Digitalization Doesn't Start with Technology. It Starts with Strategy.

Every week I talk to companies in the oil and gas space who want to "go digital." They've seen the pitch decks. They've heard the buzzwords. And they're ready to change their business.

That's usually where things go wrong.

Not because the technology is bad. But because nobody stopped to ask the only question that matters: What is this supposed to accomplish for the business?

#A Business Has Only Three Goals

If you strip away the jargon, every business is ultimately trying to do one of three things: make more money, spend less money, or protect what it already has. That's it. Eliyahu Goldratt nailed this decades ago in The Goal — the entire purpose of a business is to generate throughput (revenue), cut operating expense (cost), and reduce inventory (capital trapped in the system).

Gene Kim drove the same point home for technology organizations in The Phoenix Project and The Unicorn Project. In those books, the company is drowning — not because they lack technology, but because nobody connects technology decisions to business outcomes. They ship features nobody asked for. They build systems that don't solve the bottleneck. They automate the wrong things.

Sound familiar?

I've watched it happen across the oil and gas industry for over a decade. Companies pour money into platforms, dashboards, and digital initiatives that never move the needle. Why? Because the project started with "we need better technology" instead of "we need to solve this specific business problem."

Before you touch a line of code or sign a software contract, get brutally clear on which of those three goals you're chasing — and which constraint in your business is preventing you from getting there. Everything else is noise.

#Before You Digitalize, Know How You're Actually Competing

Here's the other conversation most companies skip entirely: understanding where they sit in their market's competitive landscape.

I recently walked a client through a framework that changed how I thought about digitalization strategy. It's a model originally developed by Windermere Associates and later made widely known through Clayton Christensen's The Innovator's Dilemma. Christensen called it the Customer Buying Hierarchy, and it explains how the basis of competition in any market evolves through four predictable stages.

Stage 1 — Functionality. Early on, customers just need the product to work. Can it deliver the core capability? If you're the only one in the market who can do the job, you win by default.

Stage 2 — Reliability. Once multiple providers offer solid functionality, customers shift. Now they want to know who can deliver consistently. Who won't drop the ball? Reliability becomes the differentiator and the company with the more reliable product or service can charge the customer more.

Stage 3 — Convenience. When reliability is no longer a differentiating factor for the business — when everyone is dependable enough — the competition moves to ease of use, integration, support, and overall customer experience. Who makes my life easier? The company that has the more convenient solution will enjoy a price premium in their market.

Stage 4 — Price. Only when functionality, reliability, and convenience are all satisfied or "good enough" does competition collapse into a price war. At this stage, the company that has built the most efficient cost structure over time wins. Everyone else bleeds margin.

This progression matters enormously for digitalization because most companies skip straight to "let's build better tech" without ever asking where their market actually sits on this hierarchy. If your customers are choosing based on convenience and you're pouring money into raw functionality improvements, you're investing in the wrong thing. Your digital spend won't move the needle because it's aimed at a dimension of competition your buyers have already moved past.

#The Trap: Customers Will Mislead You

Here's the dangerous nuance. If you ask your customers — or even industry insiders — what drives purchasing decisions, they'll often get it wrong. They might tell you it's all about price. Or that they need more features. But the actual driver could be something else entirely.

The classic proof is Apple's iPhone launch in 2007. At the time, the smartphone market had already moved past Stage 1. Multiple players — Nokia, BlackBerry, Motorola — delivered solid functionality. The battle had progressed into Stage 2 (reliability) and was creeping toward Stage 3 (convenience), with carriers and manufacturers competing on network coverage, uptime, and incremental usability improvements. Some segments were even approaching Stage 4, where price was becoming the deciding factor between comparable devices.

Apple didn't try to win at the stage where everyone else was fighting. Instead, they introduced something so dramatically better in convenience — an intuitive touch interface, a seamless app ecosystem, hardware and software designed as one experience — that it reset the entire competitive hierarchy back to Stage 1. The iPhone wasn't just a more convenient phone. It was so far ahead on convenience that it felt like an entirely new product category. Suddenly, the old criteria didn't matter. Customers weren't comparing reliability stats or carrier pricing anymore. They were asking a Stage 1 question all over again: "Can this thing do what I actually need?" And only Apple could answer yes.

That's how a breakthrough resets the cycle. When a company leaps far enough ahead on any dimension — functionality, reliability, or convenience — it doesn't just win that stage. It collapses the hierarchy back to the beginning, forcing every competitor to re-qualify on the new terms. Nokia's reliability track record became irrelevant overnight. BlackBerry's enterprise convenience didn't matter. The basis of competition had shifted underneath them, and they were stuck optimizing for a game that no longer existed.

Tesla did the same thing to the auto industry. By the early 2010s, the car market was deep into Stage 4 — price wars, rebates, financing deals. Most manufacturers were competing on cost because functionality, reliability, and convenience had all been commoditized. Tesla reset the hierarchy back to Stage 1 by introducing electric vehicles with performance, range, and a software-driven experience that made the old functionality criteria — horsepower, MPG, engine displacement — obsolete. Suddenly buyers were asking a new Stage 1 question: "Can this car do what I need?" The incumbents had to re-qualify from scratch on terms they hadn't been building toward.

#So What Does This Mean for Your Digital Strategy?

It means your digitalization roadmap should start with two questions, not one.

First: What are the specific business outcomes I need to improve? Am I trying to increase throughput, reduce waste, or protect existing revenue? Where is the constraint?

Second: Where does my market sit on the competitive hierarchy, and what drives customer decision making — not what they say, but what does their behavior reveal?

Only after you've answered both of these questions can you make technology decisions that matter. Otherwise, you're just buying software and hoping it helps. And in my experience, hope is a terrible operations strategy.

The companies that get digitalization right don't start with a technology vendor's feature list. They start with a ruthless understanding of their own business goals and a clear-eyed view of how they compete. The technology comes last — and when it does, every dollar spent is aimed at something that actually moves the needle. As Steve Job's said, "Start with the experience and work backwards to the technology." If you're thinking about digitalization for your company and want to make sure you're aiming at the right target before you pull the trigger, let's have that conversation.