  {"id":17828,"date":"2016-11-18T14:01:23","date_gmt":"2016-11-18T19:01:23","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/digitization-in-oil-gas-is-shell-a-leader-or-a-laggard\/"},"modified":"2016-11-18T14:01:23","modified_gmt":"2016-11-18T19:01:23","slug":"digitization-in-oil-gas-is-shell-a-leader-or-a-laggard","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digitization-in-oil-gas-is-shell-a-leader-or-a-laggard\/","title":{"rendered":"Digitization in Oil &amp; Gas \u2013 is Shell a Leader or a Laggard?"},"content":{"rendered":"<p><strong>Digitization trends within the Oil &amp; Gas industry<\/strong><\/p>\n<p>In the past 24 months, oil and gas companies have gone from soaring profits to crippling losses. \u00a0Facing intense pressure to increase operational efficiency and drive margins, they are increasingly turning to digital technology. \u00a0As noted in a recent Strategy&amp; study, \u201cthe term Digital addresses the confluence of data, machines and people that form the basis of Internet of Things (IoT) which can ultimately create several opportunities: improve asset reliability, boost throughput and optimize field recovery.\u201d<a href=\"#_edn1\" name=\"_ednref1\">[i]<br \/>\n<\/a><\/p>\n<p>One oil and gas major fully embracing this change is Royal Dutch Shell, which announced in 2013 its ambitious plan to become \u201cthe most innovative energy company in the field of digital\u201d.<a href=\"#_edn2\" name=\"_ednref2\">[ii]<\/a><\/p>\n<p><a href=\"#_edn2\" name=\"_ednref2\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-17800 alignright\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.36.02.png\" alt=\"screen-shot-2016-11-18-at-13-36-02\" width=\"295\" height=\"317\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.36.02.png 295w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.36.02-279x300.png 279w\" sizes=\"auto, (max-width: 295px) 100vw, 295px\" \/><\/a><\/p>\n<p>When thinking about digitisation, four types of opportunities can enhance Shell\u2019s business:<\/p>\n<ol>\n<li>Digitizing the core \u2013 <em>incremental improvements to Shell\u2019s core business<\/em><\/li>\n<li>Extending the core \u2013 <em>enhancing Shell\u2019s B2B and B2C offerings through digital technologies<\/em><\/li>\n<li>Anticipating digital externalities affecting the core &#8211; <em>adapting to competitive threats to Shell\u2019s core business<\/em><\/li>\n<li>Developing something completely different \u2013 <em>developing a completely different business through digital<\/em><\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p><strong>Digitizing Shell\u2019s core business<\/strong><\/p>\n<p>This is where Shell has made the most progress, embracing digital across the company\u2019s value chain:<\/p>\n<ul>\n<li><strong>Strategic applications \u2013 <\/strong>Utilising data to optimise value levers and enhance management decisions. For example, Shell recently developed a partnership with a laser company called WellDog. The innovative project uses lasers to find oil and gas in shale formations: looking at the photons that bounce back from these rock formations helps drillers decide where to put wells.<a href=\"#_edn3\" name=\"_ednref3\">[iii]<\/a>\n<p><figure id=\"attachment_17874\" aria-describedby=\"caption-attachment-17874\" style=\"width: 435px\" class=\"wp-caption alignright\"><a href=\"#_edn3\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-17874\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mobiles.png\" alt=\"mobiles\" width=\"435\" height=\"341\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mobiles.png 529w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/mobiles-300x235.png 300w\" sizes=\"auto, (max-width: 435px) 100vw, 435px\" \/><\/a><figcaption id=\"caption-attachment-17874\" class=\"wp-caption-text\">Examples of Shell Motorist mobile app (Source: Shell website)<\/figcaption><\/figure><\/li>\n<li><strong>Processes, governance and integration <em>&#8211; <\/em><\/strong>Enabling data sharing and increasing efficiency of internal processes. In the last few years, Shell has increasingly automated cash flows with the company, building large technical centres of expertise in Kuala Lumpur and Krakow.<\/li>\n<li><strong>Improving customer offers \u2013 <\/strong>Using mobile technology to improve retail offers. The Shell Motorist app gives drivers access to Shell offers, their loyalty card balances, and helps them find the nearest Shell filling station.<a href=\"#_edn4\" name=\"_ednref4\">[iv]<br \/>\n<\/a><\/li>\n<li><strong>Data capture \u2013 <\/strong>Collecting Big Data, particularly in \u2018digital oil fields\u2019. In 2015 Shell realized a $1 million return on an $87,000 investment in digital technology (sensors and analytics) to monitor oilfields in some of Nigeria\u2019s toughest terrain<a href=\"#_edn5\" name=\"_ednref5\">[v]<\/a>. Shell has also used Big Data for preventative maintenance, to reduce breakdowns and downtime.<a href=\"#_edn6\" name=\"_ednref6\">[vi]<\/a><\/li>\n<li><strong>Supply chain optimization \u2013 <\/strong>Big Data is also being used to streamline the transport, production, and retail distribution of Shell\u2019s products. Shell is vertically integrated; it is therefore involved in every aspect of the process from drilling oil through to selling fuel to customers or heating for their home. The company uses complex algorithms, taking in to account production costs, weather patterns and economic indicators, to allocate resources and set retail prices. Shell is also using remote sensors and mobile technology to optimise inventories and information across the supply chain. <a href=\"#_edn7\" name=\"_ednref7\">[vii]<\/a><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>Extending Shell\u2019s core business<\/strong><\/p>\n<p>Although less advanced than their core activities, Shell is looking at opportunities to extend their B2B and B2C offers. Their venture capital arm, Shell Technology Ventures, has recently invested in Sense Labs, which developed a home energy efficiency device for consumers. The unit connects to the home power supply and measures energy consumption of\u00a0all appliances and devices, sending real-time updates to apps, allowing consumers to reduce energy usage and costs.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Where Shell is lagging behind: adapting to external threats and developing different businesses<\/strong><\/p>\n<figure id=\"attachment_17804\" aria-describedby=\"caption-attachment-17804\" style=\"width: 703px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-17804 size-full\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.37.10.png\" alt=\"screen-shot-2016-11-18-at-13-37-10\" width=\"703\" height=\"367\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.37.10.png 703w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.37.10-300x157.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-18-at-13.37.10-600x313.png 600w\" sizes=\"auto, (max-width: 703px) 100vw, 703px\" \/><figcaption id=\"caption-attachment-17804\" class=\"wp-caption-text\">Energy companies currently still lagging in the Digital trend (Source: Boston Consulting Group)<\/figcaption><\/figure>\n<p>Despite the moves made in their core business, there is still a huge gap between what Shell could be doing and what they are doing. A recent survey completed by the Boston Consulting Group showed Energy companies to be \u2018laggards\u2019 when it came to adoption and accessibility to digital technology<a href=\"#_edn8\" name=\"_ednref8\">[viii]<\/a>.<\/p>\n<p>For example, what is stopping Shell from developing a \u2018fuel on demand\u2019 platform, which refuels cars wherever they are parked? It is possible that Shell is reluctant to make this move, as it will cannibalize their existing retail business\u2026but that doesn\u2019t mean no one else will.<\/p>\n<p>Shell could also look to expand in a completely different way, using learnings from other industries. Qantas for example leveraged data analysis and mobile apps to set up an insurance program called Qantas Assure, which using frequent flier miles and points from fitness trackers. Qantas benefits because they are able to monetize unused air miles\u2019 inventory, and their customers become even more loyal.<a href=\"#_edn9\" name=\"_ednref9\">[ix]<\/a> Perhaps Shell could do something similar with Shell rewards?<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Going forward<\/strong><\/p>\n<p>Shell is taking large leaps towards digitization, but there is still a long way to go. As a recent article for Forbes stated: \u201cGetting by with dated and fragmented technology will no longer work for an industry that is experiencing massive shifts due to heightened market pressures, efficiency demands, and the ever-increasing need for new technology.\u201d<a href=\"#_edn10\" name=\"_ednref10\">[x]<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>Words: 792<\/p>\n<hr \/>\n<p><a href=\"#_ednref1\" name=\"_edn1\">[i]<\/a> Nathaniel Clark, Abhish Abraham, Sanchit Goyal, \u201cImproving oil and gas efficiency through digital\u201d, Strategy&amp;, <a href=\"http:\/\/www.strategyand.pwc.com\/reports\/improving-oil-gas-efficiency-digital\">http:\/\/www.strategyand.pwc.com\/reports\/improving-oil-gas-efficiency-digital<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref2\" name=\"_edn2\">[ii]<\/a> Richard Coope, \u201cPartnering to deliver innovation at scale for Shell\u201d, LinkedIn, <a href=\"https:\/\/www.linkedin.com\/pulse\/partnering-deliver-innovation-scale-shell-richard-coope\">https:\/\/www.linkedin.com\/pulse\/partnering-deliver-innovation-scale-shell-richard-coope<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref3\" name=\"_edn3\">[iii]<\/a> Ken Evans, \u201cDigital tech drives innovation for oil &amp; gas companies\u201d <em>D!gitalist Magazine<\/em>, June 10<sup>th<\/sup> 2016, \u00a0<a href=\"http:\/\/www.digitalistmag.com\/digital-economy\/2016\/06\/10\/digital-tech-drives-innovation-for-oil-gas-companies-04258338\">http:\/\/www.digitalistmag.com\/digital-economy\/2016\/06\/10\/digital-tech-drives-innovation-for-oil-gas-companies-04258338<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref4\" name=\"_edn4\">[iv]<\/a> Royal Dutch Shell, \u201cNew Technologies \u2013 Mobile\u201d, \u00a0<a href=\"http:\/\/www.shell.com\/energy-and-innovation\/overcoming-technology-challenges\/digital-innovation.html\">http:\/\/www.shell.com\/energy-and-innovation\/overcoming-technology-challenges\/digital-innovation.html<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref5\" name=\"_edn5\">[v]<\/a> Martha DeGrasse, \u201cPumping profits: Shell saves $1M with IoT\u201d, <a href=\"http:\/\/industrialiot5g.com\/20160415\/channels\/news\/pumping-profits-shell-saves-1m-iot\">http:\/\/industrialiot5g.com\/20160415\/channels\/news\/pumping-profits-shell-saves-1m-iot<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref6\" name=\"_edn6\">[vi]<\/a> Bernard Marr, \u201cBig data in big oil: how shell uses analytics to drive business success\u201d <em>Forbes<\/em>, <a href=\"http:\/\/www.forbes.com\/sites\/bernardmarr\/2015\/05\/26\/big-data-in-big-oil-how-shell-uses-analytics-to-drive-business-success\/2\/#4860206f5639\">http:\/\/www.forbes.com\/sites\/bernardmarr\/2015\/05\/26\/big-data-in-big-oil-how-shell-uses-analytics-to-drive-business-success\/2\/#4860206f5639<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref7\" name=\"_edn7\">[vii]<\/a> ibid.<\/p>\n<p><a href=\"#_ednref8\" name=\"_edn8\">[viii]<\/a> Expert interview \u2013 BCG Energy Practice partner<\/p>\n<p><a href=\"#_ednref9\" name=\"_edn9\">[ix]<\/a> Glenda Korporaal, \u201cQantas Loyalty digital initiatives\u201d <em>The Australian Business Review, <\/em><a href=\"http:\/\/www.theaustralian.com.au\/business\/aviation\/qantas-loyalty-digital-initiatives\/news-story\/c332f258cbd0b794d41b705bb2226cf4\">http:\/\/www.theaustralian.com.au\/business\/aviation\/qantas-loyalty-digital-initiatives\/news-story\/c332f258cbd0b794d41b705bb2226cf4<\/a>, accessed November 2016<\/p>\n<p><a href=\"#_ednref10\" name=\"_edn10\">[x]<\/a> Martha Aviles, \u201cTechnology Innovation and Adoption in Oil &amp; Gas Industry \u2013 Why did it slow?\u201d, <em>Forbes<\/em>, <a href=\"http:\/\/www.forbes.com\/sites\/drillinginfo\/2015\/07\/14\/technology-innovation-and-adoption-in-oil-gas-industry-why-did-it-slow\/#42194a3a506a\">http:\/\/www.forbes.com\/sites\/drillinginfo\/2015\/07\/14\/technology-innovation-and-adoption-in-oil-gas-industry-why-did-it-slow\/#42194a3a506a<\/a>, accessed November 2016<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently Royal Dutch Shell announced their ambition is to be \u201cthe most innovative energy company in the field of digital\u201d. How far away are they from achieving that goal?<\/p>\n","protected":false},"author":2560,"featured_media":17888,"comment_status":"open","ping_status":"closed","template":"","categories":[788,2532,2029,95,157,2533,1444],"class_list":["post-17828","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digital","category-digital-oil-fields","category-digitization","category-energy","category-oil-and-gas","category-royal-dutch-shell","category-shell"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Digitization in Oil &amp; Gas \u2013 is Shell a Leader or a Laggard? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/digitization-in-oil-gas-is-shell-a-leader-or-a-laggard\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Digitization in Oil &amp; Gas \u2013 is Shell a Leader or a Laggard? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Recently Royal Dutch Shell announced their ambition is to be \u201cthe most innovative energy company in the field of digital\u201d. 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