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Managing Upstream Challenges In The Digital Oil And Gas Revolution

Brent Potts

In a recent episode of Gamechangers, Bonnie explored upstream challenges in the oil and gas industry regarding digitization. Her guests were Valerie Jalufka from Accenture, Chris Niven at IDC, and Stephane Lauzon from SAP.

Here’s what they discussed.

Pricing impacts on the industry

The recent fall in oil and gas commodity prices has had a strong impact on upstream companies. It’s impacted cash flow and high-risk project investment. Exploration and production involves finding, recovering, and reducing raw materials. It covers well location, construction, and operation. The recent focus has changed from drilling new wells to managing the efficiency of existing wells.

Understanding upstream helps everyone understand market prices. Exploration and production has been the key focus over the past 18 to 24 months.

Changing commodity prices drive automation and robotics. But many companies back off digitization because of the economic cycles common in the industry. How you move forward is vital to the success of your company. Innovation means you can keep your business moving to provide for the world’s energy needs. At the same time, you need to manage risks in capital spending.

Three trends in $50 oil

There are three trends in $50 oil. The first is the focus on innovation forming from upstream businesses. Smaller independent companies are changing the standard operations expected in the industry. In the shale boom, they bought up land and left industry leaders wondering where they could set production. This focus can make $50 a barrel the long-term goal.

The second trend is a shift to the customer’s perception. Digitalization and connectivity changes how customer engagement happens, and not only at the pump. It’s how we can engage land owners for exploration. Creating a customer focus allows you to better develop the necessary resources.

The third trend is more philosophical: It’s the belief that the only way to remain in the industry is to push through the changes. Oil companies around the world are hunkering down and consolidating their position after the changing commodity prices. Costs and employees have been cut, while production levels have been maintained. Overall, the businesses have become more agile. New reserves must be found to replace production that’s already been used.

Long-term changes

Oil and gas companies are no longer focused on the next few months, but on the next several years as they shift toward long-term planning. They strive to create a stable entity that is well positioned to come out of the downturn as industry leaders for the next decade.

Demand increases as population rises, especially in countries that are improving their living standards, such as China and India. Knowing how to deal with a range of oil prices from $20 to $120 a barrel is vital to success. Surveys show that the top IT initiatives involve digitization, citing the strong benefits of cloud, Big Data, automation, and analytics as their reason for innovating.

Innovation allows smaller and more agile companies to take advantage of changing conditions. They’re gaining more of the market share as large industry leaders take too long to shift. Modernization mixes cloud and master data management with Internet of Things (IoT) platform development, which enables companies to monitor oil field equipment as well as device and data system efficiency. This in turn allows automation.

Past and future digitization

Oil and gas involves a mix of technology lag and innovation. The environment in which oil is produced demands creative approaches to discovery and production. New technology is required to get hydrocarbons from miles below the surface. Industrial robots are expected to comprise one-fifth of today’s price within three years, while offering a 500% increase in capability. Sensors, tools, and capabilities will allow robotic automation. This may include machine vision, speech recognition, force sensing, and advanced mechanics.

Master data management helps define terms and processes across the business. When one Texas oil CEO asked his company how many oil wells they had, different departments offered different numbers based on their perception. A central platform helped unify the company’s approach. Real-time systems use IoT for devices, data systems, equipment and controllers. Automation provides connectivity across the oil field.

Investment in underwater submersible design and advancement is removing the need for tethering. Intelligent drill bits are being developed to work around particular certain geological structures. Intelligence will play into modeling production, PDPs, and similar data to help figure out where to drill. This information helps figure out costs, returns, depth, and other criteria that feed into drilling site locations. Further automation of oil rigs allows for multiple wells from one well pad using drones and robotics.

The oil and gas industry has been digitizing for 15 to 20 years. It’s now seeing an increase in sensors and automation combined with a push for digitization in daily activities. Accounting, data processing, and analytics must be added to the existing capability. Connectivity must be improved to finish the process. Predictive analytics, real-time systems, and an IoT environment will prevent downtime. Overall changes to the industry requires creating a meld of existing and new digital technology.

Learn more about digital transformation in the oil and gas industry.
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About Brent Potts

Brent Potts is the senior director of Industry Marketing at SAP, responsible for the global marketing for the Oil & Gas industry. His specialties include product management, strategy, business development, and product marketing.

McLaren Automotive: Racing Ahead With Real-Time Connected Intelligence

Richard Howells

McLaren Automotive’s entry-level 570S Coupé packs 562 horsepower that rockets the car from 0 to 60 mph in 2.9 seconds. But that’s nothing compared with the speed of the company’s real-time connected intelligence.

Based in Woking, England, McLaren designs and manufactures sports and luxury cars. Most are produced in-house at designated production facilities. And increasingly, the company relies on Internet of Things (IoT) technologies.

I caught up with Craig Charlton, CIO of McLaren Technology Group, in May at SAPPHIRE NOW, where we discussed McLaren’s IoT journey.

One strategy, four units, five transformers

McLaren is pursuing a single IT strategy: “to deliver core solutions, core platforms, and winning platforms.” But it needs to execute that strategy across four business units, each of which requires a different approach to IT:

  1. McLaren Automotive — Manufactures high-performance sports and luxury cars
  2. McLaren Racing — Races to win in Grands Prix and World Championships
  3. McLaren Applied Technologies — Applies advanced technologies and designs across markets as diverse as health and energy to achieve performance breakthroughs
  4. McLaren Commercial — Identifies and enriches partnerships to drive business success

The company is achieving its IT goals through its “Transformational Big Five:”

  1. Business platforms — Advanced business platforms support processes in each of McLaren’s four units.
  2. Cloud and mobility — With 2,800 of the company’s 3,400 employees on mobile devices, cloud is everywhere.
  3. Managed risk — By migrating from legacy systems, McLaren is reducing cybersecurity vulnerabilities and managing risk.
  4. People-centricity — IT is central to how McLaren’s people do business every day.
  5. Partners — McLaren has been co-innovating with SAP for more than 20 years.

Internet of (very fast) Things

But some of the most exciting IT at McLaren revolves around IoT. And as Craig explains, IoT is hardly new at McLaren. “We’ve been using IoT-type technology since 1993,” he says, “when we first put telemetry on our racing cars to analyze race performance.”

Today, at a typical race, the company has 150 to 300 car sensors tracking everything from tire pressure to brake wear to G-force. These sensors generate more than 100 GB of data every race weekend — producing 11.8 billion data points per season and 1080 race permutations in real time, so the race team can ask questions like, “How many times did Fernando Alonso pull 6G in the last race?” — and get the answer in two or three seconds.

“The data has truly transformed how we race,” Craig says. “Solutions like SAP HANA have allowed us to track billions of data points and look at historical data going back 24 years. In fact, we can analyze about 1 trillion data points.”

Fine-tuning race cars, transforming business models

What makes IoT mission-critical to McLaren is the ability to gain new insights to improve performance. By analyzing its Big Data, the company can identify nuggets that help it fine-tune its cars and be faster around the track.

But the company also expects to leverage real-time connected intelligence to improve the performance of its business. “IoT is going to change many organizations from being product-based to being service-based,” Craig predicts. “In the automotive industry, when we talk about autonomous cars, customers may be looking to buy a unit of travel rather than a car.”

For companies in the automotive and many other industries, business change is hardly slowing down. Real-time connected intelligence will help them stay ahead of the curve.

To learn more about McLaren’s IoT journey, watch Craig’s SAPPHIRE NOW presentation or listen to a one-on-one interview with Craig.

To see Craig and 50 other industry experts in person, attend SAP Leonardo Live, July 11 and 12 at the Kap Europa Congress Center in Frankfurt, Germany. The event will bring together a vibrant global community of up to 1,500 IoT, manufacturing, supply chain, R&D, and operations decision makers, influencers, analysts, and media. Learn firsthand from more than 50 SAP customer showcases how to connect IoT and core business processes to achieve digital transformation.

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About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

Differentiating Products With Data-Based Services

Don Gordon

Ever since Steve Jobs revealed the first iPhone, people have come to associate big tech launches with physical products. So when SAP chairman Hasso Plattner, Prof. Dr. h.c. mult., unveiled the new SAP digital innovation system last month, many people in the SAPPHIRE NOW audience reflexively looked around for a nonexistent device.

The fact is, value and differentiation are migrating away from physical products like devices and toward data-based services that fundamentally change the way consumers interact with those products. For consumer products (CP) companies, adapting to this change is imperative because today, even new and highly sought-after products become commoditized more quickly than ever before. For CP companies, this means they need to:

  • Innovate ways to be more efficient using IoT and analytics across lines of business (for example, in manufacturing and supply chain operations to increase efficiency as a way to lower costs)
  • Create innovative data services around products – for example, by building sensors into products. In this case, the data is what allows for differentiation. It’s what makes the product more valuable to the customer. And it’s how CP companies can increase market share, customer retention, and margins.

So where does a digital innovation system come in? It is, as Plattner explained, a “digital innovation system that enables customers to rapidly innovate and scale that innovation to redefine their business for the digital world.” You might think of it as a digital services innovation platform that brings together the power of machine learning, IoT, analytics, and Big Data in ways that were previously not possible.

With all of these technologies unified, it’s much easier to harness data to drive process, value, and customer experience transformation. Consider this: When customers – both B2B and B2C – purchase and use connected, self-aware products, they can passively send product and usage data in the course of daily activities and work (for example, usage levels, wear and tear rates, maintenance information, and functionality used and not used).

This data can be used to inform every aspect of the product value chain. For example, when a customer purchases a smart refrigerator, they agree to passively stream product and usage data from that refrigerator on a continuous basis. Sensors can be built into it to capture and send performance and operations data useful to every player in the product value chain. As an interactive product, the refrigerator can send data (or alerts) when compressors are overheating, vibrations or temperatures are exceeding desired maximums, or Freon levels are low.

The value of this data can extended to a CP manufacturer’s entire extended value chain. For example, a refrigeration manufacturer with commercial and consumer product lines could include B2B traditional suppliers that enable the manufacturer to make better products, as well as involve other providers of data-based services around the product to expand the customer value proposition, as shown in the illustration below.

transformation of the refrigeration value chain

Transformation of the refrigeration value chain

So from this perspective, the future of CP lies in harnessing new kinds of data – and IDC appears to agree. In a May 2017 Analyst Connection, Simon Ellis, program vice president at IDC, forecasted that 90% of the growth in the CP industry over the next decade will go to companies that successfully engage directly with consumers. “While this may mean direct-to-consumer selling, it is most likely to be about a ‘brand relationship.’ The successful engagement will be one that turns data and information from consumers into product and service offerings that meet or even exceed consumers’ expectations. The 90% is a projection, of course, and the actual results may be higher or lower, but the point is that to succeed in the future, CP companies will need to engage with their consumers in a new way.”

I invite you to read Ellis’ paper, “Using Data to Digitally Transform Consumer Products,” He provides valuable insights into how untapped digital technologies have the potential to harness data to drive new capabilities and data-driven services, deliver totally new insights into the changing behaviors and needs of customers, and more.

 

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About Don Gordon

Don Gordon leads global Consumer Products industry marketing for SAP. Previously he led global Retail industry marketing for IBM. He lives in Philadelphia, considered by many to be the finest city on earth.

Taking Learning Back to School

Dan Wellers

 

Denmark spends most GDP on labor market programs at 3.3%.
The U.S. spends only 0.1% of it’s GDP on adult education and workforce retraining.
The number of post-secondary vocational and training institutions in China more than doubled from 2000 to 2014.
47% of U.S. jobs are at risk for automation.

Our overarching approach to education is top down, inflexible, and front loaded in life, and does not encourage collaboration.

Smartphone apps that gamify learning or deliver lessons in small bits of free time can be effective tools for teaching. However, they don’t address the more pressing issue that the future is digital and those whose skills are outmoded will be left behind.

Many companies have a history of effective partnerships with local schools to expand their talent pool, but these efforts are not designed to change overall systems of learning.


The Question We Must Answer

What will we do when digitization, automation, and artificial intelligence eject vast numbers of people from their current jobs, and they lack the skills needed to find new ones?

Solutions could include:

  • National and multinational adult education programs
  • Greater investment in technical and vocational schools
  • Increased emphasis on apprenticeships
  • Tax incentives for initiatives proven to close skills gaps

We need a broad, systemic approach that breaks businesses, schools, governments, and other organizations that target adult learners out of their silos so they can work together. Chief learning officers (CLOs) can spearhead this approach by working together to create goals, benchmarks, and strategy.

Advancing the field of learning will help every business compete in an increasingly global economy with a tight market for skills. More than this, it will mitigate the workplace risks and challenges inherent in the digital economy, thus positively influencing the future of business itself.


Download the executive brief Taking Learning Back to School.


Read the full article The Future of Learning – Keeping up With The Digital Economy

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About Dan Wellers

Dan Wellers is the Global Lead of Digital Futures at SAP, which explores how organizations can anticipate the future impact of exponential technologies. Dan has extensive experience in technology marketing and business strategy, plus management, consulting, and sales.

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Why Millennials Quit: Understanding A New Workforce

Shelly Kramer

Millennials are like mobile devices: they’re everywhere. You can’t visit a coffee shop without encountering both in large numbers. But after all, who doesn’t like a little caffeine with their connectivity? The point is that you should be paying attention to millennials now more than ever because they have surpassed Boomers and Gen-Xers as the largest generation.

Unfortunately for the workforce, they’re also the generation most likely to quit. Let’s examine a new report that sheds some light on exactly why that is—and what you can do to keep millennial employees working for you longer.

New workforce, new values

Deloitte found that two out of three millennials are expected to leave their current jobs by 2020. The survey also found that a staggering one in four would probably move on in the next year alone.

If you’re a business owner, consider putting four of your millennial employees in a room. Take a look around—one of them will be gone next year. Besides their skills and contributions, you’ve also lost time and resources spent by onboarding and training those employees—a very costly process. According to a new report from XYZ University, turnover costs U.S. companies a whopping $30.5 billion annually.

Let’s take a step back and look at this new workforce with new priorities and values.

Everything about millennials is different, from how to market to them as consumers to how you treat them as employees. The catalyst for this shift is the difference in what they value most. Millennials grew up with technology at their fingertips and are the most highly educated generation to date. Many have delayed marriage and/or parenthood in favor of pursuing their careers, which aren’t always about having a great paycheck (although that helps). Instead, it may be more that the core values of your business (like sustainability, for example) or its mission are the reasons that millennials stick around at the same job or look for opportunities elsewhere. Consider this: How invested are they in their work? Are they bored? What does their work/life balance look like? Do they have advancement opportunities?

Ping-pong tables and bringing your dog to work might be trendy, but they aren’t the solution to retaining a millennial workforce. So why exactly are they quitting? Let’s take a look at the data.

Millennials’ common reasons for quitting

In order to gain more insight into the problem of millennial turnover, XYZ University surveyed more than 500 respondents between the ages of 21 and 34 years old. There was a good mix of men and women, college grads versus high school grads, and entry-level employees versus managers. We’re all dying to know: Why did they quit? Here are the most popular reasons, some in their own words:

  • Millennials are risk-takers. XYZ University attributes this affection for risk taking with the fact that millennials essentially came of age during the recession. Surveyed millennials reported this experience made them wary of spending decades working at one company only to be potentially laid off.
  • They are focused on education. More than one-third of millennials hold college degrees. Those seeking advanced degrees can find themselves struggling to finish school while holding down a job, necessitating odd hours or more than one part-time gig. As a whole, this generation is entering the job market later, with higher degrees and higher debt.
  • They don’t want just any job—they want one that fits. In an age where both startups and seasoned companies are enjoying success, there is no shortage of job opportunities. As such, they’re often looking for one that suits their identity and their goals, not just the one that comes up first in an online search. Interestingly, job fit is often prioritized over job pay for millennials. Don’t forget, if they have to start their own company, they will—the average age for millennial entrepreneurs is 27.
  • They want skills that make them competitive. Many millennials enjoy the challenge that accompanies competition, so wearing many hats at a position is actually a good thing. One millennial journalist who used to work at Forbes reported that millennials want to learn by “being in the trenches, and doing it alongside the people who do it best.”
  • They want to do something that matters. Millennials have grown up with change, both good and bad, so they’re unafraid of making changes in their own lives to pursue careers that align with their desire to make a difference.
  • They prefer flexibility. Technology today means it’s possible to work from essentially anywhere that has an Internet connection, so many millennials expect at least some level of flexibility when it comes to their employer. Working remotely all of the time isn’t feasible for every situation, of course, but millennials expect companies to be flexible enough to allow them to occasionally dictate their own schedules. If they have no say in their workday, that’s a red flag.
  • They’ve got skills—and they want to use them. In the words of a 24-year-old designer, millennials “don’t need to print copies all day.” Many have paid (or are in the midst of paying) for their own education, and they’re ready and willing to put it to work. Most would prefer you leave the smaller tasks to the interns.
  • They got a better offer. Thirty-five percent of respondents to XYZ’s survey said they quit a previous job because they received a better opportunity. That makes sense, especially as recruiting is made simpler by technology. (Hello, LinkedIn.)
  • They seek mentors. Millennials are used to being supervised, as many were raised by what have been dubbed as “helicopter parents.” Receiving support from those in charge is the norm, not the anomaly, for this generation, and they expect that in the workplace, too.

Note that it’s not just XYZ University making this final point about the importance of mentoring. Consider Figures 1 and 2 from Deloitte, proving that millennials with worthwhile mentors report high satisfaction rates in other areas, such as personal development. As you can see, this can trickle down into employee satisfaction and ultimately result in higher retention numbers.

Millennials and Mentors
Figure 1. Source: Deloitte


Figure 2. Source: Deloitte

Failure to . . .

No, not communicate—I would say “engage.” On second thought, communication plays a role in that, too. (Who would have thought “Cool Hand Luke” would be applicable to this conversation?)

Data from a recent Gallup poll reiterates that millennials are “job-hoppers,” also pointing out that most of them—71 percent, to be exact—are either not engaged in or are actively disengaged from the workplace. That’s a striking number, but businesses aren’t without hope. That same Gallup poll found that millennials who reported they are engaged at work were 26 percent less likely than their disengaged counterparts to consider switching jobs, even with a raise of up to 20 percent. That’s huge. Furthermore, if the market improves in the next year, those engaged millennial employees are 64 percent less likely to job-hop than those who report feeling actively disengaged.

What’s next?

I’ve covered a lot in this discussion, but here’s what I hope you will take away: Millennials comprise a majority of the workforce, but they’re changing how you should look at hiring, recruiting, and retention as a whole. What matters to millennials matters to your other generations of employees, too. Mentoring, compensation, flexibility, and engagement have always been important, but thanks to the vocal millennial generation, we’re just now learning exactly how much.

What has been your experience with millennials and turnover? Are you a millennial who has recently left a job or are currently looking for a new position? If so, what are you missing from your current employer, and what are you looking for in a prospective one? Alternatively, if you’re reading this from a company perspective, how do you think your organization stacks up in the hearts and minds of your millennial employees? Do you have plans to do anything differently? I’d love to hear your thoughts.

For more insight on millennials and the workforce, see Multigenerational Workforce? Collaboration Tech Is The Key To Success.

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