The only constant is change

The way we conduct business is changing, the oil and gas industry is changing and the rate of change is accelerating exponentially. The accelerating change is born from a confluence of factors: technology acceleration and the 4th industrial revolution, driven by Moore’s Law, Butter’s Law and other similar descriptors of technological evolution; the lower for longer oil price environment is challenging the economic feasibility of projects; the increase in the development of marginal fields as mature basins move to sustain production; climate change is driving changes in energy strategy and the approach to emissions regulations and the rise of unconventionals. The traditional ways of undertaking projects do not work anymore in today’s challenging business environment, if they ever really did.

When change is accelerating, it is difficult for us all to adapt, both individually and collectively. It is very easy to become entrenched in traditional ways and be left behind by the cultural, social, technological and industrial evolution. In order to avoid being left behind while the world changes, industries, companies and individuals need to adapt, they need to learn new ways of working and they need to learn them quickly. For example, when Apple negotiated the service contracts for the iPhone in 2006, AT&T signed an exclusive deal to be the service provider for the United States of America. Initially this was without problem, Steve Jobs decided to open the iPhone to app developers and in the subsequent years, bandwidth demand increased one hundred thousand percent[1]. The change in demand for data meant AT&T were faced with a challenge that could break their business and to solve it they moved away from their traditional hardware and infrastructure and pioneered software enabled networking.

Software enabled networking didn’t just enable AT&T to solve the challenge posed by smart phones, it allowed them to exploit the Big Data revolution. They had access to data travelling over their network and they could mine this data for insights allowing them to solve challenges their clients were facing. By adapting to the change in data consumption, AT&T evolved from a telecommunications company into a business solutions provider. In turn this change presented a new challenge for AT&T; a skills gap within their workforce. To adapt to this next challenge derived from change, AT&T overhauled their workforce training programme. Internal jobs are now advertised with the exact skills required and the details of where employees can get the training required to develop these skills and they have partnered with both traditional universities and online universities to provide the training courses to develop these skills. As well as being a learning organisation, AT&T has empowered their workforce to become lifelong learners. Obviously, this requirement to adapt did not stop at the corporate level, AT&T’s workforce had to be willing to transform in to lifelong learners. The fact that between 2009 and 2013, AT&T engaged 130,000 employees in their innovation pipeline[2] suggests this has been a success. John Donovan, AT&T’s chief strategy officer is quoted as saying “our cycle times for [new ideas] are much faster now” and that there was a 30% improvement in lost sick days in one year[3].

Ford, that most traditional of traditional vehicle manufacturers, opened a new technology business in California’s Silicon Valley[4] in 2016 because of the realisation that they had to be in the technology business. In an interview with the BBC, Ford’s then Chief Executive Mark Fields revealed they were working on the assumption that Apple were “probably building a car.” Their competitors are no longer the traditional automotive companies, they now include non-traditional companies such as Apple, Google and Tesla. Ford has an expectation that a Level 4 autonomous car, a car that can operate autonomously within a pre-defined area, will be available by the end of the decade. Again, this advance is partly due to Moore’s Law supporting more complex sensors and partly due to advancements in software algorithms. Faced with a change in customer needs and expectations brought about by changing technology and a changing competitor landscape, Ford is having to adapt. They have established a research and innovation centre in Palo Alto to “collaborate with and participate in that environment.”[5] Ford is moving to enhance their traditional competencies and learn from the disruptive technology companies flourishing in Silicon Valley.

A Harvard Business Review article described how GE, in danger of losing market share to non-traditional customers and disruptive start-ups, launched a multibillion industrial internet initiative in 2011[6]. Leveraging the digital transformation brought about by accelerating changes in sensor technology, digital connectivity and computing power, GE has started to change their business model. In 2015, Marco Annunziata, Chief Economist at GE, told the Harvard Business Review “We’re no longer selling customers just a jet engine, a locomotive, or a wind turbine; we’re bringing data and actionable solutions along with the hardware to reduce costs and improve performance.”[7] GE now use data to optimise the performance, utilisation and maintenance of their equipment and GE is now transforming into a “digital industrial” company[8]. In order to adapt to this change, GE established new capabilities including opening a software centre of excellence in California. This reaction to change has birthed GE Digital and Predix, which contributed $6Bn USD in 2016 and has a target of $15Bn for 2020[9]. The Predix platform has 19,000 software developers[10] building apps to continue this digital transformation.

Here at io, we too are embracing change. It is a huge opportunity to transform the industry, bringing greater certainty and higher Decision Quality by thinking differently. As well as having full access to the know-how of both our parents, we complement our highly-experienced team of industry experts with thought leaders from other fields, including economists, systems engineers and digital transformation specialists. We adopt best practice from sectors as diverse as oil and gas, automotive, electronics, defence, finance and shipping. The io way brings a fresh and innovative approach, rooted in delivering greater certainty and puts digital transformation at the heart of everything we do. In one example, we successfully developed and deployed a unique systems thinking approach, drawing on techniques used within the aerospace industry. This systems thinking delivered a 30% capital spending saving and an 18 month reduction in project delivery schedule for one client’s project. In another example, the current ‘lower for longer’ environment is making project financing a significant challenge for operators; io developed a team of industry experts and economists specialising in the creation of innovative financing solutions to respond to this challenge, seeing it as an opportunity. Allowing, in one case, io to identify a solution with sales of LNG offshore, allowing an alternative commercial framework, and a consortium willing to undertake the project completion risk.

We encourage our io team to work creatively and collaboratively in an integrated manner, looking for solutions beyond the conventional; we provide the framework for them to learn new skills and bring those skills to the fore when delivering value and greater certainty for our clients. This culture and mindset is how the industry will collectively keep pace with the accelerating change and thrive as a valuable contributor to the global energy portfolio.

To find out more about how io’s powerful thinking can help bring greater certainty and value to your projects, contact us at hello@iooilandgas.com

[1] Friedman, Thomas L. Thank You For Being Late, 2016.
[2] https://www.forbes.com/sites/larrymyler/2013/12/05/atts-innovation-pipeline-engages-130000-employees/#5a59fdf71350 (Accessed 27th April 2017)
[3] Friedman, Thomas L. Thank You For Being Late, 2016.
[4] http://www.bbc.co.uk/news/business-36126591 (Accessed 27th April 2017)
[5] http://www.bbc.co.uk/news/business-36126591 (Accessed 27th April 2017)
[6] https://hbr.org/2014/11/digital-ubiquity-how-connections-sensors-and-data-are-revolutionizing-business (Accessed 27th April 2017)
[7] https://hbr.org/2015/01/building-a-software-start-up-inside-ge (Accessed 27th April 2017
[8] https://www.ft.com/content/81bec2c0-b847-11e5-b151-8e15c9a029fb (Accessed 27th April 2017)
[9] http://uk.businessinsider.com/ge-predix-6-billion-business-2016-11?r=US&IR=T (Accessed 27th April 2017)
[10] https://www.ge.com/digital/blog/predix-tale-how-we-built-industry-cloud-platform-scratch (Accessed 15th May 2017)