In recent years, war in Europe, extreme weather incidents, global inflation and health crises have delivered powerful economic shocks to world markets. Yet these seismic events have only sharpened the critical challenges that energy trading organizations were already facing: how to increase revenue, become more agile and cut operating costs.

Now more than ever, identifying the most effective ways to reduce costs, improve operations and move faster to capture new opportunities will decide their future. Markets are being restructured; supply chains need to be reimagined. Energy and commodities trading groups will therefore want to address customers and opportunities that have gained in strategic value as a result of these crises and to leave markets that have been undermined by it. If they are to succeed, they must embrace digital transformation in energy trading.
 

Proven strategies

The industry starts from a position well behind other major sectors, notably banking and retail, as well as the leading consumer technology firms, which have all undergone rapid digital business transformation over the past few years. The experience of these pioneers highlights some standardized approaches that can be quickly adopted, speeding up the process for those that follow. Other issues, such as the ability to hire the right talent and skills or to move quickly within existing governance norms, need home-grown solutions that reflect digital transformation priorities.

Commodity trading markets are unlikely to see a revolution in terms of business models. But the relatively slow progress of digital business transformation in this sector means that a major opportunity remains in play—removing low-value processes, which frees up the organization’s money and talent to focus on areas with the greatest potential for value creation. This allows more of the organization’s intellectual firepower to be used for activities where it can achieve a competitive edge.

Other activities need to become much more efficient and automated. Too much of the upside of digitalization remains untapped. There is too little automation, too many data silos, too many in-house data centers and too many off-the-shelf IT packages with overlapping functionalities, and not enough consistency of process and technology across participants in the market.

The missed opportunity

So, while the business opportunities in the coming months may reside in topics such as asset and inventory optimization and a truly agile supply chain, this article focuses on the approach that energy and commodity trading groups need to adopt to successfully overhaul their technology. This needs to be a priority, and this technical roadmap sets out three steps trading organizations should be focusing on now.
 
The order provided here is not rigid. Although some steps must necessarily come first, others can run in parallel and many organizations have taken steps along this path already. However, to achieve the business objectives that lie behind this digital business transformation—increasing efficiency, building their organizational capability and accelerating innovation to tap new revenue streams—organizations must make progress in all of these steps:

Conclusion

Commodity and energy trading groups have a long way to go if they are to use digital business transformation to help them reorient their operations and emerge from the current market crisis well-positioned for the future. There are big opportunities here for organizations that have already embarked on the listed steps, which are supported by a virtuous circle of efficiency gains in the early stages that help to fund investments that secure the next stages of the transformation process.

No matter the global conditions, modern trading organizations should be following this route to enhance efficiency, agility and growth. The lesson learned from other industries is that those who digitalized most have been able to better respond to changing requirements, challenges and new business models.

As a digital business transformation partner, Publicis Sapient helps organizations navigate this journey one step at a time.