In September 2018, CEO of NAUKA Alexander Nikolaevich Krivospitsky took part in the III Federal IT Forum of the Russian oil and gas industry. It was pleasant not only to see like-minded people, but also to discuss the trends – the topic of the forum “Smart Oil & Gas: Digital Transformation of the Oil and Gas Industry” sets vector for the development of the industry in the coming years.
The world is changing faster than we are
The whole history of the civilization consists of technological breakthroughs. The wheel, electricity, conveyor and other inventions have changed our world globally. And it’s obvious now, that the future lies in digital technologies. Just compare how we lived and worked in the early 2000s, and look around to experience the cardinal changes in every sphere of life, including business.
Experts are sure that this is only the beginning – the business sphere will have to change even more rapidly than now. Scientific and technological progress has accelerated to unprecedented pace, reducing the amount of time for decision-making. The changes themselves have never been so comprehensive: digital technologies permeate absolutely everything that surrounds us, increasingly blurring the boundaries between real and virtual.
The long-term prosperity of a business depends on its ability to adapt to the modern realities. This rule also applies to such a “conservative” industry as oil and gas. Although the industry is far from the epicenter of explosive changes, those who do not want to consider the demands of the time are bound to fail.
It seems to me that the digitalization of the surrounding world occurs spontaneously. One branch barely sees a new trend, the other is changing beyond recognition, the old market leaders are giving way to the leadership of pushy start-ups. But, despite the confusion, there are common features hinting at the integrity of the process of digital transformation. What are these features?
Internet of things
First of all, it is an increase in the number of connections. This is not a new phenomenon, the novelty lies in the frenzied intensity of this growth. The Internet began in the middle of the twentieth century as a local development for military purposes, later the network expanded: first, scientists joined it, then ordinary users followed suit. Websites, social networks and search engines have turned most people on the planet into active users. Mobile technologies and automation of everything have led to a curious result – the number of devices connected to the Internet has long exceeded the number of people on the planet. The Internet of people transformed into the Internet of things.
The concept of the Internet of things implies the technology of data exchange between physical objects, partially excluding the need for human participation. Previously, this term was limited to user systems like “smart home” or a fitness bracelet. Now the approach has become more ambitious: industrial equipment, individual sensors and sensors on installations can collect and redirect information between each other, offering specialists a more complete picture of production. This leads to greater autonomy of equipment and communication on the “man-device” level.
Each new connection is a source of information. Previously, a business used to buy its own servers to store information. This could not have been going on forever, as the volume of data is growing by leaps and bounds. It turned out to be more advantageous to collect information on multiple servers – in an online storage, or “cloud” — and to process it. In its place, the rapid growth in the number of connections has inevitably led to an equally rapid increase in the amount of information available.
This is how big data is accumulated – a huge array of not structured data that has yet to be sifted in search of something meaningful, like sand is sifted in search of a diamond. The amount of information is not beneficial by itself, as it does not increase the productivity of production, but rather, lowers it. What drives the business to prosperity is the quality of the data and how wisely we use it.
Imagine that we need to find an image of an object in a photo. When there is just one photo, it will not be difficult. But when there are millions of them, and they are totally different, it immediately becomes difficult to cope with this task. And with big data – the necessary data is there, but in is implicit, it is hidden in the information flow. Hence, this thread requires program processing so that the data sought is conspicuous. Using the most significant data, engineers can make correct decisions. Data analysis allows to reduce the number of downtime, prevent emergency situations, and optimize the use of electricity at the refinery.
Given the above, how can you imagine a plant of the future? What comes to mind is a strategy video game, only with a real-life enterprise.
The user only works with top-level information. A digital model of the plant signals what amount of resources is available, and the “player” realizes what goal he wants to achieve and makes certain moves. And if a facility needs repairing or new construction works are required, the user only has to give an appropriate order without thinking about the details of the implementation of those instructions, and monitor the process. What is more, it can be monitored remotely while robots will execute the basic instructions. The digital plant is already becoming a reality and is considered to be the only effective way of production.
All of the described technologies are self-sufficient and voluminous spheres of knowledge. Nevertheless, they are also part of the global process called the fourth industrial revolution.
Industry 4.0 will once again drastically change the usual way of life. All kinds of devices will get artificial intelligence that will turn them not only into sources of information, but also into its consumers. Things will be able to design, create and repair themselves. There will be universal approaches to production based on 3D-printing. Augmented reality will not only be in games with Pokemon, but will flow into everyday life.
As for industry, management will become even more flexible, and costs will be reduced. People will be free from routine work, what is more, intellectual and creative work will be appreciated, but whether humanity will be able to stand the test of the fourth industrial revolution, we are to find out.
The stronger technology grows into our life, the more accurately the digital world reflects the physical world and transforms it. This applies to both normal life and business. Even such a conservative as oil and gas.
Signs of Transformation
Digital transformation has a mass of symptoms that can be conditionally combined into three groups. First, there is a change in the mentality of end-users, which has already become known as consumerization. The meaning of the changes is that specialized IT-technologies are becoming more accessible to the mass user. In their turn, mass users try to use “home” technologies in the office, without thinking about their security. Over the past 15 years, the technological focus has significantly shifted from the business segment to the consumer segment: whereas at the beginning of the millennium the leaders were such technology companies as Microsoft, Cisco, IBM, who worked primarily with businesses, the leaders of today – Google, Apple, Facebook – are oriented at the very end of the chain. People have massively received first-class digital experience – and their expectations and behavior have changed dramatically. The person who yesterday, together with his son, videotaped his neighborhood with an iPhone from a quadrocopter, does not like the mobile banking application with an interface like an ATM or the simple “pay – fill – leave” scheme at a gas station – he wants to get something more, something , which corresponds to the rest of his experience. At the same time, if a person needs to send a large file at work or immediately contact someone, he will not hesitate to use file sharing on the network or messenger. Businesses should take these tendencies into account if they do not want to come across as outdated both to customers and its own employees.
Another important sign is that the digital transformation has already affected this or that industry: the democratic nature of the competitive environment, which is achieved by reducing the entry threshold in the business and is expressed in an avalanche-like growth of the number of start-ups. The founders of many start-ups are looking for small niches, where large companies do not adequately cover the needs of customers, but they can get a significant income. They do not necessarily compete with “dinosaurs” directly, but by their very existence in the chosen niche is forming an environment that creates strong competitive pressure on traditional businesses. In such a conservative industry as oil and gas, start-ups can find their place by offering companies innovative technologies, IT products, solutions in the field of business management.
At the same time, democratization of business results in a variety of business models used, and this applies not only to start-ups, even though, they set the tone here. Any company can expand or change its ways of interacting with customers, regardless of size and scope of activity. Platform solutions is a vivid example of a new approach. One of the first to implement this model were Google and Apple, later on hundreds of consumer platforms appeared. Now it’s time for industrial companies. In Russia, the Mail.ru Group is involved in development of platform production systems. The Holding has already entered the industrial Internet of things (IIoT) market by launching the Tarantool IIoT platform which allows to collect data from sensors in enterprises and send them to data centers for analysis.
Platform-based production systems allow you to build new business management in a new way, increase production efficiency and optimize the entire value chain.
Company of the Future
With the growth of digital density, the key competencies of the business that provide its very existence are changing – they allow creating value for the client and monetizing the created value. The emergence of some and the withering away of other key competencies can not be described as something new: the advent of cars devalued the skills of riding a horse but created a need for driving skills. Nowadays, with the advent of the navigator, the orientation skill has become less useful in the city, while the value of the ability to use digital devices has grown. The same thing happens at the level of organizations and industries. However, it is very difficult for people and organizations to abandon their polished competencies when there is no need for them.
Changes in key competencies entail restructuring the industry, the emergence of new business models and organizational changes. Digital business transformation is the development of the ability to create and develop new competencies that make a business successful in the face of constant and large-scale changes. Media, retailers, IT companies, banks have faced the described phenomena in full. The industry is away from the center of events, but those who feel safe are engaged in self-deception: the first echoes of digital transformation are heard here. According to experts, in the digital future for oil and gas companies the competencies related to innovative development, the development of new products and new markets will come first. While routine functions will be increasingly given to the robots, knowledge related to geological prospecting, data analysis, reliability management and company efficiency will remain in demand.