Innovation key to boosting productivity in oil and gas organisations

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Monday 27 May 2013 — Innovation is the single most important driver of organisational productivity in the oil and gas sector in Australia, a comprehensive new study by EY and the University of Queensland Business School shows.

Released today, Delivering a step change in organisational productivity: Findings from the Australian Oil & Gas Productivity and Innovation Survey (pdf, 1.5mb), shows that organisations that innovate are 40 times more likely to deliver productivity increases.

Collaboration with peer firms and competitive positioning are the next most important factors linked to improved organisational productivity, the study found.

EY’s Oceania Oil & Gas Advisory Leader, Bradley Farrell, says one of the most surprising findings from the study is that organisational productivity in the sector is not being measured effectively, with 55% of respondents not measuring organisational productivity.

“This is surprising. There is much debate as to the root causes of Australia’s productivity problem but everyone agrees that productivity matters, yet not everyone is measuring it. Those organisations without explicit productivity measurement will struggle to identify and deliver productivity improvements,” says Farrell.

“Encouragingly, this study shows there is much that individual businesses can do to improve organisational productivity,” says Farrell.

University of Queensland Business School’s Associate Professor John Steen says the main gain in productivity has always been working smarter, not harder.

“This study shows it is all about innovation,” he says. “Businesses that invest in the range of innovations, from continuous improvement through to new-to-the-industry breakthroughs are realising performance benefits.”

The study is based on a survey of more than 80 Australian oil and gas companies and 14 executive level interviews, and the findings were drawn from an analysis of more than 300 variables impacting productivity.

Key findings from the study include:

  • Productivity is core to growth. High growth companies tend to have a clearly defined productivity agenda and a set of targets to deliver profitable growth, relative to their low growth peers.
  • Organisation productivity is not being measured effectively. 55% of respondents are not measuring organisational productivity.
  • Innovation is the number one driver of organisational productivity – organisations that innovate are 40 times more likely to have increased productivity increases.
  • Organisations that improved their competitive positioning increased the odds of a productivity increase by nearly 15 times.
  • Collaboration with another firm in the same line of business is the third most important driver of organisational productivity, with each additional collaboration increasing by up to four times the odds of seeing productivity gains.

Barriers

Organisations surveyed for the study cited lengthy project approval (54%), government regulations /red tape (49%), environmental regulatory uncertainty (41%), shortage of skilled labour (41%), and the high Australian dollar (39%).

The study revealed that for many organisations the biggest spur for innovation is the challenging operating conditions that many businesses are facing.

“It is an interesting finding: obstacles drive innovation and innovation drives productivity,” says Farrell.

However Farrell says that governments and regulators should not misconstrue this message.

“The obstacles cited are significant barriers to the overall development and competitiveness of the industry. Governments and regulators need to play their part and address these barriers.”

Farrell says there are four key steps for businesses looking to improve organisational productivity.

  • Ensure that productivity is being measured and reported within the organisation.
  • Put innovation at the centre of the organisation’s productivity strategy. Innovation is defined as ‘doing new things’ or ‘doing what we do better’. Examples in the study included new geophysics software products, new pipeline construction methods, improved tubular cargo handling systems and new land rehabilitation services.
  • Improve the organisation’s competitive standing relative to its peers. Four factors were identified – established reputation, the degrees of specialisation, the range of service/product/technology offerings, and the ability to deliver projects in a timely manner.
  • Find ways to lift external collaboration, especially with other firms in the same line of business.

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Contact details:

Megan Ball
EY Australia
Tel: + 61 2 8295 6427