In today’s competitive and rapidly changing business landscape, driving sustainable step-change improvements from global operations remains a struggle for many business leaders either in identifying the true untapped potential in the business or ensuring that opportunities are fully delivered.
Regardless of whether you’re looking at producing assets in an upstream environment or downstream refining and retail supply envelopes, the need for robust approaches to tackling sustainable value improvements are becoming ever more important. Management challenges such as ever increasing pressures on wage inflation for scarce talent will require even high performing orgnaisations to use new approaches and tools to shine a light into new and alternate areas of value enhancement. In our extensive work in the sector there are common themes as to why businesses often fail to deliver on sustainable value improvement projects. In this article we explore these causes and outline the key principles of successful programmes, which apply irrespective of whether you’re looking to drive step changes in value through cost, pricing or working capital optimisation.
From our work with multiple operators across the oil and gas value chain, businesses often significantly under deliver on initiatives, failing to achieve their expectations in terms of financial impact. Our work in the sector indicates the same issues coming up again and again:
Our work in the sector has identified six principles of those organisations that successfully deliver on sustainable value improvement initiatives:
For many executives, the process of driving sustainable value improvement will, by necessity, begin with a careful analysis of the existing value drivers of the organisation in order to increase their understanding of where value is created and profit is generated. A task which is often much harder in larger organisations.
To do this, organisations must be prepared to look across divisions and business units, compare themselves through robust comparator insights that go beyond simplistic numerical comparisons, but also highlight alternative ways of working, and then make some tough decisions which may challenge the accepted business models and transform their internal culture.
Success will require senior management to develop and execute strategies that maintain a clear focus. In subsequent articles in this series we will bring to life practical examples of sustainable value improvements in both upstream and downstream oil and gas in areas such as cost management, pricing optimisation and working capital release.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.