27 May Oil and Gas Must Lead Digital Adoption, Not Delegate It To A Start Up
Why is it the job of the 20 person digital startup to convince skeptical oil and gas field supervisors and staff to trial new digital tools? Isn’t this the role of oil and gas leadership?
Amazon’s Automation Drive
I was struck this week by the news that Amazon is rolling out automated packing machines for its fulfillment warehouses. These gigantic facilities are probably one of the few remaining labour intense aspects of the warehouse and logistics businesses. Pickers gather odd shaped packages from the shelves, and packers arrange them into a cardboard shipping box with the ubiquitous Amazon smile artfully printed fore and aft, stuff the box with packing materials for the long journey to the customer, tape, label and haul them off to shipping.
Up to now, packing has been the exclusive job of humans who are solely able to figure out the optimal way to fit odd shapes into a box. But once this job is figured out, the day of an almost lights-out warehouse operation is in sight, since Amazon also has figured out how to use drones to count inventory, and the robot that unloads containers isn’t far off. Only picking remains human. Tesla, among others, are sorting out the challenges of driverless trucking. Rio has solved some of the issues with driverless rail.
Also this week, I fielded a call from a tech start up seeking some advice on how to grow his business in oil and gas. His technology is rather clever. A small box of sensors attaches to an oil or gas well, gathers data about the performance of the well, performs some calculations, and adjusts the equipment to run more efficiently. One of its key features is that it eliminates the need for a worker to drive to the well and carry out manual inspections, and manual adjustments of the well equipment.
His gear helps move an oil well from a highly manual operation to one that is slightly more automated.
He’s interested in discovering who is really good at convincing the field to take on new digital tools. The oil and gas managers in the head office are telling him that it is HIS job to go to the field and convince the supervisors, field engineers, service contractors and local admin to embrace his new technology. This is one of those oil and gas orthodoxies about how the world works that needs to be consigned to history.
Turkeys Don’t Vote For Christmas
How do the digital leaders drive change in their organizations? Returning to my Amazon pick-and-pack example, let’s agree with the assertion that the company is a leader in driving innovation throughout their business. Amazon releases 50 million software updates each year (that’s a pace of 1 every second, around the clock). Its market cap is around $900b. They are a leader in book sales, retailing, cloud computing, home automation and many other fields that leverage their core competencies in big data, analytics, artificial intelligence, language processing, and robotics.
It’s a pretty sure bet that Amazon is driving its experiments in work automation from the top down. Somewhere down the line there’s going to be job impacts from automated packing: fewer human packers, for example, although the growth in on-line shopping suggests there’s probably not enough people to do the job. The role of the warehouse supervisor changes to be less about people management, shift coordination, load balancing, and training, and more about robot optimisation and operation. Facilities set aside for human workers, such as lockers, lunch rooms and parking, are freed up. Even the design of the warehouse shifts to accommodate 24/7 operations that can function at very high speed, and allows for the interaction of different drones doing different jobs.
I’m pretty confident (but not absolutely certain) that these automation trials in the warehouse are not the work of the warehouse teams who do packing. For one, I doubt the gals and guys hired to pack shipping boxes are also automation experts. Second, I can’t see the line folks willingly starting up a trial that is almost certain to kill their existing manual jobs. If Amazon left it to the warehouse teams to decide if robots that do away with jobs is a good idea or not, it would be swiftly rejected.
It’s simply not plausible that Amazon can issue that many code updates into its organization if its supervisors and front line workers had to be first convinced by Joe Coder that each individual change was a good idea.
If Amazon worked in oil and gas, would they assert that it’s the job of a 20 person digital start up with limited resources, no expense budget, and no authority to take on the job of visiting field facilities and engaging with the local office to convince them of the benefits of a technology that could result in headcount impacts?
The field is deeply aware of all the reasons why new technology won’t work. They are quick to point out the incompatibility with other onsite technology. They highlight the lack of time for training. They stress the high production and productivity targets and the laughable logic that says they can both hit all the existing targets while introducing something new and unproven. They have to tend to the operating equipment rather than have a meeting. They need to build up trust in the technology, and that takes work. They don’t even have the time to invest in building a basic understanding of these technologies.
In other words, they perceive all the threats and none of the benefits.
Even successful oil and gas businesses generate their own kind of change aversion. Successful managers can easily convince themselves that they have mastery of the levers that drive economic performance. After all, they’re successful. Why run the risk of trialling new ideas that might not work out? It’s easier to drop back and punt to the field and let them decide, with the pre-ordained outcome.
But the past is no longer a certain guide to the future. Just consider what happened to: the telecoms business (phone calls are now free); media (most people do not pay for news now); taxis (Uber is a much better experience); retail (Amazon bankrupted ToysRUs); books (thousands of small shops have disappeared); music (CDs gave way to streaming); banking (the latest digital banks sign up millions of customers in a few weeks);
Advice For Leaders
Success at driving digital change into oil and gas means successfully managing the people aspects of change in the workplace.
I propose a new orthodoxy. Digitally driven business changes achieve greatness when company leadership takes a personal and active interest in driving change at work. By that I mean, business leadership, including the CEO, VP Operations, VP HR, and VP Corporate Services, invest their personal time in driving progress forward. The team on the front line need to know that management is serious about achieving success.
The leadership team needs to:
- go to the field in person, not just once
- hold field meetings at the sites
- explain the vision for the change, and why the company sees it as important
- answer the questions from the field
- adjust the expectations so that the field has the time to invest in training
- provide leadership advice to supervisors on coping with resistance to change
- respond personally and directly to follow ups from the field
- allocate enough resources to help deal with the reasonable problems that will appear
- record videos to circulate, championing the change and those most impacted
- celebrate successes personally by handing out badges/rewards/prizes in person
- tune up manager and supervisor performance metrics to include support for digital change
Sending a memo doesn’t cut it. One meeting won’t do. Punting the problem to a tech start up is a cop out. Leaders need to demonstrate accountability by sanctioning those not on board, or those who drag their feet.
Advice For Digital Startups
For digital start ups, the task is to distinguish the Amazons in the industry from the Exxons. If the managers in the company won’t lead the change, you’re probably wasting your time and treasure. If they tell you that it’s your job to convince the troops in the field, the supervisors, the IT department, and procurement, they’re not serious buyers, and you should move on.
- Use the list above as a litmus test to see who really deserves to purchase your technology
- Learn what you can about how they approach digital change
- Highlight the role of management in driving the change as a key part of your marketing and pitch
- Incorporate into your sales qualification some tests to find those companies who want to lead
- Pay attention to any press releases that mention an oil and gas company along side a digital innovation.
- Build into your customer research the questions that elicit insight into how they approach change
- Design ways to offer implementation assistance to those who need change support (ie, they agree the need to drive change from the top and the willingness to do so, but don’t know what to do).
This idea, that the digital company must convince the field of the merits of their solution, is another example of an outdated orthodoxy. It cannot be the job of a digital start up to convince the field that digital innovation is good for them. It’s management’s job to make the expectations clear and to support the field in adopting change.
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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