I am increasingly interested these days in solutions that meet industry-specific requirements. Vertical solutions are compelling because they focus on solving a critical pain point or gaining a competitive advantage within an industry.
I often write about the financial services and public sectors, so I decided it was time to look at a different face of case management. In this month’s article in my ACM series, I talk with my colleague Rob Gascho, Energy Industry Strategist at OpenText, to get his expert perspective on solutions for the Energy sector.
Deb Miller: Rob, prevailing wisdom tells us that companies don't want technology, they want solutions. More importantly they want solutions that address their industry challenges. What are the biggest operational challenges today for the energy sector?
Rob Gascho: The energy sector is a highly regulated industry facing significant challenges around risk and compliance. At the same, it is also a very capital-intensive industry, building lots of big assets such as offshore platforms, oil refineries or pipelines. The proper management of the information on these capital projects has become critical to the sector in its quest for operational excellence, and there is a significant challenge in ensuring informed compliant decision making.
I was speaking with the CIO of a large exploration company recently who told me, “We’re not in the exploration business but are actually in the risk management business.” That really resonated with me.
It’s the important decisions made about where to invest and where to put wells into production that involve millions of dollars with every decision. It’s critical that you have the right information and that everybody is working from the same page. So this is where case management and business process improvement can really help, especially given the complexity of the energy industry.
Deb Miller: The energy industry is quite complex and it seems that it’s getting increasingly so. Just one example is oil and gas exploration companies moving to become producers and integrated energy companies. They have to deal with different business units including upstream, midstream, transportation, downstream and often even retail. How are energy companies dealing with industry complexity?
Rob Gascho: Historically, a lot of the businesses have operated in silos as distinct units. I’m seeing that more and more companies are moving to an integrated and a group-wide model for their business, having a centralized business model and core business processes.
This allows organizations to have different disciplines talking to each other, whether geology in the exploration area or land or drilling operations, or further down into production, operations, or even business functions like legal, finance and regulatory compliance. You can get all of these groups working together by focusing on operational excellence and having integrated processes across your organization.
Deb Miller: McKinsey says that the value of operational excellence can be measured. Companies can get up to 30 percent higher value out of existing processes and world-class operators can achieve improved compliance by implementing operational excellence through process improvement. Has the energy industry reached a tipping point in the pursuit of process excellence?
Rob Gascho: I do see a tipping point for the industry. I think it’s a really interesting time for energy companies. The global financial crisis has driven business transformation initiatives. They've been rationalizing their IT spending and figuring out how to improve their strategy for managing information and driving operational excellence. Case management, as a part of a holistic enterprise information management strategy, can be a platform for business transformation.
Deb Miller: I've seen a disconcerting statistic from the Construction Management Association of America stating that 40 percent of all major construction projects run longer than planned and incur significant cost overruns. What can the industry do to improve that?
Rob Gascho: First and foremost, the industry needs to ensure they have the right information available to the right people at the right time. Even before the first shovel is in the ground, managing your regulatory submissions, permits and contracts with an effective Case Management solution can significantly reduce delays on major capital projects.
Deb Miller: Can you share some use case examples?
Rob Gascho: Case management as a part of an enterprise information management approach can help better manage critical business information and processes across the enterprise: between EPC contractors; vendors; joint-venture partners; and between the owner-operators.
Most energy companies are really interested in achieving process excellence and improving these processes to be more effective, to reduce costs and to mitigate risks. Health, safety and environmental compliance is a major concern in the energy sector. Case Management can improve the tracking and visibility of HSE incidents, contributing to increased compliance and reduced risks.
Deb Miller: Are energy companies succeeding in their process improvement efforts then? Are they having an impact on their cost effectiveness?
Rob Gascho: I've worked with customers who have been able to save an order of magnitude with their process improvement. For example, they've been able to solve problems around enterprise asset management and in one case, save over US$ 35 million at one facility alone in the first year.
Deb Miller: How about utilities? They seem very concerned about improving processes that help them communicate more effectively with their customers, from a billing or a customer service perspective for example. How could case management help with that?
Rob Gascho: If you’re a utility, a customer communication management solution can help you attract new customers, it can help you sell new services, and it can create new value within your organization, increasing your top line.
Integrating and enabling the customer communication management solution with case management enables multi-channel communication — whether it’s through email or through print, you can deliver customized messages to your customer that help you sell new services or help you retain customers or attract new customers. So there’s a lot of ways that utilities can increase revenue and gain competitive market share using case management technology.
Deb Miller: Tell me more about gaining a competitive advantage in the energy sector; what about oil and gas companies?
Rob Gascho: Oil and gas companies are always in this constant pursuit for operational excellence, looking for ways to gain an advantage by getting their wells into production earlier than their competition. Oil companies spend a lot of effort in improving their technological processes around their operations, but often overlook how they could actually improve their internal business processes in ways that could be more effective to increase their productivity and improve their efficiency. Business process and case management solutions can provide a competitive advantage here.
Deb Miller: We read quite a bit lately about how business process management (BPM) is evolving. For example, in his recent CEO whitepaper, Mark Barrenechea says,“Forrester maps the evolution of BPM from the early days of workflow in the 1980’s — as additional capabilities have been incorporated to include model-driven development, web services, case management and ultimately, smart process applications.” What does this evolution mean for the energy sector?
Rob Gascho: Forrester went out to the oil and gas sector and asked what business benefits they looked to achieve from improved process. The number-one business benefit was cost reduction — how to trim the fat out of business processes and become more efficient in executing common tasks.
The second one was increasing the quality of output, reducing the number of errors that are related to business processes being executed in a poor way. This is the human element.
And the third was impacting the top line — increasing sales volume, or reducing cycle time. These could be asset management or maintenance processes, or they could be processes around how to make decisions about which well to put into production. These are all areas where smart process apps could focus for a big impact.
Deb Miller: In “Smart Process Applications Fill a Big Business Gap,” Forrester describes smart process apps as a new category of application software designed to support business activities that are people-intensive, highly variable, loosely structured and subject to frequent change. As a next generation of packaged apps smart process apps can encapsulate current best practices in these collaborative business processes yet make it possible for the app to reflect continuous improvements in how collaboration can occur. Where might oil and gas companies apply case management as a smart process app today?