02 Mar Tips on How to Do Digital Transformation
IBM held its annual ReInvention event in Calgary and asked me to provide the opening remarks, as scene-setting for the panel discussion that followed. In case you weren’t able to attend, here’s what I said.
A Call for Help
A few years ago, I received an urgent email note from a complete stranger. Mike was a 23 year old engineer working for an oil and gas company, and he wanted some advice on a problem he was having at work.
Mike’s job was to travel to the gas fields and record asset details about the as-built gas wells. The paper documents at home office about the wells were somehow incorrect. His instructions were to take the inaccurate paper engineering documents to the field, and make corrective notes on the documents in red ink.
In typical millennial fashion, Mike purchased a cheap Apple tablet and downloaded a free app from iTunes for doing a home inventory, the kind you use for recording your stuff for insurance purposes. Except he loaded the corporate asset catalogue into the app, and used the app to build field data records.
He scanned the engineering document for on screen annotations, used the GPS data to auto fill locations, and took HD photos of everything. Mike and a small team of equally green beans built highly accurate, perfectly correct, electronic, fully compliant, detailed site data supported with HD photos which they dispatched back to home office, at 10 times the normal pace of work, a fraction of the error rate, for no additional cost.
After two weeks he was recalled, for some coaching. Apparently, home office was expecting incomplete, hand written, grubby paper files to trickle in once per week to be reviewed and corrected by risk reviewers, checkers, inspectors, and senior engineers, and typed into the system. They had no idea what to do with highly accurate, perfectly correct, electronic, fully compliant and detailed site data, complete with photos and annotated electronic diagrams.
Mike was told to go back to paper.
His question to me was simply this: how do I get my management to change what they’re doing?
Technical Success, People Failure
Mike’s plight underscores the most profound issue that digital innovations face in oil and gas. It’s not about the technology. Mike delivered a free technology success, but a complete workplace failure. His efforts were exactly like the 99% of tech startups that fail.
Digital innovations are going to unleash enormous technology successes but in the process, the potential for huge workplace failures.
- First, consider supply. We have only just started to apply digital innovations to improve our understanding of the subsurface. The IEA estimates that AI applied to subsurface data will expand reserves by 5%, or 500b BOE, worth some $22T.
- Second, demand. Between policy initiatives like the EU Green Deal and the drive to decarbonise transportation, fuel demand will either be cut in half or triple. What happens to fuel retailing?
- Third, productivity gains. Early indications are for productivity gains of 20% for existing assets and processes. Mike’s solution is a good example of a huge productivity gain.
- Finally, cost reduction. Expect costs to fall by at least 20% and likely much more. Mike’s app was absolutely free.
Everywhere I look in the industry, I see these same general rules at play—20% gains in cost and productivity.
The biggest worry for bosses is not Mike and his tablet. It’s that some new business model will up and disrupt the business. That’s what happened to telecoms, retailers, car makers, media. Can that happen to heavy assets?
Business Model Disruption
It’s too late. Business model disruption is already happening.
Here are 6:
- One. Small oil and gas companies pool their subsurface data into larger data sets, and use cloud based AI and crowd sourced geologic interpretation to improve valuations. A large oil company just last week asked me when Google would get into the oil industry.
- Two. Instead of driving your car to the gas station, order fuel to be delivered to your car using an app. Look up GasNinja. Or how about Whim which provides all the transportation you can consume for a monthly subscription that is less than your vehicle insurance premiums?
- Three. Turn your car into a blockchain agent and allow access to the trunk, pay road tools, and purchase fuel and power. This is the premise behind MOBI.
- Four. Turn assets that are normally purchased into subscription-based assets. Think Uber, but for certain kinds of drilling equipment.
- Five. Capture commercially interesting data, such as carbon emissions, or water use, on blockchain and create a new trusted financial asset.
- Six. Turn over the operations of your oil production field to an artificial intelligence engine and optimise production. That’s the premise behind Kelvin and Ambyint.
A Framework to Apply
How are individuals and companies pulling this off? What are they doing differently that yields both technology success and workplace success? Here’s a simple framework that connects the key digital technologies to the humans.
- The first element of the framework is data. At its heart, digital is about how data has become a valued thing on its own.
- Sensor technologies and the Internet of Things will generate vast quantities of highly valuable data to store and analyze, but in the process outstrip human capacity, and our tools, to analyse data. Mike’s tablet is a case in point.
- Artificial intelligence will read and interpret all the data, supporting key human decision-making functions.
- Autonomous technologies will apply the data and analysis to execute work, replacing humans in the office and the supply chain, as well as in costly, dangerous, and repetitive jobs. In the process, entirely new jobs will be created.
- Cloud computing will store the new flood of data, enable new disruptive business models, and provide the foundation for most other digital innovations.
- Blockchain will transform business processes involving assets, trust, ownership, money, identity, and contracts.
- ERP systems will continue to provide the commercial underpinnings for the industry, while becoming more digital in their design and operations.
- Agile methods will augment waterfall methods, and transform how digital gets done.
- Finally, digital will drive far more attention on people, change management, skills development, talent models, gamification and governance.
You can see how Mike’s approach worked (a focus on data and the use of cameras, built quickly for free, and fun for his team), and failed (no management support, poor change management, home office apathy). The winners in digital change are those that concentrate as much, if not more, on the human element of digital.
Organizational Reaction to Change
Mike ran headlong into the natural organizational responses to change that help avoid workplace failures, but at the same time kill off technology success.
- I don’t understand digital. It doesn’t apply to us or we would have heard about it. Digital is more consumers, and we’re industry.
This reflects a profound lack of understanding of digital, and I see this most frequently at Boards and executives.
- Digital is important, but it’s not the priority. We have to do other things, like improve safety, or grow production, or reduce costs.
This reflects a lack of leadership and executive ownership for digital.
- Don’t worry. Digital is just the latest passing fad. It too will fade.
This reflects a failure to communicate clearly and repeatedly that digital is here to stay.
- Digital is not our core business. it’s overhyped and sounds like consulting piffle.
This reflects a pattern of technology led change that is unconnected with true business problems.
- Remember that ERP project we did? It was late, over budget and didn’t deliver.
This reflects a poor understanding of how digital change can be embraced, with agility and in smaller change steps.
- My data is mine and I’m not sharing it. There’s too much risk.
This reflects a traditionalist view of data as a scarce resource, and an overreaction to cyber worries.
- We tried that once, and it didn’t work.
This reflects oil and gas’s nature to avoid failure at all cost.
Antidotes to Organizational Resistance
How might you turn your technology successes into workplace successes? I offer you 7 tactics that I regularly see as the essential ingredients to drive change fast and with results.
Honour your past, define your future
Boards and executive management need to own the strategy and direction. Without clarity of direction, the Mikes in your organization will bump continually into those locked into the past.
CEO as change leader
Digital isn’t something that is best delegated deeply into the organization. Take a page from Suncor whose CEO is championing their journey. It’s really hard to argue with the CEO. And remember, the tipping point is when 30% of your organization gets it.
Communicate, communicate, communicate. Repeat.
Communicate everything — successes, trials, pilots, awards, results, promotions, failures — Share them all. Shine a light on the Mikes.
Be purpose driven, focus on business drivers
You know something’s wrong if your digital effort is called a science project. Mike’s challenge was that his solution solved his problem but did not solve the organizational problem. Take aim at real business problems that are linked to results.
Think BIG, start small, be agile
Yes, digital will be as big a change as deploying an enterprise resource system or adopting the internet, but the way forward is through a series of small projects to build that momentum. Mike’s solution, although really clever, wasn’t part of a bigger change, so it could be safely ignored.
Build cyber security in
Digital creates a far greater attack surface, and you’re right to be concerned. But cyber is just the new safety. You just gotta do it.
Stay the course
An oil company tried bot technology for the first time. Their initial bot didn’t work. In fact, the first 50 iterations didn’t work correctly. But they stayed the course, in the face of completely reasonable voices arguing to stop the pain.
How should you move forward to create your world of technology and workplace success?
First, set your digital North Star. Where are you headed with digital and what is your ultimate aim? Your organization needs that clarity so that it can properly mobilise.
Second, educate your organization. You need to reach that 30% tipping point, and digital awareness is still a work in progress.
Third, Build that business driven roadmap. Set out the specific investments that you’ll make to trial some ideas, test some thinking, and move the organization along.
Fourth, Raise your data acumen. Oil and gas is generally rubbish at data. Mike’s innovation was all about creating data, the lifeblood of digital. You’ll need to get good at it for digital to pay off.
And finally, put the foundations in place — cloud, solid enterprise solutions, cyber defences.
Check out my book, ‘Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, available on Amazon and other on-line bookshops.
Take Digital Oil and Gas, the one-day on-line digital oil and gas awareness course.
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