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    What makes a energy-industry leader? Accenture's global strategy chief on the defining traits

    February 6, 2023 - Kyra Buckley, Houston Chronicle


      Feb. 6—Muqsit Ashraf and his team at global consulting firm Accenture had been researching the pace of disruption in industries such as energy when they noticed a big spike starting about five years ago.

      "We found that number — the volatility across industries — grew about 200 percent between 2017 and 2022, which is about 10 times the volatility in the prior five years," Ashraf, the Houston-based global chief executive for the firm's consulting business, said. "So overall, there was a lot more disruption going on."

      The industry has over the last few years experienced two major downturns, a global pandemic that temporarily destroyed fuel demand and led to long-term supply constraints as well as Russia's invasion of Ukraine that pushed up oil prices while exacerbating supply chain snags. All of it happened amid a worsening climate crisis.

      Ashraf, who has called Houston home for more than two decades, said of the more than 200 companies surveyed for Accenture's most recent reinvention index, around 20 emerged as leaders in the face of change, 50 lagging behind and the rest made their mark somewhere in the middle.

      He sat down with the Houston Chronicle to discuss more about the findings and what they mean for Houston's oil and gas industry. The interview has been edited for space and clarity.

      Q: Why did Accenture choose to study how oil and gas companies are reinventing themselves?

      A: The oil and gas industry has been through a very challenging decade. If you just purely look at it from an investment or equity market standpoint, [the industry] used to have a double digit share of the S&P 500. At the start of this decade, it was down to about 2 percent, now it's growing back up to somewhere around 4 percent. So the industry has been through a bit of a crisis.

      Technology, clearly, is changing industries, and it's impacting energy in a big way. Then layer on top the climate crisis, which has been becoming more and more prominent. Last but not least, over the last 12 to 18 months, the energy crisis — which is not just related to the geopolitical events, but was forming as soon as the world started recovering from the pandemic.

      Every industry is looking at some level of transformation, and in some cases, reinvention, but oil and gas clearly was in need for a major change.

      Q: You heard from just over 200 companies and broke them up into companies leading the way in terms of shifting to new and lower carbon energy, companies that are following and companies that are lagging behind. What did a company have to show to be a leader?

      A: We didn't start by categorizing or segmenting, we had the data speak for itself. What we found in the leaders, first and foremost, they were not being held back by benchmarks — they were looking at the art of the possible. We almost called it "benchmarks are the enemy of the possible." So they were really breaking the mold of what could happen, given all the disruptions that I mentioned.

      We found the leaders, when they thought about competitiveness, they were thinking enterprise-wide transformation to drive competitiveness. Where they were thinking carbon, they were thinking about not just addressing emissions, but building low-carbon businesses. When they thought about culture, they thought about innovation and collaboration as the core of the culture.

      Q: What were some of the traits of a company that was identified as lagging?

      A: The laggards were generally seeking more limited transformation or change, that was the first aspect. The second is that they were more focused on addressing pain points. So, retroactively fixing problems, or addressing only the near-term opportunities or challenges. When energy security increasingly became more prominent, their focus is entirely on ramping up production.

      On the carbon side, they said we are emphasizing [lowering] carbon [emissions], but it was also a defensive posture, which is, "How do I manage to stay under the methane emissions guidelines?" or, "How do I address my direct emissions?" Which is important, but it's a small subset of the change that needs to be driven.

      Q: Were there things they missed?

      A: They did not prioritize as much the talent side of the agenda, or upskilling, in the way we found leaders. One of the things we have consistently observed across industries is without the talent management aspect, you're not going to be able to transform, let alone reinvent.

      What we found is 80 percent of the transformations or reinvention programs fail to achieve their targeted objectives, and one common denominator across all of them is not building the talent and the culture to drive those changes — too little emphasis on the soft skills and the soft side of the change, too much often emphasis on the hard side of the change, which is the actual investment in technology.

      Q: What are the barriers that might be holding back those lagging companies?

      A: The last 10 to 15 years has taken a toll on the industry, and the investment capacity of the industry has dissipated in many ways. As a result, the ability to invest or be bold about those investments has also been impacted.

      And there is still a lot of emphasis on investing in technologies — but if you look at the level of maturity and the economic viability of a lot of low-carbon technologies, outside of wind and solar it still is subpar. It is not competitive. And so it's not in the purview of any company to just go and invest in something, which is likely to destroy capital, at least for the foreseeable future. Your investors are not going to accept it.

      Overall, the industry has been in this kind of continuous improvement mindset. Going back to an enterprise, transformation, reinvention mindset is hard. You have to make sure you have CEO-level sponsorship, the top of the house saying, "We're going to be backing this change, it's going to be complex, it's going to require a lot of changes in the way we recruit and train people, the way we run our organization, the processes we have [and] the technology we have." But that has to come from the top.

      Q: What are some challenges in the investment space?

      A: You have a high-end inflationary environment. Even if you're holding your investment steady, or maybe marginally increasing it, but you have 20 percent to 25 percent inflation average — some categories in the oil and gas industry higher, some lower — you're effectively investing less on a real dollar basis. So you are going to see continuous challenges on the supply side.

      Similarly, if they're returning a lot of the capital [to shareholders], they're not investing in new tech — and new technology, low-carbon technologies, are dependent on fast scaling. Fast scaling is going to require a lot more investment. Just to give you an idea, today in the low carbon system, which includes the electricity system, the world spends around $1 trillion. That number needs to go up to $4 trillion if we're going to meet the 2050 netzero objective.

      Q: What does the changing energy landscape mean for a city like Houston?

      A: Houston has almost everything it needs to continue to be the energy capital of the world. What does that mean? It has, of course, some of the largest, most well-endowed energy companies in the world, and many of them are making significant investments.

      Houston has companies that possess technical capabilities. It has academic institutions in and around it where you have the expertise, the academic knowledge and investment already happening in the space. It's got talent — not only the oil and gas talent, there's people that are excited about the possibility of contributing to the low-carbon transition. It's got a significant amount of energy financing available.

      I go back to "show-me-the-money" investments of $15 billion to $20 billion [in Houston] in 2021 — and yes, what we need is north of $100 billion of investment in Houston every year for long periods of time, but we're moving in the right direction.


      (c)2023 the Houston Chronicle

      Visit the Houston Chronicle at

      Distributed by Tribune Content Agency, LLC.


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