17 Jul How To Organise Your Digitalisation Team
So you’re considering a digitalisation program in your oil and gas company. How should you organize the effort?
I’ve fielded a couple of phone calls on this subject so it’s clearly on the minds of those who are either hard at the effort or thinking seriously about it. Frankly, the considerations do not really hinge on what part of the oil and gas value chain is your playground. You could be upstream explorers and producers in conventional, unconventional and offshore, a midstream participant such as a pipeline and tank farm, a downstream operator in retail, wholesale and distribution, or a supplier to the industry.
How is digital different?
Digital is so new, particularly to oil and gas, that it is confusing, mysterious and tantalizing at the same time. It shape shifts monthly creating new ideas and solutions. How about brain wave sensors in hard hats to detect sleeplessness. Already done. What about crowd-sourced geology interpretation? Happening already. Could we use low-flying drones to measure rogue methane emissions from gas wells? Being piloted. How about using bitcoin technology to automate the trade in LNG? Coming next week. Could we 3D print replacement parts for field equipment? Trials are underway.
How are you supposed to organize a digital transformation team when the field of digital is so variable? Even agreeing a definition of digital is a challenge. And there are a few significant ways that digital is very different from all the technologies from the past.
Digital solutions place far greater emphasis on the user interface and the user experience. That’s why innovative solutions like Uber, AirBnB and Amazon have no user training departments. The designs of these solutions is no accident. There are now disciplines, standards, and fields of study devoted exclusively to user design.
Digital solutions display rapid growth trajectories, suggesting that there is a second and related field to the user experience which is the know how to scale up fast. Easy to use digital solutions that require no training accelerates their adoption. For companies that sell technology, this means figuring out in advance how to deal with what could be rapid growth.
Finally, digital solutions don’t yet come out of a box, like a product, ready to go. There’s typically a process of trial and error to get the digital solution precisely on a problem. Incubators of digital innovation talk about PoCs (proofs of concept), and MVP (minimally viable product). Economic models are often not quite thought through.
Each of these aspects of digital is fundamentally different from traditional technologies that oil and gas purchasing departments might seek. Imagine this dialogue with Purchasing:
- C&P: Here’s all our requirements. Can you meet them?
- Digital Company: Perhaps after the proof of concept, I might be able to meet some of them.
- C&P: Do you have a list of satisfied customers?
- DC: Several have been satisfied with the experience, yes. Some have not worked out.
- C&P: Do you have a “product”?
- DC: Yes, it’s minimally viable and it will likely pivot to something completely different once we start to work together.
- C&P: What is your annual maintenance charge?
- DC: I have no idea. I haven’t built the solution yet.
Driving Digital Innovation via Corporate IT
The launching point for many digital transformation efforts is to view digital simply as a variant of information technology. Internal IT shops likely have already put in place support processes for those ubiquitous digital devices, the smartphones and blackberries (so that we can all bring our favourite personal device to work). Company sponsored apps run on these devices, they access corporate IT services like email or personnel data in the same manner as desk top devices, perhaps through a browser, and they may be exposed to some cloud computing solutions.
IT has probably stood up a help desk for smart phone incidents, manages cyber issues like passwords and authentication, and mandates or limits certain solutions for anyone inside the corporate firewall. For example, my company frowns on collaboration tools that do not have built-in encryption because of the sensitivity of company data.
All this suggests IT is a good place to house the digital team. But it does not logically follow that because IT looks after the compute infrastructure, it should also be the leader in driving digital transformation. Corporate IT may have a huge workload already (many oil and gas companies have hundreds if not thousands of separate IT solutions that demand care and feeding). Corporate IT will often impose their own list of requirements for digital that can serve as barriers to digital innovation:
Imagine this dialogue with the corporate IT buyer and the digital startup.
- Corporate IT: Can you integrate with SAP and all of the thousand other systems we have here?
- DC: Yes, we can probably do that, maybe, in time.
- CIT: Is your solution fully compatible with our standards that originated in the 1990s?
- DC: Probably, but why is backwards compatibility to the age of mainframes relevant?
- CIT: We don’t trust cloud computing. Can we house your solution in our data center?
- DC: Possibly, with extensive modifications and no ability to upgrade.
- CIT: We don’t have wireless networks in the field. Is that a problem?
- DC: Depends. Did you want your mobile workers to use digital too?
Driving Digital Innovation via Operations Technology
The big money in oil and gas is in operations. Most, if not all, of the physical assets and facilities belong to operations, and predate the rise of digital innovation. Operations has invested mightily in continuous improvement initiatives, asset management solutions, supply chain enhancements to drive better returns on assets.
Industry observers agree, however, that the biggest benefits in oil and gas from digitalisation likely reside in operations. At a recent meeting I attended at the behest of the IEA, presenters outlined how digital innovation would impact operational performance:
- A 7-15% reduction in energy use
- A 30% improvement in asset availability
- A 90% reduction in unplanned asset failure
Operations understands just how difficult it is to introduce change to plants that are running 24/7, with technologies that date back to the 60’s in some cases, have multiple shifts, process dangerous materials, and have very small outage windows.
Most oil and gas concerns will have an operations technology support team, kind of like corporate IT, but with a focus just on the operations technologies. A digital transformation program could be part of this team’s mandate. It’s not a perfect fit, because operations technology is generally very stable, doesn’t have the patching issues of commercial IT, doesn’t have the exposure to cyber issues as plants are often “air gapped” or fully disconnected from the internet, and likely doesn’t have as much exposure to cloud computing.
Driving Digital Innovation Separately
Another model is to create a stand alone Digital Transformation team that has no involvement fromCorporate IT or Operations Technology, and task it with driving digital forward. This has some merit – the team could potentially be free of any of the biases typical of corporations. It could take a more clean sheet approach to digital. It might not be bound by the usual budget limits, standards compliance and legacy business alignment challenges.
On the other hand, such a team might create blissfully elegant but thoroughly implausible solutions that cannot be easily adopted by either operations or corporate IT. The team might come up with technology that hasn’t been invented yet. And an arbitrary separation of digital from the technologists can create its own dynamic challenges, from resentment, to envy, to feelings of inadequacy and of being punished by the organisation for past technology issues.
Driving Digital Innovation Jointly
In my view, this is the most appropriate design. Business users, IT and OT have tons of insight to contribute to how digital could impact the business, and they don’t get too many opportunities to work together. Their strengths are in fact complementary – IT is better at cyber, but OT is better at reliability, and business users are better at business insight. The team could be supplemented with specialist skills imported for the job, in key areas like user interface, user centric design, scale effects, digital economics, and digital innovation, as well as in specific candidate areas for investment (like big data, blockchain, 3D printing, augmented reality, artificial intelligence, robotics and new business models).
Future high impact solutions (like using drones to inspect and monitor gas infrastructure) rely on the business, IT and OT working very closely together. Drones are great examples of OT technology, but they rely on commercial data systems for work order history, parts inventory, and corporate reporting.
This combined team would be composed of up and coming business leaders from the organisation, and would ideally report to an executive that is tasked with driving digital innovation across the organisation (that is, they are neither the CIO nor the COO).
Digital is so different that standing up a digital transformation team really should include critical skills from the business, as well as from both corporate IT and operations technology, supplemented with specialist knowhow in specific technologies and capabilities.