In 1997, Clayton Christensen coined the term “Disruptive Innovation” in his thoughtful book, The Innovator’s Dilemma. Since then, the term has been shortened to simply ‘disruption’ and it has taken on a life of its own across the technology and media complex.
Silicon Valley technology companies wear the term like a badge of honor, taking pride in their inevitable toppling of long-established paradigms and slow-moving companies that do not ‘get’ why the newest technology is about to upend their respective industries. While there are innumerable cases of disruption across a range of consumer-facing businesses, the dynamics of- and the realities around ‘disruption’ are different in industrial industries.
I am the CEO of an Industrial IoT company called Ambyint. Today we serve the oil and gas industry with an end-to-end solution that includes proprietary edge devices with embedded communications, a cloud platform for autonomous management, optimization, and analysis of customers’ assets (i.e. producing oil and gas wells), and are actively rolling out frontier, edge-powered machine learning capabilities live into customers operations, something that few, if any, industrial AI companies can actually claim to be doing.
I formally took over as CEO of Ambyint a year ago. As soon as we announced the leadership transition in my first all-hands meeting, I banned the term ‘disruption’ from use across the company. In particular, I did not want to hear anyone from Ambyint tell our exploration and production company (i.e. oil and gas producers) customers that we were going to “disrupt” their businesses. I couldn’t just ban customer-facing employees from using the term externally – I also had to ban it internally to change the culture around how we thought and talked about the innovations that we are delivering to our customers.
Oil and gas producers and other industrial asset operators invest billions of dollars of capital into the ground over investment periods that typically span 20 years or more. They do not pivot overnight to the ‘next’ wave of technology, as they are first and foremost concerned with maintaining the integrity of their operating assets and their revenue-generating potential. When you approach a customer to tell them that you are going to ‘disrupt’ their business with your innovative new technology, many of them instead hear, “I am going to put your industrial assets at risk.” That is the fundamentally wrong message to send to customers, particularly those that are already skeptical of new technologies.
The Upstream Oil & Gas industry has a history of its own ‘disruptive’ innovations. For example, the shale revolution, with its multiple knock-on economic effects for the US economy and global oil and gas markets, is fundamentally a technology and innovation story. However, the industry can also be slower to adopt new technologies such as process optimization and modern data/software technologies, despite the multitude of benefits that analytics, machine learning and AI promise. Onshore production operations, which we serve today, seems to represent the most extreme example of this slower adoption mentality, with field operations staff at many companies operating in the same ways they have been for 50+ years. This means that there are now tremendous opportunities to leverage new technologies to drive efficiency improvements.
In spite of some industry stalwarts resisting the pull of more efficient technologies, especially in production operations, there are some examples of companies who are innovating, and who are starting to reap the benefits. However, changing the status quo requires leadership, as it is often more comfortable for field staff and engineers to stick with the devil they know. The customers who are most aggressively adopting our technology, and who are seeing the largest benefits, are those where senior managers and executives see the opportunities for change and improvement and are at the forefront leading that change. Without senior leadership, change does not happen.
By working with oil and gas technology leaders like Ambyint, companies are seeing the benefits of innovation without the unnecessary jolt of disruption. For example, some operators are seeing production increases on under-pumping wells of up to 33% without reducing production efficiency. On overpumping wells, these same operators are realizing efficiency gains of 10-25% without losing production, while reducing maintenance and electricity costs by similar or greater proportions.
Taking Christensen’s thesis on disruptive innovation a bit farther, while disruption can be innovative, we believe that innovation does not have to be disruptive; and when billions of dollars of operating assets are at risk, it should not be disruptive. To that end, at Ambyint we describe our technology as creating the ‘self-driving car’ for oil wells, which really means letting the ‘machine’ run the oil well and field. Ambyint is leveraging best-in-class technology tools like artificial intelligence, machine learning, and IoT devices, but we cushion those potentially ‘disruptive’ technologies with deep domain expertise – enabling our customers to innovate at their pace, and creating significant value for them in the process.