five key digital transformation trends and challenges in

Five key digital transformation trends and challenges in 2021 for power and utilities

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Insights from the Executive Roundtable at Oil & Gas IQ

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Since the start of the pandemic, digital initiatives and technology spending in the power and utilities sector have surged. According to Accenture, over 90% of utility executives report that their company has been innovating with new urgency this year while 59% report that digital transformation is accelerating.

“The running joke is that power and utilities have a five-year [digital transformation] plan that keeps getting postponed and postponed and postponed. Then we have a pandemic and in five days that five-year plan gets implemented,” observes Jose Pires, a panel moderator at Oil & Gas IQ’s recent Operational Excellence in Power & Utilities event.

Utilities have successfully automated manual processes in corporate offices, in the field and for residential customers. In the past year utilities had to pivot quickly to the rapid adoption of technologies that enable remote

working and greater on-site distancing. The pandemic only accelerated a trend towards digital transformation that allows for more flexible, efficient and safe operations underpinned by advanced mobile-enabled and data-driven work processes.

By year-end 2023, according to Gartner, nearly half of utilities will have enterprise-wide deployments of solutions that support digital field workers and facilitate operational excellence.

According to Dr. Carole Nakhle, CEO of global advisory firm Crystol Energy, the pandemic really separated those companies who were already further along in the digital journey. “Those who responded quickly and efficiently to the changes were those that were more mature in terms of adoption of technology,” she observes.

“Technology that was driven by costs is now about survival,” says Biju Misra, Director, Operations- Corporate Business Services &

Automation CoE, Enbridge. “Now leaders need to understand technology and how it impacts their business. If you didn’t pay attention, if you didn’t invest over time, you’d be left behind…you wouldn’t be able to operate. “

But software tools alone aren’t enough to ensure that companies harness the benefit of transformation. Success and scalability depend on getting the benefits embedded into the core work processes of the organization in order to deliver safer, more efficient and reliable outcomes in compliance with the governing regulations.

So, what are the key challenges of implementing an effective strategy to make technology and innovation successful? In September 2021, Oil & Gas IQ brought together utility industry leaders from across North America and Europe to discuss key opportunities in digital transformation. Here are the five trends and their challenges that they identified for the year ahead.

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Challenge: Greater clarity is needed on who owns what and where the money comes fromAs companies pivot towards more digital work processes and machines become IoT and sensor enabled, the distinction between capital intensive assets such as machines and infrastructure (OT) and information technology infrastructure (IT) has become blurred. Operational technology is inherently cross functional as cloud computing models and network security issues are embedded within the changing work processes.

The breaking down of these traditional silos offers

utilities potentially huge benefits as it enables operators to digitally monitor, operate, and automate physical infrastructure. But one key challenge is who owns the budget – IT or OT? Separating operating costs from capital costs, for instance, becomes problematic with cloud-based computing.

Oil & Gas IQ’s executive roundtable recommended coming up with common set of agreed upon internal accounting rules to better manage the distinction. For instance, can you treat a cloud computing initiative as a capital cost? Then, once those internal rules are agreed upon, it is worthwhile discussing those definitions with the regulator.

Key Trend #1:Information Technology (IT) and Operational Technology (OT) continue to converge

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Challenge: Need stronger data governance and clarity of purpose for reporting toolsAdvances in data analytics and sensors allows power and utility companies to tap into an immense amount of operational performance data, grid infrastructure, as well as external information from news and weather sources. But without a clear definition of what the business purpose of that data is, any organization will struggle with garnering insight from the reams of information. The data simply becomes a meaningless stream of information that lacks context or actionability.

Further, human introduced error in data can skew the results rendering them less accurate. For many utility companies, for instance, data collection is not yet fully

automated and that can impact on the quality of the data going into the reporting systems.

“It changes what the end users do to make sure that the data is correct and well managed,” comments Bonnie Schwartz, Vice President, Environmental Health & Safety, Calpine, adding that it’s essential to have “the education of the people doing it and the money to put in the data collection devices and make sure they’re maintained well.”

Oil & Gas IQ’s Executive Roundtable recommended focusing on the end goal: what business objective are you trying to achieve with this information? What problem are you trying to solve, or insight are you trying to gain? Then, having appropriate data governance structures in place to provide oversight is crucial. Staff must be trained and understand the critical impact of data on the operation.

Key Trend #2:Advanced analytics provide unprecedented insight into business operations

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Challenge: Lack of industry wide standards on cyber security increases risks for operatorsAs utilities deepen their reliance on remote and IT-enabled work processes, the risk posed by external cyber threats also increases.

“There is a disconnect that we want to adopt digitization as a rapid trait but we’re ignoring the risks that comes with it,” observes Crystol Energy’s Dr. Carole Nakhle. “As soon as you become digital, you’re exposing yourself to the threat. Cyber-attacks are happening a lot more often than is being reported.”

IIoT only compounds the problem as connected and intelligently automated equipment and infrastructure increases the mechanisms through which a nefarious actor could gain access.

Despite the risks, there is currently no common industry standard for utilities. According to a recent IBM study of utility executives, for instance, 70% of utility companies reported to have only a moderate understanding of cybersecurity of the Industrial Internet of Things.

Oil & Gas IQ’s Executive Roundtable identifies the need for better, industry wide standards on cyber security.

Key Trend #3: Cyber security will move up the agenda as remote and digital work processes intensify

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Challenge: Getting sponsors to shift to a more agile mindset and understand how to leverage their position to successfully drive digital transformation forwardEven before the pandemic upended business as usual, utilities were poised for a decade of unprecedented turbulence as climate change, the transition to cleaner and renewable energy sources, a generational shift in the workforce, and new operational technology were combining to require new ways of working. This change is only set to deepen and enhance the operating models of those companies best poised to take advantage.

But these changes also require a shift in mindset. As young executives enter the workforce, some are driving

new, more agile operating models. Other leaders are having trouble pivoting to the new way of thinking: no longer a cautious utility but something more agile. As with any major change program, strong sponsorship is a critical component.

“There’s no better adoption than the leader him or herself talking about what that change is, what’s important, what we’ll get out of it and what it will contribute,” says Enbridge’s Biju Misra.

Oil & Gas IQ’s Executive Roundtable proposed creating a training program for sponsors to help them better understand their role and how to successfully support digital transformation initiatives. Sponsors should be someone with an open mind who is curious to explore the art of the possible rather than locked into the organization’s historic operating model.

Key Trend #4: Utilities are set for a decade of unprecedented change

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Challenge: Creating the right roadmap and then following that roadmap (rather than chasing every new technological development)As technology capabilities rapidly improve, there’s a risk that organizations chase the latest fad and technology without understanding first how it fits into the future operating model. When technology is implemented without thought to the business case, it can be difficult to realize the full benefits of the new technology.

Oil & Gas IQ’s Executive Roundtable recommends creating a clear roadmap and then sticking to it. It is

important not to be constantly diverted by the latest technological trend. Additionally, starting small can help to make the process smoother by providing validation and a testing ground for concepts and technology before rolling them out to the wider group.

“Start small and scale fast is always better because it gives the workforce time to absorb the change,” says Enbridge’s Misra. “You can overwhelm people just by talking [too much] about it.”

As one executive participant noted in the roundtable: “Transformation is not tomorrow…it is a journey.”

Key Trend #5:Technological advances in Artificial Intelligence, automation, IIoT, Data and Analytics enable quantum leaps in the art of the possible

five key digital transformation trends and challenges in

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