big changes are coming: it’s the oil and gas industry’s turn to embrace the 4th Industrial Revolution

We are on the cusp of a profound technology change across industries, including the oil and gas supply chain. General technologies – ones that have broad application across a range of industries – will drive the next era of productivity growth. They will lead to disruptive innovation and change the basis of competition. Disruption was seen first in technology companies and then in consumer products – now it’s coming to traditional industries and the implications are broad. The World Economic Forum refers to this as the Fourth Industrial Revolution[1].

Estimates of the opportunity size vary, but in one example Forbes cites a Cisco forecast that the global Internet of Things market will be worth more than $14 trillion by 2022. Half of this value is expected to come from improved logistics, reduced costs and increased employee productivity[2]. These are the areas within which oil and gas operators and contractors know they need to improve. Exponential performance increases are occurring in technologies such as: the internet of things, artificial intelligence, machine learning, Big Data, cloud computing, 3D printing, and autonomous vehicles. For oil companies this has already started to change how they design, build and operate assets but the true size of the opportunity for capturing long-term value is only starting to emerge. For service companies this will change not only how they go about their business but also the products they produce, the customers they serve, and the competition they face.

The resources and capabilities controlled by today’s leaders in our industry may well become the liabilities that hold them back. Consider, for example, companies such as Amazon, Uber and AirBnB that have disrupted traditional industries by combining flexible, re-configurable services with real-time, transparent customer information. They do not own any of the conventional assets that determined winners in the past – such as prime real-estate, taxi cabs or hotel bed-space. These companies grew by serving individual consumers but expect shortly to see them, or similar, in industrial settings disrupting processes in procurement, logistics and short-run asset rentals.

Much of the needed technology is available to purchase now but applying and capturing value requires combining knowledge of what is possible with a deep understanding of industry practice and customer problems. Once identified, new configurations can be quickly created, deployed and scaled.

To harness the Fourth Industrial Revolution requires: knowing where everything is, and how it’s is performing; when it will arrive and how long until it is working (if in transit or mobile); sharing this information widely; setting the context in which connections combined; understanding and continually learning what all this information means; making risk-based decisions; and taking proactive or responsive actions. If these steps can be achieved without intervention, processes can be automated, optimised and made better.

Barriers to change are no longer technical – they are human and commercial. Know-how, insight, and large-scale behavioural change need to combine with investment cases that cater for non-linear changes in business practice.