Drawing on their vast experience with global energy clients, KPMG professionals explore how to get business transformation right.
In boardrooms across the energy-value chain, leadership teams can struggle to define a clear direction and to determine when, where and how they should invest in transforming their businesses. They are also up against competing pressures from multiple stakeholders, uncertainties in regulation, energy demand and pricing, and, of course, wider economic, climate and geopolitical complexities.
So how can businesses make a step change in structures and behaviours that have long endured and establish an agile, resilient, and scalable operating model fit for the demands of the future?
Five steps to transformation
1. Establish a strategy-led approach with a shared vision of success
A cohesive and well-understood vision, and aligned leadership, will support the execution and delivery of your strategic transformation programme.
Wafa Jafri, Partner in Energy Deal Advisory at KPMG, says: “We’re trying to change an entire industry here. While many players fixate on an end target date, successful transformation should be about making decisions that are commercially sound for your business now that are ligned for the long-term vision.”
Regardless of leadership changes, or other significant shifts that come your way, your strategy should remain focused on the commercial imperatives of delivering value to shareholders and customers.
2. Set challenging and inspiring targets
Think big. Transformation means more than incrementalism and moving beyond the way you’ve always done things. Express your ambitions in a way that connects with stakeholders. This means setting clear targets for your teams that forces them to challenge the engrained thinking and go beyond the status quo. For instance, achieving a savings target of ‘£X billion by 2035 with energy transition technologies’ may be more relatable than reducing carbon emissions by nine million tons annually.
To plan and make effective decisions, clearly you need to understand the market and commercial dynamics. Be alert to tipping points in the energy transition. Look at external indicators and signals, like growth or decline in existing products, or the adoption of emerging technologies. Use this information to decide when and where to invest to debate the right optionality for the long term.
3. The “how” of transformation matters
To get the transformation you want, consider the implications of change across every element of your operating model. Gauge the potential impact on performance, governance, data management, processes, technology and company capabilities. And design your transformation so that it is directly linked to your unique to strategy.
A blended approach tends to work best with a top-down approach setting the long term ambition combined with a bottom-up perspective allowing two-way learning to inform, empower and engage the business and its people driving a longer term shift in mindset and culture.
With artificial intelligence considered a top priority for the coming decade by 71% of 1,000 CEOs surveyed by KPMG,[1] data is going to be critical source of potential. “Generative AI capabilities will be borne on the foundations of fundamentally having good quality data,” says Barry Edmonstone-West, Partner, Deal Advisory, The Strategy Group, KPMG in the UK. “And by combining conventional transformation with digital and AI-enabled transformation, it becomes possible to not just shift with the energy transition but to significantly improve business performance at the same time.”
4. Focus on the human journey
An industry in transformation can be an unsettling place to be. Some people fear for their job security; others are overwhelmed by the prospect of change.
Managing the human journey through transformation is critical as ultimately it’s not organisations that change but people. Change is highly dependent on people, which is why talent attraction, retention and development dominate our discussions with clients.
Effective communication and engagement of a strong vision and new ways of working will help employees to envisage their role and future career paths within a transforming industry.
