ML Journal October 2021

ML Journal October 2021

Dialogue: Transforming the Future at Shell

Shell’s future vision is being fueled by sustainable innovation, data, and meaningful digitalization that delivers clear business outcomes, explains General Manager of Digitalization Peter Westerink.

“Digitalization is not just continuous improvement. It’s a process of exponential and disruptive improvement. It’s going to mean significant change. And that requires a change in mindset and very deliberate leadership.”

Peter Westerink, General Manager, Digitalization Chemicals and Products, Shell


Inspired by the exotic seashells that trader Marcus Samuel imported from Asia during the 19th Century,
the Shell brand was chosen by his sons to represent their new kerosine business in 1897. Over a century later, Royal Dutch Shell has grown into one of the world’s largest energy and chemicals companies operating across more than 70 countries and with 87,000 employees.

From the lips of Marilyn Monroe in the film ‘Some Like it Hot, to the glowing signs outside thousands of gas station forecourts across the world, Shell’s name has become synonymous with power and innovation. In the midst of today’s global transition to cleaner energy, the company is now focusing on developing new sustainable solutions, transforming its global operations, and achieving its own ambitious decarbonization targets, all with the help of digital technologies.

In our latest Dialogue with a manufacturing industry thought leader, Peter Westerink, General Manager of Digitalization for Chemicals and Products at Royal Dutch Shell, talks to Manufacturing Leadership Council Executive Editor Paul Tate about the balance between data, people, and technology along a digital journey, the rise of the citizen data scientist, the parallels between digital transformation and global energy transition, and the role of manufacturing in shaping a different kind of future.

Q: What excites you most about your role at Shell?

A: We’re in a time of tremendous change. Being at the forefront of redefining what the role of manufacturing is going to be for Shell in the energy transition is tremendously exciting. We know about the challenges, but we also see tremendous opportunities in the growth of certain areas of the business, like performance chemicals, for example. What excites me most in this role is bringing technology and people together in new ways to create transformative business results. I think the word transformative is critical here. We’ve seen a lot of continuous improvements in our industry over the years, but digitalization gives us a new opportunity, not just for incremental steps of improvement, but to make radical changes that can deliver significantly different transformative bustiness outcomes.

Q: What challenges still keep you awake at night?

A: What keeps me awake at night is, how am I, as a leader in this industry, going to be able to lead and influence some of the major decisions that are going to shape not just the industry, but also what’s going to happen in our society? I’m convinced there is a role for the manufacturing industry in the future, and I’m also convinced that that role is going to look very different. Making sure that our industry is relevant and that we meet the challenges not just of today, but also the challenges that future generations are going to face is one of the most important drivers I have.


“I believe that successful digital transformation is 60% about data, 30% about people, and 10% about technology.”

 

Q: What key trends that are currently driving Shell’s global markets and the way Shell defines and develops its business in the year ahead?

A: The first is the global move towards decarbonization. It’s a hot topic for every industry. In Shell we take a sectoral approach, looking at each sector that we play a role in and then developing specific strategies for those sectors. Take aviation. We know electric airplanes are still a long way away, so what can we do today to develop more sustainable aviation fuels? We did some great work on this earlier this year with synthetic kerosene that is partially produced from CO2 from the atmosphere. Look at road transport, particularly for individuals. We see a massive electrification of vehicles in Europe, in the US, and major urban hubs across the world. Shell is actively playing a role, including extensive EV charging networks and specialist EV lubricating fluids.

The second priority is to look at the assets we have and try to repurpose them to enable the energy transition. It will be the same for a lot of manufacturing companies. Shell is transforming five traditional refineries into Energy & Chemicals Parks, which will see less processing of crude oil and more recyclable and renewable feedstocks, so they can be linked into a hydrogen infrastructure, a biofuel chain value chain, and become producers of, or sinks for, electrons as we stablize grid operations for large-scale electrification.The repurposing of assets is going to be a major trend.

The third key trend is the completely different role that customers and stakeholders will play in our industry in the future. We are creating a different mindset within the company that puts the customer at the heart of what we do. We are already seeing a far more differentiated customer base which will become increasingly more demanding of the energy industry. Being able to translate those customer demands into value propositions that generate the revenues our shareholders expect is going to be a big challenge for the industry and a major trend in the coming years.

Q: What’s driving Shell’s digitalization strategy today?

A: Digitalization is not a new idea at Shell.  We pride ourselves on being a high-tech company and we’ve always looked out for opportunities to leverage digital solutions. But the pace of change has picked up tremendously in the last decade. We’re now at a stage where the hype is over, and we’re in a period of heavy lifting. We have become very deliberate and purposeful in the way that we approach digitalization. In the initial phase, lots of people pursued lots of different ideas; we sometimes called it the “let a thousand flowers bloom” strategy. But we’ve recognized that is not the way we’re going to win in this industry and not the best way to leverage our scale. So, bringing structure, a clear vision, and perhaps more of a top-down approach to our digital strategy has helped us to become far more focused on a line of sight between a technical capability, that results in a business capability, that then brings a significant business outcome. That being said, we see huge potential in making AI accessible to employees who may not come from a traditional data science background. We provide the frameworks and tools so bespoke solutions can be created to solve local problems. Digitalization has enabled $2 bn of process improvements, cost reductions, production increases, and increased customer margins across Shell’s businesses in 2020 alone, doubling from 2019.

Q: How do you balance the various aspects of digital transformation as part of this strategy?

A: I believe that successful digital transformation is determined 60% by data, 30% by people, and 10% by technology. Very often in an organization of technically oriented staff we’re enamored by new technology. But really, data is the fuel that makes the digital engine run. What’s important is that our business leaders start to think differently about the data behind their business challenges before they get into anything else. One of the things that has influenced my thinking is Thomas Redman’s book, The Field Guide to Data Quality. He states very clearly that organizations that have an improved data governance will sustain and report enormous benefits. They will improve their customer satisfaction. They will create empowered employees. They’ll save enormous amounts of money. And they’ll make more confident decisions faster and better align their departments. Data is at the heart of many of those challenges. So, it’s good to start your focus there.

“Data is the fuel that makes the digital engine run.”

I also think the way we operationalize our data, the way we bring insights to the teams and decision-makers, the way we work with data in our work processes, and create new data-centric business models, is going to be the other major value lever. Bringing people along in how you apply data is essential. Organizations that are going to be most successful are the ones who can get their data and their people right. I think the technology is only a marginal differentiator in a successful scale-up digital transformation.

Q: Let’s start with the data dimension. How are you coping with today’s vast explosion of data at Shell?

A: At Shell, we have aggregated more than 1.7 trillion rows of data in our asset data lake. With such staggering data volumes, cloud storage is absolutely essential. It’s crucial that you team up with the right companies to help you do that and keep data storage at an affordable cost.

Beyond storage, how do you process all that data? We’ve significantly invested in building up internal capability. We have a skill pool of over 350 people in our mathematics, computational, and data science department. We have over 4,000 software engineers.

But we also have nearly a thousand citizen data scientists all working on developing applications on the back of this data. We’ll continue to see volumes data grow. So, having good data standards and good data governance is critical for the data that we generate in-house. But a large part, in fact the majority is generated outside, in the public domain. There, I think it’s about developing the right tools that allow you to process unstructured data in a way that it becomes meaningful to your business.

Q: How important is that citizen data scientist program for Shell?

A: In our early days, we built small teams we called digital pods, which would comprise of three people – a data scientist who has the skills to write algorithms that will unveil correlations that exist within the data; data engineers who are able to unlock data and navigate through different cloud storage spaces; and domain experts, or subject matter experts, who really understand how to translate the insights from data into meaningful business outcomes.

We now see many more people in the company who have been trained in using digital tools, so we developed our citizen data scientist program. We have a community of nearly a thousand citizen data scientists today and that community is growing rapidly as a lot of people are seeing this as a way to up-skill and re-skill and to remain relevant in our changing industry. In our Chemicals and Products business alone, within a year, we have trained more than a thousand citizen developers who have developed more than 75 live bespoke applications. These efforts have already realised more than $35 million in cost reductions, improved reliability and efficiency benefits. And there are at least 200 more applications in the pipeline.

“The future requires leaders who are far more able to listen to what is happening around them, listen to what stakeholders want, what shareholders want, what customers want, what societies and governments want, and be able to respond much, much faster.”

The people who are skilled in these three areas of using data are really the workers of the future. If you look at young people and the way they’re being trained at universities today, you can already see that they will come in with skills that far outpace many of us when it comes to these three key data domains in the future.

A: In broader terms, how have you been able to manage the people aspect of Shell’s digital journey?

A: One part is where digitalization offers excitement and opportunity because digitalization can be seen by some people as a threat to their jobs. One of the key things that we realized in Shell is that success doesn’t come from outside the organization. If we’re going to be successful it has to come from within. So, we have to invest in our internal capability and that means investing in people, training, and giving people opportunities and different kinds of challenges.

It’s also very important to create a digital narrative for the company and for our employees – a description of what the future state looks like so people can recognize their own role in the process. Inevitably, they also have to recognize that the world is going to be different from the way they’ve been operating before. Digitalization is not just continuous improvement. It’s a process of exponential and disruptive improvement. It’s going to mean significant change. And that requires a change in mindset and very deliberate leadership.

The key for me is to address that openly, to have a meaningful engagement with the organization. Digitalization offers more opportunities for centralization, for remote operation, maybe even autonomous operations in time. So, having that open dialogue with the organization I think is critical. When you have that dialogue, there’s a lot less fear within the organization than maybe leaders had anticipated, and you’ll start to find new ideas coming right from the shop floor. So, we believe that success will come from within the company and by being able to successfully change the business model and the mindset and the skills of the people within it.

Q: Which digital technologies do you think will make the most impact on the company in the future?

A:  I see a lot of activity in four key areas. There’s definitely an area around predictive analytics building on AI machine learning and on the collection and storage of data, because having more data, and easy access to it, will allow you to do better analytics. We`re currently monitoring over 8,200 pieces of equipment using AI. There’s also a lot of focus on the connected worker, making sure that we enable people in the frontline better with real-time insights to streamline processes. That is a key area. A lot of effort is also going into digital twining, which is seen as a very transformative way forward towards remote or autonomous operations, and to creating full transparency in everything that’s happening in a manufacturing asset, not just for real-time insights but to be able to simulate what could happen and explore different scenarios to better play into market opportunities. That’s an area of massive development to keep an eye on as well. I think one of the other technologies that folks get very excited about is blockchain. Towards the second half of this decade that is going to cause a massive shift, not just in the manufacturing industry but, if it scales as a technology, it’s going to essentially remove trusted third parties – accountants, auditors, all the companies that are providing verification services, including even banking. So, it’s going to have a tremendous impact on the future, and not just on the manufacturing industry.

Q: How do you measure the success and the impact of all those technology initiatives?

A:  For me, digitalization is not about deploying technologies or technical capabilities. It has to lead to a change in business capability that brings a business outcome. Sometimes that can take a little while and sometimes, it can be a bit of a nebulous question. What’s the demonstrable value of email, for example, versus regular snail mail? Is it the savings from stamps, ink, and paper? Surely there is more value, but it becomes hard to assess that objectively. You can quickly get caught up in a complex calculation process that gets challenged by different people.

Even if it’s difficult to calculate the value, we need to address this head on and we may have to look for proxies to expose that value or to make it visible. That’s for two reasons. One is that we are running a business, so we have to compete with other initiatives for time, resources, and budgets. Being able to demonstrate value is important. Secondly, the success of any digital project comes from business ownership. If the business looks at this as simply a potential upside opportunity or an IT project that is happening on the periphery of their activities, you’re not in the space of transformative change. You’re at best in the space of continuous improvement.

“Making money in the future and running a successful business is going to be far more complex. It’s going to require partnerships, not single companies.”

 

So, the value question is absolutely essential to driving an effective digitalization strategy. We use an approach which we call “ultimate potential”, looking at the potential of that part of the  business and how do digital tactics play into that. There’s a process around it, including evaluation. We have a dialogue with the business leaders and then make a value assumption. If predictive maintenance is meant to bring X amount of value, for example, then let’s measure how much of our equipment is being monitored by AI, take a baseline, and measure the improvement in reliability that we see from it.

So, there are different ways and techniques we can use to try to address the question, But I will say, at some point, you need an element of belief, particularly for the bigger initiatives like digital twins, which are the virtual representation of physical assets integrated with their dynamic behavior. It requires leadership to believe in it. Having a number of smaller wins that really show how the business is changing will help to inspire that belief within senior management that some of the bigger projects are certainly worth the bet.

Q: How important will digital transformation be to creating more sustainable operations and meeting net zero decarbonization targets over the next few years? What level of priority do you think manufacturing leadership teams should now be giving to sustainability?

A:  I see a lot of parallels between digital transformation and some of the decarbonization and energy transition challenges we have. One is driven by competitive forces and digitalization allows us to generate different business models. But decarbonization is a more complex forcefield. It includes building and maintaining a societal license to operate that mirrors changing customer demand. Both of these trends will have a massive impact in how we move forward. Although we may know the outcomes we seek, we don’t necessarily know the paths to get there right now. For both of them there isn’t a silver bullet. There’s more of a silver bucket of solutions that we need to act on to make our way into that new future.

That requires leaders to be quick on their feet, able to experiment with different technologies, but also able to forge partnerships because no company on their own is going to be successful in driving a digital transformation or thriving in the energy transition. In both cases, it’s a team sport. Finding and selecting the right partners for both challenges is critical. It also requires leaders who are far more able to listen to what is happening around them, listening to what customers, government, and wider society want and need, and be able to respond much, much faster. I think that’s where the two trends come together in terms of defining the changes that our industry will go through in the next 10 years.

Q: What do you think the biggest challenges and opportunities for the manufacturing industry along the way?

A: The key themes for the manufacturing industry over the next few years will be around introducing and building more sustainable models around circularity. That requires a value chain approach creating a closed loop on circular feedstocks. To do that in a profitable way, and in a way that delivers on decarbonization goals, will be key challenges.

If you look at the commodity side of the industry, we will also see the rise of platform trading. The companies that are going to be successful will be those that are able to integrate across the value chain to keep their costs low and better respond to customer needs.

If you look at performance products, which is the more differentiated part of our business at Shell, I see an expansion of manufacturing into more of a services environment as well. Not just only providing products, but by listening to customers and working with them on the innovation of new products. If the customer demands more transparency around the carbon footprint or the recycled content of a product, how can you offer a service that will help your customer decarbonize with those products? How could you offer a service around value chain transparency?

So, it’s a combination of new sustainable approaches to product innovation and more focus on service innovation for the manufacturing industry. Digital is going to be a key element of those transitions.

Q: What kinds of skills do you think the next generation of manufacturing leaders will need in that new era?

A:  Leaders of the future are going to have very different skill sets. They will have to be far more adaptable to change because the world around us is changing so rapidly and the stakeholder landscape is much more varied. In the past, manufacturing leaders had to work with the asset base, and marketing, and sales businesses. But nowadays, leaders in the manufacturing industry have to be tuned into customers, regulators, employees, and all of them have rapidly changing demands and requirements.


“We are the future-makers, and we will be able to shape what it is that we, as an industry, are going to become in the next decade.”

 

The second aspect is commerciality. Making money in the future and running a successful business is going to be far more complex. It’s going to require partnerships, not single companies. They will need the ability to setup contracts in a multilateral way that result in win/win solutions for multiple parties simultaneously in a world that is likely to be far more regulated. That is going to require different insights into how you run a business.

Thirdly, and perhaps most importantly, I think future leaders have to be inspiring and purposeful. The employees of the future are going to look at their time in the labor market far differently than we did 10 or 20 years ago. Jobs for life won’t exist. People will be far more comfortable switching between companies, or even working as independents for a company. They will want to associate themselves with a company that they feel is relevant. Those changes in the labor market will require a very different response from the leaders in the future.

Q: Finally, if you had to focus on one thing as a watchword or catchphrase for the future of manufacturing, what would that be?

A: Meaningful future makers. For me, that reflects the sense of purpose that we have, the relevance we will bring, but also the fact that we shouldn’t just focus on what we have today. We are the future-makers, and we will be able to shape what it is that we, as an industry, are going to become in the next decade.   M

FACT FILE: Royal Dutch Shell
HQ: The Hague, Netherlands
Industry Sector: Energy & Chemicals
Revenues: $180.54 Billion (2020)
Net Income: $4.8 Billion (2020)
Employees: 87,000 Employees
Presence: 70+ Countries
Production Sites: 13 Refineries + 7
Chemicals Facilities (Q1 2021)
Website: Shell.com

EXECUTIVE PROFILE: Peter Westerink
Title: General Manager, Digitalization Chemicals and Products, Shell
Nationality: Dutch
Education: Masters’ degree, chemical engineering, University of Groningen, Netherlands
Languages: Dutch, English, Spanish
Previous Roles Include:
Production Excellence Lead, Integrated Gas Division, Shell
Production Unit Manager, Pearl GTL Qatar, Shell
Start-up Business Advisor, Pearl GTL Qatar, Shell
Technology Services Manager, Shell
Process Design Engineer, Shell International Chemicals

 

 

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