In my previous blog, I looked at the need to gain control of your content when creating operational excellence. In this blog I thought I’d cover the role of effective change management.
Operational excellence is the main focus of the Energy track at this year’s Enterprise World where some of the world’s largest brands will be discussing industry best practice and their individual approaches.
Change management at an operational level provides huge opportunity to drive cost and productivity improvements. The last few years had been tough for energy companies. Low oil prices have seen capital projects cancelled and costs cut to the bone.
Wood MacKenzie believes that oil and gas companies, especially, are coming out of survival mode and are set for renewing investment in growth. However, I’d say that the focus on operational efficiency is now ingrained at most energy companies. As Wood MacKenzie points out, one reason that companies can begin to re-invest is that the focus on operations to create revenues has improved cash flow generation.
Energy companies are far from out of the woods just yet.
The result of years of retrenchment, according to Ernst and Young, is that over 50% of global oil and gas production comes from assets that passed the midpoint of their life cycle. We all know that the older assets get, the less reliable. We may want 100% production and 100% uptime but that is not going to happen. Things go wrong. In fact, Ernst and Young reports an 11% year-on-year decline in E&P operational efficiency between 2008 and 2012.
Putting a value on operational change management
Delivering a structured approach to change management at an operational level boosts efficiency and productivity by reducing the errors and accelerating workflows and collaboration across the organization and with external parties. It is only one element of operational excellence but it can be highly significant. Ernst and Young predicts that operational costs for major oil and gas suppliers increases at 2.85% per annum – which will see costs rise from just under $250 billion in 2017 to over $280 billion in 2020. The consultancy suggests that there is the potential for $25 billion savings to be made between best-in-class and average operations.
In a presentation for Digital Energy Journal, Haliburton discussed the ‘power of the 1%’ – the ability to find a small improvement in operations that brings major benefits. If effective change management can achieve only a 1% improvement – using EY figures – that’s a $250 million saving. In practice, excellent change management offers far greater rewards.
Implementing effective change management
I define operational change management as the process of improving workflows to minimize the time, effort and cost of delivering peak asset performance. From something that was primarily paper-based, we’re moving to a completely integrated operations and maintenance environment. This means more than digitization. It requires a highly structured approach – underpinned by a central EIM platform – to the capture, management and sharing of information within the change management process.
There are five key elements to delivering effective change management:
- Integrate your Plant Maintenance scheduling system with your critical engineering content: As work orders are issued to the maintenance engineers, links should be generated to lead the engineer to the relevant and up to date documentation required to undertake the task safely and successfully.
- Capture & coordinate content change: As the plant is modified during a maintenance task, you have to be able to capture all change requests and automatically associate all relevant content to that request. Any necessary revisions to documentation only occur after the changes have been approved.
- Automate notifications & acknowledgements: All updates to documentation have to be circulated to the people who need them. The process should be fully automated not only to ensure access at the proper time but to also facilitate an audit trail for compliance.
- Review & approve changes: You require a central system that allows all changes to be managed from a single package. There needs to be stringent version control so all participants know that they are working on correct – and the most up-to-date – information.
- Share & collaborate: As industry partnerships and cooperation grows, you require an automated and secure means to exchange documents with external parties. The shared information has to be correct and tracked – all changes have to go through exactly the same change and approval process as internal documentation.
In this way companies can create a fully end-to-end change management process (see figure 1 below) that has benefits beyond improving the efficiency of operational changes. The energy industry is the midst of a major skills challenge. It’s not just assets that are aging! As people retire or move, essential skills are being lost and are not easy to replace. A digital change management approach lessens that burden on knowledgeable staff and reducing the training overhead for new staff.