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For many of us, the mere thought of "transformation" conjures up feelings of anxiety. Change is scary. Nevertheless, businesses are trending toward digitization -- replacing time-consuming and error-prone manual processes with more efficient digital management practices. How can going digital benefit your company? When is the right time for transformation, and where do you start?
This webinar answers those questions and provides practical advice for implementing digital workflow in multiple business areas. Discussion topics are:
Yogi Schulz of Corvelle Consulting has a 40-year history working with Calgary-based oil and gas companies to advise on, manage, and implement information systems that streamline workflow, leverage data analytics, and generate business value.
About The Pandell Leadership Series
The Pandell Leadership Series is a collection of free webinars featuring presentations by energy industry experts in a variety of specialized fields. Topics range from global business issues to recommended best practices in oil and gas; pipelines; mining; utilities; and the renewable energy industry (including wind, solar, hydrogen, geothermal, marine & hydrokinetic, nuclear and biomass power).
ELIZA WITH PANDELL Good afternoon everybody. My name is Eliza, I’m the Customer Engagement Specialist here at Pandell and I’m pleased to have you joining us here on our sixth Pandell Leadership Series Webinar. And today’s topic is Demystifying Digital Transformation.
Today, we are very pleased to have Yogi Schulz with us. Yogi is the founder of Corvelle Consulting, which specializes in project management and information technology management consulting. He has 40 years, experience in the industry and has presented professionally at many conferences and has served as a member of the Board of Directors of the Professional Petroleum Data Management Association. So, without further delay I’m very excited to welcome Yogi onto the floor and I’ll switch over to your presentation Yogi.
YOGI Well thank you Eliza. Thank you for inviting me along to present Demystifying Digital Transformation here in the Pandell Leadership Series. Sometimes the claims for what digital transformation could do are associated with a lot of hype. Sometimes digital transformation is closely associated with advanced or even emerging technologies. That can be an accurate association.
However, today you’ll hear me describe digital transformation opportunities that don’t require high risk technology. And during the time we have together I’ll provide an overview of what digital transformation is and what it isn’t. I hope to provide you with some ideas on how you can apply digital transformation within your company in a reasonable way, and not in a large-scale high-risk approach to digital transformation.
So, let’s look at what happens in many organizations, there’s a lack of clarity of what digital transformation and what benefits it offers. Clearing up some of the confusion is what caused the Pandell staff and me to offer this presentation.
So, what’s this comic say?
(comic strip on screen) “Since it’s our top priority, what do we mean by digital transformation?”
“Digital-first, data-driven um…customer centric um…”
“Don’t forget agile.”
“And Something with the cloud.”
“Making Tik Tok videos.” I don’t think so.
“Maybe we should start with what it doesn’t mean.”
Okay, let’s approach digital transformation in a less confusing and more thoughtful way. And here’s how I hope to do that together today.
I want to start with some trends that are enabling digital transformation. Then we’ll talk about some common business issues that you’ll recognize where digital transformation can help. We’ll define some definitions, and then we’ll go to some goals, and some opportunities, and some benefits of digital transformation.
Future digital developments as technology developments create new opportunities will be our next topic. And then we’ll talk about some common obstacles to digital transformation that companies encounter. And we’ll talk about some lessons from success and failures. And then we’ll wrap up with some conclusions and recommendations.
So, the overall goal of the presentation today are to enhance your understanding of digital transformation. And to trigger some thinking about how and where you can help your company benefit from digital transformation.
Now let me show you how the oil and gas industry stacks up. In 2019 Deloitte ranked many industries by their digital maturity. And Deloitte ranked the oil and gas industry last. So, this poor ranking tells us that there are lots of opportunities to apply digital transformation at our companies. This situation means that there are opportunities for you to enhance your career through leadership of digital transformation at your company.
What are the trends that are enabling digital transformation? Why are we talking about it now? Here are some trends.
The first one is, affordable information technology. As you’re probably aware the price of computing resources has plummeted during the last few decades. These resources continuing to decrease. The price of application software continues to decrease especially in view of the increasing functionality that vendors are generally offering.
The second trend is called big data and data analytics. Now you’ve probably have heard these two phrases bounced around quite a bit. So, big data is about technology to manage large volumes of data effectively for your organization. Data analytics is about better software to analyze those large volumes of data quickly and with low software developer effort. Together these two concepts leverage data information technology to enable the data driven oil and gas producer.
The next trend is SCADA [Supervisory control and data acquisition] and its successor IIoT [the Industrial Internet of Things] data. Massive quantities of this data enables operational agility in oil and gas producers and the data driven concept again.
And then we have the digital generation. A new generation of people who we call millennials have graduated from universities, colleges, and technical institutes are entering the work force. They have grown up with digital devices, they’re comfortable with computers, they expect to use this digital technology in their careers. This is the trends that I think we are going to take advantage of in digital transformation.
Now let’s talk about some common business issues. Now I’m sure this picture doesn’t represent your organization or what’s going on within it. Let’s ask which of these are you struggling with?
Still today oil and gas producers rely heavily on various paper-based, manual processes. Examples include, mineral rights, surface land leases, contracts. Regulatory approvals of wells, facilities, and pipelines. Regional assessments of exploration potential. Performance reports for management. These are all still quite manual in many organizations.
And many producers function with no integration among their various IT systems. For example, financial systems don’t receive data from production accounting. Field operation systems don’t see financial data.
Some struggle with employee and partner collaboration. When employees work with vendors on the same project at the same time that tends not to work very well in the sharing of project data.
Some organizations lack electronic connectivity with their trading partners. For example, these organizations include marketers, product and service vendors, pipelines, government. Communicating with these vendors is often performed with just email and attachments and that limits the effectiveness.
Some companies operate with more or marginal data. And these data quality gaps means that before you even get any work done you first spend time on data clean up.
Some organizations work with rather haphazard data management practices. So, for example, data quality varies from vendor to vendor such as seismic data, acquisition or well log vendors. Data quality varies from application to application, and region to region within your organization.
And some organizations defer the modernizing of IT systems repeatedly. Every year we say we are going to undertake a modernizing project but then we cut the project at budget time.
Obviously, many oil and gas producers are successful despite these shortcomings. However, the increasing pressure for more demands for cost cutting and more capable competitors competing for the capital that we want that we want to attract mean these shortcomings have escalated into serious impediments.
So, digital transformation then invites organizations to address these business issues by going beyond routine use of the web, email, smartphone apps, and the in-place portfolio of IT systems. So, there’s an idea here that there’s some bigger opportunities ahead of us if we use digital transformation.
So, lets run through a very typical invoice processing example just to recognize opportunities to implement digital transformations. So, here is the process and it typically goes in this order, and how does it start? Vendor enters invoice data on a website that you’ve provided. And the first step is to confirm that the vendor number and the vendor is active in the vendor database.
The second is then to confirm that the provided well identifier is accurate and likely in the well data. And the third step is to confirm that the work description is reasonably complete and plausible for the well and the facility data. Once everything checks out, the fourth step is to update the invoice as ready for payment in the financial system. And the fifth, and last step is to actually-issue a payment using the EFT data.
The way that I’ve run through that it all sounds very smooth and fully digital through the action of one or more people with various systems and datastores. So, what happens if a datastore is missing, then all of a sudden a largely manual process has to kick in. The effort to complete the work goes up significantly, delays occur, opportunities for mistakes multiply, and we call this situation incomplete digital transformation.
Now the whole process also has other issues, mostly data quality busts, that can occur. For example, we can have incomplete invoice data; missing or inactive vendor data; unlikely well typed in; inactive facility; incorrect financial coding; or there’s no banking information. I know none of these issues ever happen in your company, but I suspect over there in your neighbor’s company some of these problems occur.
And digital transformation says we need to up our game so that the likely hood of these problems goes way down, and our business processes are more effective.
So, these business process disconnects, and data issues amount to an opportunity to implement high value, low cost, and low risk digital transformation at your company.
So, let’s talk about a definition for digital transformation. These are the ones we often hear. A good definition is we want to transform business processes and practices to help the organizations compete effectively in an increasingly digital world. So, this definition says do apply or leverage digital technologies in support of improving business processes.
Sometimes we get a bad definition, focus on technology to conduct business in new and different ways. And this one means, and my recommendation, don’t implement new technology for its own sake. However, do consider alternative ways of conducting business for reduced cost or competitive advantage.
And the ugly version is implementing or operating cutting-edge technologies. So, I’m saying don’t implement cutting technologies that may or may not be ready for prime time because it will be an expensive distraction for your business. Do experiment with cutting-edge technologies to better understand their potential.
So, the bottom line of digital transformation is about improving business processes. Digital technologies are likely to play an important role in achieving this goal. However, technology should not be the primary focus.
So, let’s expand on what this means in the way of goals. What are the goals that I can attack with digital transformation?
The first one usually is, I want to make smarter, data-driven decisions. I want to reduce the risk of making bad decisions, bad investments.
Our second goal is to leverage assets and capabilities more efficiently for growth. Assets can be anything, wells, equipment, pipelines, facilities that perhaps are not being used to their optimum or maximum. I may want to reduce risk, and what I mean by that is I may want to stem a market share or margin erosion issues that are going on. The oil and gas industry is conflicted by major margin issues around transportation. Particularly trucks and railcars. So, whenever I can get away from those two items I can reduce cost and increase my margin.
Digital transformation does say exploit new information technology when it’s low risk, readily available, cost effective. And some of these technologies include cloud computing, we’ve seen more people involved in that; open-source software packages; and Software-as-a-Service [SaaS], which Pandell is an excellent example of.
I may also want to take advantage of some new hardware: augmented reality headsets, drones, IIoT, and even tablets and smartphones. So, those are the major goals that are typically pursued under the heading of digital transformation.
(comic strip on screen) “Here’s a set of about 100,000 data sources full of bits of well data. Please consolidate and integrate them into one meaningful data warehouse.”
Well isn’t that something we’d love to be able to do. So, in fact this is request is a digital transformation project. However, be careful about taking on ridiculous projects or making commitments that will be difficult or impossible to fulfill. Often managers have no idea how difficult data integration is.
In every case, data integration work is preceded by major amounts of data cleanup effort. So, be very careful to manage expectations about how much effort and elapsed time this work will take. Project managers are often bludgeoned into committing to budgets and schedules before anyone has any credible idea of the issues the project will face to achieve the stated goal. In this situation, selling a proof of concept that’s an excellent way to explore the likely issues while not committing to any deliverables that anyone expects to move into production status.
So, my recommendation is you start these projects with the smallest, cleanest data sources where you can anticipate you can deliver the most business value and have the most interested end-users sign up to participate in the project. With that small success under your belt, you will typically have built some credibility to tackle the next and slightly more ambitious project.
So, what are the typical opportunities that exist in oil and gas organizations for digital transformation?
The first one is to eradicate the remaining paper-based, manual business processes. And then you’ll be able to get a more comprehensive view of the organization’s data.
The second one is to integrate IT systems to enable a cross-functional view of the organization’s activity. A cross-functional view greatly reduces departmental silos and encourages cross-disciplinary collaborations.
Another opportunity is to support seamless employee and partner collaboration for process improvements, sharing of knowledge, reduced rework.
And then we can implement electronic connectivity with larger trading partners to improve supply chain efficiency and minimize the risk of running out of things.
We can also improve data quality to enable predictive data analytics. Now this opportunity supports data-driven decision-making and reduces the risk of making poor decisions based on misleading data.
And we can enhance data management practices to improve the value of the organization’s data. And we can modernize any aging IT systems that we have, perhaps with Software-as-a-Service, to achieve a more comprehensive digital support of the organization’s business.
Now as you listen to me I hope this list of opportunities all of which are quite substantial has triggered a thought for you about how some digital transformation project that you could undertake in your company to achieve certain benefits.
Okay, let’s talk about those benefits. The first one, and I’m sure you hear this all day long, is to reduce operating costs. Wherever we can optimize business processes with digital technology we’ll be reducing the costs per transaction. Often optimizing will improve, meaning reduce, turnaround time and it usually makes it easier for employees to do their job.
The other benefit is we want to be able to convert our data into actionable intelligence. To do this we need to value data as an important asset just like we already value facilities or intellectual property. And we can develop processes and a governance structure to manage data quality to support data analytics.
Now digital technologies can combine data from all these transactions, support operational data and formerly paper-based data into a useful, actionable view of the organization. Now let me give you a very tangible example.
What you are seeing here, all of these on this graph. The graph shows monthly production volumes across multiple wells by operator. So, each line is all the wells for one operator. And as is typically the case, a given set of wells will decline over a set of time. Now what you see here at the top is the very best operator. At the bottom is the very worst operator. So, the top operator operates with high digital data availability and data integration. And the worst vendor obviously has less of that data availability, and it has a more siloed approach to doing the work and produces less of a result.
You’ll notice that this benefit which starts at four to one on the left soon after the wells comes onto production four years later the delta between the best and the worst is still double. So, while the improvement shrinks over time, in terms of cash value there’s an enormous difference between these curves. So, if somebody asks you is there really a business case for digital transformation? Well this is a very tangible dollar, oriented example right here.
So, with digital transformation we can also increase agility and innovation. Digital technologies that supplant limitations of legacy IT systems, transform organizations to become nimbler and quicker to respond to changing stakeholder expectations, market trends and technology advances.
And we can provide a universal employee experience regardless of whether they are in the office or at home, on a laptop, on a workstation, or on a tablet. And all of that increases productivity and it increases employee morale and reduces turnover.
And we can leverage some of the newer technologies for business values. Examples are cloud computing, artificial intelligence, augmented reality, and machine learning. So, I’ve given you an opportunity here to think about some of the benefits of all of this.
Now let’s look at it in a Pandell context. Since many of you here are the staff from customers of Pandell’s suite of software packages. So, here’s a list of the software packages grouped into major functions that they support. Now for the perspective of digital transformation what opportunities do these software packages suggest to you?
Well, I think the first opportunity to consider is which of these software packages are you not licensing today that might have value at your company if you started to do that.
And then the second opportunity is, which of these software packages are you licensing already but you’re not using them very widely or not using it very fully? So, if you used them more it wouldn’t cost you anymore. How might using these software packages more effectively add value at your company?
Now in addition to those two opportunities there’s this one. Across all these packages these are the data entities that they share. So, that leads to the third opportunity. How well integrated are the various modules that you already license and use regularly? So, might that improve integration add value at your company?
So, answering these four questions typically identifies digital transformation opportunities. They’re really quite modest in scope. They tend to be low risk. We’re not introducing any new technology. Not anything that the organization is not already familiar with. And they’re cheap to implement and they’re cheap to operate. And they can be significant in terms of business value. So, I invite you to think about these opportunities on this slide.
Now here’s another big opportunity, preventative maintenance.
“Henry, it’s for you – apparently your heart is about to fail . . .”
And there is the technician with the new heart already available.
We all want to predict the future. In the upstream oil and gas industry, predictive maintenance to reduced unplanned outages remains a huge opportunity that’s only been partially explored. The relevant applications include production planning, logistics, financial, capacity planning. And when, you think about the requirements of these applications, they include diverse data groups, huge data volumes, predictive data analytics software, modeling capability, and fast response times.
Now due to the variety of the data involved or the volume of this data predictive maintenance is a valuable application that arises when there’s an opportunity for you when you have better digital transformation in place at your organization.
Now, what are the applications? So, in the previous slides we looked we looked at some small processing improvements. Now on this slide we want to look at some bigger applications and some technologies that are available to us.
Let’s start on the left with the applications. Here are some applications that I urge you to consider that might help your organization. The first one is enterprise search. It creates the illusion of enterprise application integration across the structure and especially the unstructured data that you have. It makes it easy to access all your data; especially data that used to be hard to find. Knowledgebase captures corporate intellectual knowledge and experience for easy access by everyone.
Machine learning is about advanced pattern-matching applications that can identify issues and opportunities in your data.
Master data management is about identifying and highlighting high quality, high confidence data that helps your organization use and report only a single source of truth. Regardless of whether it’s spending, or land holdings, or production volumes whatever the single source of truth is.
Metadata management is about managing the origin and versioning of data that you have so that people are always clear about data they are seeing.
Supply chain applications avoid project slowdowns due to missing components. So, many oil and gas companies don’t have too many of these in place and they represent a significant opportunity.
Now on the computing infrastructure side. There are some advances that help with digital transformation and they include cloud computing. And I’m sure you’re hearing lots about that these days. And cloud computing outsources the operation of your computing infrastructure to a vendor.
Data analytics, I mentioned that briefly, it’s about analyzing your data for business value. Graph DBMS is a new DBMS technology that focuses on managing relationships in large data volumes. Almost all of us are using some form of relational DBMS at-the moment and for some applications Graph DBMS is superior to relational.
IIoT, many people still call this SCADA, but IIoT says dramatically increase the number of sensors that you have in your operating assets so you can acquire more digital data to better understand operational issues and optimize that for improved profitability.
RPA, robotic process automation, is advanced software to better support process automation. The classic example everybody throws out is a better invoice processing but it’s not the only one. Land records, contracts, lots of opportunities to apply this.
Now, tablets, some of you may think, Well wait a minute that’s hardly new news why is this on this list? Well, I believe there a still many opportunities to use tablets in a business context that remain to be explored and implemented.
So, which of these digital transformation technologies can help you improve your business? So, these are available pretty much today and the challenges is to identify something that will help you.
Now looking out into the future a little further. There are technologies that will have wide application in the production and exploration business. So, as you know under artificial intelligence – today most humans make most of the decisions. Artificial intelligence is about software making decisions more autonomously with less human supervision or involvement. Now oil and gas examples include seismic interpretation, and gas plant or refinery operation.
Another concept is augmented reality. Now you’ve probably started to see some of those headsets already. Here’s an example not with the headset but with the tablet. Augmented reality merges the real world with the digital world. Augmented reality can improve operations and repairs by bringing component data onto the screen for staff to see and evaluate. It reduces mistakes during operation and maintenance. Augmented reality eliminates walking back and forth between the component location and the field office trying to figure out what the problem is.
Something you’ve probably heard of a little bit is called blockchain. It enables non-refutable, transparent, and auditable business transactions among business partners. Blockchain can transform the oil industry supply chain networks, contracting, and joint ventures.
'Digital twins' is a digital data representation of a physical object. And digital twins help producers plan construction, commissioning, and decommissioning work they reduce project cost, risk of accidents and the probability of expensive rework.
Computing hardware advances include a lot of things like Non-Volatile Memory Express (NVMe), User-Programmable Solid-State Drives (SSDs), Field Programmable Gate Arrays (FPGA), Graphics Processing Units (GPU), Programmable Network Interface Cards (NICs).
These are all on the radar screen now and dramatically improve the through put and capacity of computing and as we dramatically increase the amount of data we’re selecting for any one process we need faster, bigger computers and obviously we don’t necessarily want to pay more for those. So, those technologies will help us.
Another one is called robotics. They are machines that automatically and repeatedly perform work processes. And they perform that work more consistently than humans. And they can work in dangerous and hostile environments such as gas plants.
3D printing this is additive manufacturing as opposed to subtractive manufacturing. Which is what we have been doing the last few centuries. And they can reduce the price of parts and components, and despite their slow speed, they can improve delivery times for complex components that are needed for compressors, pumps, valves.
Now while some of this technology is available today and some of it is on the near-term horizon it typically requires a significant business case because there are implementation costs and risks associated with this. So my message is, while you don’t ignore this you certainly don’t start with this list as you continue on your digital transformation journey.
Now you know, maybe this is all sweetness and light that I’ve shared with you. I do want to recognize that there are some common obstacles to digital transformation. Sometimes we have a lack of senior management support. After all executives are paid to be skeptical so, my advice ensure that you communicate your business case succinctly and accurately.
Sometimes there are problems accessing or managing data. Not surprisingly digital transformation projects require lots of high-quality data. As we discussed earlier, lack of data quality is a common issue. Plan to spend resources and budget to improve your data quality and data management processes.
Lack of collaboration or cooperation across the various silos in the organization. Most digital transformation projects cross organizational boundaries. It’s almost inevitable. Ensure that all of the departments are interested and want to participate.
Project budget overruns. It’s easy to under-estimate project cost as difficulties occur or effort required increases. Try to add contingency dollars to your budget.
Lack of resourcing or funding. Don’t start a project without all the pieces in place, thinking that the rest will appear later. The rest never does appear.
A lack of skilled staff to deliver the project. Some digital transformation requires specific application or technology skills. Make sure you have those skills in place on all your project teams.
Challenges with the existing or new technology. New technology, by definition, is new and therefore comes with low reliability sometimes or software parts. So, you need to include some dollars in your budget and extra time in your schedule for more testing of what you are doing.
Complexity in the implementation of new technologies. Implementing new technology often reveals unexpected complexities as the project unfolds. So, plan to spend money on people change management to deal with this. So, plan tasks and resources to make sure that your project mitigates these issues that can stall or torpedo your project. So, keep these obstacles in mind.
So, what are some lessons about digital transformation that we’ve heard? Or we’ve experienced? The first one is focus on the business opportunity not the technology potential.
The second one is, do listen to your end-users. Excite them, delight them with your improvements you’re proposing. Don’t believe that their comments or challenges are no longer relevant in a digital world they do have useful insights for you to consider.
Prioritize people, process, and behavioral change. These topics are more important to address in your project than technology.
The next one is, avoid pilot purgatory. Don’t just conduct pilot after pilot after pilot. Propose projects that solve real problems where you can move deliverables and a solution into production use.
Fail fast and learn fast. Do not let the perfect be the enemy of the good. Set expectations that failures will occur, and you’ll react to them quickly.
Approach work with agility. Be willing to revise your scope as you learn about what works and doesn’t work and where the real problem lies. Often your initial problem statement is wrong. What you’re observing is the symptom not the real problem. And the real problem will emerge as you continue your work.
Recognize that this digital transformation takes effort, and these digital transformation projects are not slam-dunk, simple projects. However, they are valuable so that’s what makes them worth pursuing.
Okay, so we have some conclusions. Digital transformation is receiving lots of attention because the benefits are real. This concept isn’t just some fantasy that consultants have dreamt up to increase their billable hours.
Successful digital transformation can be achieved with modest projects. You don’t need to launch high cost, high risk, bet-the-farm kinds of programs to make some progress and to deliver real benefits.
Every organization in the upstream industry offers opportunities. They’re often not that hard to find. Listen for whining and complaining about unproductive busy work. That’s frequently a digital transformation opportunity.
Let’s talk about a few recommendations that you can act on literally starting this afternoon.
The first one is start. Show some initiative, don’t wait for someone to tell you. Start anywhere, it doesn’t matter where you start. Often financial reporting processes need improvement. Sometimes data loading processes for subsurface interpretation are tedious. Frequently field data gathering, and reporting processes are clunky. Start small, often improving administrative processes are a place where you can deliver some small, quick wins at modest risk.
Identify irritants. Where are inconsistent numbers showing up on reports that are annoying management? Where is rework occurring due to bad data or convoluted processes?
Identify a project sponsor. Identify someone in middle management who needs your improvement ideas. That person will provide support and communicate the results around the organization. If you have the luxury or latitude to start something without a sponsor I urge you not to do that. That will be seen as some kind of a weird project that maybe shouldn’t have been started at all.
Assess risk. Be upfront about that, that nothing is without risks. Understand the people change your improvement will cause and address it. Help people through the change.
Go easy on technology. New technology always adds risks to your project. Focus first on squeezing more value from the information technology that you already own and operate.
And read some of the vast number of available resources about digital transformation on the web. There’s a lot of good material out there and to help you I’ve created several slides of resources at the back of this presentation with lots of links and your welcome to have a look at that and see how it’ll help you.
With that it’s time for questions.
(comic strip on screen) “Please don’t ask any questions.”
“Can you help us implement digital transformation?”
“Just do everything soon and perfectly!!!”
And that’s ridiculous and impossible and that’s why fortunately we don’t live in the Gilbert world but in the real world.
This is me if you’d like to get in touch. You’re welcome to connect with me on LinkedIn or send me an email and we can go from there. Just to show you what these resources look like, I’m just scrolling through them very quickly. Okay, back to you Eliza.
ELIZA WITH PANDELL Thank you, Yogi that was fantastic. So, we do have a little bit of time to answer some questions.
For those individuals or companies that they maybe don’t have access to any of the technologies that you’ve listed? What are your recommendations for the best way to get started?
YOGI Well, I’m assuming that almost every oil company has some very basic systems like financial accounting, production accounting, field data capture, their managing seismic data, and well data in some way shape or form. And if you have a large room with thousands of file folders start there. Consider where you have manual processes and I’m amazed at the richness of the software and services that’s available to everybody to get started.
So, I think there are two ways to get started. One is to fill in the gaps between your digitally supported processes where you have manual processes. And the other is just to say, What’s driving me crazy? And what can I do to address that?
ELIZA WITH PANDELL We have another couple of questions that came in. Is there hesitancy, in your experience, in organizations to adopt digital transformations? Digital transformation may eliminate jobs.
YOGI Yeah, it varies all over the map. Some oil companies I think overdo it. They lunge to new technology because it’s the shiny new thing and they seem to have the money to do it and the business case is a bit shaky. So, that’s one extreme. The other extreme is smaller oil companies that are under using technology. They are very comfortable with their manual processes and they don’t see what they are missing. Sadly, they tend to have higher drilling costs, they tend to have higher production operating costs because they’re not leveraging any of this technology.
ELIZA WITH PANDELL Okay. So, next question. Yogi is what technologies do you think will support a company’s future ESG [Environmental, Social, and Governance] goals and how do you see those technologies interacting with the supply chain?
YOGI That’s a big question. Maybe that’s a future Pandell Leadership Series theme but very quickly, you need to do more data gathering of your environmental footprint and see what you can do to reduce that. The other thing is that I think many Canadian oil companies have excellent ESG records and they are doing a horrible job explaining that to the world. So, maybe some of this is about your corporate communication. Or the communication of which ever industry association, be it CAPP [Canadian Association of Petroleum Producers] or EPAC [Explorers and Producers Association] you’re apart of. Encourage them to do a better job. Some oil companies are starting to include a section on ESG in their annual report and you can look at what kinds of themes they’re talking about there. And there’s now software available to help you to capture that data, present that data, compare that data, show trends of that data. So, those would be my three suggestions on how to deal with ESG.
ELIZA WITH PANDELL So, you touched briefly on the challenge that might be convincing the executive level to take interest in the need for the improvements to data quality. And so, if you hit a brick wall at the executive level what’s the best way to address that?
YOGI Those frequent brick wall, and by the way I agree with the executives on this one if someone is pitching more of a technology benefit than a business benefit. So, from these huge lists of benefits of various kinds of projects they really come down to three. There are really, only three benefits. Every benefit that you can articulate has to fit in one of these three categories and if it doesn’t it is a mirage, you’re kidding yourself. And the three secret items are can it reduce my cost? Can it increase my revenue? And can it advance my business plan? That’s it.
So, make sure that you’ve got a very solid business case that addresses one of more of these three opportunities. And make sure that it’s not a fantasy, there’s some reality in what you are pitching, and I think that will overcome resistance.
The second thing is investment. To get a benefit you tend to have to make some kind-of investment. So, don’t scope something that is planet wide, that requires most of the organization to quit doing what they’re doing now and focus on your project. That’s not going to sell. Start with something really, small, and modest. Make sure it’s done within in less than a year and preferably for less than a million dollars.
And then you build some credibility and do another project next year. And everybody can see the benefit and say, Wow. You know Yogi and his team did a good job. Let’s listen to them some more next year.
ELIZA WITH PANDELL Great, I love those tips. Thank you, Yogi. I think we have addressed the questions that have come through. Some really, interesting points. And thank you once again Yogi for your time today and your wonderful presentation. So, thank you again and have a wonderful afternoon. Thanks Yogi.
YOGI Bye all.
ELIZA WITH PANDELL Bye.