The global upstream oil and gas industry spent $1.3 trillion in 2012, and is projected to exceed $1.6 trillion by 2016. Even in a growing market, companies face ever-changing technical, environmental and safety challenges that can have a major impact on their ability to find and produce oil competitively. There is a constant need for new ideas, technologies, partnerships and business models to support more challenging production environments and achieve ever-higher production efficiencies. Much of that innovation will come from the supply chain, but the operator has a very significant role to play.
A considerable part of the global upstream spend is in the development and introduction of new technology and ideas. Innovation is not simply down to the traditional measure of dollars spent, but also how that investment is administered. Factors such as geography, service models and production challenges mean operators have different drivers and focus areas. Company history and culture also influence innovation processes.
Based on our experience, we see that most operators are achieving huge innovation success – but there is a great deal of variation in their approaches. So, given the amount of deviations, can they each be taking the optimum path to achieve top-dollar return?
Evaluating effective innovation management methods in the major oil companies can act as a guide for organisations operating in the gas and oil sector to ensure the highest returns on technology investment.
So, what is the winning formula? The most important, and often overlooked, aspect to implementing new ideas is to make the process exciting.
Keep innovation innovative
Some of the most interesting ways of teasing out innovative ideas are methods which are simple and straightforward, whilst others try to be novel or unique, aimed at encouraging new thoughts from employees, the research organisation and the public. Innovation matters, so why not make processes exciting as well as effective?
Chevron, for example, says it seeks new opportunities and ‘out-of-the-ordinary’ solutions, and has built an ’Innovation Zone’ lab in San Ramon. This provides a dedicated space to foster creative and innovative solutions, and teaches employees a variety of concepts such as the ‘Innovation Cycle’. The company has reported an increase in ideas generation and intellectual breakthroughs since these measures have been introduced.
To produce a winning innovation strategy, the following themes are also required to provide a framework for the supply chain to be part of successful innovation engagement.
Emphasise the importance of encouraging and identifying innovative ideas from company employees. Those closest to the challenge know the process best and are ideally placed to see new innovative solutions. Actively encourage and pay attention to ideas from staff, while also promoting stronger employee buy-in. A great example of this is ENI’s annual staff award – ‘Recognition at Innovation ENI’ – which seeks to identify the best patented proposal in terms of potential impact to derive innovation.
No pain, no gain
Companies need a mix of game-changing and incremental innovation, with projects experiencing varying degrees of risk – the greatest gain generally comes from those that carry the greatest risk. But how is an acceptable overall level of risk determined, and which operators seem to do this well? The answer lies in providing a structure to establish an innovation project portfolio. Exxon’s ‘Process to Manage Innovation’ operates with research teams following a stage-gate management system, from early idea generation to final deployment. They regularly assess active topic areas and the benefit/risk levels they should be investing in to deliver the most value.
Ask for help
In situations where the solution does not always reside in-house, innovation comes from successful partnerships. Flourishing operators tend to have well-developed means to engage innovation partners from the supply chain and research communities. For instance, Shell has well-established and diverse links to foster and encourage innovative ideas. These include hundreds of universities from across the world, industry experts, partnerships for research investment, ‘B-basic’, a biotechnology consortium, and numerous research institutes.
PA has an extensive track record of helping companies develop new technology, and guiding them through the innovation process. To find out more, contact us now.