Category: Business

Inspiration, business models and ways to organise a portfolio career

No point being right at the wrong time

Experts, at least the ones I have talked to, cannot see how renewables and electric cars will make a meaningful impact on hydrocarbon demand in the medium term. Factors such as intermittency of supply and storage, coupled with economic growth in India, China and Africa and the requirements for chemical inputs are some of the factors that drive their opinion.  Add to this the energy required to produce cement and the methane contribution from red meat farming and it covers many of the themes suggesting the modern economy would fail quickly without oil and that this is not changing anytime soon.

When I talk to the investors, however, they tell me that it is now much easier to finance renewables than oil. The returns required are often 5-10x higher for fossils than for wind or solar. Though some are fearful of the potential knock-on effects of the “CRD-IV” Basel regulations.

When I hear Rob West speak, he tells us about the is the possibility that the current low investment in oil and gas may meet the natural decline curves on the way-down and growth demands on the way-up to form a spike in the Oil price. Such increases have previously been the portent for economic slow-down, the rise in violent protest and countries going to war with their neighbours.

There are countless articles that repeat the claims about the fall in Solar prices being dramatic enough to threaten conventional and nuclear generation. Here’s just one sample on “oilprice.com”:

“The Next Stage Of The Solar Boom Is Already Underway”

https://oilprice.com/Energy/Energy-General/The-Next-Stage-Of-The-Solar-Boom-Is-Already-Underway.html

However there was a rather underreported article recently in the FT which migh suggest something different:

https://www.ft.com/content/be1250c6-0c4d-11ea-b2d6-9bf4d1957a67

[…] Yingli was the world’s largest solar-panel maker in 2012 and 2013, exporting all over the globe and celebrated in China as a national champion…..Today Yingli is insolvent. It has been defaulting on debt payments since 2016, and in 2018 it was kicked off the New York Stock Exchange because its market capitalisation had sunk below the minimum $50m threshold. Although Yingli still makes solar panels, its factories operate at a loss and the most valuable asset it has left is the land underneath them….The company is the highest profile casualty of a change in policy that is being felt across the renewable energy sector in a country once celebrated as the world’s clean energy champion. Chinese investment in clean energy is plummeting — down from $76bn during the first half of 2017, to $29bn during the first half of this year.

Maybe the fall in the price of solar may not be all to do with manufacturing efficiency and fall in production cost, perhaps it’s also to do with the marginal cost of production, large fixed asset factories, sunk costs and supply-and-demand.

Whatever opinion you may rationally deduce is of no relevance. We’re going down a renewables route on a green agenda that no longer needs to stand the test of traditional economics and logic but will become a defining shared belief. Something that can’t be questioned. Something that is above rational thought. As one of the UK Ministers said a few years ago “We no longer need experts”.

If members of our network are to proposer in the short-run they must understand the impact these forces will have on their business and take action. In the long-run economics and logic will re-assert, but by then the world will have changed and who knows what we might discover we can do by making seemingly irrational choices? Perhaps there will be game-changing, unpredictable inventions found. You cannot prosper in the long-run if you don’t survive the short-run.

As John Maynard Keynes said in 1925, “The market can remain irrational longer than you can remain solvent”.

Petropolitics – 2019 style

As I write this in Late November 2019, we are in the middle of the oddest British general election campaign I can recall. It is by no means clear what the outcome is going to be, and the choice seems to be choosing an irrelevant option or picking a party that might be the least damaging.

We are in an era defined by what (or who) people are against, not what they are for. Debate is framed by blaming the “others” for what they have done/will do and simply stating that you are for the opposite of that. None of the political parties offer policies that stack up using the accepted logic or economics of the late 20’th century. Nor are they willing to justify them in those terms. This is a dangerous time where sub-groups (old, young, migrants, followers of religions, business owners, workers, environmentalists, the fossil fuel industry, etc.) are at risk of being pitted against one another – each blaming the other for causing the situation they believe is comming. Fearful that one group has stolen the others’ hope.

We are in globally unstable times. Perhaps energy supply is a contributory factor.

The UK became a net exporter of Oil in 1979 and our economy boomed. In 2005 we became an importer again. Things became bleaker. Shale Oil has recently led to the USA becoming self-sufficient for the first time since the second world-war. China is an importer of energy.

The USA have no energy-related interest to protect by managing global tensions but perhaps China now does. Could this be part of the reason that the world feels less stable?  Look across Europe, North and South America, Hong-Kong Australia and the Arab World and see how divisive and “entitled” the politics and associated direct-action has become.

One area where there is broad agreement, however, is on climate change. We are in a net carbon zero goal-setting race. And we’re in good company – other countries are falling over themselves to do likewise (with notable exceptions of course).

This is a topic that the world has rallied around to fight a common “enemy”. Big themes (such as the previous “war on terror”) can be used to justify the case for actions that are irrational if viewed using other frameworks – such as logic, or economics.

Is it right that we permit large nations to pollute our planet and if not, how can we stop it? As an example, today’s FT reports that the Permian basin is set to flare 7BCM of associated gas this year – for comparison, the whole UK gas sector produces 45BCM per year.

Weighing up the pro’s and con’s of reduced carbon emissions, understanding the winners and losers and the national self-interests is not easy, and the result will not be determined only by logic and economics. Politics and the opinions of the uninformed could be decisive. And disastrous.

Currently, anyone expressing a view other than that we should halt emissions and reverse climate change is lambasted. The Oil and Gas industry needs to be careful to understand and react to the political climate (i.e. the opinions of others) and not rely on the logic of days-past and the economic models from the 70’s. Lip service, ignorance or faux-concern is the wrong approach.

We risk losing the license to operate in the UK and this will damage us all.

While we were sleeping – Oil 1.4 and Solar

It’s been very busy since the Network Dinner in September. I will post an update on the discussion later this month.

In the mean time I’ve been busy working on innovation – more of that later – but I recently came across two interesting items that I think might be worth sharing.

Firstly the FT ran a special issue talking about Oil and Gas 4.0 [Link]. It’s good to see that this term is being widely applied – and a big change from when I started to talk about it a few years ago.

I wrote an article in March 2016 when I claimed that Oil and Gas were really at 2.5 while industry was going 4.0 [Link] I was concerned about the lack of urgency and technology progress. I also called out the contribution of Collette Cohen as being one of the few that seemed to get technology. She is now director of the Oil and Gas Technology Centre.

The OGTC were referred to in this article [Link]

In October, the non-profit Oil & Gas Technology Centre (OGTC) in Aberdeen in Scotland, announced the next phase in its autonomous robots project with Total of France, which is developing what it calls the world’s first offshore work-class robot. The first phase of the work saw Austrian firm Taurob create a robot to conduct visual inspections at Total’s Shetland gas plant and the Alwyn gas platform in the North Sea. A second-generation version will have a stronger chassis and a heavy-duty arm that will lift objects and turn valves. It will be tested by Total and Equinor of Norway, the research initiative’s new partner.

“A lot of our work on hazardous environments focuses on whether we can avoid sending people into those areas in the first place,” says Stephen Ashley, head of OGTC’s digital transformation solution centre.

Another article coined the phrase Oil and Gas 1.4 which is a clever take on the combination of an old-age industrial organisation embracing new digital technologies within its core business. I think I like this term better than my 2.5 one.

This article [link] makes the point that the new technology is prevalent in some areas of the business, but that the new frontier for production might be the application of technology to find economic ways of enabling enhanced oil recovery. 

Unmanned rigs are now commonplace, complex operations are monitored from a single control room, leaks and emissions of greenhouse gases can be identified by drones and satellites, removing much of the need for direct human inspection. Numerous technologies are being applied in ways that can reduce cost and improve productivity.

The key question, however, is whether the digital revolution can answer the sector’s biggest challenge: how to secure future production. Oil demand is not falling. There may be 7m electric vehicles on the world’s roads but there are also 1.2bn vehicles with internal combustion engines.

[…]

One answer must be for companies to make the most of assets they already hold. Across the world the typical recovery rate from a conventional oil or gasfield is only 35 per cent.Even after decades of production giant fields such as Prudhoe Bay in Alaska or Ghawar in Saudi Arabia still contain billions of barrels of oil. Recovery rates have slowly risen and provinces such as the North Sea, originally expected to close at the end of the last century, continue to produce oil and gas. In Norway recovery rates are typically 50 per cent — well above the world average but still leaving half the resource base undeveloped.

The point at which recovery becomes uneconomic, ie when the cost of enhanced recovery is greater than the value of the oil, is a serious constraint.

What I’ve found really interesting this year is how irrelevant the oil and gas industry seems to have become down here in London. What I mean by that is that Oil and Gas seemed to be at the crux of things in a way that, say, copper mining and concrete production wasn’t. It used to be a cool place to play with technology, travel the world and to make a bunch of money. I think those days may be over (though some predict a spike in prices around 2025). Now no-one here cares about Oil and Gas at all.

Where I am seeing a lot of action and excitement is around Solar and Wind. I thought for a while it was just me becoming aware, but now I’m onvinced that it was a sea change and it really is picking up. And the cost-curve of Solar is particularly striking.

I urge you to have a look at Tim Harford’s article on Solar [link]. As always he has an ability to grasp the implications of what he sees in ways that other’s don’t. He looks a PV cells – how in 1980 Solar was about $100 per watt ($10.000 to light a light bulb). It is now already below $0.25 / watt and falling. Utility scale production is now looking to provide generation at below $0.015 per KW/h. [link]

The thing about Solar Panels is that they are a pure manufacturing play. Once created they just sit there and make energy. No moving parts, no plat to really operated as such. We have been, and continue to be, very good at manufacturing standard products in standard factories.

Sometimes the learning curve is shallow and sometimes it is steep, but it always seems to be there.

In the case of PV cells, it’s quite steep: for every doubling of output, cost falls by over 20%.

And this matters because output is increasing so fast: between 2010 and 2016 the world produced 100 times more solar cells than it had before 2010.

Batteries – an important parallel technology for solar PV – are also marching along a steep learning curve.

The learning curve creates a feedback loop that makes it harder to predict technological change. Popular products become cheap and cheaper products become popular.

And any new product needs somehow to get through the expensive early stages. Solar PV cells needed to be heavily subsidised at first – as they were in Germany for environmental reasons.

More recently China seems to have been willing to manufacture large quantities in order to master the technology.

Watch this space, it’s just getting cheaper, better and faster. This is where the action is – I just don’t know how to play the opportunity yet.

 

London Tech Week

Last week was London tech-week. I guess a bit like London fashion week, only much larger.

There were events all over London – this has grown from a week of borrowed conference rooms and underground gatherings into a large series of happenings. Monday-Wednesday saw the COG-X show near the google campus north of Kings Cross. At this event there were 10 stages giving parallel presentation sessions over the full three days, an Expo, start-up section and various corporate networking events.

Wednesday and Thursday (yes overlapping) saw the TechXLR8 exhibition at the Excel Centre, this was a large expo event with presentation 6 stages running all day.

Alongside these two there was also 5G Europe and Identity Management conferences both of substantial size.

Have a look at the website here https://londontechweek.com/events – there are 18 pages of events with 7 events per page. Tech-XLR8 above is only one of these.

This blog previously covered the launch of the UK’s industrial strategy (at Jodrell Bank) and the lack of coverage of this in the main stream media [Link]. Well, despite there being still no interest from the media. The UK industrial strategy was evident everywhere – with announcements from the various bodies, challenges, and funding opportunities. Have a look at this if you haven’t already : https://www.gov.uk/government/publications/industrial-strategy-the-grand-challenges

And did you know there is an “Office for Artificial Intelligence” ? https://www.gov.uk/government/organisations/office-for-artificial-intelligence

I’ll write more about some of the events in due course but here are the highlights:

  • There were 1000’s of under 40, very intelligent, eager advocates of tech everywhere. Very diverse in terms of sex, ethnicity, country of origin you name it, very much in contrast to this [Link]
  •  AI, IoT, ML, CV, AR, VR were the flavours of the moment (and I learnt some really interesting new insights here, more later)
  •  AI Ethics is a huge deal, and lots of people are thinking about this.
  •  Energy tracks focused on decarbonisation, distributed grid and combining sensor technology with predictive algorithms to reduce consumption. Oil and Gas didn’t feature once.
  •  Interesting to see the traditional tech players (with notable exceptions) were looking dated and pushing out platitudes about the new tech and the business impact it should have (but with no concrete examples). Meanwhile there were (really) hundreds of well-funded small companies that had real-world use-cases for niche solutions that had demonstrated value (though most had not had to pass a business-case hurdle to get going).

What struck me most was the vibrancy of the arenas, the buzz of conversation and the high-energy engagement between participants – problem solving and exchanging ideas. It was very refreshing to see. There was also a willingness by all sorts of industries to try new solutions and approaches – knowing that not everything will work but understanding the need to learn and push the envelope forward. The pace of change is amazing.

I was lucky enough to have the chance to try a VR simulation made by Linconshire Fire Brigade to train their officers in fire investigation. On with a VR head-set and into a virtual world. It was very, very realistic.

Oh and everyone was talking about “Digital Disruption”

Next year London Tech-Week should be one for your diary.

Looking for inspiration

I like to look across sources for analogy and stimulating ideas. A couple of things have recently caught my eye.

I find it amazing how hard it is for people (including me) to see the implications of new technologies and ways of working. In retrospect, once a change has happened, it’s obvious what the outcome would have to be. But when the change is happening it’s not so clear.

Going up

Ground floor
Perfumery, stationary, and leather goods, wigs and haberdashery, kitchenware and food. Going up…

Can you remember the theme tune to Are You Being Served?

I’m old enough to remember the lift operators in Aberdeen’s E&M and Watt & Grant department stores. They were replaced by automated lifts in about 1980. The stores have both succumbed – one to the shopping mall, the other a victim to digital retail.

Being a lift operator was a skilled profession, making sure that you stopped the elevator car level with the floor and opening the concertina iron-work doors with the brass handles.  Apparently New York’s last lift operator was only made redundant in 2009 Link

The Economist 1843 magazine just ran a story making the connection between the elevator operators strike and the adoption of self-driving cars. We could probably do the same with roles in the oil field.

The elevator strikes in 1945-47 crippled the city, and led to calls to redesign the city so that only low-rise development was permitted – to reduce the power of unions.

Of course, the answer was – as we know – automated elevators. But a lot of change management was required before people started to use them. Innovations such as emergency stop buttons, telephones for help and recorded announcements all came about in this time.

I’ll wager that we will look back at some of the manual ways of operating an oilfield we use today in the same way was we look back at the anachronism of the elevator operator.

Electricity – who’d want that?

Another story that I picked up on and found illustrated a point was this one [Link]. It’s written by the BBC’s Tim Harford. He asked and answered the question why did it take so long for electricity to displace steam in the factories in the North of England. It was decades after the invention that it was fully adopted.

He explained that it required a redesign of factories before the economics made enough sense for people to abandon centrally powered manufacturing and move to individually powered machines. We’ll see the same adoption economics in oil field operations and technologies such as 3D printing.

Digital Marketing – a lesson for oil and gas?

Today I found another article that resonated. This one is from Marketing Week [Link]

Mark Ritson makes the case that the separation between Digital Marketing teams and Traditional Marketing is ridiculous. What I think he’s saying echoes my point that there should be no separation between “IT” and “The Business”, because IT needs to be just how things are done around here. It’s true in Marketing, it’s true in Oil and Gas too.

“… On the one hand you need to avoid being precious about your digital creds. Signal early you are entirely comfortable losing the D prefix from your title and, for good measure, add something re-assuring like ‘I do not even know what digital means anymore’ or ‘isn’t everything digital now?’.

The merger process means that anyone who is a member of the extreme digerati will be the victim of the new regime. You know the type: obsessed with AI, convinced in the long-term value of VR, boastful that they don’t own a TV. They will be the first to go when the revolution comes.

Digital experience is a prerequisite

But make no mistake, it’s no good proclaiming that digital is wank and it’s time to get back to basics, pull all the money from Facebook and get it back into ‘proper’ media. The post-digital era cuts both ways.

While idiot digerati will be exposed, so too will those who aren’t open to the potential of all the new research and media options that have appeared over the past decade. When Alastair Pegg, the leading marketer at Co-op Bank, noted that that there was “no such thing as digital marketing” he followed up with the corollary that “all marketing is digital marketing”.

I think I can see the parallels between what he’s saying is happening in Marketing now, and what will overtake the world of Oil and Gas operations in the next 3-5 years. What do you think?

Grey innovation

Grey suits, grey ties, grey hair. Oh what a grey day.

I’ve just come back from the Subsea Expo in Aberdeen. I was heartened to hear some  thoughts I agree with expressed during the plenary session. Without pointing fingers, I heard that the UK regulator was keen to get operators to engage quickly with innovations coming from the supply chain (and saw the time-delays for making a decision, and taking action, as a major obstacle).

I also heard from a number of suppliers who were re-branding as “underwater engineering” so that they could engage with more proactive industries such as offshore wind – where their services and expertise were welcomed and where contracts were signed quickly.

I’ve had a bee in my bonnet for a while. It’s set-off by the general demographics of our industry which seems to get in the way of innovation being adopted.

Below are some images that I’ve shamelessly nicked from Google to illustrate my point. I put in the search term “Technology Innovation Team”, “Hackathon” and “Technology creatives”.  Here are some results:

HackathonForSocialImpact

FoodMobsters

BrightonTechStartUp

Now compare the demographics to our industry. No more comment required.

OGTC-Youth-Activist-Wing

It’s not the OGTC’s fault – they’re trying really hard and succeeding, but we’ve just got to become more fun!.

What are you going to do to innovate in 2019? Who do you need? Where are they coming from? How are you going to access new ideas?

Leadership 4.0

The oil and gas industry is finding it hard to access needed talent. There are many reasons for this, and it’s only going to get worse. This report from the BBC is about the GETI (Global Energy Talent Index) survey [Link] that found the oil and gas sector is suffering from a talent shortage and an inability to attract graduates.

The survey said:

“possible recruits are attracted to the ‘technology’ sector rather than oil and gas.”

It did not elaborate on why that might be. My guess is that its to do with the old-fashioned approach our industry takes to adopting new ways of working coupled with young people’s expectations for the way they want to engage with the world. The idea that they want to work “in tech” may be read as they want to work “with tech”, and perhaps they equate “tech” with innovation and creativity.

This report on CNBC [Link] sets out to explain why people want to work in tech instead of finance. It’s findings include: “High-potential grads want to work at tech companies like Google and Facebook because they are more innovative in nature, give employees a deeper sense of purpose and offer flexibility”

The GETI report also found that

“young people were less attracted to big salaries than in the past – and instead wanted roles which offered promotion opportunities.”

What do you think that they meant by a promotion?  Perhaps that’s a desire for autonomy, self-direction, control and flexibility. Perhaps the new generation don’t appreciate being told what to do by an old bloke (and it normally is a bloke) who can’t use his email, who can’t be bothered with these guys who constantly have their face down using “twitbook” or “facesnap” on smarty phones.

The BBC quoted Hannah Peet from Energy Jobline saying

“Leaders and hiring managers recognise that the world has changed and the desires of young people are different, with only 30% of those aged under 25 believing that higher pay effectively attracts talent.  The trick now is to respond by working to provide individuals with more opportunities to grow their careers, travel and work with new technologies.”

What do you think she meant by the word “trick”, surely this language conveys an underlying lack of buy-in to the fundamental change that is required. Trick seems like a quick fix. Perhaps a deception. What I hear when I read it is: “We’re doing it right, we’re not going to change, we need young people to come into our industry – let’s trick them and they’ll come. Then we can show them what the world is really like which is not innovative, or tech led nor does it embrace change and discovery – by then it’ll be too late”.

Well I’m sorry: they’re right and you’re wrong. There isn’t a trick. We need to change – and the young recruits are going to show us how.

Leadership in the fourth industrial revolution is crucial, luckily the WEF (Davos) just published this a guide on how  to lead in the Fourth industrial Revolution.

http://www3.weforum.org/docs/WEF_Leading_through_the_Fourth_Industrial_Revolution.pdf

This quote is from there:

Googling the phrase “Every business is a digital business” reveals a list of today’s leaders attributed to that phrase. Yet, 44% of leaders say a lack of digital skills in their organization is delaying business transformation. Executives believe only one-fourth of their workforce is ready to work with intelligent technology. Less than half of executives believe they possess the skills and abilities to lead in the digital economy.
In his book, Dreams & Details, Jim Hagemann Snabe, Chairman of Siemens, wrote: “The new digital reality requires a new kind of leadership, one that understands the rules of the digital season, reinvents business from a position of strength, thinks exponentially rather than linearly and develops people to unleash their full potential.”

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