Petrotechnics conducted a survey to find out. Here, Scott Lehmann, VP Product Management, discusses the results.
Operational Excellence is a global concept whose time has most certainly come, despite a fairly rocky ride since it first made its debut in hazardous industries several years ago. Like many aspirational sounding concepts, operational excellence has been dismissed by some as yet another management theory with little practical application in the real world. Or perhaps it has suffered from being poorly understood or misinterpreted.
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But all that is changing – and fast. A recent survey of oil, gas, and petrochemical industry professionals, conducted by Petrotechnics, shows a growing consensus around operational excellence, what it means and the benefits it can bring to organisations in hazardous industries.
When it comes to defining operational excellence, participants in the survey were presented with the following description:
“Operational excellence is the pursuit of world-class performance. It requires everyone, from the boardroom to the frontline, to consistently make the most effective operational decisions, based on an integrated view of operational reality, based on risk, cost and productivity.”
An overwhelming majority – 98 per cent – agreed with that statement. Inevitably, some caveats were made: some people thought that ‘best possible’ was preferable to ‘world-class’, while others suggested statements about sustainability, value improvement, or risk should be added. But a broad consensus was there.
That consensus continued when considering the value of operational excellence. 92 per cent said achieving operational excellence was important to the success of their business – 82 per cent of said it was very important.
A slightly smaller majority – 80 per cent – said that operational excellence had become more important over the past two years – either to some or to all of the people in their organisation. The view that operational excellence is simply a management trend that the industry does not take seriously was held by only 13 per cent of the people who took part in the survey.
Understanding the benefits
Contained in the definition above are indicators of why organisations are taking operational excellence very seriously indeed: risk, cost and productivity. In its own recent examination of operational excellence, industry analysts at Ernst & Young (EY) suggested that by reducing the growth rate of a company’s compound annual cost expenditure rate, operational excellence could deliver staggering results. The analysts stated that achieving operational excellence could lead to a 29 per cent increase in oil and gas production. It could reduce costs by up to 43 per cent, and deliver savings over five years of up to $30 billion. And it could reduce the number of safety incidents by 43 per cent.
Bain and Company came to very similar conclusions. It pointed out that companies achieving operational excellence would benefit from enhanced asset integrity and improved efficiency of maintenance execution – as well as a 50 per cent reduction in critical incidents.
Respondents to the Petrotechnics survey have taken these findings on board. Given a range of options, nearly two-thirds (63 per cent) said that the need to achieve greater cost efficiencies was a key driver for achieving operational excellence in their organisation.
The same number said reducing operational and major accident hazard risk was a driver, while more than half (56 per cent) said optimising maintenance programmes was a key driver in their organisation.
The most frequently cited objectives for an organisation’s operational excellence programme were: increasing operational performance; operations maintenance and reliability; and increasing health, safety and environmental performance.
Making it real
In its earlier incarnations, operational excellence struggled. The necessary tools were simply unavailable. But that too has changed. As EY pointed out, “With new technological advancements, we have the potential to improve business functions across the industry… technology has caught up with the industry’s needs.”
This was another area overwhelmingly supported by the Petrotechnics survey: 92 per cent agreed that technology is an enabler for delivering sustainable operational excellence in hazardous industries.
The key word here is enabler. As the initial definition recognises, operational excellence is about everyone in an organisation consistently making the most effective operational decisions. In other words, technology doesn’t replace skilled, knowledgeable or experienced people. It supports and enables them to make the best possible decisions based on all available evidence.
As industry professionals pointed out in the survey:
- “Technology delivers only part of the solution. People are still a very important aspect of day-to-day operations.”
- “Technology takes you some way along the journey but fundamentally operations personnel’s knowledge and competency is key to sustainable operational excellence.”
- “Technology is a tool – the strength of desire and depth of understanding of how to use it come first.”
This view is also reflected by the 56 per cent of survey respondents who said a key driver of their operational excellence programme was influencing cultural and behavioural change. 35 per cent said providing operations personnel with better, real-time information was a key driver. And 31 per cent of respondents pointed out that operational excellence was driven by everyone in the organisation. This is, as our definition explains, a ‘boardroom to frontline’ effort. It’s not just another programme sponsored by the C-Suite or handed off to a specific operational excellence function.
This is important, because until now one of the things that has prevented organisations from achieving operational excellence is the way information within an organisation remains fractured and provides only a limited view on what is happening at any given point on an asset.
This is a diverse and complex industry. Most operators have managed intricacy by organising themselves in a largely siloed fashion that has produced largely siloed decision-making. In many cases, these technology and information silos have actually impeded people from doing their best work. And they’ve hindered operational excellence as a result.
If everyone is to make more effective decisions, they need a fully integrated view of operational reality – in real-time.
Technology tools that effectively support operational excellence give everyone – from boardroom to frontline – that all-important global-view of their operations. Personnel can know what’s happening, where, and when – and equally, what’s driving risk. These tools can bridge the gap between planning, maintenance and operations functions, and allow everyone across the entire enterprise to see and manage operational risk, productivity and cost in exactly the same way.
There is some urgency about the adoption of these kinds of tools, because the amount of data that is available and will need to be parsed, shared and understood is growing rapidly. The big data phenomenon is here, as are the data capture, analysis and connectivity tools behind the Internet of Things.
Today, 47 per cent of survey respondents are already using data analytics to support operational excellence, and 31 per cent are using predictive or prescriptive analytics. 25 per cent are using 3D visualisations. 11 per cent are using Industrial Internet of Things (IIoT) technology now – but twice that number plan to in the future. In fact, all of these technologies are higher up the list of solutions that organisations plan to use in the future than the more traditional systems like ERP, asset performance management, enterprise asset management and maintenance management systems.
Scrapping the silos and connecting data gives every single person in the entire organisation the information they need to make better, safer, smarter, and more informed operational decisions. That is the long-promised, tangible business advantage of operational excellence. It’s time to lower maintenance costs and increase production, reduce risk to people, plant and profit. Only then can companies gain more control over ever-growing costs. And the good news is that the industry agrees!