Preparing the Next Generation of Digital Engineers and Helping Experienced Petroleum Engineers Build Digital Literacy
This is Part 2 of a paper written by the Digital Transformation Subcommittee of SPE’s Digital Energy Technical Section on the importance of change management in digital transformation.
This is Part 2 of a paper written by the Digital Transformation Subcommittee of SPE’s Digital Energy Technical Sectionon the importance of change management in digital transformation.Part 1 can be found here.
The industry has a lot of data that needs to be captured, processed, modeled, and interpreted in order to help enable better and faster decisions, allowing it to operate more efficiently, safely, and with a minimal environmental footprint. So, there is no lack of opportunity, yet the recruiting job is getting tougher. Not only does the industry have to get its share of top talent, it must try to recruit those who are not even thinking about the industry or who come to recruiting night with a negative perception. Unfortunately, the industry has earned the reputation of being better at firing people than investing in them. That is fighting the war for talent with one arm tied behind your back.
Talent, even more than technology, is what is going to solve the technical problems that the oil and gas industry faces in producing crude oil and natural gas from the complex reservoirs in more challenging locations. Talent, more than technology, will build a sustainable competitive advantage and a profitable enterprise in the end. Talent will help sort out the energy, environmental, and economic balance that the world needs to move forward. Now, we need to convince them to accept the summer internship offer that companies want to make or give us a second chance when companies pull the job offer because of current budget cuts.
What is the digital skill set the industry workforce will need to survive and prosper in the digital oil field? How do you know if your company is ready for the digital future, or even the next digital pilot? Is there an assessment tool that you need to run to give you the intelligence to prepare for the digital future? Can the same be said for an assessment of your data foundation? Are you building the digital capabilities and tools without adequate data fuel to power the manage-by-exception approach or to build the appropriate digital twins that are required?
The following Industry Talk interviews are first-hand accounts of the experiences of change leaders who have lived the key lessons expressed in this paper:
Disruptor or Disrupted?
Where will the transformation come from? There probably is not much chance of a new entrant coming into the industry as a disruptor, except for renewables and the keep-it-in-the-ground crowd. There is not a lot of diversity in management, nor the workforce, to bring new ideas. There are a lot of headwinds facing the industry at the moment (e.g., economics, regulations, safety, and health).
We will have to disrupt ourselves. We know that this is an uncomfortable message (Fig. 3). The best practices that have gotten us this far may turn out to be the bottlenecks keeping us from moving forward. We are all for the adoption and development of new technology; but, it is what we do with it that is going to matter most. As Warren Buffet is supposed to have said, “Predicting rain does not count. Building arks does.”
What is a Change-as-a-Competency Framework?
While there is an abundance of generic articles and resources on the topic of change management, there is currently not much available in the way of industry-specific guidance that provides a clear and targeted approach to change management. We are also lacking a description of how practices and processes relate to the design and deployment of collaborative digital-oilfield technologies. Ideally, the change-management effort begins during the earliest stages of a digital-oilfield project and extends through post-implementation until the new processes and technologies are adopted and in use as designed.
Change management is the competency that guides how we prepare, equip, and support individuals to adopt change in order to drive outcomes and organizational success. If you don’t get anything else out of this article, please remember this definition.
This is true whether we are talking about the potential of the digital oil field or the threat of lower commodity prices. While all changes and individuals are unique, decades of research show that there are actions companies can take to influence people in their individual, team, and organization transitions. Change management provides a structured approach for supporting the individuals in organizations to move from their own current states to their own future states (Prosci 2020).
By treating change management as a competency, required in most cases, there are definitive methods—not instinct, command/control, or charisma—that must be defined. Project management is accepted in this way, including the standard Project Management Body of Knowledge. In fact, change management is the same, including the Standard for Change Management. There should be a framework that includes guidance on economic business cases or maybe customized to fit digital transformation in oil and gas. With so many opportunities to advance operational processes, we can encourage applying different approaches now to achieve durable success this time around to prevent passing phases that eventually backtrack. In summary, we must change; it’s not just them.
In the initial stages of a digital-oilfield project, the change-management effort serves to ensure the project team identifies, engages with, and relentlessly incorporates the perspectives of the affected audiences (stakeholder heat mapping), including cross-functional end-users, business unit leaders, and project sponsors. Effective change management brings these perspectives to bear on project framing, scoping, and design activities with the aim of steering the project in a direction that leaders will consistently and visibly support and end-users will adopt readily. This work is particularly critical in digital-oilfield projects because the existing legacy applications and ways of working are seldom decommissioned.
As the project moves into deployment planning, the change-management effort is focused on identifying the most receptive business units and audiences for pilots, advising on a realistic pace for deployment, and recommending the appropriate scaling and staging for the implementation to create quick wins. For digital-oilfield projects, in particular, it often is necessary to manage change in two waves; the first wave involves supporting end-users in learning to use the application, and the second wave addresses the collaborative processes and optimization of the solution. This second wave is often missed in deployments of digital-oilfield technologies but, in many cases, should come first.
Change-management work also includes strategic planning and implementation of project communication, training, and end-user support strategies, each of which should be consistent and targeted to reduce the particular kinds of resistance encountered with digital-oilfield projects and support the development of the awareness and skills needed for rapid adoption and value creation. Resistance is a good thing. It signals a start on the adoption curve. A company has a problem when it gets stuck in resistance and cannot move forward.
Three Levels of Change Management
Individual Change Management. This requires understanding how people experience change and what they need to change successfully. It also requires knowing what will help people make a successful transition, what messages people need to hear when and from whom, when is the optimal time to teach someone a new skill, how to coach people to demonstrate new behaviors, and what makes changes stick in someone’s work. This level of change includes
- Awareness of the need to change
- The personal motivation to support and be involved in the change
- The knowledge and skills needed (i.e., digital literacy) to know how to change
- The time to practice new skills in order to demonstrate the ability to change
- A clear outline of behaviors they will demonstrate as they progress through change
- Reinforcement by supervisors and management for the change, including new job definitions and reward systems
Work-Process/Project-Change Management. This involves first identifying the groups and people who will need to change as the result of the project and in what ways they will need to change. It starts with an understanding of the business problem and the work flows currently being used. Work-process/project-change management then involves creating a customized plan, design, or roadmap for ensuring affected employees receive the leadership, coaching, and training they need to change successfully. Driving successful work-flow transitions should be the central focus of the activities in organizational change management. Doing things differently, with different perspectives, rather than just using new technology is the key. This includes redefining how teams work together and the set of behaviors that govern how they will interact with each other. Work-process change management is a critical component to project management. Project management ensures project’s solutions are designed, developed, and delivered, while change management ensures project’s solutions are adopted effectively.
Enterprise Change Management. This is an organizational core competency that provides competitive differentiation and the ability to adapt to the ever-changing world. The agile method is a project methodology and a development approach to help a team produce results quicker. Agility is an enterprise competency to help an organization continue to adapt processes, people, and technology in a dynamic world. Do not confuse the two.
An enterprise change-management capability means effective change management is embedded into an organization’s roles, structures, processes, projects, and leadership competencies. Change-management processes are consistently and effectively applied to initiatives; leaders have the skills to guide their teams through change, and employees know what to ask for in order to be successful. With an established set of expected behaviors, modeled by leaders and reinforced by recognition, the culture shifts to one of engaging in change instead of resistance.
The result of change-management capability at the previously mentioned three levels are
- Individuals embrace change more quickly and effectively.
- Organizations are able to respond quickly to market changes.
- Employees embrace strategic initiatives.
- Employees adopt new technology more quickly and with less effect on productivity.
This capability does not happen by chance and requires a strategic approach to the following four aspects to embed change management across an organization:
- Execution—promoting and implementing new upstream innovations
- Effectiveness—silo-busting and bridging to integrate upstream organizations
- Crew—capitalizing on the landscape of change roles (internal/external, functions/operations)
- Career—navigating advancement angles facing an inspired change leader
Framework of Change-Management Requirements for Digital Energy Projects
The authors of this paper are not change-management experts, but we all have seen the effect of good and poor change-management efforts. We have researched the papers written by several change-management professionals who have worked in oil and gas digital-transformation projects and have brought some of their insights to this paper. We do not feel qualified to develop the change-management framework and competency, yet we recognize the need for one and the many elements that must be included.
A high-level framework (Fig. 4) is provided as a basis for digital-oilfield teams to use in considering how change-management activities relate to the overall project management process (Berger and Crompton 2015). While not comprehensive, this framework can serve as a helpful guide in developing change-management plans for digital-oilfield projects. There are other change-management processes worth looking at and applying when appropriate. The idea is to identify one, commit to it, budget for the appropriate resources, and then do it (now!). The industry cannot wait for Digital Oilfield 3.0 to try to get this right.
It bears saying, however, that, while frameworks are useful and there are some consistent principles for change management, the area of human behavior can be messy and confounding. Intelligent energy projects are often complex and challenging, and change-management plans must live and breathe with the projects they support. Tools and templates cannot substitute for team members with relevant experience and strong relational skills.
In general, many companies use the term “digital oil field” to refer to ways of working collaboratively and enabling teams to work on a shared problem with enhanced efficiency. Some digital-oilfield transformation programs are focusing more on finding ways to rethink approaches to problem solving, dictated by statistical evidence. Those projects are the big change requirement facing companies today. This is the heart of the “physics or statistics” debate and the heart of the incremental improvement or transformation discussion.
Often these programs require a move back to traditional thinking around team collaboration, providing the opportunity to test remote working scenarios, especially with the work-at-home situation in which we are all currently living. This is not the case for the types of use cases one might encounter at the business enterprise level. The technology is the enabler, but changing tools is not the game changer executives are hoping for. The game changer is providing a framework with which the executives can provide more business change driven by evidence, make better decisions, and act quicker on operational problems or market changes.
According to the 2017 World Economic Forum report Digital Transformation Initiative Oil and Gas Industry, four themes are central to the digital transformation of oil and gas over the next decade.
Digital Asset Life Cycle Management. New digital technologies combined with data-driven insights can transform operations, boosting agility and strategic decision-making, and result in new business models.
Circular Collaborative Ecosystem. Applying integrated digital platforms enhances collaboration among ecosystem participants, helping to fast-track innovation, reduce costs, and provide operational transparency.
Beyond the Barrel. Innovative customer-engagement models offer flexibility and a personalized experiences, opening up new revenue opportunities for oil and gas operators and new services for customers.
Energizing New Energies. The digitalization of energy systems promotes new energy sources and carriers and supports innovative models for optimizing and marketing energy. To remain relevant to customers, the oil and gas industry must understand the full effect of these changes on the broader energy system.
The report makes the following recommendations to the industry:
- Make digital a priority for senior executives. Digital transformation, like any other transformation, needs to be sponsored from the top. This includes setting a clear vision, committing funding and resources, and actively championing the change-management effort associated with it.
- Drive a culture of innovation and technology adoption. Define the human behaviors on a personal and team level that will drive change and reinforce them. While not everything will be developed in-house, companies will need to be open to new ideas and ways of working.
- Invest in human capital and development programs that promote new, digital thinking. Ultimately, a digital-savvy workforce is both a foundational enabler of transformation and a key driver for maximizing value capture.
- Put in place a methodical approach for developing or industrializing new capabilities. This includes decisions about whether to build or buy capabilities and a program-management approach to scale up technology and digital platforms.
- Reform the company’s data architecture. Data sits at the heart of digital transformation, so the harmonization, integration, and interoperability of data platforms are critical.
- Identify opportunities to deepen collaboration and understanding of sharing-economy platforms. This will allow for sidestepping the potential pitfalls brought by changing customer preferences shaped by the rise of the sharing economy.
Keep your Eye on the Prize
Change is as inevitable as death and taxes. This is an adaption of a Benjamin Franklin quote that remains true today and becomes even more relevant in the economic impact of the current pandemic, as well as the industrywide impact of digital-transformation programs. By definition, with transformation comes change, and how change is managed is critical to the success of the transformation—a classic chicken-and-egg scenario.
In an estimate published in 2018 by Steven Zoebell, chief technology officer of Workfront, all industries spent $1.37 billion on technology-driven projects, yet nearly $900 million of that was not successful as measured by the initial objectives of these projects. Where, in our business, can we waste two-thirds of our investment and expect to be successful? Change management has a hard business case not just a series of quotes and a trail of failed projects. Change management also has a track record of making a difference in several projects by several operators and consultants. All it takes is vision, an understanding of the effect change has on different stakeholder groups, a good design with the related strategies and tactics, execution of a change program that belongs to all involved not just the change-management team, and the right metrics to measure your progress along the journey.
Change should be a competency in every digital-transformation project. When BP was running the Advanced Collaborative Environment program in the mid-2000s, it dedicated central resources for change. These were full time on the central team. BP had a process work flow change lead; a people (soft) change lead that included competency, training, and cultural change; and an organizational change lead that also looked at governance, remuneration, and contracts. BP found that all three of these change skill sets were needed and that balance across all three was organizational and culturally dependent. It also had change leads in all the assets that were implementing. So, if we know how to do this right, why do we still see the same lack of focus on change and the same mistakes being made 15 years later?
We suggest a rule of thumb that, if you are not spending 20% or more of your budget on change, then you are likely to fail. There are plenty of examples of success and failure in the digital-solutions programs that lay the foundation for this recommendation. For another benchmark, Franz Van Den Berg, who ran the collaborative work environment program for Shell for many years, said that, on average, the amount spent on change at Shell was 19% per project.
The industry experience shows that an overwhelmingly positive business case (>$200 million net present value in the era of $100/bbl oil) never actually made leaders or organizations change; they needed a burning bridge, fear over greed. At least now everyone has a burning bridge. Fear is a greater motivator than greed. We all need to show some greater anxiety about our future and become agents of change within our companies.
Successful uptake of the technology and the associated change in the way of working has always had to be tied back to an operational need. Too often, this is not done in a way that means anything to the frontline operations teams. It leads to more collaboration, yes; but collaboration to do what? Analytics to do what? The practical answer that operations needs to hear is that implementing artificial intelligence and collaboration (or any technology) will reduce the number of maintenance staff in the field by approximately 20%, reducing operating expense and improving safety. There is a role for most workers in the digital oil field, but, for many, that role will change from what they are doing now.
Today’s hot topics are, not surprisingly, remote operations and minimum manning (Edwards and Gordon 2015). These trends could lead to a real transformation in the operations model for the future of the digital oil field. However, the authors of this paper caution the industry with the following perspective: The majority of technology and engineering issues that are needed to develop high-complexity unmanned-platform concepts and operations are already available. The primary issues preventing the uptake of this approach are nontechnical. The nontechnical issues can be categorized into organizational and governance—people, process, and technology.
So, the question is, “How do we capitalize on the current crises and make remote operations and minimum manning enabled by digital solutions the new normal?” The oil and gas industry has a huge opportunity; yet, the secret is not the technology but rather focusing on the old adage “people, process, and technology.” Managing the change; don’t let it manage you. Manage the people and culture change and focus on the business processes and results. Remember the observation of “big D, small T.” Let’s make people and change management the focus the next time around.
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The Digital Transformation Subcommittee of SPE’s Digital Energy Technical Section is
Jim Crompton, Colorado School of Mines
Patrick Bangert, Algorithmica
Melanie Bladow, Tern Consulting
Tony Edwards, StepChange Global
Helen Gilman, Wipro
Marise Mikulis, EnergyInnova
Steve Smart, Accenture