Making Digital Transformation Stick

It is said that necessity is the mother of innovation. The Covid-19 pandemic is creating a necessity for digital transformation across the economy. Entire industries are adopting digital solutions at a rate that was unimaginable just months ago. Microsoft CEO Satya Nadella summed up the breakneck transformation on a recent earnings call: “We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning to sales and customer service, to critical cloud infrastructure and security—we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything.”

The energy industry is among the hardest hit by this crisis. Low oil prices and an uncertain recovery have led to dramatic spending cuts. Social distancing requirements and travel restrictions make operations challenging, even when the economics make sense. Digital transformation is needed desperately, but the industry’s track record of successfully transforming is mixed, at best. How can we achieve a better outcome?

Many people are surprised to learn that the oil & gas industry was one of the first adopters of big data and digital innovation. Operators started using these technologies in the 1980s to better understand a reservoir’s resource and production potential, improve health and safety, and boost marginal operational efficiencies. Today, cloud computing, artificial intelligence, and the Internet of Things provide more opportunities than ever before. In 2017, the World Economic Forum estimated that “digital transformation in the Oil and Gas industry could unlock approximately $1.6 trillion of value for the industry, its customers and wider society.”

The 2014-2016 oil price crash led to the first industry-wide effort to transform inefficient legacy practices with modern technologies. Nearly every energy company implemented a digital strategy, formed digital transformation teams, and piloted a plethora of new systems. In fact, the technology behind our company, Cumulus, was first developed within Shell as part of a larger project to improve efficiency and reduce costs on capital projects.

Despite these efforts, the industry has never fully taken advantage of the opportunities that come from using data and technology. Outdated regulatory frameworks, a lack of standardization in data formats, an inability to share information across the ecosystem, and a generally conservative mindset among senior industry leaders have all inhibited adoption. Digital transformation initiatives tend to stop at the corporate office and new technologies become stuck in pilot purgatory, rarely crossing the chasm to a fully implemented enterprise solution.

Why is this so challenging, and what can we do differently this time around?

In the next part of this series, we will look at 4 things industry leaders should consider when adopting digital solutions to help make them stick.

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