Digital Energy Journal- 10 fatal flaws of every DOF initiative

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10 fatal flaws of every DOF initiative

Monday, July 19, 2010

If a digital oilfield project is not part of the company’s strategy, not supported by senior management, not part of employee incentive plans, subject to flaky decision making or poor portfolio management, it will probably fail. by Dr. Dutch Holland, PhD, Holland & Davis LLC, a service line of Endeavor Management

Gaining business advantage from digital initiatives is hardly a cake walk. Upstream companies and technical vendors alike still find DOF initiatives difficult to design, develop and especially difficult to implement.

A fatal flaw is just what it sounds like, an inherent weakness that could jeopardize the health of an entire initiative. The scariest aspect of many fatal flaws is that management does not always know if they have one until it is too late.

1.   Fatal Flaw: Failure to make DOF a part of formal company strategy

Believe it or not, some personnel inside companies really do consider written strategy statements as the official word. In turn, they use those words when assessing and prioritizing how they will spend their time and the company’s money. The Acid Test: Is “Taking advantage of digital technology” written down as a formal strategy and briefed to the board and to analysts on the street? The answer is either Yes or No.


2.   Fatal Flaw: Failure to have needed level of executive commitment to DOF

Most Program and Project Managers beg for indications of executive commitment to a DOF initiative. And most company executives are likely tired of hearing about the need for more commitment. What’s missing?   The answer is so basic it’s often overlooked. If anticipated business returns from the DOF initiative are not included in the company’s financial pro forma for the “Go Live” time period, there is inadequate executive commitment. The Acid Test: Are anticipated returns from the DOF initiative in the pro forma? Yes or No?

3.   Fatal Flaw: Failure to have needed incentive structure in place

While many consider goals as the primary steering mechanism for organization, the actuality is that people pursue incentives first and goals second. Show someone a goal-oriented organization and it can likely be shown how their incentive structure reinforces the goals they pursue. What better test than to watch a DOF initiative come to a screeching halt when an innovation is served up for trial to an asset manager whose incentives are based almost entirely on production and the absence of any disruption. The Acid Test is whether goals and matching incentives for using digital technology are a part of all incentive structures from the top levels of the organization down. Yes or No?

4.   Fatal Flaw: Failure to have robust portfolio management

Portfolio Management involves both selecting the best investments for the company’s money and ensuring that the investments turn into business value. While most mature companies have at least a form of portfolio management for capital expenditures, many potential DOF projects and their advocates often struggle for visibility, a fair hearing, toe holds and executive-level sponsors. Launching a DOF initiative under such circumstances is likely a fatal flaw that damages the initiative’s chances of success, as day-to-day business priorities weaken or even gut the initiative. The Acid Test: Does the DOF initiative show up as an item on the short list of high priority investments? Yes or No?

5.   Fatal Flaw: Failure to make an explicit decision on “Deploy” or “Permission to Adopt”

“Deploy” is usually considered a decision made by a senior executive to put a DOF solution into play in all relevant parts of the organization by a date certain. Failure to make a deploy decision “loud and clear” will result in the organization reading “permission to adopt at our own discretion.” While deployment can hit a date, permission to adopt is guaranteed to stretch over multiple years, never reaching all parts of the organization. Acid Test: Is the DOF initiative clearly and explicitly described by top management as a deployment with date certain?
Yes or No?

6.   Fatal Flaw: Failure to focus the initiative on the business reason and processes

How easy it is to think of a DOF initiative as “an R&D project” or, worse yet, “an IT project.” While DOF initiatives almost always start with at least some business goals, how soon personnel forget and find themselves considering the initiative very narrowly as a technical play and not a business improvement. And the problem that follows can be a fatal flaw. As soon as anyone forgets to stay focused on the business rationale for the initiative, they lose business-side feelings of ownership and, therefore, of responsibility. The Acid Test: Is the DOF initiative described solely in terms of the desired business outcomes? Yes or No?

7.   Fatal Flaw: Failure to serve up a fully-tested technical solution

Surely this only occurred in yesteryear. Unfortunately, no, it still happens with technology introduced to the customer (asset managers, for example) with all sizes and manner of bugs. Complete testing in as near a combat environment as possible must be completed before production sees it. Given that production-side personnel are paid to manage production risks, showing them something not fully developed and tested (therefore, risky) can kill the initiative. The Acid Test is whether the technical team can serve up their technical solution along with full and complete test records. Can they? Yes or No?

8.   Fatal Flaw: Failure to have a robust implementation strategy that integrates processes, technology and people

Until quite recently, the words “implementation” and “robust” were not heard in the same sentence or conversation. After all, “robust” is a technical term that goes with the hard stuff, the technology. That contrasts with implementation, which is soft stuff that can never be tied down enough to be labeled as robust. However, as implementations hit brick walls, the industry as a whole has learned that strong (read that “robust”) implementation methods are needed for work processes and people, as well as for technology. The Acid Test is whether a formal, integrated work breakdown structure for the DOF initiative exists and includes concrete action steps for aligning technology, work processes and people systems to meet business objectives. Yes or No?

9.   Fatal Flaw: Failure to organize around “Technology Ready” and “Business Ready”

The work to be done in a DOF initiative is clear-cut. Not coincidentally, the organization needed is also clear-cut:
(1) create business value by calling for a Business Program Office (BPO)
(2) prepare the DOF technical system for the organization by calling for a Technical Project organization and
(3) prepare the production organization for technical system usage by calling for a Organizational Readiness Project organization.   Putting all three kinds of work into a single organization will likely be fatal. The almost certain outcome of use of a single organization is “a technical success but a business failure.” The Acid Test: Does the initiative have three separate organizations linked together under a single production-side executive? Yes or No?

10.   Fatal Flaw: Failure to use a comprehensive risk management process

Today, having a formal risk management process as a part of any significant technical initiative is standard practice. That is good. Yet, managing the technical risks (i.e., will the technical system work?) is not nearly enough. For DOF success, two other categories of risks must be managed: organizational risks (will production employees use the system?) and business risk (if the system works and if people use it, will the company make money?). The Acid Test: Does the risk management process cover all three primary risks? Yes or No?

Readers with ten “yes” answers are well on the way to success. But, even one “no” answer may indicate a cancer in the company’s initiative that will eat its way into business and personal success. Act accordingly.

Associated Companies
» Holland & Davis LLC

External Links
» Holland & Davis LLC

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