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Low Oil Prices Prime Oil And Gas Industry For IoT Adoption

John Ward

“When you are making money and shareholders are happy, there is little case for change,” explains Peter Reynolds, a contributing analyst with the ARC Advisory Group. “But when prices are this low, it’s time to look at doing things differently.”

Reynolds is talking about the need for change in the oil and gas industry. And you can’t argue with the timeliness of his remarks.

Recently, U.S. crude prices fell toward $26 per barrel; their lowest since 2003. But what kind of adjustments make the most sense in this economy?

Reynolds – who spoke with me after the Best Practices for Oil and Gas Conference – believes finding ways to lower operational costs could be a key to survival for many oil and gas companies. Further, he sees embracing the industrial Internet of Things (IoT) and its proliferation of networked devices as a good place to start.

Sweating the assets

The world of oil and gas is dominated by physical assets. The industry is built on countless miles of pipe and millions of pumps, valves, and gauges.

“There is an awful lot of legacy infrastructure out there,” says Reynolds, “but that doesn’t mean you have to rely on legacy thinking.” The IoT is really about rethinking your work processes and transforming the operational experience, he tells me.

Reynolds cites a couple of examples around optimizing performance and lowering maintenance costs.

“Everybody talks about sweating the assets,” says Reynolds, “but where should this optimization take place? Is it with work boots on the ground or in centers of excellence?”

Sensor-enabled infrastructure and wireless connectivity offer oil and gas companies alternatives to costly field operations. “Why monitor 50 pumps when you can monitor 50,000 pumps?” Reynolds asks.

Remote monitoring from a centralized location lets companies achieve economies of scale while enabling them to make critical performance decisions based on mass amounts of data.

More than one option

Manufacturers in many industries are already building in secure sensor technology as a standard component of their products – everything from pressure monitors in your car’s tires to the three-axis gyroscope in your iPhone.

The OEMs supplying the oil and gas industry are no different, and this leads to multiple business models.

“Oil and gas companies could decide to buy every pump with a service contract.” Reynolds suggests. “Let the OEM do the remote monitoring and predictive analytics.” The oil and gas company saves on maintenance because it no longer needs to stock spare parts, and it could see improved uptime as well.

“There is an explosion of companies looking to make better use of this sensor data,” says Reynolds, “The idea is to bring this real-time information up to the enterprise where the benefits can cascade across several different areas.”

IoT isn’t about disruption

From Reynolds’ perspective, the industrial Internet of Things isn’t about disrupting the existing supply chain but rather enhancing it. And he recognizes the challenges inherent in an industry with so much extant infrastructure.

“At ARC, we estimate that there are US$65 billion worth of legacy automation systems in place today,” Reynolds says. “We aren’t going to modify it all overnight.” But as he points out, if you need remote monitoring or performance guarantees, you can easily add a real-time sensors and new connectivity to layer existing controls.

Reynolds also notes that if companies can find better and cheaper ways of operating, then these investments are essentially self-funding – especially when you are talking about the scale of the oil and gas industry.

And in an economy where operational efficiency just might prove to be the key differentiator, self-funding changes make a lot of sense.

Many thanks to Peter Reynolds of the ARC Advisory Group for taking the time to share his insights, and please join me on Twitter at @JohnGWard3.

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This story originally appeared on SAP Business Trends.

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About John Ward

John Ward is an Integrated Marketing Expert at SAP. He has over 30 years of professional writing experience that includes marketing material, sales support, technical documentation, video scripting, and magazine articles.

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Transform Or Die: What Will You Do In The Digital Economy?

Scott Feldman and Puneet Suppal

By now, most executives are keenly aware that the digital economy can be either an opportunity or a threat. The question is not whether they should engage their business in it. Rather, it’s how to unleash the power of digital technology while maintaining a healthy business, leveraging existing IT investments, and innovating without disrupting themselves.

Yet most of those executives are shying away Businesspeople in a Meeting --- Image by © Monalyn Gracia/Corbisfrom such a challenge. According to a recent study by MIT Sloan and Capgemini, only 15% of CEOs are executing a digital strategy, even though 90% agree that the digital economy will impact their industry. As these businesses ignore this reality, early adopters of digital transformation are achieving 9% higher revenue creation, 26% greater impact on profitability, and 12% more market valuation.

Why aren’t more leaders willing to transform their business and seize the opportunity of our hyperconnected world? The answer is as simple as human nature. Innately, humans are uncomfortable with the notion of change. We even find comfort in stability and predictability. Unfortunately, the digital economy is none of these – it’s fast and always evolving.

Digital transformation is no longer an option – it’s the imperative

At this moment, we are witnessing an explosion of connections, data, and innovations. And even though this hyperconnectivity has changed the game, customers are radically changing the rules – demanding simple, seamless, and personalized experiences at every touch point.

Billions of people are using social and digital communities to provide services, share insights, and engage in commerce. All the while, new channels for engaging with customers are created, and new ways for making better use of resources are emerging. It is these communities that allow companies to not only give customers what they want, but also align efforts across the business network to maximize value potential.

To seize the opportunities ahead, businesses must go beyond sensors, Big Data, analytics, and social media. More important, they need to reinvent themselves in a manner that is compatible with an increasingly digital world and its inhabitants (a.k.a. your consumers).

Here are a few companies that understand the importance of digital transformation – and are reaping the rewards:

  1. Under Armour:  No longer is this widely popular athletic brand just selling shoes and apparel. They are connecting 38 million people on a digital platform. By focusing on this services side of the business, Under Armour is poised to become a lifestyle advisor and health consultant, using his product side as the enabler.
  1. Port of Hamburg: Europe’s second-largest port is keeping carrier trucks and ships productive around the clock. By fusing facility, weather, and traffic conditions with vehicle availability and shipment schedules, the Port increased container handling capacity by 178% without expanding its physical space.
  1. Haier Asia: This top-ranking multinational consumer electronics and home appliances company decided to disrupt itself before someone else did. The company used a two-prong approach to digital transformation to create a service-based model to seize the potential of changing consumer behaviors and accelerate product development. 
  1. Uber: This startup darling is more than just a taxi service. It is transforming how urban logistics operates through a technology trifecta: Big Data, cloud, and mobile.
  1. American Society of Clinical Oncologists (ASCO): Even nonprofits can benefit from digital transformation. ASCO is transforming care for cancer patients worldwide by consolidating patient information with its CancerLinQ. By unlocking knowledge and value from the 97% of cancer patients who are not involved in clinical trials, healthcare providers can drive better, more data-driven decision making and outcomes.

It’s time to take action 

During the SAP Executive Technology Summit at SAP TechEd on October 19–20, an elite group of CIOs, CTOs, and corporate executives will gather to discuss the challenges of digital transformation and how they can solve them. With the freedom of open, candid, and interactive discussions led by SAP Board Members and senior technology leadership, delegates will exchange ideas on how to get on the right path while leveraging their existing technology infrastructure.

Stay tuned for exclusive insights from this invitation-only event in our next blog!
Scott Feldman is Global Head of the SAP HANA Customer Community at SAP. Connect with him on Twitter @sfeldman0.

Puneet Suppal drives Solution Strategy and Adoption (Customer Innovation & IoT) at SAP Labs. Connect with him on Twitter @puneetsuppal.

 

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About Scott Feldman and Puneet Suppal

Scott Feldman is the Head of SAP HANA International Customer Community. Puneet Suppal is the Customer Co-Innovation & Solution Adoption Executive at SAP.

What Is Digital Transformation?

Andreas Schmitz

Achieving quantum leaps through disruption and using data in new contexts, in ways designed for more than just Generation Y — indeed, the digital transformation affects us all. It’s time for a detailed look at its key aspects.

Data finding its way into new settings

Archiving all of a company’s internal information until the end of time is generally a good idea, as it gives the boss the security that nothing will be lost. Meanwhile, enabling him or her to create bar graphs and pie charts based on sales trends – preferably in real time, of course – is even better.

But the best scenario of all is when the boss can incorporate data from external sources. All of a sudden, information on factors as seemingly mundane as the weather start helping to improve interpretations of fluctuations in sales and to make precise modifications to the company’s offerings. When the gusts of autumn begin to blow, for example, energy providers scale back solar production and crank up their windmills. Here, external data provides a foundation for processes and decisions that were previously unattainable.

Quantum leaps possible through disruption

While these advancements involve changes in existing workflows, there are also much more radical approaches that eschew conventional structures entirely.

“The aggressive use of data is transforming business models, facilitating new products and services, creating new processes, generating greater utility, and ushering in a new culture of management,” states Professor Walter Brenner of the University of St. Gallen in Switzerland, regarding the effects of digitalization.

Harnessing these benefits requires the application of innovative information and communication technology, especially the kind termed “disruptive.” A complete departure from existing structures may not necessarily be the actual goal, but it can occur as a consequence of this process.

Having had to contend with “only” one new technology at a time in the past, be it PCs, SAP software, SQL databases, or the Internet itself, companies are now facing an array of concurrent topics, such as the Internet of Things, social media, third-generation e-business, and tablets and smartphones. Professor Brenner thus believes that every good — and perhaps disruptive — idea can result in a “quantum leap in terms of data.”

Products and services shaped by customers

It has already been nearly seven years since the release of an app that enables customers to order and pay for taxis. Initially introduced in Berlin, Germany, mytaxi makes it possible to avoid waiting on hold for the next phone representative and pay by credit card while giving drivers greater independence from taxi dispatch centers. In addition, analyses of user data can lead to the creation of new services, such as for people who consistently order taxis at around the same time of day.

“Successful models focus on providing utility to the customer,” Professor Brenner explains. “In the beginning, at least, everything else is secondary.”

In this regard, the private taxi agency Uber is a fair bit more radical. It bypasses the entire taxi industry and hires private individuals interested in making themselves and their vehicles available for rides on the Uber platform. Similarly, Airbnb runs a platform travelers can use to book private accommodations instead of hotel rooms.

Long-established companies are also undergoing profound changes. The German publishing house Axel Springer SE, for instance, has acquired a number of startups, launched an online dating platform, and released an app with which users can collect points at retail. Chairman and CEO Matthias Döpfner also has an interest in getting the company’s newspapers and other periodicals back into the black based on payment models, of course, but these endeavors are somewhat at odds with the traditional notion of publishing houses being involved solely in publishing.

The impact of digitalization transcends Generation Y

Digitalization is effecting changes in nearly every industry. Retailers will likely have no choice but to integrate their sales channels into an omnichannel approach. Seeking to make their data services as attractive as possible, BMW, Mercedes, and Audi have joined forces to purchase the digital map service HERE. Mechanical engineering companies are outfitting their equipment with sensors to reduce downtime and achieve further product improvements.

“The specific potential and risks at hand determine how and by what means each individual company approaches the subject of digitalization,” Professor Brenner reveals. The resulting services will ultimately benefit every customer – not just those belonging to Generation Y, who present a certain basic affinity for digital methods.

“Think of cars that notify the service center when their brakes or drive belts need to be replaced, offer parking assistance, or even handle parking for you,” Brenner offers. “This can be a big help to elderly people in particular.”

Chief digital officers: team members, not miracle workers

Making the transition to the digital future is something that involves not only a CEO or a head of marketing or IT, but the entire company. Though these individuals do play an important role as proponents of digital models, it also takes more than just a chief digital officer alone.

For Professor Brenner, appointing a single person to the board of a DAX company to oversee digitalization is basically absurd. “Unless you’re talking about Da Vinci or Leibnitz born again, nobody could handle such a task,” he states.

In Brenner’s view, this is a topic for each and every department, and responsibilities should be assigned much like on a soccer field: “You’ve got a coach and the players – and the fans, as well, who are more or less what it’s all about.”

Here, the CIO neither competes with the CDO nor assumes an elevated position in the process of digital transformation. Implementing new databases like SAP HANA or Hadoop, leveraging sensor data in both technical and commercially viable ways, these are the tasks CIOs will face going forward.

“There are some fantastic jobs out there,” Brenner affirms.

Want more insight on managing digital transformation? See Three Keys To Winning In A World Of Disruption.

Image via Shutterstock

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Andreas Schmitz

About Andreas Schmitz

Andreas Schmitz is a Freelance Journalist for SAP, covering a wide range of topics from big data to Internet of Things, HR, business innovation and mobile.

How Much Will Digital Cannibalization Eat into Your Business?

Fawn Fitter

Former Cisco CEO John Chambers predicts that 40% of companies will crumble when they fail to complete a successful digital transformation.

These legacy companies may be trying to keep up with insurgent companies that are introducing disruptive technologies, but they’re being held back by the ease of doing business the way they always have – or by how vehemently their customers object to change.

Most organizations today know that they have to embrace innovation. The question is whether they can put a digital business model in place without damaging their existing business so badly that they don’t survive the transition. We gathered a panel of experts to discuss the fine line between disruption and destruction.

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qa_qIn 2011, when Netflix hiked prices and tried to split its streaming and DVD-bymail services, it lost 3.25% of its customer base and 75% of its market capitalization.²︐³ What can we learn from that?

Scott Anthony: That debacle shows that sometimes you can get ahead of your customers. The key is to manage things at the pace of the market, not at your internal speed. You need to know what your customers are looking for and what they’re willing to tolerate. Sometimes companies forget what their customers want and care about, and they try to push things on them before they’re ready.

R. “Ray” Wang: You need to be able to split your traditional business and your growth business so that you can focus on big shifts instead of moving the needle 2%. Netflix was responding to its customers – by deciding not to define its brand too narrowly.

qa_qDoes disruption always involve cannibalizing your own business?

Wang: You can’t design new experiences in existing systems. But you have to make sure you manage the revenue stream on the way down in the old business model while managing the growth of the new one.

Merijn Helle: Traditional brick-and-mortar stores are putting a lot of capital into digital initiatives that aren’t paying enough back yet in the form of online sales, and they’re cannibalizing their profits so they can deliver a single authentic experience. Customers don’t see channels, they see brands; and they want to interact with brands seamlessly in real time, regardless of channel or format.

Lars Bastian: In manufacturing, new technologies aren’t about disrupting your business model as much as they are about expanding it. Think about predictive maintenance, the ability to warn customers when the product they’ve purchased will need service. You’re not going to lose customers by introducing new processes. You have to add these digitized services to remain competitive.

qa_qIs cannibalizing your own business better or worse than losing market share to a more innovative competitor?

Michael Liebhold: You have to create that digital business and mandate it to grow. If you cannibalize the existing business, that’s just the price you have to pay.

Wang: Companies that cannibalize their own businesses are the ones that survive. If you don’t do it, someone else will. What we’re really talking about is “Why do you exist? Why does anyone want to buy from you?”

Anthony: I’m not sure that’s the right question. The fundamental question is what you’re using disruption to do. How do you use it to strengthen what you’re doing today, and what new things does it enable? I think you can get so consumed with all the changes that reconfigure what you’re doing today that you do only that. And if you do only that, your business becomes smaller, less significant, and less interesting.

qa_qSo how should companies think about smart disruption?

Anthony: Leaders have to reconfigure today and imagine tomorrow at the same time. It’s not either/or. Every disruptive threat has an equal, if not greater, opportunity. When disruption strikes, it’s a mistake only to feel the threat to your legacy business. It’s an opportunity to expand into a different marke.

SAP_Disruption_QA_images2400x1600_4Liebhold: It starts at the top. You can’t ask a CEO for an eight-figure budget to upgrade a cloud analytics system if the C-suite doesn’t understand the power of integrating data from across all the legacy systems. So the first task is to educate the senior team so it can approve the budgets.

Scott Underwood: Some of the most interesting questions are internal organizational questions, keeping people from feeling that their livelihoods are in danger or introducing ways to keep them engaged.

Leon Segal: Absolutely. If you want to enter a new market or introduce a new product, there’s a whole chain of stakeholders – including your own employees and the distribution chain. Their experiences are also new. Once you start looking for things that affect their experience, you can’t help doing it. You walk around the office and say, “That doesn’t look right, they don’t look happy. Maybe we should change that around.”

Fawn Fitter is a freelance writer specializing in business and technology. 

To learn more about how to disrupt your business without destroying it, read the in-depth report Digital Disruption: When to Cook the Golden Goose.

Download the PDF (1.2MB)

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Why Small And Midsize Businesses Need More Than Just Data To Act In The Moment

Alison Biggan

Part 4 of “The Road to Live Business” series

The challenges small and midsize businesses face on a daily basis are beyond anything seen before. Over the last five years, companies across all industries have been impacted by:

  • The rise of mobile devices and cloud-based applications that have fundamentally changed how firms interact with customers and manage operations
  • New market dynamics that emerge without warning and threaten to disrupt operations significantly and at a moment’s notice
  • Employees of all roles and decision-making authority who want access to information so they can positively impact overall business performance

To address these pressures and ensure growth and expansion, small and midsize businesses must be agile and highly responsive – all with a drive to act in the moment.

Although a data-driven mindset and analytics are crucial to achieving this state, they only matter if you use them to look into the future, uncover emerging trends, and predict where the company is heading. Then, you can act in the moment, make thoughtful decisions in an instant, and serve customers in the moment of need – all characteristics of a Live Business.

There’s never been a better time for small and midsize businesses to act in the moment

Access to data is better and easier than ever before. You don’t have to be a big, multinational brand to take advantage of the analytics technology that’s available today. Your approach to leveraging analytics can be incremental and the technology is more affordable than ever, which drives down your company’s investment risk and simplifies your technology complexity.

Thanks to cloud technology, analytics solutions that were once siloed are now merging to form a single, integrated solution. From one source, you can capture business intelligence, generate a report, plan for the future, predict outcomes, and visualize insights. You don’t have to be a power user or a Ph.D. data scientist to get insight from your data. Data discovery and exploration are so intuitive that you can drill down and interact with data in real-time to get deeper, more accurate insights into what’s happening in your business. And through predictive modeling, you can pinpoint trends, compare the effectiveness of potential scenarios, and predict the future to drive new business models.

With this level of access and speed, you have the information needed to make the right decisions – in real time. Very quickly, you can see how regional activities, customer behavior patterns, market volatility, and emerging risks can impact your operations in the here and now. And with the rising popularity of mobile apps, all of your business users can make these decisions anytime, anywhere.

The value of combining the strengths of a small and midsize business with analytics

Small and midsize businesses are famous at operating with greater agility and speed than their much larger counterparts. Now that technology is more affordable and right-sized, companies like yours can leverage the technology as a competitive advantage while they are in that agile state.

It doesn’t require big budgets, big teams, or big IT departments. If you think about it from a data analytics perspective, that’s a huge step forward in delivering the features and functions your business needs – right now.

To learn how your business can become a Live Business, check out Forbes Insights’ recent report “Doing Business In-the-Moment: How SMBs Run Live in the Digital Economy.” Over the next three weeks, we will share additional insights from this research. Be sure to check every Tuesday for new installments to our blog series “The Road to Live Business.” 

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About Alison Biggan

Alison Biggan is global head of Product Marketing, Digital Enterprise Platform Group, at SAP.