Digitalisation in the Energy Industry: Adapt, or be Disrupted
Mar 5, 2019
At the Global Leadership Summit for the Asian Lubricant Manufacturers Union, Richard Jory, Shell’s Vice President, Lubricants Supply Chain, spoke on how Shell is extracting value from digital solutions while staying focused on delivering to customers.
Ladies and gentlemen,
Digital technologies are transforming our lives in ways that were unimaginable even one decade ago. In the UK where I’m from, over 80% of people now own or have access to a smartphone or a mobile phone. In Singapore, the mobile penetration rate is an astounding 147%, which means many people have more than one mobile phone subscriptions. Since moving to Singapore last year, I no longer go to the supermarket for groceries – I order mine via an app. A click of a button and my groceries get delivered to my door. And not too far into the future cars may not need a driver.
As a result, the amount of data is growing at an astounding pace. The world creates 2,500 petabytes of data every day, and around 90% of that data was generated in the last two years alone. To put that into perspective, just 50 petabytes is enough to store all the books that’s ever been written in the world.
Digitalisation is certainly transforming the energy industry. The World Economic Forum estimates that digitalisation could provide around $1.6 trillion of value for the oil and gas industry, its customers and wider society by 2025. We need to be adaptive, or we’ll be disrupted. We have to achieve the greatest efficiencies today, while preparing for tomorrow. And always with a deep focus on the customer. The decisions we make today could make the difference between thriving and just surviving.
As lubricants manufacturers, all of us here in this room play a role in keeping the world moving and machinery operating. As Shell, I’m proud to say we have the largest lubricants business in the world and have been market leaders for the past 12 years. We sell about five billion litres of lubricant every year, about one third of which goes into passenger cars, and two-thirds into industrial and heavy-duty use.
The breadth and scale of our business, combined with the voice of our customsers, means there is enormous potential and urgency to use digital to make our operations more efficient. At Shell, we are in the process of accelerating our digital transformation in our organisation. Across our lubricants supply chain, from manufacturing through to distribution and sales, we are investing more in digital technologies such as data analytics, artificial intelligence and machine learning. These enable us to gain deeper insights into our customers, and improve how we deliver products and services to our customers.
Today, I want to share three areas Shell is extracting value from digital solutions while staying focused on delivering to our customers.
First, building a strong digital backbone through our existing business. We estimate that 80-90% of the benefit of digital and digital work is simplifying complex data to better know and serve our customers.
A critical success factor that we’ve done is to standardise many of our processes in countries across the globe. Having just one global ERP, the same in every country, means we can strengthen data management and makes it easier for our customers to do business with us. The data collected by this central IT backbone over many years has helped embed a data-driven decision-making culture throughout the organisation. Needless to say, this access to big data has benefited us enormously on our digitalisation journey and simplifying everyday activities.
For example, we are building a “track and trace” system that we envision will improve visibility of our lubricants supply chain end-to-end and increase transparency. Eventually, this will enable us improve sustainability across our wider value chain, quality assurance and communication to customers.
In our supply chain, we have introduced a data-driven tool that helps us make better, faster and more effective blending decisions. My team uses data-driven insights to automatically determine for any given lubricant product the right formulation that optimises both costs and quality for the customer. This product optimisation tool integrates digital technologies into our supply chain. It enables frontline users to make the right choices in real-time to drive cost savings and adapt to changing customers and market needs.
Having a strong digital backbone also means connecting and integrating applications, and knowing what to stop doing. We have committed to radical simplification, and progress only on activities that generate real value for us and our customers.
Second, we create new value from existing business. Our customers want to reduce their total cost of ownership, running their machines for longer with less downtime. We are creating services that enable them to do that. We are also using digital platforms to grow our business with workshops.
In our personal lives, we expect greater convenience and connectivity with our mobile devices. Why shouldn’t this apply to how we work and interact with customers?
In 2017, we launched Shell LubeChat, a user-friendly and AI-enabled online chat robot, a world-first for B2B lubricants customers. By simply using their smartphones, our customers gain easy, real-time access to product support, technical services and lubricants data. These insights help them make faster and better informed lubricant decisions. LubeChat is now being used by 6,000 users across the world in our key established and growth countries including the US, UK, China, India, Germany and Russia, and right here in Singapore.
In China, we have developed LubeMaster, our first digital, integrated platform for intelligent lubricant services and which connects us directly with end customers through our network of distributors. Today, in China alone, more than 200,000 garages and maintenance workshops for cars and trucks have signed up to this platform.
Finally, our third focus area is to create new business models. We invest in a pipeline of digital ventures, managed as standalone businesses with a culture of customer focus and fast development. We take the best of a start-up culture and approach, and marry it with the power of a global leader with deep and extensive industry knowledge.
But digitalisation is about more than technology. It is also about people and creating more agile ways of working. It’s about upgrading jobs so that they become more interesting and enjoyable and at the same time allows us to automate and have better reliability and consistency in our core processes.
It is also about embracing the culture and approaches that have made many start-ups the key success stories of the business world in the last 10 years. What does it mean to think differently? And why is it important? In a world driven by digitalisation, it is all about speed to innovate. You might have very different expectations of a company like Shell that has thousands of employees around the world when it comes to speed of innovation.
Let me give you an example of how we have embraced a new approach to support our speed to innovate. In October 2017 we had an idea to maximise the profitability of our customers’ off-highway fleets by using smart sensors and next generation analytics. Five months later we had the business, MachineMax. It was operating as a Shell majority-owned non-operated venture. By August last year the digital venture was venture capital funded and last month we launched a service offering in the UK focused on the construction and mining sectors.
Another example is in shipping. We are piloting Shell Accuport, a computer software programme used by ship owners and fleet managers to track how much lubricant is used by the vessel, and real-time locations to optimise delivery. This helps us optimise deliveries as our customers save time and money and simplifies processes. We benefit too as we can ensure we have the right products in the right locations without holding excess inventory.
Our approach to digitalisation is the same as in our R&D function. It is not the latest gadget or tool, but what’s the customer pain point and how can technology enable us to solve it best. We believe this is the right strategy to take and we expect the return and customer satisfaction on our digital investments to be substantial over time.
Digitalisation will continue advancing and there will always be new technology or ways that will be integrated into our lives.
We need to be on our toes and we need to make decisions based on these changes. These decisions could make the difference between thriving and just surviving. Be the disruptor, and not the disrupted. This is the new order of doing business in a digital world.