The oil and gas industry is going through a tough time with low commodity prices which most analysts agree is likely to remain low for sometime. A frequently heard phrase is that it needs to prepare for a “lower for longer” oil price.

In an industry with historic commodity price instability, why do we find ourselves in such a tough place?

It is easy to blame the low oil price and that it’s “OPEC’s fault”, or in fact anyone’s fault but our own. However, the problem isn’t today’s low oil price, it is what the industry continued to do (and not do) during the  four years of stable higher oil prices before this crash. The industry got bloated, accepted and continued to build additional inefficiencies into the business. Often this was done in the name of operational excellence. Additional processes, systems, gold-plated approaches were adopted to make us “better”, but “better” for what? The reality is that operational excellence forgot its purpose, forgot the bottom line, got disconnected from business performance and revenue generation.

What is operational excellence? It’s not easy to define and an internet search can reveal a multitude of definitions; “Being world class”, “Being the best globally,” “Excellence in everything we do” or simply “continuous improvement”. As a result, many different interpretations of Operational Excellence can be found in organisations, most of which are difficult to translate into practical actions.

The key to achieving operational excellence starts with the right definition.

The one that works for me is:

“Operational Excellence is the execution of the right business strategy more consistently and reliably than the competition”

By defining operational excellence in this  way we ensure our efforts are aligned with business strategy, linked to delivering value and business performance. This may not seem very inspiring definition, isn’t going to motivate people but for me this isn’t its role – inspiration comes from purpose, a purpose that supports operational excellence delivery,  builds a purpose-led organisation, focused on the bottom line.

More of this in my future blogs.