Building Digital Muscle

As low oil prices, the rising use of renewable energy, and digital technologies threaten disruption, oil industry incumbents face a prolonged period of uncertainty. Alisa Choong, head of digitalization at Shell, one of the world’s largest oil and gas companies, believes digital technologies are essential to solving today’s energy challenges.

But companies must be able to anticipate—and embrace—change. As Choong points out, technologies that were considered state of the art a few years ago already are out-of-date. For this reason, she and her team continually scan the horizon for innovations that can advance the industry and reshape the future of energy.

Recently, Choong sat down with Jake Leslie Melville, a senior partner and managing director in the London office of The Boston Consulting Group. Edited excerpts from that conversation follow.

Good morning. Thank you very much, Alisa, for taking the time to speak to us. Let’s start with a description of your role as the executive vice president of technical and competitive IT in projects and technology at Shell.

In my role, we use IT technologies, especially digitalization, to drive competitive advantage in the Shell businesses. We focus on a few key areas: subsurface, valves, engineering, and production as well as capital projects. We also focus a lot on our customer experience.

How much of a balance is there between working with the core business and seeing the disruptive technologies that digital will potentially bring to some of your customer-facing businesses?

In the past 12 months, every single business leader—including our executive committee—has digitalization on his or her agenda. The technology of using robotics, remote monitoring, and advanced analytics to drive efficiency in our manufacturing and production is key to our core business.

We are currently using drones to check the flare stacks. As a result, we do not have to have people climbing up 100 meters, and we can keep people safe. At the same time, it increases our production and reliability because we don’t have to shut down the plant to have this equipment safety check.

There’s nothing in the whole supply chain that digitalization does not touch. However, it’s not without its challenges. The first challenge is that we have to adjust to living in the world of lower-for-longer oil prices. How do we roll digitalization into our integrated programs to ensure that whatever we do is about sustainability and that [digital] is embedded in the asset? That’s where it’s important. That’s where we get value.

The second challenge is that we have lots of data. However, when you have lots of data, it comes with a certain ownership of data and being clear about who is responsible for which data. How do you keep it clean? How do you keep it current? And, more important, how do we gain insight from data?    

You mentioned lower-for-longer prices. Many energy companies are being squeezed because of the lower oil prices. In this environment, as you roll out the digital agenda, how easy is it to manage and balance the need for efficiency and cost savings with the drive for innovation and growth and investment in those two areas?

When we look at lower-forever oil prices—whatever we do, whichever projects we work on—we have to look at them with two lenses. There’s the lens of the ability to reduce cost and increase productivity and reliability. Digitalization gives us that opportunity. If we just apply analytics to how we look at our production, a 1% increase in production will save us billions of dollars.

Shell is also looking at energy transition. Energy transition means that we have to look at what we can do now to lay the foundation for the changes that are going to come in the next couple of years, if not the next ten years.

There’s been quite a lot in the press about building digital muscle to manage the optionality of the future. How is Shell going about building up its own digital muscle?

My organization and I feel that we have the responsibility to educate our senior leaders. They will be the core champions who drive the digital opportunities that they will identify in their business strategy.

One of the roles that has been established is the IT chief technology officer (CTO), who is responsible for scanning the market on emerging technologies and the markets of potential startup companies we work with. It’s a rather important role because the CTO is scanning what is available and, most important, seeking out the technologies and the companies that can add business value to Shell. We bring those technologies in house, and we work with our innovation team to mature those technologies, identify business opportunities so that we can do a proof of concept, and then roll out a pilot so that we can drive business value within a short period of time.

What advice do you have for other large companies in terms of developing, retaining, and recruiting highly skilled digital talent—particularly when potential employees view you as an industrial company, not a technology company.

We have to have the right human resources policy that allows us to capitalize on and treasure our talent. We also need to have an environment that is open to people bringing in ideas and challenging existing norms. We start that by ensuring that when you come to work with Shell, you are given a complex problem to solve.

That itself is very energizing and motivating for the talent we bring in, because new recruits start working on a business problem together with the businesses and with their colleagues who have years of domain expertise. They get to see their talents bring a solution and bear fruit. That is also very satisfying.

Alisa, thank you very much indeed for your time. For big and small companies, looking at Shell’s digital transformation will be very interesting.

Thank you, Jake.