We continue to be surprised by the number of investment prospects that leave us with the question, “Why didn’t we think of that?” Many of these candidates have some level of meaningful user adoption making it readily apparent that a lot of change is happening in upstream oil & gas. When we consider the variety of operational problems under attack, we have to believe the industry is overwhelmed by the shear potential for change and the noise level is extremely high regarding how to set its priorities.
The intensely specialized functional design of upstream oil & gas was chosen historically as the means by which the industry built scale. Specialization permitted the industry to go faster and faster with a reduced error rate. However, specialization meant specialized languages which meant that a thing (e.g. an oil well part) might have three different names/definitions inside the same company. Companies like Amazon and Google have been around long enough for the energy industry to now appreciate the value of automating self improvement by means of a single, common view of data on top of which all problems can be attacked.
When we think of "going digital" for upstream oil & gas, we perceive the big goal to be the automation of self-improvement. Equity markets have hammered shale oil & gas for failure to convert from a discrete manufacturing process to a continuous one empirically reflecting scalability. There are many circumstances where an industry drowning in data must rely excessively on humans to determine what happens next. The oil industry's functional specialization is the largest impediment to the goal of automating self-improvement.
We all want the Big Bang to occur when it comes to investment returns in the upstream sector. However, software companies that evolve to become huge financial successes will be those who start with a solution that does one small thing very successfully causing humans to engage and be willing to do the next thing. This means taking the market to a destination in small increments of change that in and of themselves look nothing like the ultimate value proposition. Our counsel to anyone investing in this sector is...DO NOT try to do something big fast (in re process change)...it will not work. Be satisfied will the accumulation of small victories resulting from simplicity and smallness. This regularly leads to a big place.