Oil and gas industry lags new trend of chief digital officers

Alex Endress, World Oil
6/27/2017

Companies from around the world are starting to establish new executive-level positions, as in “chief digital officers (CDOs),” to navigate the open sea of the digital transformation, according to a recent survey by PricewaterhouseCoopers. There is one notable laggard, however—the oil and gas industry, as indicated by PwC’s findings.

The results suggest that of the 2,500 largest public companies in the world, 19% had appointed CDOs by year-end 2016, a sizeable increase from the 6% that had done so in 2015. The survey also revealed that only 3% of the oil and gas companies that were included had made such appointments by 2016, lagging behind metals and mining companies, at 5%, as well as utilities, at 12%. The CDO additions were most common in the insurance sector, as 35% of the survey respondents had created such positions, with media companies following at 28%, and banks, at 27%. Other sectors surveyed included health care, of which 19%  had added CDOs, as well as the the automotive industry, with 15%, and the travel industry, with 14%. According to the survey, 60% of all appointments were made from 2015 onward.

“Such trends reflect the movement at many companies toward a state of more advanced digital competence,” states the written report that accompanies the numerical results, authored by PwC’s Pierre Peladeau, Mathias Herzog and Olaf Acker. It is unsurprising that the oil and gas industry is, so far, one of the slowest to make such leadership commitments. It has always been conservative, and understandably so in many cases, as millions of dollars could be at risk, if an unproven technology fails to perform. Of course, while neglecting to appoint a CDO, alone, is not necessarily a complete indication of a company’s focus on digital technologies, it could be a sign of how well-organized efforts to implement such technologies may be.

“In the early days of (transition), different business units and corporate functions conduct scattershot experiments and pilot programs, in hopes of kick-starting their digital efforts. But once a company decides to design a coherent, comprehensive strategy to capture the benefits of digitization, that decentralized approach will no longer suffice,” stated the PwC authors.

There are also indications, from those working in the oil and gas industry, that there may be a need for more digitally-minded talent, or “digital natives.” Another survey recently completed by Houston-based Petroplan, an oil and gas recruitment company, demonstrated that “(more than) a third of respondents pointed to the growing need for IT skills, as technological advances combine with the need to reduce costs and improve efficiency to make the digital oil field a reality.” The company surveyed more than 2,000 people from the oil and gas workforce.

Together, the context that the two surveys provide is thought-provoking. Even if the oil and gas industry began to hire more CDOs, would these people be able to legitimately impact their organizations? Would the companies have enough talent supporting the CDOs to properly implement anything new? Maybe not.

“The digital talent gap is universally recognized as a critical challenge for companies seeking transformation,” PwC says. “PwC’s most recent Digital IQ study found that lack of properly skilled teams was considered the number one hurdle to achieving expected results from digital technology investments; 61% of respondents identified it as an existing or emerging barrier. In another telling finding, the survey revealed that 46% of CDOs are external hires.”

The PwC authors also preview a few other hurdles that companies may endure, even after hiring a CDO. “When it comes to implementing a digital strategy, the new class of CDOs often encounters several key obstacles upon assuming their roles: ad hoc digital initiatives spread throughout a large organization, lacking central oversight; a traditional culture that resists change; a gap in the talent required; and legacy systems and structures that threaten to derail their ambitions.”

Could these challenges be awaiting the E&P industry, as it ventures deeper into its own digital transformation?

To view the blog from World Oil's sister publication, Hydrocarbon Processing, focused on current events in the downstream oil and gas sector, click here.

The Authors ///

Alex Endress Alex.Endress@worldoil.com

Comments ///

comments powered by Disqus