15 Apr Correcting the Shortfall in Digital Leadership
With all the buzz about digital’s impact on the oil and gas industry, the demand for digital leadership should be strong. But in what shape is the talent pipeline for leaders in the world of digital oil and gas?
I know personally of at least one Chief Information Officer (CIO) who eventually became the CEO of a large oil company. Tim Hearn, former CEO of Imperial Oil, was at one time the head of Information Systems and Technology (or the IS&T department), for Imperial Oil in the early 80’s, when I worked in the technology department there.
This is sensible. To run a big oil company, executives need at least some exposure to the various functions of finding, producing, refining and selling petroleum. Upwardly mobile executives in oil companies change roles frequently (every 3-4 years perhaps) to gain that experience. Oil companies benefit by maintaining a healthy pool of leadership talent from which to draw. It’s actually not that uncommon, at least in large oil companies, for the pathway to the corner office to include a tour of duty through the overhead functions, including Finance and IT.
But how does the pipeline look for this coming wave of digital innovation?
Digital Talent is the Key
My conversations about digital innovation in oil and gas inevitably start with painting the big digital picture of the changes coming to the industry. Many oil and gas professionals still seek a primer on what digital is—definitions, basic concepts, examples, and realised results.
This conversation is very useful and I don’t mind having it at all. Until there’s a minimum common understanding of terminology, change drivers, key technologies, and the business case for adoption, the talent question cannot be thoughtfully addressed. Talent questions exists because there’s a job to be done, and that job needs to be defined.
But perhaps an hour into it and the conversation inevitably turns to the talent question. It is clear to most executives that digital change is going to be big (it already is), they don’t really know what talent they need, they’re unsure what talent they have or where that talent is, but they’re pretty sure their organizations are short.
Executives complain that there are not enough data people. Few digital natives occupy leadership roles. Companies have few directors, if any, experience with artificial intelligence, internet of things, robots and cloud computing. At best they point to an underwhelming portfolio of small science projects spending minimal capital, but without much oversight, and with little apparent impact.
Of course, given enough time a digital native will eventually rise to a place of leadership in oil and gas, provided that they already have the other ingredients that bias promotion in the industry—a background in engineering, and a meandering career trajectory that takes them into roles in the various domains of oil and gas. But I don’t believe the industry has the luxury of time on its side.
Oil and gas culture poses a critical impairment to developing digital leadership. Really successful rising executives in oil and gas are disincentivized to invest in new areas like digital innovation. Spending precious career capital on novel, risky, and failure-prone technologies might leave a black mark on the resume, and block your promotion. As an executive it’s easy to convince yourself that you’re not qualified to work in digital areas, and that digital is actually just IT. With all the challenges facing the industry, from intense competition, carbon pressures, and price volatility, there are ample opportunities for career development besides digital.
I can’t see a long line of executive leaders standing outside the CEO’s door begging for a shot at leading a digital initiative. Better and safer to run that new oil facility, or build the next plant.
My conclusion is that there will be a prolonged and systemic shortage of oil and executives with experience in digital innovation and transformation. This shortage will make the handful of successful executives in high demand for the next transformation, keeping the pool of experienced digital leadership small.
And digital is impacting all industries at the same time, leading to the digital leadership vacancy being handed around from company to company.
Building the Digital Leadership Pipeline
The challenge is pretty clear—cultural disincentives, a thin pipeline, competition for talent within and without the industry, confusion about the need, and a perception of high risk.
This isn’t the first time that oil and gas has had to confront leadership challenges. In fact, commodity industries go through frequent booms that strain talent pipelines, and the industry has a handful of tactics that it can execute.
Did you note that story in the Economist about the big cloud companies (Google, Amazon and Microsoft), descending on CERAWeek to pitch their cloud and AI offerings to the industry? Big digital has discovered the magnificent profitability, cash flow, data intensity and global scale of big oil. Undoubtably they have done the math to conclude that it will take the big balance sheets of oil companies to invest the sums necessary to pay for decarbonisation of the energy sector, a sector that they are targeting too through autonomous transportation.
But it’s unlikely that the big digital firms have anything close to the expertise needed to understand the business challenges of big oil. Digital sells to many industries and big oil hasn’t been to date a serious buyer.
I suspect that the digital outfits would welcome the opportunity to rotate some of their talent into oil and gas, and in exchange, rotate some oil and gas talent into a digital company. Amazon would benefit from exposure to the challenges of enabling digital in field assets and legacy SCADA systems, and oil companies would gain from learning how Amazon manages to release new software every few seconds.
Tap the ecosystem
Just about every town and city has now stood up one, or more likely several, incubators, accelerators, co-working spaces, maker studios, rainforests, mash ups, communities of interest, development labs, field trial zones, founders’ clubs. These innovative work models are full of talent that are aiming to solve the world’s problems. It’s where you can find the start up community of tech inventors and innovators.
They are also a fertile place to recruit for talent because start ups are demanding. The pace is unrelenting, the uncertainty is draining, and the success rate is low. To quote Gimli in The Lord of the Rings: “Certainty of death. Small chance of success. What are we waiting for?”
It is a certainty that some bright sparks joined a start up and became disillusioned with its directions, leadership, unpredictability or compensation. Some of the leaders will have cashed out and will be looking for new horizons and new opportunities to exploit.
When the price of oil rocketed to north of US$100 a barrel, the imperative to grow was overwhelming, but the leadership pipeline was again found to be too thin. Big oil relaxed its normal bias to hire strictly on experience, and recruited in from any industry on the basis of merit. Digital has created these same conditions, and it is now time to look outside the normal boundaries of the industry.
But which industries? I would take a close look at the mining sector, as some miners are well along in rethinking their use of digital innovation to create the mine of the future. The big digital companies themselves are candidate recruiting territory for the obvious reasons. Clean tech has the dual advantage in that many such firms are already smart on the vagaries of the energy industry and incorporate digital solutions into their business models.
I would not overlook consumer-facing businesses, particularly airlines who have thoroughly demanned their front offices (the modern traveller has unwittingly become a ticket agent, check in desk and baggage handler), pizza companies who have robotised their operations, and logistics companies like Fedex who are practically computer companies.
Lastly, but importantly, I would take a close look at advanced manufacturing. Oil and gas work, particularly in the upstream, is looking ever more like some kind of manufacturing business, and less like a prospector randomly searching for treasure. Pull up Google Earth and zero in on the desert surrounding Midland Texas for an eye-popping visual of oil and gas on a manufacturing scale.
Leadership shortages are going to be a continuing feature of digital oil and gas for some years to come, but there are proven ways to bolster the pipeline that can be implemented quickly and at low risk.
Check out my new book, ‘Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, available on Amazon and other on-line bookshops.
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