Don’t Let The Hedgehogs Back

hedgehog holding drilling rig

Don’t Let The Hedgehogs Back

The true impacts of digital on oil and gas are now clear as the wreckage of the pandemic recedes. Boards and management should continue to clear out the hedgehogs guarding the status quo.

The first version of this article appeared on June 8, 2020. This edition has been slightly updated.

Post Pandemic

Now that the pandemic restrictions such as social distancing and mask mandates are being lifted, businesses are starting to return to the pre-pandemic normal, or at least, a version of normal. Looking back, there were surprisingly few true energy shortages, unlike the shortages of new cars, microchips, yeast, flour, and sardines that popped up throughout the pandemic. The oil and gas energy system (find, extract, transport, refine, distribute) is clearly designed with resilience in mind, as it should be, since energy is so fundamental to human survival and activity.

To a cynic, hindsight is always 20/20, but to a learner, the review of past events is a teacher. To this generation of management, one of the lessons from the pandemic will certainly include a realization that prior investments in digital innovations helped the industry survive. Data in the cloud let people work from home. Household WI-FI enabled video conferencing. That huge Microsoft installed base finally unlocked the power of Teams. Field data capture transformed paper processing so people could work from anywhere. Visual analytics eliminated the need for  field crews to travel to site.

It helped, of course, that inventories were overflowing in January 2020, as Saudi Arabia and Russia disagreed on how severe the pandemic would weigh on demand, and then embarked on an ill-timed volume war. Throw in two years of underinvestment in fresh supply, a snap economic recovery, and a rapid depletion of inventories, and suddenly prices are on a tear. WTI surged from US$66.50/bbl on December 2, 2021 to $123 on March 8 of this year.

In commodity markets, the cure for low prices is low prices, and the cure for high prices is high prices. There will be considerable pressure (financial and social) on Boards and management to focus all energy on the drill bit to take advantage of the market, and possibly at the expense of the transformation of the industry. This would be a mistake.

The Pandemic Effect

There was a funny meme circulating that highlighted COVID19, rather than the CEO or the Chief Technology Officer (CTO), as responsible for driving the corporate change agenda. This was as true in oil and gas as it was in retail.

The pandemic ripped the curtain away from the objections of some in management to implementing changes in oil and gas. The pandemic showed that faced with an important and intractable foe, the industry is well able to implement changes at lightening speed, instead of the usual glacial pace involving proofs of concept, prototypes, field trials, and funding applications. The true challenge about digital is on the pace of adoption, the how of adoption, the pathway to scale.

The corporate ability to rapidly adjust to the pandemic has taught the industry what agile means:

Align against an intractable foe, make the threat existential, make change happen, make it quickly. In other words, behave like a start up.

The industry took this lesson on board, and now has a small but undeveloped muscle called change management that needs more exercise.

Hedgehogs — Change Blockers

The CFO of an oil company once called me to learn more about my digital awareness course. He was encountering puzzling objections from his managers in the face of a digital opportunity. For example, his firm had acquired a large oil asset and the seller had shipped over boxes and boxes of paper files associated with the asset (which was not surprising as many oil assets predate the digital era). The managers dismissed his suggestions that the paper files be converted to digital to make them more searchable.“If we want anything from those files, we’ll just go looking for it”, they claimed.

This was a recipe for the boxes never to be opened. None of the engineers would want to devote their time to pawing through dusty papers. The CFO suspected he was then going to spend twice for data and analysis that he already had.

His management team reminded me of hedgehogs. In nature, hedgehogs curl in balls with their quills pointing out, making it hard to attack them. Hedgehogs in management say things like “this won’t work in oil and gas”, or “we can do this the old-fashioned way, manually”, or “we are too regulated, too fragmented, too business to business”, or “our operations are 24/7 and can’t be taken off line except in turn arounds or emergencies”, or “I’m retiring in two years, This isn’t worth my time to change”. These aren’t the droids you’re looking for. Move along. Move along.

Hedgehogs are not confined to the garden or the work world. There’s a specific piece of equipment used to block tanks in war settings, called a hedgehog. It’s made of steel, designed to be immovable, features lots of sharp pointy edges, and does a lot of damage if you confront it head on. Ukrainian metal shops are turning out these things for home defence.

The best place to find hedgehogs in oil and gas are in brownfield plant offices. Much brownfield gear was never designed for a digital world, does not easily support wireless networks, and is manual, paper-based, mechanical, and human centered.

The End Game for Hedgehogs

Here’s what happens with hedgehogs in your midst.

Compromised market position

Stock market analysts now insist that companies sketch out how they are responding to the digital wave, and what investments are being made. They compare companies to each other and gauge competitive position. Discounts are applied to companies with lots of hedgehogs that only harvest and do not invest in a digital future.

Lack of future resilience

A few oil and gas businesses set out to permanently reconfigure themselves during the pandemic and beyond. Additionally, all oil and gas companies face further headwinds from  energy diversification, decarbonization, energy security, and unpredictable petro-states. A phalanx of hedgehogs protecting the status quo business model does not look very resilient when all about you is adapting.

Poor talent outlook

Employees throughout the economy now have the upper hand in tight labor markets. They don’t need to accept an oil and gas job that has zero flexibility and a crushing daily commute. They recognize the need to keep pace with technology change.  Hedgehogs that block digital from their companies are therefore laying the groundwork for talent erosion, or worse, zero talent attraction.

Timid digital strategies

With digital innovations impacting all parts of the economy at the same time, and accelerating in the pandemic, Boards should be asking management for a complete digital strategy refresh. The industry largely proved itself able to implement a 100% remote workforce in a week. Hedgehogs that cling to outdated ideas like the multi-year roll out should be viewed for what they are — timid, cautious and uninspiring.

An ecosystem of hedgehogs

It’s the small start ups that have the upper hand in embracing digital. They have fewer constraints, faster decision making, lower initial approval hurdles, and creative talent. Hedgehogs instead double down on their existing ecosystems of like-minded incumbent suppliers who, like them, are slow to embrace change.

Hedgehog team-think

Hedgehogs tend to hire other hedgehogs, and create a kind of top-to-bottom thinking model that discourages change. This manifests when front line workers challenge innovations on the basis of safety concerns. I get this — hastily introduced changes can be dangerous, and need special attention to safety and roll out. But whoever said safety OR innovation? Why is digital innovation positioned as anti-safety? Surely it’s safety AND innovation? This is hedgehog team-think at its best.

Keep the hedgehogs out

Your company probably cleared out a number of hedgehogs during the pandemic. Now is the time to accelerate talent transition by identifying the remaining hedgehogs in the business and moving  them along to someone else’s burrow. They are not doing you any service.

Check out my latest book, ‘Carbon, Capital, and the Cloud: A Playbook for Digital Oil and Gas’, available on Amazon and other on-line bookshops.

You might also like my first book, Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, also available on Amazon.

Take Digital Oil and Gas, the one-day on-line digital oil and gas awareness course on Udemy.

Mobile: ☎️ +1(587)830-6900
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