The oil and gas industry is no stranger to innovation. Companies in this sector have been at the forefront of digital transformation, from digitization to the use of remote sensing and scanning methodologies for exploration. There have been immense steps forward in data acquisition and analysis techniques and a continuous effort to leverage data to enable business insights and ultimately generate value.
From my experience helping executive teams transform their businesses, it’s clear to me that one critical innovative model that remains largely underdeveloped in the oil and gas sector is the platform business model. We’ve all seen how platform businesses, such as Airbnb, Uber and Amazon, are disrupting industries, so I believe that the case for bringing that model to oil and gas is a natural one.
Platforms Are The Next Frontier
According to McKinsey, platforms will “account for $60 trillion in revenues by 2025, or roughly 30 percent of all global revenues.” The word “platform” is sometimes used as a synonym for “system” or “ecosystem.” However, in this context, a platform is not a system or a technology, but rather a business model. The platform business model enables two or more groups, namely a producer and a consumer, to create and exchange value between them. The owner of the platform acts as a digital matchmaker connecting them. These large, scalable networks of users and resources enable producers to connect directly with those who are interested in their products and services.
How Can A Platform Benefit Oil And Gas Companies?
I believe that the first question for innovation leaders in the oil and gas industry must always be one of return on investment (ROI). Investing in digital transformation can be expensive, and the investment should have a clear road map for profit early on.
Oil and gas companies collect a significant amount of data. “A single drilling rig at an oilfield, for example, can generate terabytes of data every day, according to OilandGasMiddleEast.com. So creating a platform that can consolidate and share that data — within the operating company but also potentially with other companies and original equipment manufacturers — can create a rich data set that can enable the application of advanced analytics to predict failure, optimize performance and ultimately generate revenue and value.
Changes Have Already Began
Some leaders in the field are already exploring the power of platforms. The Efficiency Task Force of the Oil & Gas UK trade association has created an online trading platform that will allow five companies to share 200,000 inventory items. Any of the companies can access any item, which can decrease wait times across the board for access to equipment. The hope is that this collaborative model will help companies drastically reduce storage and maintenance costs but more importantly minimize the loss of production that can have major financial implications.
Booster Fuels, which raised $56 million in funding this year, is a mobile fuel delivery service that uses its own proprietary software to route and dispatch its mobile fuel tanks to businesses. “Users can request gas from Booster with a few buttons on its app and a service professional … shows up soon after in a custom-built mini-tanker to refuel the vehicle.”
Six Steps Toward Becoming A Platform Business
Starting to reimagine your business as a platform could start with the following steps.
1. To get started and prioritize your company’s ROI for digital innovation, consider starting with a minimum viable product. Innovation moves quickly, and getting a trial out the door makes it more likely that executives will buy into a more comprehensive platform. Think in a six-month time frame.
2. Draw on data you already have, and build your platform incrementally. This allows you to get started quickly and slowly bring in further aspects of your business on a case-by-case basis.
3. Make sure the platform solves real business challenges by drawing in analytics. Don’t make assumptions about which data is the most useful and where you need to focus. Base every decision on trackable metrics.
4. Build innovation teams from existing staff members. They understand the business better than an outsider ever could, and their ideas may surprise you. Invest twice as much in talent as you do in the tool you’re building.
5. Make data accessible across your organization. Draw from employees in other departments, make sure everyone has access to projects and can provide input, and be ready to hear innovative ideas from unexpected places.
6. Lastly, iterate. This is not a linear process, and as the market changes, it’s important that your platform keeps up with innovation.
Don’t Let Hurdles Get In The Way
Regulations can create hurdles when they fail to keep up with innovation. The lack of standardization among innovation regulations is another challenge I’ve noticed. This can lead to roadblocks in adoption, as can security fears, which grow with every new data leak.
These challenges can be overcome. Beginning the path to success in the platform economy requires clear, definitive action and an iterative development process. Taking into account the six steps above can help you avoid these hurdles and put your business on the path to success.
A Digital Platform Is More Than Nice To Have
Oil and gas companies have much to gain from leveraging the platform business model to future-proof their businesses. The World Economic Forum noted in a white paper 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 future is ready for oil and gas — it’s up to the industry to meet it.