These are interesting times for the oil and gas industry.
Low oil prices have many upstream exploration and production companies cutting costs and focusing on cash flow. Yet at the same time, cheaper crude is good news for consumers at the pump, and sometimes offer downstream companies higher margins.
But where will oil prices go in the coming months? No one in the industry knows for sure.
Maybe that’s why talk of the future seemed to take center stage at last month’s 2015 Best Practices for Oil & Gas Conference (BPOG) in Houston, Texas.
The BPOG is an annual conference that brings hundreds of oil and gas professionals together to exchange fresh ideas, embrace innovative solutions, and learn about best-in-class strategies designed to improve on overall business performance.
This year, the attendees had a lot to talk about.
The Disruption Challenge
Uncertain times invite speculation, but are they also the perfect environment for disruptive innovation?
Author and business consultant Robert B. Tucker delivered the opening keynote of the three-day BPOG event. In his presentation, Tucker spoke of the importance of innovation in driving corporate growth and about what he called the “disruption challenge.”
As Tucker explained, disruptive innovation occurs when new technology or finding a different way of doing things creates an entirely new market or value chain. Think cell phones and Uber. Such game-changing innovation can be sparked by any number of factors, such as technological advancements, regulatory mandates, or social change. Evolving economic conditions belong on that list too.
The challenge, of course, is being on the right side of the tipping point. And Tucker cited sobering examples of once successful businesses that were not – companies like Blockbuster, CompUSA, and Borders.
“Fifteen years ago when we first talking about this phenomenon called disruption it was confined to industries like disk drives a few others,” Tucker told the crowd. “Today, every industry is vulnerable to disruption.”
Is the oil and gas industry posed for its own disruptive innovation? Perhaps.
“We’re seeing a lot of disruption already happening in the traditional oil and gas value chain,” said Ken Evans when it was his turn to take the stage.
Evans, who is vice president and global head of oil & gas at SAP, described what he believes is an evolution of a larger energy network where companies will bring their individual expertise and plug into a more collective digital framework.
“Access to capital and resources may no longer be the main driver of competitive differentiation,” Evans suggested. “It could be those companies that can access and exploit the information that will be the ultimate winners.”
Evans went on to invite the audience to “reimagine everything.” He described a possible scenario where the future energy industry is led by a new set of players.
“First, there could be the specialist companies that excel in one or more core competencies and that can leverage this expertise across the energy sector,” Evans said. He offered the example of an offshore oil driller that also develops offshore wind farms.
Then there are orchestrators – companies that build the ecosystems and focus on optimal delivery of products and services along the value chain. And finally, there could be the creators. These companies might develop new sources of customer value by blurring the boundaries of the present-day industry.
Call these companies the disruptors.
Today’s Actions Will Shape the Future
But even if the oil and gas industry is not on the verge of a truly tectonic shift, there seemed to be agreement at the BPOG that now is the right time for companies to refocus their future strategies.
Evans mentioned that he recently reviewed a number of “energy outlook” presentations created by industry leaders like Shell, BP, and ExxonMobil. He found recurring themes around working more collaboratively to ensure future success, adapting strategically for the longer term, and investing in advanced technology to help meet tomorrow’s energy demands.
No one can say with certainty what the future will bring. But after attending the 2015 BPOG, here is one prediction that seems like a pretty sure bet.
The actions oil and gas companies take today will reshape the future of the energy industry.