QUESTION: Do we, as an industry, define ourselves as providing fuel for end-users? Or are we energy providers meeting the needs of our evolving communities?
And yes, there is a huge difference between the two. Whichever way an organization chooses to identify, it is safe to say that co-creation applies to all. For simplicity, co-creation is the contribution of otherwise unconnected stakeholders from separate fields towards creating innovation value within the same project eco-system. Like casting your net wide across the ocean, instead of fishing with just a hook and a line.
From conversations with many colleagues, I realize that the issue of innovation and the possibility of co-creation is still very much on the backburner for many. I have been variously questioned about the possible risks of sharing trade secrets with internal and external partners, in the name of co-operation. I have also been warned about the dangers of investing in the public as contributory stakeholders to the future of Africa’s oil and gas market. After all, I am told, many of us are not businesses that face end-consumers directly. And there are more than enough burdens that affect our P&L already. Why add more?
As practitioners in the co-related fields of oil and gas, we have come a long way from the days when we enjoyed a ready and steady global market. Today’s management teams are increasingly pre-occupied with driving our costs down, keeping our footprints low, keeping our overheads light, keeping our processes efficient, and most importantly, keeping our positions and market shares away from the competition.
While there can be no argument as to the importance of our preoccupation with these dynamics, there is another angle to success in today’s customer-centric market: the innovation angle. Our very industry was founded on innovation and cooperative engineering from those who coax the earth to yield her treasures; to those who coax the machines that process these treasures into usable form; to those, like myself, who coax the end-consumers into yielding the contents of their pockets.
Monitor Deloitte’s 2016 Oil and Gas study looked at “current perspectives on innovation in an age of rising costs, multiplying risks, increasing environmental concerns, escalating activism and shrinking margins.” (emphasis mine.)
Perhaps we have inadvertently grown more risk-averse because of this need to respect our margins. Recent events have also not given us the confidence to invest in innovation. Low oil and gas prices make it economically unwise to pursue exploitation in areas that are not easily accessible, prone to unrest, or governed by unfriendly policies. We are having to deal with conservation, environmental advocacy, and the vocal push for clean energy infrastructure in the communities that we serve. The place of technology in new data analysis, new operational dynamics, and new resource information needs, cannot be understated. We are moving towards a new way of engaging our markets (internal and external) and those organizations who embrace the paradigm shift will enjoy the dividends well ahead of the rest.
This is one point where Africa needs to be realistically futuristic about the terrain we want to create for the long-term future. In order to stay relevant, we must make room for radical innovation inside our organizations, across our regions, and within our connected industries. Alva UK’s June 2016 study reports that innovation has been a key driver for organizations that embrace this concept. Accrued benefits include increased company visibility, positive brand awareness, product line adoption for consumer-facing businesses, and heightened goodwill and loyalty for energy companies that co-create to innovate for the satisfaction of the end-user.
SSE (UK) became a celebrated case for using Artificial Intelligence in their product portfolio, so that data could be used to ensure “safe, secure, and reliable” energy supply through the eco-system. British Gas gained ground with ‘New Smart Energy’ monitors which lower operational costs by showing consumer usage – in real time. They moved from batch-processing to real-time analytics, aggregating precious usage data from hundreds of thousands of UK households. By co-creating innovative solutions with other players in the market, they were able to touch the consumer directly, while improving the operational reality. Taking the leap further, London-based Tempus Energy has launched a platform that can predict performance, forecast market behavior, and optimize the organization’s flexibility to deal with these dynamics. American automobile Local Motors, is using co-creation for online engagement, car design crowd-sourcing, usage experience data, and buy-in from the enthusiastic build-your-own community. In a world where our home and work environments are increasingly automaton-led and web-connected, we are facing a future that is energy-decentralized and increasingly influenced by our end-user’s desires.
NASA, Nike, Starbucks, Orange, and Tesla are examples of co-creation pioneers whose stories are globally relevant. Co-creation enhances the dialogue between all our connected parts, builds up the eco-system, invokes stakeholder buy-in, and enriches the entire value chain. The real power of co-creation is in the collective intelligence generated from the gathering of players. As a football game is won by a team, with individual champions making the winning plays, so a market should be played with an eye to the value of the individual as an integral part of group success. Relationships are nurtured in co-creation, and our industry is very relationship-dependent, with strong sociopolitical influences on global energy policy.
Imagine for example, a co-creation team involving local farmers, environmentalists, students and academics, homemakers, platform developers and the oil and gas exploration firm, ABC. ABC emerges at the end of these deliberation with transformative innovation solutions for power grid analytics, seismic drilling analytics in difficult-to-reach locations, LPG usage analytics for households and businesses, grassroots-to-government buy-in and policy support, not to mention the fact that Company ABC is now personally known, positively visible and directly relevant to each of the contributors. The information generated is integrated into the strategic planning process, the resulting innovation is then incorporated into the eco-system where it helps to fulfil our initial goals of cost-efficiency, market optimization and stakeholder engagement. The co-creation experience engages partners on all sides of a problem, challenge, or opportunity, and enables us to jointly tackle issues from both ends of the value chain.
Questions have also been raised about patenting and ownership rights for communally developed solutions. This has been addressed by other co-creators. Co-owned intellectual property can be creatively licensed to promote systemic collaboration, while protecting end-product design ownership. In most cases, the outcome is directly beneficial to all parties and enjoys regulatory buy-in from concept to desired outcome. The Petroleum Institute of East Africa prides itself on the ability to gather industry players at various levels, to curate industry fora where we can contribute, and to benefit from the knowledge base that our community represents. This is the beginning of co-creation within our industry. Now, on to the magic of finding innogrative solutions to challenges we face as stakeholders in Africa’s oil and gas future.
Funke Michaels is an MIT Sloan Fellow, a Harvard Mason Fellow, and co-founder of the MIT Africa Investment Forum. Nigerian-by-birth and Kenyan-by-marriage, she also heads marketing and strategic communications at Burhani Engineers, an innovation-focused organization working across 16 markets in East and Central Africa.
Credits: Original paper on Innovation and Development in Oil and Gas, written for The Petroleum Institute of East Africa. July 28, 2017.