Driving Innovation During the Downturn
The importance of taking calculated risks as the pandemic surges.
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2020's pandemic economy is full of contradictions. The unemployment rate reached a high of 14.7 percent in April, yet the stock market has been soaring. And demand for oil and gas has seen historic lows as many work from home and avoid flying and driving. Yet, if there is anything to be learned from both pandemics of the past and previous economic downturns, it’s that innovation thrives during periods of duress. There is an opportunity for the oil and gas industry to emerge from this challenging time stronger and positioned for growth — with a focus on digital transformation and a commitment to new talent and a culture of reinvention.
Tragedies of the Past Led to Innovation for the Future
We’re now several months into the pandemic, and a number of norms have crept into our daily lives — social distancing, working from home, masks and more frequent hand washing. Former routines and comfort zones have disappeared, and there is no such thing as business as usual. In the past, this type of environment has led to leaps in science and technology in particular.
Take the 1918 flu pandemic that killed tens of millions of people. In its aftermath, countries around the world recognized the need to provide a healthcare safety net for the public. The U.S. began adopting employer-based insurance plans while European nations like the U.K., France, and Germany introduced socialized healthcare systems.
More recently, the SARS outbreak of 2002 resulted in advancements in technology, with China leading the way. Like COVID-19, SARS spread quickly and lockdowns forced many Chinese businesses to close their doors. For two companies, Alibaba (a young B2B e-commerce site) and JD.com (a chain of small electronic shops), the shutdowns provided an opportunity to expand their businesses and begin to introduce consumers to e-commerce, which today is a $3.5 trillion industry.
How the Oil & Gas Industry Can Win
Like every other industry, O&G has seen new challenges in recent months. And it’s not a short-term level of disruption: In a recent survey of U.S. oil and gas companies by the Federal Reserve Bank of Dallas, 51% believe that consumption levels might return to pre-pandemic levels by the end of 2021.
With more resources and room for risk, large oil and gas companies are well-positioned to innovate during this downturn. Now is the time to recognize the needs of a more tech-forward industry. Talent with skills in AI, data science, and machine learning are crucial to moving these businesses into the future.
However, talent can only be activated once O&G companies establish a digital roadmap that is both achievable and delivers value, like increased revenue or operational efficiency. What’s more, underlying any momentum toward innovation is an agile culture. Traditionally, oil and gas companies do not move as quickly due to prioritizing safety and the need to plan projects across months and years. But as companies begin to digitize, there must be opportunities for discrete projects that allow for quick decision-making while maintaining safe operations.
In light of these trends, Studio X has emerged. Powered by Shell, this global innovation studio is reimagining the future of energy exploration. With its talent incubator, Sixlab, Studio X is providing startups and entrepreneurs with the opportunity to practice and test new technologies in energy exploration.
Hopefully, History Will Repeat Itself
The current public health crisis quickly ballooned into an economic hardship as well. For this industry, it has exposed a need for digital transformation. Yet with the right tools, resources, talent, and motivation, innovation will inevitably follow.