94% of Canadian energy and mining companies are investing in digital technology to create a competitive advantage—saying transformation is critical to their long-term success.
Canada’s energy and natural resources (ENR) companies—mining, oil and gas, and power and utilities—have made pivotal contributions to our country’s economic prosperity. KPMG’s recent research into the Canadian ENR sector’s digital readiness found 95 percent of ENR executives state that digital transformation is a key driver to future success. There is a keen sense that, in the face of aging infrastructure and emerging disruptive forces, technology investment is essential; a total of 86 percent of ENR respondents to our survey—more than any other industry—said they are already investing in technology to improve business processes.
The reason for this urgency? Depressed commodity prices across the sector (with the exception of the Power & Utilities segment which faces high infrastructure renewal costs) and the resulting downward pressure on margins have spurred ENR businesses to find savings in any ways they can, especially through investments in technology.
Priority on back office and big data
The top tech investment goals of respondents indicate the greatest benefits of digital transformation for their organization lie in back office support, integrated reporting systems, and better overall reporting. More and more ENR companies are able to monitor processes at remote locations in real time, hour by hour, minute by minute, and make adjustments as needed. The challenge for back offices is implementing technology and analysis that makes meaning and drives value from the resulting data.
Despite substantial progress, most ENR organizations lack a seamless integrated reporting system from top to the bottom. They still tend to run a myriad of different systems that include manual interfaces and require manual interventions. ENR’s future tech investment plans will make system integration an even bigger priority:
- 51 percent of ENR companies indicated they are considering big data implementations.
- over 40 percent of those surveyed report using some form of sensors, for instance, to gather data in real time, from equipment and infrastructure.
- ENR is behind other industrial sectors on implementing and leveraging demand-driven supply chain technology (66% vs 73%).
Competency to succeed at digital transformation
Just 30% of the ENR executives surveyed believe their companies possess the necessary competencies to undergo a digital transformation. A central challenge to ENR’s digital transformation is the loss of talent. Many skilled employees left the industry as a result of the downturn. Interest among engineering, technology and other graduates has fallen, perhaps, in part, due to a perception that the sector is a less-than-secure place in which to start a career. Human Resource executives in ENR will need to take their existing focus on people management and use it to forge a strong understanding of what the workforce of the future will look like.
Elevated concern on cybersecurity
More ENR companies are concerned about cyber security risks than other industrials – 70 percent versus 60 percent. This is to be expected given the energy sector’s status as critical infrastructure and the risk of multiple factions wanting to interfere with an ENR company’s operations or capture P&U customer data for exploitation. Only 63 percent of respondents feel their IT world is largely secure with 33 percent reporting an industry-leading level of cyber technology adoption. New technologies such as IoT will bring new cyber vulnerabilities, so companies will need to stay vigilant and continue to invest in this vital area.
Energy and natural resource companies need to take a fail fast approach to technology and technological investment. It’s critical that they try new technologies, learn from their mistakes, and leverage that experience. Success in digital transformation also depends vitally on tapping into the technology savvy of those entering the workforce.
Learn more about the digital readiness of Canada’s energy and natural resource sectors in KPMG’s new report, Building up to transformation: Digital maturity of Canada’s industrials sector.
Michael T. McKerracher
KPMG in Canada