Last Word
Businessman shouting into a megaphone
A practical guide for accelerating energy transformation
Energy sector leaders must act decisively to reinvent their businesses for the future.
Businessman shouting into a megaphone
Arno van den Haak, Amazon Web Services;
Venkat Venkatraman and David J. McGrath Jr.,
Boston University Questrom School of Business
I

n the Fourth Industrial Revolution, digital is becoming the foundation of every industry. Energy sector winners will be defined by their ability to leverage digital technologies to design sustainable and profitable business models. This does not mean merely applying the latest tech to existing business processes—a “digital varnish” approach that is fraught with pitfalls. Digital technologies must be embedded across the value chain, from exploration to production to distribution to consumption, and extended to customers and ecosystem partners.

To accelerate business transformation in a logical and coordinated way, energy sector executives must embrace a more structured and systematic approach. The Industry Transformation Matrix (ITM), developed by Amazon Web Services (AWS), is a useful tool for managing business transformation across the organization and creating pathways for transformation. The ITM plots transformation in a company’s business and technical domains across time to define four mandates that are integral to successful business transformation. The efficiency mandate represents technical areas that support current business strategy and operations. Efficiency requires continuous assessment and assimilation of new digital functionality to keep technical infrastructure effective and streamlined.

The effectiveness mandate gauges how digital technologies such as robotics, drones, artificial intelligence (AI) and machine learning are used to link and unify siloed activities to optimize workflows across the company and the entire energy value chain.

The innovation mandate focuses on the benefits and risks of integrating digital technologies and imagines novel ways of using them to drive new business opportunities.

Finally, the reinvention mandate plots the company’s future business models, looking at the business from the outside in, imagining a new future and working back to today.

Digital technologies must be embedded across the value chain, from exploration to production to distribution to consumption, and extended to customers and ecosystem partners.
Guiding principles
Successful business transformation is an ongoing, dynamic process and companies should embrace, embed and measure progress against the following guiding principles to adapt to changing market conditions and take advantage of new digital opportunities.

Work back from the future state. Projecting business transformation from the current state typically results in limited change. Instead, define the desired future state and work back to today to determine the best path forward.

Create a connected value stream. Take an enterprisewide view of business processes and value metrics, and extend it to customers and ecosystem partners.

Learn from experimentation. Rapid experimentation is a great way to adapt and reengineer operations and processes. Think of experimentation as a portfolio of learning objectives that offer insights for follow-on initiatives whether they succeed or fail.

Orchestrate a network. Doing everything internally will not lead to reinvention. Align with partners and vendors to manage today and design for tomorrow.

Augment human skills. Identify areas where machines and humans can work together, especially where one augments the value of the other.

Measure business impacts. Transformation is first and foremost about business and should be defined by business goals and tracked against business metrics.

Adjust the speed of transformation. Digital transformation and innovation take place in weeks, not years. Pace business transformation with the speed of the market and competitors.

Tackle big problems. Solving complex problems promotes innovative thinking, expedites new relationships and provides insights that can accelerate business transformation.

Energy sector leaders must act decisively to reinvent their businesses for the future. Applying the ITM to coordinate transformation efforts across the business and embracing the principles above to guide the journey will help drive efficiency today and effectiveness tomorrow.