a process mining solution, combined with the transformative powers of machine learning and automation to support optimizations at scale. This kind of platform unifies the end-to-end process data of an energy enterprise in real time, from every source. By forming a system-agnostic, digital twin of processes that spans the entire value chain — from hydrocarbon logistics and asset management to materials management, accounting, and customer service — it facilitates comprehensive insights and improvements.
Once the process digital twin is created, a process intelligence platform will automatically find and capture value in end-to-end operations, independent of the systems used (from ERP to CRM and beyond).
For example, a process intelligence platform can streamline warehousing and logistics by ensuring raw materials are high-quality, compliant with safety standards and being routed effectively — whether on onshore platforms or subsurface locations — without the need for human intervention. Additionally, the platform can be used to reduce waste and unexpected maintenance expenses by aligning master data, material planning and labor estimates.
This degree of specificity, tailored not only to the industry but also to individual use cases, is poised to accelerate the path toward horizontal value creation for energy companies. Notably, this approach has already been proven successful for industry leaders such as BP, Neste, Chevron and countless others in the sector.
For more information, visit Celonis.com.
