5 March, 2024

Time to play catch-up

27 October, 2017

There’s no way to escape it; the digital theme in all its guises is going to be one of the most widely debated themes within the fluid power industry and wider manufacturing and engineering space going forward. For example: Industry 4.0 and the greater computer-based connectivity of humans and machines; the Industrial Internet of Things (IIoT) and embedded digital devices within tools, equipment and systems; Big data and the immense sources of data that can be analysed by computer algorithms to plot business patterns etc.; and Digital Transformation (DT) and the manifold changes that can come about through applying computerised/digital technology to things and actions in our daily professional and social lives.

Awareness of the importance of digitisation within industry in order to push the innovation envelope and stay ahead of, or at least keep up with, competitors has grown considerably over the past few years. However, there seem to be pockets where the whole debate is not being given what might be referred to as priority status. For example, if recent research by IFS is anything to go by, the global oil & gas sector would appear to be lagging behind other industries in terms of digital maturity.

The IFS Digital Change Survey makes the point that many companies believe disruptive technologies such as big data/analytics, IoT and ERP can help drive crucial operational efficiencies to accelerate DT and business success. Nevertheless, the oil & gas industry seems still to be in the early digital transformation phase. Indeed, just 19% of surveyed oil & gas firms regarded themselves as advanced in leveraging DT, significantly behind aviation (44%), construction and contracting (39%), manufacturing (29%), and service industry early ‘nascent’ or ‘exploratory’ stages of their DT programmes, with that figure rising to 73% of firms with less than 5000 employees.

Given the financial pressures that have been facing the oil & gas industry recently, perhaps it isn’t too surprising that by far the most popular driver for digital transformation was ‘internal process efficiencies’ (48%). It scored significantly higher than ‘increased competitive pressure’ (31%), ‘accelerating innovation’ (29%), and ‘productivity gains’ (29%). There’s evidence to suggest that improving process efficiency is a vital first step on the digital transformation journey, providing a foundation on which to build larger-scale, more ambitious projects to accelerate innovation and make productivity gains. However, the report found that aversion to change and security threats/concerns remain the biggest barriers to successful digital transformation in the sector; mirroring feeling across all industries.

It would appear from the survey that oil & gas firms are also behind the curve in harnessing the power of data. While 81% have ‘access to the right data to make successful business decisions today and plan effectively for the future’, the industry is lagging behind others in the use of data for innovation and competitive advantage. The survey indicates that only 7% are ‘successfully harnessing data-driven insight to deliver faster time-to-innovation, which is a distinct competitive advantage for my company’, and this is by far the lowest of any industry surveyed. Furthermore, in North America, not one company considered themselves to be operating at this level. Overall in the oil & gas sector just 16% of companies with more than 10,000 employees said they are ‘successfully harnessing data-driven insight’, versus over 25% in manufacturing and commercial aviation sectors.

The above is just a snapshot of the detailed findings in the IFS report, but I think a clear indicator of the current status of DT and the oil & gas sector. As Colin Beaney, global industry director for energy and utilities at IFS, said: “The oil & gas industry has been facing turbulent times of late, with low oil prices leading to major job losses in some areas. But this only makes the need for digital transformation even more urgent.” I think it’s time to play catch-up.

Ed Holden


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