According to a new Accenture research that details best practises firms should implement to survive in the energy transition, oil and gas firms who are most committed to reinventing themselves as a result of the Covid-19 outbreak over the next three years, anticipate to grow their sales and margins at twice the rate of firms who are least devoted to reinvention. The research titled “Necessity is the Mother of (Re)invention,” includes data from a global poll of more than 200 oil and gas executives, as well as Accenture’s “Reinvention Index,” which evaluated organisations on key reinvention elements. Accenture designated the top 10% of organisations in the Index as reinvention “leaders,” while the lowest 25% were labelled “laggards,” indicating that they are setting the pace for reinvention by bold and decisive action.
In reaction to the Covid-19 pandemic, all leaders aim to make significant changes to their businesses, with half (50%) planning radical reinvention, compared to only 9% of laggards. Nearly seven out of ten leaders (69%) believe that enterprise-wide transformation is critical to this reinvention and 77% believe that cloud will be critical to their company reinvention objectives in the next three years. And it’s possible that reinvention may pay off handsomely. For example, Leaders forecast minimum margin increase of 7% over the next three years, more than double that of the Laggards (3%) and revenue growth of at least 11% over the same period compared to just 6% for the Laggards.
“Competition from new energy sources, environmental accountability, talent scarcity, investor apathy, and the COVID-19 pandemic have prompted most oil and gas firms to see the need to reform to assure profitability, embrace sustainability and preserve their relevance,” said Muqsit Ashraf, a senior managing director at Accenture who manages the company’s Energy industry group.
“What’s needed is wholesale company innovation, which is grounded on a new methodology we call our ‘5C’ model.” According to the research, achieving carbon neutrality is a critical aspect of the reinvention required to flourish in today’s fast energy transformation. In fact, more than a third of respondents (37%) predict margin increases of 20% or more from their low-carbon firms in the next three years, including all of the Leaders. With 97 % of all respondents stating environmental performance as a priority and one-third (33 %) selecting it as their top priority, refocusing investments, operations and goods will be critical.
The two low-carbon businesses with the biggest growth potential were selected as hydrogen and renewable energy. Indeed, more than half of CEOs predict hydrogen (62%) and renewable energy (54%) to account for more than 7% of company income within the next decade. “This decade will be a make-or-break moment for the oil and gas industry, which is stuck in a low-price scenario,” Ashraf added. “To stay relevant during and after the energy transition, all oil and gas businesses should aspire to be like the innovation Leaders. Otherwise, the transformation would devolve from an opportunity to create a long-term, lucrative future to an existential threat”, added Ashraf.
More than a third of the corporations (36%) have annual revenues of more than $10 billion and 48% have annual revenues of between $1 and $10 billion. Accenture has developed a Reinvention Index Score, which is made up of equally weighted ratings from each of the five key aspects of reinvention and is based on chosen survey findings (competitiveness, carbon, connectivity, customers and culture).
