March 2018

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Digital: Operational excellence index—Part 2: The digital transformation

Without a doubt, digitalization is the engine fueling the growing adoption of operational excellence (OE) in hazardous industries.

Lehmann, S., Petrotechnics

Without a doubt, digitalization is the engine fueling the growing adoption of operational excellence (OE) in hazardous industries. As Part 1 of Petrotechnics’ OE index (OEI) survey—featured in the November 2017 issue of Hydrocarbon Processing—revealed, technology is at the heart of a rapidly accelerating effort to deliver unparalleled transparency, efficiency and intelligence into operational decision making.

Part 2 of the OEI survey provides a window into applications, attitudes and benefits, capturing the insights of oil, gas and petrochemical industry professionals. The experiences of the respondents reflect a firm belief in digitalization to enable and transform an organization’s OE frameworks.

Having realized the initial benefits, early adopters are leading a nascent, yet inevitable, march toward the next stage of digitalization. However, the rapid pace of innovation may pose some barriers to widespread adoption that will challenge senior leaders to foster organizational cultures that embrace the strategic value of digital transformation.

Full steam ahead

The momentum towards OE adoption in hazardous industries is building, and digitalization is playing a vital role. More than 73% of companies surveyed noted that digitalization is helping to accelerate their ability to deliver sustainable OE.

Many companies have made great strides integrating dispersed operational data, business processes and workforce roles to create the foundations of an enterprise-wide OE framework. Having achieved new levels of transparency and oversight, companies are looking to digitalization to manage OE in a proactive, strategic manner. According to survey respondents, enhanced key performance indicators (KPIs) and metrics (51%), and improved prioritization and planning (49%) are the two areas where digitalization is creating the biggest impact within organizations (FIG. 1).

FIG. 1. Digitalization is driving OE, according to survey respondents. Source: Petrotechnics.
FIG. 1. Digitalization is driving OE, according to survey respondents. Source: Petrotechnics.

 

A need to dispel concerns

Viewing digitalization as a silver bullet is a mistake. It is dangerous to point analytics at disparate data and apply machine learning with the expectation that actionable insight will be the result. As the nature and use of technology accelerates, obstacles to progress arise.

The rate of digitalization in hazardous industries has some observers worried whether people can keep pace. According to respondents, steep learning curves (19%) and data overloads (18%) are the top challenges that digitalization poses for operators. When you add the potential for disengaged workforces (14%), 51% of respondents recognize challenges to embracing digitalization. This comes as no surprise. Workplace culture is ranked as the single biggest barrier to advancing OE.

Beyond these concerns, newer applications—predictive analytics, machine learning and others—have the potential to disrupt long-standing models of operation. Naturally, this breeds a sense of uncertainty among individuals ranging from job security to fears of “Big Brother” monitoring through mobile device GPS location tagging, which only increases resistance.

In reality, digitalization is meant to enhance, not replace, the human element of decision-making. The smart combination of human and sensor-derived inputs provides everyone with the right information at the right time to make better, more informed operational decisions.

Data is a prime example. The reality is that we have too much data and not enough context and insight. Delivering meaningful and actionable insights requires us to unlock meaningful relationships between previously disparate data sources. Analytics are only as good as the inputted data. A “common currency,” such as risk, that connects data to operational reality is fundamental. In this way, organizations can understand what is happening, when it is happening, and where it is happening on the asset. This allows data to be transformed into meaningful and actionable insight, and allows operators to forecast, with great accuracy, when equipment will require maintenance. This intelligence enables informed decisions and elevates operational performance, safety and efficiency.

Part 1 of the 2017 OEI revealed a large gap between organizations whose senior leaders champion OE and those that do not. For digitalization to become embedded in organizations, senior leaders must lead from the front and effectively communicate the benefits across the business. More importantly, they must be proactive in demonstrating how digitalization is part of a wider strategy to ultimately enhance the way individuals and teams operate.

Foundations first, then evolving strategies

Given that companies are in different stages of digital OE adoption, it is no surprise that the majority of organizations rank the use of more mature point applications, such as enterprise asset management (84%), asset performance management (69%) and operational risk software (61%), at the top of the list of technologies they use or plan to use. The emphasis on these technologies signifies that many organizations are in the infancy of establishing their OE foundation.

Simultaneously, early OE adopters are ramping up their use of more cutting-edge technologies to build on their initial successes. Deriving insight from data is a key focus, with 65% of respondents either deploying or planning to deploy predictive analytics. The use of mobile workforce applications (35%) and smart sensors (37%) are expected to increase, as real-time visibility and frontline productivity remain high on the list of operational priorities.

Cutting-edge digital technologies, such as the Industrial Internet of Things (IIoT) platforms (53%), artificial intelligence (AI) (39%) and machine learning (49%) are not just on the OE horizon, but are already seeing modest adoption. According to respondents, the usage of IIoT platforms and AI will increase nearly three times (280%), with machine learning (200%) close behind. The future of digitalization lies in creating even deeper levels of intelligence to enable a more predictive and prescriptive approach to operational decision-making, which is at the heart of OE.

Aspirations become outcomes

Digitalization is delivering on its promise to bring OE to life. According to respondents, technology is having the greatest and anticipated impact on areas that are at the heart of a strong OE framework.

More than 83% of organizations agree that digitalization is enabling a single, shared view of operational reality. By bringing together disparate data and creating an integrated view of all operational activities and risk, companies realize greater levels of transparency, efficiency and performance.

Likewise, 81% highlight real-time visibility of asset risk as a significant benefit of digitalization. The connection between risk control systems and frontline operations is enabling proactive risk management, loss prevention and enhanced safety.

Companies are also feeling the benefits of digitalization around strategic management and the deployment of operational resources. As previously noted, prioritization, planning and the establishment of more impactful metrics are areas where technology is having the greatest impact on OE.

The shift from real-time to predictive management of OE reveals the areas where the future potential of digitalization is greatest. Organizations anticipate a 209% growth rate in the use of advanced analytics to better understand where and how to improve operational processes. Additionally, respondents expect a vast uptick in the use of digital twin technology (222%) to create virtual replicas of their operations to run more-detailed operations simulations to improve maintenance strategies and uptime, and reduce risk.

A clear direction, but there is work to do

Debates over the merit of OE and digitalization have been far surpassed by the progress made across hazardous industries. With more companies creating the foundations for OE and early movers already plotting future advancement, OE has grown firm roots.

The question of digital OE adoption is not “if,” but “when.” For each organization, the answer lies in its ability to embrace technology as an enabler of a more collaborative operational culture. Digitalization must be used to close the loop between functions to make better, more-informed, collaborative decisions. Convergence and consolidation allow a whole organization to be understood as an end-to-end business process, with the OE focus on the entire process rather than siloed functions.

With strong leadership, silos can be broken down and operational models can evolve.

As the impacts and business benefits continue to stack up, the momentum towards widespread OE adoption only increases. The only choice left for companies in hazardous industries is whether they are willing to pay the price to wait any longer.

Industry representation

The OEI survey was conducted between August 2017 and October 2017, collecting responses from a broad representation of functions, demographics and industries across the oil, gas and petrochemicals sectors. HP

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