Business process reengineering is a critical component of ERP implementations in any industry. Given the massive changes and turbulence sweeping energy-related companies across the globe, these elements are especially important in the oil and gas industry.
Oil prices have dropped to less than half of their prices just a few months ago, which has led to a significant shakeup in the energy industry. Exploration and production energy companies are closing facilitates to reduce supply, manufacturers and other suppliers with the goal to become more efficient against the current backdrop of free-falling prices for oil and natural gas.
Every industry has its own challenges and changes. These can include a weak global economy, regulatory changes, increasing competition or consolidation among industry players. Through these challenges we have gathered that the lessons of the energy industry are applicable to any industry or company going through changes.
Below are a few concepts to keep in mind for the oil and gas industry – or any other industry experiencing significant changes and obstacles:
Business process reengineering should focus on both top-line revenue growth and cost containment. Too often, energy companies and those in other industries put too much focus on top-line growth OR cost containment when they should be focused on BOTH. For example, just a few months ago, energy companies had a surplus of revenue pouring in. Fast forward three months, and now they are scrambling to find ways to scale back operations and contain costs to deal with these economic realities. These companies should not forget about additional ways to leverage more top-line growth, especially in an environment with a shrinking market. Effective business process reengineering will look at both sides of the business benefits equation.
Process improvement should touch all major areas within a company. Just as process definition and improvements should focus on revenue growth and cost containment, it should also address multiple areas within your company. As integrated as most companies are – whether in energy or other unrelated industries – business processes shouldn’t be addressed in isolation. Instead, they should be addressed in an integrated way so that the efforts are able to generate more “bang for the buck” and deliver a solid return on investment (ROI). This approach also ensures that inefficiencies aren’t simply shifted from one functional area or business process to another, which is typically the case when business processes are improved in isolation.
Business process reengineering efforts should precede any ERP implementation or IT initiative. Too many organizations – including those in the oil, gas and energy industry – fall into the “implement a new ERP system and the process improvements will come naturally” trap. In order to get the full business benefits of a new ERP system, it is important to define and even implement many of the process changes prior to selecting and implementing a new ERP, CRM, SCADA, fixed asset or mobile workforce management system. This is something we covered in more detail in a past blog: Five Reasons Why Business Process Reengineering Should Happen Before Your ERP Implementation.
Align organizational change management with your process reengineering efforts. Defined business process improvements are meaningless if they aren’t implemented and if employees aren’t adopting them. For this reason, organizational change management activities should enable the desired changes from a people perspective. For example, detailed business processes by department or workgroup should be defined and communicated in a targeted fashion well before end-user training. In addition, your organizational change activities should include more tangible performance metrics and KPIs to track the improvements over time. You can learn more about our recommended organizational change management strategy and playbook by viewing our on-demand webinar.
While these lessons are not necessarily unique to the oil and gas industry, this vertical underscores some of these industry-agnostic lessons that are useful to anyone considering business process reengineering or an ERP software initiative.
Learn more about creating a sound approach to increase sales in any industry by registering for our webinar, Sales Strategies for the Oil and Gas Industry.