The energy industry is facing a new era of conscious production and consumption of energy with the outlook of safeguarding our planet for future generations. Energy technologies such as solar generation, battery storage, and electric vehicles are challenging the traditional roles of the consumer and producer. Digital transformation in the energy sector not only assists the decarbonization of the planet but also the decentralization of market power, granting energy consumers the ability to also be energy producers. According to the World Economic Forum, there will be $1.3 trillion of value to be captured from rapid digital transformations in the energy sector in the period 2016-2025.
Despite the importance of digital transformation in the energy sector, the word “digitalization” has become a trend in the industry, one that is not fully understood and often overlooked. This might be due to the expectations that as engineering-savvy and ingenuine by nature, energy enterprises can quickly and painlessly embrace digital transformation. Might also be due to the current market turbulences such as the global pandemic that has put survival first and digitalization second. The pandemic had managed to bring to light two different insights, though. First, survival requires the organization to adapt quickly to manage increasing costs. This is where digital comes to play. Second, business as usual is not possible anymore, and change towards digital is inevitable to accommodate the fully remote and hybrid working regimes.
This blog post will explore the “why” and “how” of digital transformation in the energy sector. It will further note businesses that have already successfully embraced it. It is aimed for energy professionals at the forefront of decision-making to assist them in navigating the journey, regardless of whether they come from small, medium-sized, or big organizations.
why is digital transformation in energy sector necessary?
Enterprises around the world need to realize that embracing digital transformation for the energy sector, in particular, reflects not only on their organization but also on the rest of the world. A report from the International Energy Agency (IEA) claims that around 940 million people worldwide do not have access to electricity, and this number is increasing.
Making energy resources available to people living in poverty will certainly improve their lives while still preserving the environment in which they live. Digital plays a key role in improving the efficiency of energy systems and managing their complexity. Furthermore, by scaling the energy resources companies guarantee global competitiveness. That will help them survive and thrive in a market in which they are faced with more and fiercer competition, more complexity, and less predictability. Through digital transformation, they can quickly analyze received insights about systems current condition and address any challenges in time.
the journey of digital transformation in energy
There are a few major steps that every organization can take in embracing and implementing digital transformation in the energy sector. The steps are intuitive enough but know that you do not need to face them alone. Even leaders in the energy sector in different international markets, seek out the guidance, expertise, and technology power of IT solutions partners such as Accedia. Without further ado, let’s dive into the deep:
Develop Value-focused vision
The first major phase of the journey produces insights on which you are going to base your whole transformation strategy. That is why you should not overlook it. In this phase, you envision how your energy organization should look after the digital transformation.
Build a roadmap
Such as every journey starts with an itinerary, you cannot embark on the digital one without a comprehensive roadmap.
Value: Identify the whole workflow through which the transformation can drive the most value to the business. Workflows are quite specific for each organization, but cases might include plant operations and field maintenance cycles, turnarounds in refineries, production cycles in upstream oil and gas. To summarize, all the processes that will have the biggest productivity, operational efficiency, or profit impact are also the ones you need to transform.
Technologies: Define the technologies and infrastructure that are missing and need to be built or implemented to support the journey. Your in-house IT team can perhaps help you with the infrastructure aspect, for the possible technologies and framework that are needed, you can get on board a dedicated team from trusted IT providers.
Culture: Clarify the alignments between present culture and the digital vision, as well as adaptation or upgrade of current digital capabilities that have to be enforced. Do informal research to understand how familiar and comfortable your employees will be to work with new technologies or have entire manual processes automated. Then perhaps you can identify a third-party company that can organize training for them to fill the knowledge gap.
The next step in developing a digital transformation journey in the energy industry is to envision:
Value: Decide what you want to achieve and work with your team to envision how the identified workflows can reach it in the easiest way possible. Examples range from optimization of the energy production cycle to save on time and costs, to real-time monitoring of certain processes to avoid possible system failures.
Technologies: Identify the key systems that are being used and all that are planned, in progress, or in the testing stage. You can engage here your technical team as they know best and can work from there to agree on what has been working well so far and what can be more efficient or modernized while still in development.
Culture: Aim to engage at this stage your most experienced or proactive opinion leaders who have the know-how and ideas of what can be changed. Your best bet will be to outline to them the benefits the new systems will bring to the organization and the positive changes they will make to their day-to-day job, such as automating cumbersome manual tasks, free time for strategic initiatives they are passionate about, etc.
After envisioning the workflows, inventorying the technologies on record and on-demand, and engaging the people that can make it happen, it is time for actions:
Build an MVP
Value: Test whether your envisioned solution is plausible and use the findings as a springboard. You can do it by either engaging a technical team if you have such or bringing on board an external IT services provider. They will help you with rapidly developing and deploying initial products called MVPs that can generate learnings from a selected target group and even deliver value.
Technologies: Establish basic best practices with the help of an experienced operations team to assure that later digital transformation in energy would be easily implemented. Those basic rules can include approved tech stack across business units, automated security approvals, and else.
Culture: Ensure frontline buy-in from business units and create a mechanism that can simplify IT policies. At this stage, digital transformation is becoming a reality and you need your whole team on board. Work with your managers or other decision-makers to simplify the transitional process for the rest of the company.
Improve the MVP
Value: Encourage your team to use the insights from the testing phase to improve the developed initial products. That way, you will assure that the MVP will be operational in a live context at scale.
Technologies: Ensure that the solutions’ code is “cleaned” to enable its scalability later on. Your in-house team or dedicated team can start running quality assurance tests at this stage that need to continue throughout all stages of the transformation journey.
Culture: Establish a user support process, and confirm you have the capabilities to scale it up. You can work with your experienced people and IT team to establish some basic frequently asked questions and scenarios and then onboard the rest of the enterprise.
Embrace the digital transformation
You already have the vision in place, have tested it, and now is the time to implement it:
Scale and expand your vision
Value: Start reusing the developed MVPs across different business units and continue by building new products based on gathered insights. Once your team has established basic rules to follow and has tested the code, the process of scaling the developed solutions becomes much faster and cost-efficient. That frees capacity for the development of new innovative solutions. You have two choices – to either use your enterprise’s current capabilities or tap into the international talent pool through an IT solutions provider partnership.
Technologies: Create the so-called code libraries that can help speed up the transformation process. A good technology partner will even include that step in the preliminary transformation strategy they will offer and then help you establish it and learn to use it efficiently.
Culture: Demonstrate to your organization the value of standardization and knowledge-sharing. Furthermore, scale and expand in-house talent base that can support further digital transformation. You and the initially selected team of experienced professionals can launch some practical workshops customized for each department. Once those are proven to work, you can easily include them in the onboarding of new and returning employees.
Establish a platform to support the scale-up
Value: Develop a sustained digital incubator that further enables digital innovations to spread across the enterprise. This can be a skill-sharing initiative like the Innovation Development Center (IDC) we have at Accedia. Through it, employees can easily form cross-department teams, brainstorm and develop innovative ideas and transform them into viable products that solve not only organizational but also social obstacles.
Technologies: Set up an internal API marketplace that grants access to the dedicated teams inside the company to the reusable code for continuous innovation. Your IT team will be invaluable at this step, especially as it will alleviate their work at a later stage.
Culture: Formalize the digital incubator and replicate it across the enterprise. You can do that by announcing it officially as a part of your organization, department, and personal goals and encouraging the innovations coming out of it through financial or some other type of support.
*Do not forget that this bite-sized approach explained above requires also the appointment of certain timeframes to each step that will enforce you to focus your full attention on transformation tasks at hand.
Energy Transformation – Success Case
Every digital transformation journey in the energy sector is unique and specific to the business’ needs, responsiveness to change, and the current stage of digitalization.
However, the transformation journey steps stay the same and now we are going to apply them in practice to the case of one of our clients at Accedia – a leading energy services provider.
Develop a Value Focused-Vision
Build a roadmap
Value: The client wanted to change the entire energy lifecycle, starting from energy generation to distribution.
Technologies: The business was missing a cloud infrastructure in place that could provide security of collected data, as well as scalability across the different departments and branches. Furthermore, with our help, they identified that they need tools to help them efficiently retrieve and store data for decision-making.
Culture: As the digital innovations would transform the whole organization, the client did internal research. It uncovered that at present key decision-makers do not have timely access to essential energy insights to forecast production KPIs, and outlined that they will be provided with it through the digital solution to be developed.
Value: The end goal after transforming the whole lifecycles, was to achieve effective plant management and resource consumption.
Technology: At the time of the project, they had a few legacy systems that were failing to assist them in collecting real-time data, storing, analyzing, and then dispersing it to key parties.
Culture: Not only did they engage their key plant operators, but also brought us on board to brainstorm together what can be done and how can it be changed.
Build an MVP
Value: They reached to us to build a set of interconnected cloud services. One of them is an integrated smart data platform that processes energy insights in real-time, calculates, and dispatches optimal decision choices for customers and their assets.
Technologies: Together we agreed to the technologies that are used for configuration, user data authentication, for automation of certain processes, and not at the last place – data retrieval and storage.
Culture: At this stage, we have already prepared a comprehensive report on what has changed and why we have recommended certain technologies. Based on it, the client organized training to quickly onboard the rest of the team.
Improve the MVP
Value: After realizing the value of this first data solution, we helped our client develop and test a similar platform for a partner of theirs that needed to collect and process a large amount of data on water resources required for energy production and power plants productivity.
Technologies: We supported the client by continuously running quality assurance tests at all transformation phases and making sure that the code of the initial solution can be scaled up to accommodate the growing and varying business needs.
Culture: As mentioned, we worked as one team to develop some training and onboarding that helped the rest of the organization transition towards digital faster.
Embrace the digital transformation
By reaching out to us, the client has truly embraced the digital transformation journey. In the last two steps – scale and expand, and build a sustainable scale-up platform, we ensured that the interconnected cloud initiatives developed together can be easily replicated across units.
Furthermore, we created API marketplace and code libraries to ensure that the client can quite independently use the full power of the digital solution and expand to new markets and ahead of competitors. This is just a small part of what the transformation towards digital can do for your organization.
Digital innovations can transform not only the energy sector but the way we live our everyday lives. According to Ernest and Young, by 2030, more than 50% of all new cars that are sold on the global markets will be electrified.
Digital innovations and transformation are important not only for the enterprises’ future success but also for global economic growth and environmental preservation. Indeed, a report from the United Nations states that digital technologies have reached around 50% of the developing world in only two decades, which is considered the most rapid advancement than any other innovation in our history.
Digital transformation in the energy industry then should be considered a vital business process, which if implemented to its full potential, can create long-term value for the organizations and be the difference between a market player and a market leader. And as the profit margins are under pressure and the margin of error for survival is shrinking, organizations can choose whether to fight against the new digital future or embrace and shape it to support their business needs. The only tools they need are a vision and a good IT solutions partner that can help them realize and scale it to bring the biggest value.