Beset by numerous crises, including reduced oil demand, investor ambivalence and regulatory scrutiny, oil and gas companies face a small, but crucial, window to preserve their role in the future economy and energy system. The industry must demonstrate it is prepared to provide energy in what could be a fundamentally different society.
The industry is increasingly looking to digital technology to enhance efficiency and deliver greater value. Technology, however, is only part of the answer. Companies must also retrain their workforce and change corporate culture to create organizations that integrate technology strategically across the enterprise.
In the EY Oil & Gas Digital Transformation and Workforce Survey, 90 percent of oil and gas executives agreed that investment in digital technology and the workforce is needed to survive. Executives ranked the increased availability of data analytics and insights as one of the top three trends expected to positively affect their companies’ growth in the next three years, along with changes in energy consumption and decarbonization.
Clearly, different skill sets and operating models will be required. In that context, it’s unsurprising that 92 percent agreed their ability to advance worker skills will determine their companies’ success over the next three years. Given the current environment, however, many companies have placed less focus on the workforce and culture than before.
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Further complicating the challenge, continuous evolution of technology makes retraining an ongoing requirement, instead of a one-time event. This underscores the need for a strategic, comprehensive approach to address skill gaps.
The COVID-19 pandemic has only shortened the runway for companies to address the issue. Given the importance, oil and gas executives must take three actions to develop a human-centered approach to digital transformation:
Cultivate in-house talent and develop a pipeline of digitally savvy employees
Executives in the survey conceded that one-third of the oil and gas workforce will likely not fit with their organizations in the future, whether from an inability or unwillingness to learn new skills, retirement or other factors. For the 43 percent of the workforce that will learn new skills or upgrade existing ones, executives estimate it will take, on average, 10 months to train or retrain the average worker. The need for digital skill should influence personnel and staffing decisions today.
For instance, while workforce adjustments are inevitable in a downturn, oil and gas companies should view staff reductions not simply through the prism of cost but rather skill set. The EY survey shows that significant skill gaps exist, particularly in crucial fields such as artificial intelligence and machine learning. While the industry is confident in its ability to retrain and recruit talent, it will be competing with other industries for the same skill sets.
Take a proactive approach to address the organizational and human challenges hindering technology adoption
Digital implementation will take more than teaching employees with new technology. Challenges to digital adoption and workforce retraining are embedded deep in a company’s structure, processes and culture. According to the EY survey, more than half of executives said their culture and organizational structure impede skill development in their companies.
Overcoming these challenges will require leadership commitment, a culture of empowerment and robust planning. Oil and gas companies and management teams need to evaluate their enterprises holistically to make the culture and workforce accelerators of digital transformation rather than roadblocks. These are necessary steps for any organization looking to move from “doing” digital to “being” digital.
Develop a system to enable digitalization and prepare the business for the future
Expeditious implementation of a digital workforce strategy is essential for an industry undergoing significant change. In fact, 92 percent of oil and gas executives report their companies will have to change how they operate coming out of the downturn. Yet, an evolution in evaluating and executing workflow is needed.
Nearly half of executives said they will collaborate with other organizations to address shifting skills. Similarly, oil and gas companies should assess what pieces of their business model should be owned and controlled what can be performed better by a partner. This helps to ensure efficient use of both people and money and provides a mechanism for anticipating and preparing for new challenges as energy needs change.
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The energy company of the future will look different than it does today. But the industry is accustomed to finding solutions for complex problems. That same spirit and innovation will be essential. Ultimately, the industry’s ability to evolve the business and workforce will determine success or failure. Time is of the essence.
Mitch Fane is EY U.S. energy markets leader and Rachel Everaard it the US-West Region people advisory services leader for Ernst & Young.
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