For companies that operate in the capital projects space, the ground has been truly broken on digital initiatives. Owner-operators, engineering, procurement and construction companies (EPCs) alike have invested heavily in digital to drive business transparency and agility across the value chain of capital projects.
However, as new global research from Accenture Industry X reveals, only a minority realize the full value of their investments. Findings show that two-thirds of owner-operators and EPCs fail to see the expected benefits of their data-driven digital transformation efforts, such as improved cost management, delivery cycle time or resource productivity.
With economies worldwide eyeing capital projects as a way to boost economic growth post COVID-19, it’s more important than ever that capital project businesses can realize efficiency and productivity through their digital transformation initiatives. But what’s keeping them from doing so?
Two Missteps and One Big Barrier to Value Creation
Accenture research suggests that there are two common missteps that are draining value from digital efforts:
- Companies often omit the cultural change required to become truly digital-first. For instance, they do not work toward creating a culture that encourages and equips the workforce to make more extensive use of data for digital use cases.
- Many struggle to operationalize data and digital technologies to help make better and more informed decisions and complete projects on time and within budgets.
But what is keeping companies from tackling these challenges head-on? Effectively, companies struggle with creating the right operating environment that can help them realize the full benefit of their digital transformation initiatives. The right approach will allow companies to see data and digital technologies working in harmony to bridge the operations of owner-operators and EPCs and enable better collaboration, decision making and resource allocation.
Fortunately, understanding what the “right approach” looks like has never been easier. Research shows that 24 percent of owner-operators and 14 percent of EPCs are ahead of their peers when it comes to productivity and efficiency and are seeing better financial returns as a result. We examined what these companies are doing differently and uncovered four differentiated actions which, if adopted by peers, will drive an additional 6.6 percent return on capital investment for owner-operators and grow EPCs’ operating margin by an additional 5.8 percent.
- Establishing C-suite commitment to data-driven digital use cases. The majority of outperforming owner-operators (57 percent) and EPCs (60 percent) have made a top senior executive such as the CEO or COO responsible for the digitization of capital projects. They are also more likely to have fostered a culture of data-sharing for informed and insightful collaboration within their organizations and across partners and value chains. BP is a great example, where the CEO is the driving force behind the company’s industry-leading digital agenda and is helping to build its digital culture. The CEO’s office itself hosts a large touchscreen, where data from all of BP’s operations are streamed in real-time to provide useful insights on performance and safety around the globe.
- Building digital infrastructure and capabilities. Cloud platforms, data lakes, drones and reality capture are top technologies in which outperforming owner-operators invested in the past five years. EPC outperformers, meanwhile, spent heavily on technologies including industrial IoT devices to make supply chains more intelligent and predictive. For example, using a cloud-based Edge IoT analytics solution, Petrofac collects and transmits data from tags on workers and equipment to provide a live, one-stop dashboard displaying project KPIs, build progress, planned production compliance and also flags schedule deviations.
- Nurturing talent. Owner-operators identify data stewards to use data for addressing foundational issues in the areas of schedule management, productivity and regulatory issues. Meanwhile, outperforming EPCs leverage an army of digital coaches who work closely with their workforce in the field to help them handle operational issues related to executing projects and deliver outcomes with more efficiency, safety and certainty.
- Leveraging incentive-based contracts. Over one-fifth of all outperformers engage in contracts that incentivize project stakeholders to achieve financial, environmental and social responsibility goals (owner-operators: 22 percent; EPCs: 27 percent). These contracts foster collaboration on, and a more rigorous adoption of, digital solutions to drive shared success. Take Sutter Health California Pacific Medical Center (CPMC) as an example. The company crafted a three-way, incentive-based contract that incentivized all parties to successfully deliver on its projects. As a result, the project was delivered on time and $150 million under the original project budget.
As capital project industry participants look to innovate in the year ahead, the struggles many owner-operators and EPCs are having with their digital projects can and must be avoided. By putting in place a strong technology foundation, fostering a data-centric culture and unleashing next-level collaboration, owner-operators and EPCs can unlock the full potential of digital and deliver capital projects faster and more cost-effectively.
As the world gears up to build back better over the next few years, there’s never been a better time to put digital at the heart of capital projects operations.
Tracey Countryman is the global lead for Digital Manufacturing & Operations, Andy Webster is the global lead for Capital Projects, and Raghav Narsalay leads global research for Accenture Industry X.