Leveraging Tech Start-Ups, Removing Fear Of Failure Could Drive Innovation In Oil And Gas

Fear of failure, lack of sharing of ideas and an inability to tap into the tech start-up community and transform R&D into commercial products are hampering innovation and productivity improvement in the oil and gas sector, say industry insiders.

“You cannot have fear of failure in your organization or you will not have innovation,” said Suzanne West, president and chief executive officer of Imaginea Energy. “You will not have it because people will not bring forward ideas if they feel that somehow they are going to be punished. We don’t seek failure but we also celebrate failure because it means we learned something.”

Speaking on a panel at the Industry Roadmap: The Future of Oil & Gas 2017 event in Calgary last week (hosted by TheFutureEconomy.ca, part of Milestone GRP), West added: “The other thing that is huge in our organization—it applies to everything—is, do not expect to have innovation if you do not have a leader who is innovative. Don’t ask people to do something you are not prepared to do yourself.”

Brett Henkel, vice-president, commercial development at Inventys, a Burnaby-based developer of a carbon capture technology currently undergoing field testing with Husky Energy Inc., said oil companies don’t appreciate the leverage they have in working with technology start-ups.

“I think oil and gas companies underestimate the power that they have in leveraging their involvement in technology development. We have leveraged our investment from oil and gas companies 10 times with investors, with government, with others. The power of leverage is huge for technology providers.

“The other benefits are speed of development and nimbleness. Small organizations can be very focused on specific technology challenges; that’s harder for large organizations to do. That’s a real benefit.”

Marty Reed, chief executive officer of Evok Innovation, a Vancouver-based cleantech fund launched by the BC Cleantech CEO Alliance, Cenovus Energy Inc. and Suncor Energy Inc. last year, suggested there is a shortage of tech start-ups in Canada to create a vibrant innovation ecosystem.

Reed described the typical venture capital funnel thusly: “We will start by looking at about 1,000 companies, we will select out of that maybe 10, and out of that 10 if five succeed, that is an absolute homerun by our metrics.

“When we talk about an ecosystem, we have got to find ways to iterate quicker and faster because when I look around the Alberta ecosystem, or all of Canada, right now I don’t think I can name 1,000 companies that would merit coming across my desk. So how do we increase that number?”

By comparison, Silicon Valley is home to tens of thousands of start-ups, he said, “95 per cent of which are pretty bad, but that’s how you get to those five per cent that really move the needle.”

Canada could also learn something from Silicon Valley giant Google when it comes to creating a culture where it is acceptable to fail, and where companies can do so in a way that it is done quickly and relatively cheaply. In its creative lab, the company “basically gives bonuses to employees when they kill a project. They get a bonus for initiating it, saying this is a great idea, but then if six or 12 or 18 months down the road it’s not working they decide to kill it and move on, they get a bonus for that. So you have got to have that culture.”

The reward for innovation is a potentially big one, he notes, chalking up the unconventional oil and gas revolution to digital oilfield innovation. “The tight oil revolution in the U.S. was a digital revolution. That is what enabled it. When we talk about 40 per cent cheaper drilling, faster drilling, almost all of that was enabled by smarter computing and better analysis of the data that was coming out of that.

“It is a technology broadly speaking that can be deployed faster, quicker, cheaper, and it informs everything else that you are working on, whether it is carbon capture, water solutions or other. The ability to have that data, process it quickly, and use artificial intelligence to inform future decisions, is massive. If there is one takeaway, in my opinion, Alberta has underinvested in this category and it needs to catch up quickly.”

Joy Romero, vice-president, Technology & Innovation with Canadian Natural Resources Limited, said it is often unrecognized that CNRL is a “leader of R&D in Canada” as the fifth biggest spender overall and the largest spender in oil and gas last year.

As the company has grown, it has had to put processes in place to facilitate internal innovation. It has “put in systems to make sure those [internal] voices are still heard. Unless you actually do that kind of active driving to support innovation, and grade those systems, especially in a company of our size, unfortunately good ideas get lost.”

The company provides to employees the same level of service and access to processes as it would an outside technology provider. “And we have those workflows so they can go on to our internet and basically say, ‘I have got a great idea, who do I need to see?’

“My team also goes and visits inside of the departments, attends meetings with managers… and we definitely have a very frequent interface with our engineering teams,” she added. “All of that also goes up into the governance structure, right from our president to our senior VPs across the company. Accountability goes in all directions. And I think that is what is really important—you can’t ever have it that it is just the top that says, ‘we will do this,’ or you have great ideas coming from the bottom but you have no ability to execute them. You have to have those linkages all the way through.”

It’s part of creating a culture of innovation from top to bottom, Romero said. “Innovation—doing something different, better—is every employee’s accountability, as is safety, as is environmental accountability.”

The company-wide accountability and new processes have brought results, she added. “Before we had our teams, some of these things could churn around the company for a year. Now, our goal is to bring [the process] from somebody who brings an idea forward through to the contracts being in place and a pilot or a pre-pilot … in less than three months, and we hope to actually improve that.”

Inventys’s Henkel said another way to speed up the innovation cycle is for companies to establish dedicated technology teams within their organizations with the mandate to foster and shelter technology providers.

“When we go into a large organization and try to get a pilot project into the field, we deal with about five different divisions within oil and gas companies—the business group, the projects group, an operations group, the safety group and usually there is a technology services group. So we may touch hundreds of people within the organization, and the technology provider is usually a small organization, so that takes time and it is a real challenge.

“A dedicated team within those oil and gas companies that deal with the innovation cycle from start to finish and actually shelters the technology provider within the organization is very powerful. And actually we did go through that—a power company down in the [United] States had exactly that and I tell you the difference was night and day. It was a much better system and much easier to navigate for a technology provider,” Henkel said.

Additionally, oil and gas companies should get involved with the technology providers at an earlier stage of technology development, long before a technology is ready for field-testing, he said.

“Failure in the field is costly, and that’s why there is a hesitancy to [field test]. Spending more time with the technology providers before the field is very powerful, and it doesn’t cost a lot for the oil and gas companies to deal with the technology providers in the lab before the field. That’s where the power is, for guidance, for product development, focused on the oil and gas companies’ needs before you step into the realm of field-testing, where failure can be very, very costly.”

Romero, who said she has worked with universities and research institutions across the country, said the lack of sharing of knowledge is costly to the industry. She said she has experienced “the great displeasure of seeing the same thing invented many times. This is one of the saddest travesties of our country, because it wastes the unique capital that, if innovation and knowledge was better shared if it was more open, people would be building on that knowledge versus repeating it. We will still get there, but we will waste a lot in getting there.”

“I am going to up that one more and say something potentially quite disruptive,” added West. “Our industry has been destructively competitive—we just don’t have sharing as a general rule. And until we start sharing as an industry and until we break down these competitive barriers, then we will also suffer the same fate, wasting and being slow.

“We are amazing in R&D in Canada and we are atrocious at basically early adoption and commercialization. We invent this stuff and then we never use it. If we want to really move the dial, we need to have a sense of urgency around what we are doing. At Imaginea, in our accelerator, we open source all the results. I don’t want competitive advantage; I am interested in changing the world.”

Richard Adamson, former president of CMC Research Institutes, said innovation does not need to be locally grown. “What we need to do is create the conditions that make it a really attractive place to do that, and attract innovators from everywhere in the world into this ecosystem to solve a problem. We need to make sure we are focused on bringing in innovators as much as trying to grow them internally.”

Todd Parker, chief executive officer of Blue Spark Energy, said that Canada has a productivity issue to the extent that creative ideas are not commercialized and fully taken advantage of.

“Canadians are inventive. Canada is full of ideas, full of innovators and innovations, there is no lack of that,” he said, but the country lacks in “the ability to take those and create value. We are not a marketplace that has been very successful in taking advantage of those innovations and utilizing them, in a tough industry, to try and create value. In Canada we do need to catch up—we do have a productivity issue.”

Steven Koles, president and chief executive officer of Hifi Engineering, noted that Alberta does have some successful programs to assist start-ups through to commercialization, such as those offered by Alberta Innovates. “These programs are great and we have been very successful leveraging them here in Alberta,” he said.

At Imaginea, part of being innovative is having no people who say “no,” said West. “We don’t have any hierarchy, so everyone is basically responsible for their own domain, in which case they have the ability to execute ideas etc. within those domains. They don’t necessarily need approvals from anybody if that is within their jurisdiction.

“We have what’s called project pitch, and you pitch it to your teammates; you don’t pitch it to bosses, so if your teammates say yes, that sounds like something we should spend our time and resources and shift some of our moneys to, it’s a very joint accountability [to take it forward],” West said.

“Our number one thing is that we literally don’t have the noes in our organization, and people get to do it on their own and they have passion. When you have a company that’s based in purpose, not solely for profit, it makes a massive difference in people’s engagement—their hearts and souls—in what they are doing. They will be more innovative, more collaborative, more productive, because they care deeply about what they are doing.”