6 – 7 June   |   Amsterdam, Netherlands

Cutting through digitalization hype

Posted on 07-12-2018 by GBC

Digitalization is undoubtedly a hot topic right now across many industries, if not all. But, is digitalization really living up to the hype for oil and gas? That is the exact question that was posed to two experts – Scott Lehmann, vice president of product management and marketing at Petrotechnics and Richard Ward, senior manager for data science and digital in oil and gas at McKinsey Energy Insights by Mark Venables –  one of the contributors at Forbes in order to gauge their opinions on that. Here is what they had to say:


“Nearly every oil major, plus many independents are looking at the technology stack and evaluating their options,” says Ward. However, “New technology is a tool, it’s not the solution in itself, for example, just expecting analytics to magically provide insight and connect the dots is a first-class ticket to disillusionment.”


“Any time there’s hype like this, you have to keep a level head. Digitalisation is not a sure-fire salvation. You can’t just spend money, plug it in and expect results. It isn’t going to change your business fundamentals by itself.”


Digitisation is not an overnight project, but the time is right. “Organisations are ready for it, they haven’t done any real technology projects for a long time, they’re tired of cost-cutting, and this could dramatically transform their business.”


“In three years you should have a clear direction and a very solid digital foundation from which you can build out AI, machine learning, and predictive analytics to add real value, but firms do need to get started: you can’t play catch up because things will change very quickly.”


“Our analysis shows very clearly that the biggest opportunity is with advanced analytics and machine learning. We calculated that if operators in the North Sea implemented the full digital stack – IoT, soft automation, machine learning and advanced analytics – it could be worth $11 per barrel. About 60% of that comes from advanced analytics. That’s simply a case of being able to forecast better and analyze more options when making decisions.”


A recent Gartner survey showed though, that only 9% felt their company was doing digital transformation at scale. The majority are optimizing around the edges, looking over their shoulders and doing just enough without making any big bets. “Of course, the hype doesn’t help, among all the confused messages, for many, it might seem safer to digitize the status quo.”


“The direct reduction of IT cost, like cutting data costs by 30% by moving to the cloud is very appealing, but we’ve seen situations where the potential value for moving to predictive maintenance is as much as 20-30% of total maintenance budgets. Which is a much harder sell as it requires diligence, persistence, and change.”


“People will probably be the biggest determining factor of how fast and how successful digitalization is – it’s not going to be successful unless the workforce adopts it. So, it needs to be made usable, tangible, and practical. People must see what it can do for them. It also must be driven and backed from the top. Otherwise, it can just end up as a digital sideshow for innovation directors.”


“Leadership is critically important and it’s more than just setting a digital strategy. If you’re going about it the right way, leadership needs to be there at every step of the way to help the organization adapt and transform. Throwing technology at the business without understanding how it enables the strategy is just another project that is set up for failure.”