Oil and gas companies most committed to reinventing themselves over the next three years expect to grow their revenues and margins at twice the rate of companies least committed to reinvention, according to a new report from global professional services company Accenture. The report titled ‘Necessity is the Mother of (Re)invention’ features results from a global survey of more than 200 executives and introduces Accenture’s Reinvention Index, which analysed companies across key factors related to reinvention.
Accenture classified 10% of companies that scored the highest in the index which are setting the pace for reinvention through bold and decisive actions as reinvention leaders and with those at the bottom 25% labelled as laggards.
All business leaders plan at least some level of significant changes to their business with half intending radical reinvention compared with only 9% of the laggards. Almost 69% consider enterprise-wide transformation essential to this reinvention and 77% of leaders see cloud as essential to their business reinvention plans in the next three years.
And reinvention could drive substantial rewards. For instance, leaders expect minimum margin growth of 7% on average in the next three years, more than double that of the laggards (3%), and expect to grow revenues over the same period by at least 11% compared with just 6% for the laggards.
Muqsit Ashraf, Senior Managing Director at Accenture, said competition from new energy sources, environmental accountability, talent scarcity, investor apathy and the Covid-19 pandemic have led most oil and gas companies to realise the need to transform to ensure profitability, embrace sustainability and maintain their relevance.
“What is required is not just piecemeal transformation but wholesale business reinvention, which is anchored in a new approach that we call our 5C model,” he said referring to Competitiveness, Connectivity capabilities, Carbon neutrality, Customer experiences and Culture which is purpose-led.
The report notes that attaining carbon neutrality in particular is a key facet of the reinvention required to thrive in today’s era of accelerated energy transition. In fact, more than a third (37%) of respondents including all the leaders expect margin improvements of 20% or more from their low-carbon businesses in the next three years.
Refocusing investments, operations and products will be key with 97% of all respondents citing environmental performance as a priority and one-third (33%) naming it their top priority. Hydrogen and renewable power were identified as the two low-carbon businesses with the most growth potential.
“This decade will be a make-or-break period for the oil and gas industry which remains rutted in a low-price environment, but the opportunities presented in the report provide a blueprint for reinvention for continued success,” said Ashraf.
