2019 – The Year Ahead

Happy New Year

As we enter 2019 I’ve managed to already break my first resolution – to get this blog post out before everyone gets back to work. As an excuse I’ve had a very busy start to the new year. As a warning, I think we will all have a busy year this year.

When looking forward, I often find it useful to reflect first on the past and see how thoughts are changing.  After you’ve read this post, please revisit this one [link]. It was written in March 2016 – Trump had not been elected, the Brexit Referendum had not occurred, Cambridge Analytics had not been exposed and Russian interference in the US election was not known about. An extract from the post reads as follows:

With modern communications and the ability to mobilise quickly we’ve already seen massive changes in the way the people (or, in Greek, demos) interact with conventional democratic systems and capitalism. [….] Whether that’s the Arab spring, so-called ISIS, Brexit, the mass-migration of populations or the astonishing rise of Donald Trump, things are getting decidedly odd in traditional politics. […..]

Cyber-politics is a whole new dimension. Whether cyber aggression is aimed at accessing private information, denying or altering the dissemination of information or compromising the physical integrity of machine-based systems the ability of people to alter the course of events through “hacking” has never been so great.

As the 4th Industrial revolution unfolds there will be more disruption ahead.

On the positive front, last year we saw the unveiling of the first industrial strategy for Britain for a generation link. I’m seeing the ripples of this throughout the industrial landscape of Britain, including a member of the Bestem network  who told me about some very innovative work he’s doing with the railways – all funded from central government. The funding he has access to is much larger than the whole OGTC [link] annual budget and he just needs to fill in a form to get it. It’s very light weight, no committees, websites, offices, equipment, industry sponsors – just get on with it. And he has. Big time. Oil and Gas is still not innovating, but we are good at committees and wasting each-other’s time.

My top predictions for 2019

  1. Attention will continue to swing away from economics & finance and towards science, inventiveness and engineering (genetic, information, computing, transport).

  2. Competition between nations will intensify with value-capture swinging towards creators and away from traders and rent-seekers.

  3. Politics will continue its rise – no more will debates be settled on the economic benefits of an argument. Politicians will start to use emotive language more. Manuals on speech-writing for rhetoric, bathos and pathos will be dusted off along with words and phrases including: trade, craft, pride, sacrifice, service, future, humanity, community, future-generations and “for-our-nations-children”.

  4. Language will continue its progression-regression. Old words take on new meanings. In my field the fourth industrial revolution became digitalisation, I am sensing that this is now becoming “innovation”. Again.

  5. Productivity will increase and the british economy will grow. Not, you understand, because it will objectively do so – but because the way we decide to measure it will change. We are already moving to double-deflation accounting in April [link] . You can expect more of this type of thing. It may be good for us.

  6. The Oil business will still be ruled by old-world economics and yesteryear-practices. I remember the dot-com boom in the late 1990s when there was genuine fear in my part of the Schlumberger world that we may be acquired by  Yahoo. Now Google (which was only formed in 1998 and not floated until 2004) could swallow Schlumberger many times over – but frankly, my dear, doesn’t give a damn. It’ll be the same this cycle, the Oil business will still work, be profitable and vital – but paradoxically become increasingly (and proportionally) less relevant to measured world economic activity.

  7. The Big-Oil innovation committee will, after a multi-year tender programme, finally hold a committee meeting to issue the PO for the automated remote light switch. After their youngest member retires on full final-salary and is the last to leave the building this will be used to turn off the lights. By SMS. Sent by his secretary. From the last electrons of his dying Blackberry.

  8. Elon Musk will either be killed in a freak mid-air collision between him and Richard Branson, or will buy a small nation (to be called Matrix) and will be joined John McAfee [link] and Larry Ellison. They will declare independence.

2019 looks like it will be a fascinating, scary, depressing, joyful and amazing ride. Strap-on, tune-in and don’t drop-off. All the best my friends, it’s going to be a wild-one.

Self driving and the digital avalanche

Justin Rowlatt just published an interesting article (he admits it is provocatively one sided) about the inevitability of self driving cars and the disruption it will cause. The article can be found here: https://www.bbc.co.uk/news/business-45786690.

I urge you to read the article, because it describes accurately the confluence of forces that causes avalanches and a split between the new and the old. When technologies hit a certain point the economies of network, scale and of learning kick-in to reduce the cost and increase the convenience of switching to the new, while the exact opposite happens to the old – making the switch happen in a non linear avalanche of change.

Justin’s article includes a photo of a New York street in 1900 and then in 1913 – in the first, the street is full of horse buggies and one car, in the latter the situation is reversed. The Model T Ford motor car was introduced in 1908.

For electric cars – just like in parts of the world where you still find many horse (and Ox) drawn carriages – motor cars as we know them will not disappear; the rate of manufacturing switch will be slower and cars bought today will still work in 20 years time.

A few years ago I made a calculation that, because of these and other factors, the internal combustion engine would take 50 years to be replaced even if the rate of uptake of electric vehicles accelerated. Justin makes a great point that, because of the effects of self-driving, we need, perhaps, only 10% of the current fleet to change and we’re done. Economics will kill the current car and nothing else matters.

This reminds me of why Amazon can (and has) destroyed the high-street. It doesn’t need to take 100% of the business, but – because bricks-and-motar retail has high fixed costs and low margins – they only need to take 10% of the revenue and Mrs. Smith’s Bookshop is toast.

The Fourth Industrial Revolution will be made on lots of changes like this. The facilities that the self driving car will enable (and the infrastructure needed to support them, and spin offs around that) will mean new industries emerge and old ones die. And it will happen quicker than we imagine.

Elon musk, for all his bluster about electric cars, is really re-inventing manufacturing [Link]. Not only will his disruption hit the auto industry, but any form of manufactured assembly of mass-produced product. And that’s just about everything consumers buy.

Get ready now!.

Digital overload?

I’ve just had the time to scan the Sept-Oct ’18 issue of HBR and there is one article that all digitalisation professionals should read. Titled “Too many projects” by Hollister and Watkins [https://hbr.org/2018/09/too-many-projects].

Not only does it provide an example of why cutting IT budgets across the board is a bad idea for business, and an explanation of “logrolling” where executives support each-other’s pet projects, but also it provides a neat framework for assessing initiatives prior to launch.

I touched on initiative selection as part of a prioritisation framework Introduction to Prioritisation V 1.0,  I also wrote an article in 2017 which was recently published in Oil and Gas Technology that touches on some of the concepts [link]

I hope HBR don’t mind me paraphrasing one of their templates but it’s really quite excellent:

Questions to Ask Before You Launch an Initiative:

Analyse the project

  • What problem is this initiative meant to fix?
  • What data or other evidence tells us that this initiative will have the desired impact?

Assessing resources

  • What is the true human capital demand?
  1. What resources (time, budget, and head count) are needed to design and launch the initiative?
  2. In addition to the department that owns the initiative what departments or functions will be tasked with supporting it?
  3. What time Commitments will be asked of leaders and staff members to attend meetings or develop the skills needed to understand or implement the initiative?
  4. What resources will be needed to sustain it?
  • How does the human capital demand compare with the potential business impact? Does the cost outweigh the benefit?
  • How will the organization determine whether it has the capacity to take on the initiative?

Sizing up stakeholder support

  • Who are the key stakeholders?
  • What actions will be required to support the initiative?
  • How fully is that support in place?

Selecting limits

  • What trade-offs are we willing to make? In other words, if we do this, what won’t get done?
  • What’s the sunset schedule and process?
In summary then: next time you're asked to add yet another digital initiative make sure that it takes into account the impact and value to operations!

image credit: http://www.chinadaily.com.cn/photo/2013-12/02/content_17143892_2.htm

 

 

BAgain

BA has had another IT disaster, it appears to be becoming a habit.

Quote from today’s FT

Neither the customer emails nor the airline’s public statements to date have offered any explanation for how BA managed to lose such vital information. Some critics of the airline have asked whether its parent IAG has focused too much on cost-cutting and failed to invest sufficiently in technology. This is its second big problem in two years — last May, BA’s global IT system crashed grounding more than 700 flights and leaving 75,000 passengers stranded. To be fair, the two problems are almost certainly unrelated except as part of a general window into BA’s IT. An airline spokesman insisted, “This was a sophisticated criminal act. We are investing more in cyber security than ever before and will continue to do so.”

The article can be found here: https://www.ft.com/content/a301f46a-b4df-11e8-bbc3-ccd7de085ffe

Just as a reminder, here are the pieces that I published last year [link] [link]

The fourth industrial revolution demands investment in information technology in order to reap the benefits of efficiency, BA has been trying to cost-cut its way to success. It will be left behind if it doesn’t get with the programme.

Image credit: https://edition.cnn.com/videos/travel/2015/09/08/las-vegas-british-airways-plane-catches-fire-hampton-beeper-erin.cnn

 

 

Report from the future

The trouble with our industry at the moment is the plethora of conferences and events that go on. The FT reported on Thursday that our industry is 40% less productive than the rest of the economy, is there a connection?

Last week there were, at least, four separate events happening in Europe. I didn’t manage to attend the Future Oil and Gas conference in Aberdeen, but it seems that I may have missed a rather good one. I’ve been asking around and receiving reports on the discussions and topics.

My informal word-count revealed some key themes: Open platforms, leverage of diverse data sets, generating insight (whatever that really means), data silos, collaboration, machine learning and AI.

Where are all the young people?

First the bad news. This conference seemed to have a definite bias towards the fourth industrial revolution and the future of innovative technology – but no-one arrived by skateboard. In fact, my sources indicate there were more suits and ties on display than at a moss-bros Christmas party and Grecian 2000 narrowly avoided being the main sponsor.

Where are all the young people?

When I go to a tech conference in the South East or in Silicon Valley I’m positively jumping out of the way of hover boards, unicycles and tattoo artists. I may appear flippant but I’m not – the great creative and innovative minds of the future seem to be missing from our conferences. If we are going to succeed we need to be able to form teams that embrace diversity and create energy. We need people like this and we need to provide an appealing set of challenges to keep them motivated.

Equinor supports entrepreneurs

Now onto the good stuff. Einar Landre from Equinor (the artist formally known as Statoil) told how they supported small vendors – while being careful to explain that they were not offering blank cheques, he recognised that procurement processes could be slow and risked pushing suppliers to the wall. I heard they claim to be actively promoting ways to engage with innovation and to create disruptive business models where they pay for outcomes rather than for inputs. Separately,  I  picked up on an announcement that Equinor plan to release all the operational data that was gathered on the Volve field to be used to test algorithms and find new ways of working. Well done chaps, I think that’s a very collaborative and welcome move.

Chrysaor integrates a new asset

I also hear that David Edem from Chrysaor gave a lively presentation where he told the gathering about the recent experience of taking over an oil field from another operator. How explained that first problem is to get hold of the data to understand what it is that you’ve actually bought. In the middle of all this their organisation head count grew 20x in a year and, for them, it is clear just how much time and effort had to be invested searching for data. David told us he was keen to address this early in the company’s life and highlighted one case where a simple change in data-handling practice is already producing savings of $1M pa. He said that we should consider carefully the value that is embedded in the data that comes with a platform and treat this as a capital asset.

Ithaca understands the tension between IT and OT

I also heard that Malcolm Brown from Ithaca was keen to share his experience regarding the tension between IT and OT. He brought a key insight that the perception of risk is different – IT believe that the more you leave a system alone the more vulnerable it becomes (because of the evolving security threats and the lack of patching), whereas OT believe the opposite – each time you touch a system it is more likely to break than get better (i.e. don’t fix what ain’t broke).

Of course, both viewpoints are valid and have merit. Reconciling these is going to be important for us all, so it sounds like formal risk-management processes with OT are going to be required to enable safe innovation.

Fail Fast and Learn

Another theme that emerged from the conference was Agile development of systems and processes. This is important, because Silicon valley has proven that Agile methods can increase the rate of value creation. They also establish competitive advantage and lead to unimagined breakthroughs. How can we integrate the “fail – fast & cheap – and learn” methodologies with our industry and still keep everything safe.

Keith Wildridge from Eigen brought this topic into his talk and was keen to share experience engaging in collaborative development with ENI making safety systems and using methods such as SCRUM and SPRINTS.

Event Format

The format for the event – that of discussions and panel sessions – was warmly received by everyone I talked to. They all said they were fed-up of boring people with boring powerpoints standing up and lecturing at an equally bored audience. This was much better.  They were also happy that the representations were not all from Vendors trying to find a way to dress-up a blatent sales pitch as some form of case study. Exploring broad themes in an open environment went down really well – so this conference seemed like a welcome boost and I think it will stand the test of time and become a feature in my diary for 2019.

Conclusion

I’ll leave it to the words of Esa Jokionen from Rolls Royce who apparently summed up the industry approach to AI and Big Data. I’m told he said it was like teenage sex. Everyone thinks everyone else is doing it, everyone wants to say they are doing it – but, truth be told, there is not much of it actually going on, no one knows how to do it properly but everyone’s keen to try.

Image credit: http://www.futureoilgas.com

 

 

The Fourth Musk(eteer)

Introduction

Amazon reinvented how we bought books. In the process they re-invented the way we enable people to find and order almost any type of goods. Once ordered, the company arranges to have to have our orders despatched and delivered. Amazon seems to have become an unstoppable force in the world of retail – laying waste to high-streets, department stores and shopping malls along the way.

I see something similar beginning to happen at Tesla. Elon musk has moved on from innovative products such as the electric car and is now on the cusp of reinventing manufacturing. Few people seems to have noticed how general his approach can be and how it can be applied to making just about anything, and making it anywhere.

Innovator’s Dilemma

If you haven’t read “The innovators’ Dilemma” by Clay Christiansen [LINK]  it may be time to do so, or if you have brush up on the contents again. This book was first published 1997, as the world was going internet and computer crazy. It has stood the test of time.

The basic premise of the book is that industry incumbents tend to innovate by making their products better. All their customer focussed research and development is structured to avoid making products that are demonstrably worse than what they have in almost every way. But upstarts can and often do launch products like that to serve market segments uninteresting to the incumbent.

But innovation, it turns out, is dynamic and pretty soon the upstart is learning to get better to the point that their offering becomes “good enough” for a large slice of the market served by main suppliers.  The most demanding customers will still be pushing for extra features from the incumbent but this becomes increasingly difficult to achieve and scale economies fade (as the mass-market defects). This leads to the demise of the once dominant generation and the rise of the innovator.

The examples that Clay based most of his early published research on where the manufacturers of disk drives in Silicon Valley. But he drew the parallels in other industries. The book considered end-product (the disk drive), whereas now I am seeing the same market dynamics emerge in processes and services. Where the first steps of the new methods are not quite as good as the traditional, but the direction of travel means that the inevitable result will be an unstoppable revolution in the way things are done and the way things are made.

Amazon warehouse success and Tesla’s manufacturing innovation

Earlier I wrote about the innovation that was happening in the Ocado warehouse. [LINK] Amazon has quite a lot to say about efficient warehousing but (I don’t think) are licensing their technology to others. The innovation that has happened here has digitalised the warehouses and made them more efficient.

Elon Musk is doing this for manufacturing. What I find interesting about the approach to manufacturing in the Giga Factory [LINK] [LINK] is that it’s fundamentally different approach than updating a car manufacturing plant to become digital. It’s the reverse. Let me explain.

Amazon didn’t apply digitalisation of retail to book buying, they applied book buying to a digital retail and supply chain – once perfected it was instantly ready to serve across categories. Tesla is doing the same in manufacturing. Once you’ve learned to manufacture in an automated way – it’s a small step from cars to any other type of product.

A good place to start

Books were a good place for Amazon as it was a very inefficient process and bad for the customer. It turns out that car manufacturing is also a great product to choose to apply to digital manufacturing because there is demonstrable market for the finished goods. They are poorly served by the current process and the incumbents are being held back by two big forces – the internal combustion value-chain, and the clogged thinking born of mass employment and model for command-and-control distribution of labour and “industrial man”.  See “My Years at General Motors” Alfred P. Sloan [Link]  for insights on what the world of manufacturing has been striving to emulate since the 2nd industrial revolution started.

How does this apply to oil and gas?

There are two reasons why this is relevant to Oil and Gas.

  • firstly we are organised very much along the lines of division of labour and command and control described by Sloan. If this model is now under threat from people like Musk then we can assume that world of work as we know it in our industry will also change;
  • secondly as Patrick Von Pattay said in my interview with him [Link], perhaps the threat is not going to come from an incumbent applying digitalisation to make their existing oil and gas operations better, but perhaps it will come from someone who has learned to be an efficient operator of facilities who is now going to include oil and gas to their process. Like Amazon starting to sell electronics as well as books.

Conclusion

For the next 25 years, I suggest closely following the advances in automated manufacturing which is happening in Nevada right now, and imagine how such changes in working practice can affect our industry. Because they will.

Get out of the way of digital Chris

A friend of mine runs operations for one of the larger players in the North Sea. He has a chap who works for him. For the purposes of anonymity, I’ll call him Digital Chris.

Digital Chris is a very valuable person. He’s what’s referred to as a “Barrel Chaser” he’s the trouble shooter, the ideas man, the guy that gets things done. Digital Chris adds thousands of barrels of production each year. Production that would otherwise be locked up due to process constraints, lost through shut-in’s and trips or lost through delays getting things back on-line. Digital Chris probably contributes a few million pounds of cash that drops straight to the bottom line.

It’s odd then that not everyone is like Digital Chris and that people like him are so rare. I remember there was a chap I met who worked at Elf in the 1990’s who I’ll now refer to as “Digital Martyn”. I hope he won’t mind me name checking him – Martyn Beardsell – https://www.linkedin.com/in/martyn-beardsell-5639aa1/

Digital Martyn worked as a reservoir engineer and seemed to be able to use software tools he had available to construct answers to geological modelling and reservoir production questions in ways that others couldn’t. He could take information from many different disciplines, combine them and use it to solve sub-surface puzzles in new and imaginative ways.

Digital Martyn and Digital Chris are digital pioneers, a different type of digital twin if you will. They may not think of themselves this way but they are. The problem-solving results they achieve are not only orders of magnitude faster & better than whole departments of people, but I’d go as far as to say that they spot and solve problems to unlock opportunities that would otherwise be lost forever in the fog of bureaucracy.

What’s interesting now is that if you walk into a G&G department they are no longer divided by discipline as they were once: Geology, Petrophysics, Geophysics, Reservoir (with geochemists and bathymetry not knowing where to report); instead they are organised as “Subsurface” and divided by business objective Exploration, Development and Production.  Computing power and data was the underpinning of this change. All companies now organise their G&G departments and behave in the way that Digital Martyn pioneered 25 years ago. I suspect 25 years from now all operations groups will organise and behave in ways that Digital Chris, and those like him, are pioneering today.

The BBC reported that there will be a requirement for 10,000 digital workers in Oil and Gas in the next 20 years. http://www.bbc.co.uk/news/uk-scotland-north-east-orkney-shetland-44067949 On average that means each of the 50 or so operators need to find 10 Digital Chris clones each year. My friend has only found one in the last 15 years.

If Martyn and Chris are twins separated by 25 years and, if Digital Chris is a pioneer, there are three things the wise oil company executive should do: Learn to spot more digital pioneers; develop and grow them; and help them be successful in their roles.

To help you spot them, here are the traits of a digital pioneer:

  1. Is technically advanced in area of specialty
  2. Is a creative problem-solver
  3. Maintains broad overview of situation
  4. Prioritises attention to areas that maximise value
  5. Digs into extreme detail when required
  6. Tests Hypotheses with data, discarding ideas when necessary
  7. Develops networks and creates social and political capital
  8. Naturally works across organisational boundaries
  9. Can’t stand bureaucracy and form filling

 

Once you’ve found them here’s a few suggestions to help them develop and grow

  1. Develop tools to gauge the business impact of decisions
  2. Create common language to enable discussions on relative value
  3. Share strategic vision and what will be considered “good”
  4. Reward the identification and quantification of problems
  5. Provide unfiltered access to whatever information is needed, even if only needed for curiosity
  6. Encourage diversity of approach and non-conforming ideas
  7. Ensure that safety is not compromised by new ideas without killing the idea-generation process itself

As they develop, it’s your responsibility to help them be successful in their roles

  1. Prevent nay-sayers from using trivial detail to thwart progress
  2. Align interests by addressing the gap between process-driven functions like finance, procurement and IT and those working in the white-heat of operational time-frames
  3. Deploy technology that reduces information-friction and promotes transparency
  4. Try to work with the minimum of forms, reports, emails or meetings

 

It’s going to be a long process to re-equip the whole workforce with digital skills, some of that will happen naturally as new workers enter the industry. There will be a need for conversion to new ways of working to be established within existing workers as well.  The challenge is going to be attracting new people with digital skills, embracing those new skills and associated ways of working (letting them flourish and keeping work meaningful and not frustrating) then combining them with the know-how from established practices in the industry.

In the short run we’re going to need to work in teams – and teams with diversity of thought and approach. Not the sort of team I’ve seen (and experienced) where all new digital methods are pooh-poohed. Not the type of “team” where the old guard try to reprogramme the progressive new digital guys to adopt the way it’s done here – and the digital guys opt out and are replaced with IT people (who haver IT skills but are not Digital, see traits above). The IT guys end up going off on IT projects for their own sake and impose so many restrictions on technology adoption by the operations teams that the whole thing falls flat and fails.

Be Digital!