27 Feb Digital strategies for field service companies
What should the digital strategy be for today’s oil and gas services companies, exposed and buffeted by unbounded cost and productivity pressures? Not your dad’s gameplan, that’s for certain.
The wave of digital transformation unleashed by the constant advancement of technology is unrelenting and services companies are actually going to be more impacted than their customers. Think about it – all it takes is for one service company to innovate even a bit, and the next procurement will favour that supplier. The buyer doesn’t even have to take advantage of digital solutions to demand digital innovation of their supply chain.
And there’s plenty of room for innovation and improvement. Most Alberta-based suppliers, certainly those with revenues less than $1b, are woefully behind in adopting digital technology. I think it was the good times from 2009 to 2014, with the high prices and a raging growth agenda from oil sands, that thwarted innovation. The suppliers were all about expanding capacity, as they needed to be. The past 3 years, however, have been about capital constraint, price reductions, idling equipment and crews. There’s been scant dollars to pursue digital innovation.
In my view the same digital trend lines that are driving the operators to change are there for the taking by the suppliers.
Helps convert fixed IT costs to variable, and gives access to unlimited computing horsepower and storage at reasonable cost to anyone.
Wireless networks have progressively grown to where they now span much of the oil and gas fields of play. And where they do not, field workers are rarely a day away from syncing up.
Virtually every employee, whether commanded to or not, has found the lure of smart phones and tablets irresistible, and they have them at work already.
Affordable, low power and increasingly capable sensors are within reach of virtually any business, bringing voice command, self diagnosis, precise real time measurement to the masses.
Show me the money
Where might a supplier of goods or services to the industry find opportunity using digital capabilities?
Oil and gas is all about safety. Every single company in the industry has in its mission (or values statement, or company ethos), a robust statement of respect for the environment, a commitment to zero harm, or some equally unobjectionable stance.
But should this just translate into protective clothing and hard toed boots?
In my view, suppliers are underinvested in the kinds of digital solutions that improve their safety performance. People, assets, equipment and rentals are still, for the most part, off grid and invisible except to the naked eye. This simply won’t work in a world that features much more automation, drones, robots and analytics. Suppliers will be far better served by having their crews happily broadcasting their presence to help with man-down situations, evacuations, incident data capture, fatigue and idle equipment.
There’s another big benefit too – better service optimisation. All that safety data can also be used to improve productivity and service levels.
There’s a clear market opportunity for some suppliers to position themselves as leaders in becoming the ultimate digital service company. There are no clear and obvious leaders in this area.
Suppliers have had a good run selling dumb kit (that is, equipment without the ability to self diagnose, or report operating condition, or off grid staff, or invisible rental assets). But the days of the dumb asset are over and smart assets (festooned with sensors) are here. Those autonomous mine haul trucks are just the first wave. If your assets are still in the dumb category, they will soon run out of interested customers, except in some brownfield applications that are too far gone to be smartened.
Strapping some sensors on kit is just the first step. All those sensors will throw off a ton of data which will need to be handled. Is that just a job for the customer, or is there a sexy new business model lurking in there by capturing that data, analysing it and selling the results back to the customer? That’s what some vendors of turbine technology do.
Suppliers need to give thought to how data from their front office (their assets, crews, rentals and equipment) can be turned in a new revenue source.
Oil and gas operators are progressively turning their attention to the quality of their data assets. In the main, they have concluded that crappy data quality is holding back the adoption of powerful new digital technologies, and they are investing in cleaning up their data as well as embracing data-driven suppliers who also value high quality data.
The days of a supplier feeding field data late to the customer on paper, or having out-of-date systems that cannot easily integrate with operator databases are coming to an end.
But there’s a second key data development. As smart assets penetrate the market, and low cost sensors spew torrents of data, operators will struggle to make sense of it all. Much of that data should stay with the asset, sitting on a controller beside the asset, but some subset should be handed along to a control room for supervision, some should be fed into other critical systems for asset performance management, and some should head to planners in an even more distilled form.
Suppliers need to consider how their data assets will play in a bigger and more connected world.
The last great wave of ERP adoption among suppliers was certainly prior to the downturn in 2014, and in my experience, dates back to 2006-2008 period. These warhorse systems are now well and truly due for an overhaul for the digital age. Indeed, suppliers who try to run their businesses on ERP versions that predate 2014 are probably using systems that were designed before cloud computing, smart devices and analytics. This just won’t do. They will, if they are not already, become an impediment to embracing a digital future if they are not replaced or overhauled.
As painful as it sounds, suppliers need to confront their ERP systems to determine their viability in an increasingly digital world. I’m betting the ERP systems will be found wanting.
Other business systems
Just as there’s a wave of transformation building in ERP, there are similar smaller waves about to unlock in the dozens of other systems that comprise the supplier’s information systems environment. Advanced customer analytics, the digital supply chain (yes, suppliers to suppliers need to be digital too), the connected worker, the workplace of the future – all are here or undergoing dramatic change.
This is a bit more thorny to address because there are likely lots of systems involved. Investment will take more than two budget cycles to address, I’m betting, as most systems will need upgrading or replacing.
New business models
The great thing about change is that it creates space for incredible innovation in business models. I’ve already mentioned one new business model – selling specific asset performance data for profit. Here’s five more:
Uber for the field
Apply cloud computing, smart devices and equipment sensors to create new new procurement models and new collaborative business models for field services companies. Solutions are market ready now.
Upload downhole pump operating data to an analytic engine in the cloud in near real time to allow for predictive pump maintenance regimes, across multiple operators and suppliers. Available through GE Predix.
Convert specific spare parts inventories to pooled inventories across multiple inventory holdings to lower the overall cost inventory holdings. In trials in the UK.
Pool logistics operations across multiple players in a specific field to reduce less than truck loads, lower carbon emissions and reduce driving incidents. In place in other industries.
Create a single integrated services coordinator across multiple services and logistics in a single basin to reduce service costs. In place in Norway for vessels, helicopters and shore base coordination.
4 Steps to Move Forward
What should a supplier do? I personally don’t advocate a wait and see approach – there’s more than a few suppliers who have grasped the new world we are in, and are hell-bent on owning it all. Here’s my four step program to getting on with it.
- Revisit your business strategy – There’s a good possibility that your assets are not going to be fit for purpose if they are not smart assets. As a result, you need to revisit your business strategy to determine how you could reposition your company and its assets and services in what will be a profoundly more digital world. New business models beckon.
- Embed a digital strategy – While I no longer believe it’s possible to have a business that ignores digital or does not have a digital bent to its business model, we are not at a place where digital completely trumps business. Therefore, you can, for now at least, consider your approach to digital developments somewhat separately from your business strategy. Your digital strategy should consider these new business models, the role of data, and possible futures that involve a lot more automation, analytics and devices than today.
- Sort out your systems footprint – Unless your information systems are 2 years old or less, it’s highly likely that they are not designed for a digital age. Set out a road map that allows a progressive and cost effective approach to upgrading your business infrastructure. The upgrades should line up with the business strategy and digital strategy. If the system isn’t key to the strategy, and won’t help create a digital future, defer any change.
- Rethink your capabilities – the digital world is going to need new skills that you probably don’t have on staff. Indeed, if you’ve done a number of layoffs, and curtailed hiring, there’s a good chance you don’t have enough of the technically literate types in the ranks to help guide your way to the future. This transition is so profound, you may need to get some outside help.