Oil & gas firms can be said to be in a state of emaciation. Bogged down by a CAPEX intensive business model, relying on ownership of oil-rich fields rather than lean operating models. They are starved from the successes of the past and battered by the move towards a green energy global push. Increasingly, they find themselves isolated from the new world order.
How does the emphasis on labour and deep engineering knowledge align with a global shift towards automation and data? And how can they ensure they draw the right conclusions from the rise and rise of Big Tech?How can #Oilandgas draw the right conclusions from the rise and rise of #BigTech? Click To Tweet
Tech disruption in the Oil & Gas industry?
Digital transformation seems like an inevitable reality for these giant traditional industrial companies. Since the 1999 Dotcom bubble, tech industries have been encroaching on oil and gas’ top 10 positionings by market cap. Out of 2019’s top 10, Big Tech dominates, taking 7 out of the 10 spots, whilst Big Oil slid off the rankings in 2014.
Accepting that they missed the initial boat, they now are ready, standing in the shadows of these innovative tech giants. Oil & gas are poised to fuse their heavy industrial muscle with the ethereal technologies available to the new world.
Despite their corporate PR zeal on the topic, they completely misunderstand the definition of “technology” as it pertains to Big Tech. For example, building the latest drone to take pictures of an oilfield is “technology” in the traditional sense, but it is not disruptive.
What do these Oil & Gas tech companies have in common?
They nearly all share the same characteristics:
- Non-scalable in their application vis a vis the wider market
- Built “in house” as a competitive advantage over other firms in the industry
- Scope of data for data analytics companies is in house data… not market data
This is the opium that incumbent industry leaders seem to be addicted to: pandering to a misconception of what high disruptive technology is. They find comfort amongst similarly misguided peers and pulling the cotton wool over their eyes.
What can incumbent Oil & Gas industries learn from tech giants?
Here are some of the similarities that the new tech giants share:
- Built OUTSIDE of the firms they serve
- Their value is via connecting different market participants, but NOT being part of market participants
- Their main value proposition is not actually high technology. Instead, they are able to harvest huge quantities of data from independent actors acting within a market, and then apply technology to those interactions and data for the benefit of the market
Incumbent behaviour is fundamentally oligopolistic, whereas tech relies on a free and dynamic market to flourish.
By seeking to create at an intra-company level, rather than fostering creation in the market, the incumbent industries are barking up the wrong digital tree. They are also destroying the hopes and dreams of leaner tech companies looking to help them break out of the slow, process-driven and laborious norms. Disruptive tech relies on liberating data amongst independent market participants, rather than applying technology to a limited company set of data or activities.By seeking to create at an intra-company level, rather than fostering creation in the market, the incumbent industries are barking up the wrong digital tree. #oilandgas Click To Tweet
There is always light and there is always hope
There are some admirable efforts by incumbent participants in trying to address the problem at hand and bridge their status quo with new technology coming to market via external entrepreneurs (OGTC, Techstars Energy, Cognite, to name just a few). The industry is already reaping the rewards from a number of these initiatives, both culturally and financially. Here are some suggestions on how to further these efforts:
- Have skin in the game, i.e. put money to work on a minority basis in digital companies. Without potential monetary benefits, why would incumbents get stuck in? Charity? A warm fuzzy feeling?
- Actively share data around non-core parts of your business. Other than not damaging your competitive advantage, these areas will have a higher correlation with other firms non-core activities, so you get greater market efficiencies across your industry.
- Building and solving problems in house is one way, but tap the market. Be happy if external hungry companies with fresh minds help solve them for profit.
- Build on industry initiatives such as EPIM JQS, Achilles JQS, Cognite and OGUK but bring them into the digital century and stop granting them (or their favoured friends) monopolies, but rather endorse open frameworks where point tech solutions can provide value.
- Primarily focus on data liberalisation rather than technology.
Discover how DeepStream can disrupt your tendering process here.