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While technology has become indispensable in the energy industry in the digital age, the current approach to digitalisation has struggled to meaningfully scale and deliver the promised impact. Many companies struggle by taking a linear bottom-up, broad data transformation first path. This is often slow, difficult to scale, and typically leads to ambiguous and soft returns. It doesn’t need to be this way. Increasingly, companies are choosing to be more strategic and balance data efforts with transformation at scale for hard value delivery. With this approach, we see faster, more tangible results at scale as clients run their operations better by integrating digital technology with their operating models end-to-end to drive greater performance, as an integrated part of their future operations strategy – not as a bolt-on to existing ways of working.

Unlike tactical digitalisation, a strategic digital performance model (DPM) uses performance-engineered digital workflows fueled with Large Language Models (LLM) and generative AI to enable higher-quality, clock-speed decision-making across operations. We typically see an end-to-end DPM multiplying returns and bottom-line impact by 4x or more across critical dimensions of core business operations, like throughput and cycle time. With the proper performance management framework in place, implementing a DPM at scale is relatively straightforward, with minimal disruption, and it can be up and running within a six- to 12-month timeframe.

Companies using a strategic DPM are achieving the digital promise today. At Kongsberg Digital, we have witnessed the exponential value digitalisation delivers at scale by transforming up to 15 assets per year for some of the world’s largest oil and gas companies. By embracing a DPM, companies can realise substantial Return on Asset (ROA) gains, including OPEX reductions by up to 50%, support workforce productivity savings by up to 30%, and a 20% decrease in engineering costs.

How To Apply a DPM for Maximum Benefit and Scale

Scalable functionality exists today, enabling companies like yours to transform holistically with minimal disruption through a stepped approach, not a big-bang transformation. The key to executing for maximum scale and benefit requires shifting your digital mindset from digital tools to digital ways of working.

It starts with taking a step back and thinking about how you work, organise your resources, and coordinate decision-making. With that understanding, you break that down to enabling digital, enabling processes and focusing on driving the key things that are either hindering your organisation from realising business value or the things that drive the most value. We call these digital services. Digital services are defined and deployed, one at a time, alongside digitally designed processes that capture inputs, drive focused actions and deliver outputs that enable impressive tangible results, like double-digit OPEX reductions.

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The services are deployed from the middle out by connecting digital tools and data at the tactical execution layer with the company’s top-level strategic management processes and goals. The middle layer provides operational decision-making coordination capabilities and critical performance management infrastructure to move from tactical to strategic digitalisation. By deliberately embedding digital into a cascading performance architecture - where visibility into performance at all levels are integrated through operational cockpits - insight is linked to actions and outcome. This affords employees at all levels of organisations direct insight into how gaps are being closed, and how the workflows they are executing on are delivering toward the strategy. Once implemented, the workflows become transparent, AI-enabled, and edge deployable, enabling de-risked and scalable autonomous operations in the near term, typically within two to three months for high-frequency services. Autonomous operations are built one service at a time from the bottom up.

Implementing a strategic DPM includes evaluating the data foundation, digital connectivity, digital replication of assets, defining business drivers, and deploying end-to-end digital services. Quality digital enablement provides the organisation with additional positive reinforcement through UX that gamifies, captivates and inherently motivates employees.

Additional game-changing differences this approach offers include:

Blueprinting ROA Upfront: By blueprinting processes and ROA upfront and starting with simple, low-risk changes, you can gradually digitally scale with predictable returns while introducing greater degrees of autonomy as each new service matures.

Shortening Time to Value — High Frequency, Low Value Focus (the “Walmart approach”): You can tackle value leakage in operations by automating high-frequency, low-value tasks, yielding significant benefits. By analysing event frequency, you can identify immediate opportunities to automate at scale. For example, by focusing on high frequency “low value” events and applying digital efficiency to monitor, coordinate actions, and respond, we deliver autonomous services from the bottom up to achieve value at scale.

Infusing the Power of LLMs and Generative AI into Workflows: By harnessing the power of LLMs and Gen AI into the context of a holistic, strategic DPM, where intelligence links directly to digital services and results, the potential level of results and relevance to business will be magnitudes higher than ad hoc or incremental uses of these technologies. We have learned that embedding provenance and lineage are critical elements to succeeding in this space. Organisations should seek to deploy solutions that preserve and enhance trust when deploying these technologies.

Running Your Business Better with Cockpits Versus Dashboards: Cockpits differ from dashboards in that they pull three critical decision-making performance management aspects together: planned versus actual metrics, situational awareness, and action tracking. This allows a cascaded view of performance and actions to address gaps. Cockpits foster proactive decision-making, enable quick adjustments to stay on track, and address issues identified through individual workflows and at all levels. Furthermore, this environment lends itself to AI adaptive language models to deliver insights and support faster, higher-quality decision-making.

I have successfully applied this value-focused modularised approach to several businesses I assisted in digital restructuring, including a multi-billion-dollar LNG development company. We enabled a 50% reduction in onsite staff and unlocked maintenance with remote digital services for future AI-enabled automation. In another case, we avoided the pitfalls of a data-driven bottom-up digital deployment by pragmatically selecting the top five business processes and services, integrating them into one platform, and then digitally replicating them across a portfolio of platforms. This enabled a reduction in unplanned downtime by 50% and delivered an 18% decrease in maintenance costs for the company over six months. In addition, starting with the top five services and gradually expanding helped manage capital investment and resource workload.

The Right Metrics are Crucial - Soft ROI Versus Hard ROA

Understanding the distinction between hard and soft savings and ROI and ROA is crucial to realising the digital promise. While claims of standard soft measures, like improved efficiency and effectiveness, can garner buy-in, the hard performance measures determine whether a digital deployment is successful. Having a material impact on the business is why companies must focus on ROA, not ROI.

For example, consider filter changes in maintenance, which are high frequency yet relatively low in value. Traditionally, these follow an OEM-recommended preventative maintenance schedule. However, the equipment can be digitally monitored with a DPM, predicting when filter changes are needed based on factors like pressure drop. When the pressure drop reaches a certain level, it triggers an autonomous closed-loop workflow, seamlessly handling tasks such as record checks, inventory orders, work pack assembly, and isolation planning. Transitioning to predictive maintenance can yield substantial hard ROA savings, potentially reducing costs by 20 to 30%.

The Bottom Line on Digital: The Choice is Yours

The current approach to digitisation in the energy industry is struggling to deliver meaningful scale and the promised impact. As operations and governance become even more complex and data becomes even more critical, a strategic, end-to-end digital performance model is the only viable way to apply digital for maximum scale and impact.

Rapid, informed decision-making enabled by a holistic, end-to-end digital approach is fast becoming the most important competitive advantage for businesses today and will only become more critical. When it comes to digital, ultimately -- the choice is yours. Stick with tactical digitalisation and digital ceilings. Or transform how work is done with the operating model of the future driving increased performance and exponential returns. Read more.

About the Operating Model of the Future Executive Series:

This article is part of the first wave of Kongsberg Digital’s educational executive series to showcase different perspectives on why and how leaders are rethinking digital transformation and moving forward with a strategic, end-to-end digital performance model (DPM), as they advance toward the operating model of the future.

To learn more.

Achieve the Digital Promise Today with The Operating Model of the Future Achieve the Digital Promise Today with The Operating Model of the Future

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2-5 October 2023

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