[CAT® OIL & GAS] Digital as an Enabler: Planning Ahead & Working the Plan

Sergio Tigera: Welcome to the Cat® Power Podcast, where we deliver powerful insights into the world of Caterpillar Oil & Gas, showcasing the latest in technological advancements and highlighting the stories of the industry's most dynamic leaders. I'm your host, Sergio Tigera. Now let's get ready to power up with the Cat Power Podcast. Welcome to the Cat Power Podcast. My name is Sergio Tigera. We come to you each and every episode with some amazing topics and leaders, people whose stories have changed the game in Caterpillar and in the industry. And today, my guest is David Shannon. He's the commercial manager for Digital Services for oil in the gas division for Cat. So welcome my friend.

David Shannon: Good morning, Sergio. How are you today?

Sergio Tigera: Hey, great, great, can't be better. Today we're talking about digital. Everything digital in this world as we know that it has become, in our personal lives, in our professional lives, each and every day, digital plays a much bigger role in our success, in our health, everything. Today we're going to be talking about, just in general, we'll start off a bit about you, David, and then we'll get into some of the great things that Cat is doing in the digital space and helping customers and so forth. But let's start off with a little bit about your background. Tell me how did you get into the digital world? Were you always in that space?

David Shannon: Oh, wow. Well, it's ironic that when I started at Caterpillar, I had a bit of time where I worked in manufacturing and was in the quality technologies group. And at that time, digital was capturing all the data of the factory and using basically pre-Excel, where we would develop critical indicators to determine, are we producing 100,000 engines really well or really bad? So that really got it all turning for me from a quality standpoint in digital crosstalk.

Sergio Tigera: Hold on. Hold on. What was pre Excel? Because I don't even know what existed before.

David Shannon: A 2020. A 2020. So you have to type all the keystrokes in to develop the cells and it wasn't a data scientist. It was a statistician at that times.

Sergio Tigera: There you go.

David Shannon: Very retro. And then digital budget really bubbled back up for me when I moved into the marine division back in 2006, where we were focused on how do we develop remote monitoring? It wasn't even called telematics or digital. It was remote monitoring for the yacht segment. And I've touched quality, basically my entire career at caterpillar in one way or the other, whether it was product support and now specifically, in the digital space where I was in marine digital. And then I moved to the oil and gas division, where now I'm the commercial manager in digital. So it's weaved its way through my entire career at Caterpillar. It's very addictive and ever changing. It's always on the move.

Sergio Tigera: Absolutely. Yeah. That's one thing that's for sure with technology is, it's changing each and every day. And if you don't keep up, then you're going to be falling behind for sure. So let's start off on a high level, we're talking the internet of things with a digital landscape. Give me an overview of where we've been and where we're heading now on a high level.

David Shannon: Well, at a high level, the digital world is, it's a lot of investment. So if you look at the big three consulting companies and what they do in this digital space, they would tell you that about one and a half trillion dollars is being spent annually in the digital space, in the industrial internet of things, which, that's a lot of money.

Sergio Tigera: A lot of money.

David Shannon: And the challenge is that for all the money that is being spent, we're still stuck in this paradigm of the '90's that I talked about, where customers aren't really receiving that value, which that's really the contradiction between it. The money is being put in. You're hearing about digital and everything. You're seeing it in your automobiles and in your life. And the industrial space is still having to really play catch up in this area.

Sergio Tigera: Got it, got it. And so why is it taking so long or why is it so difficult for it to translate into practical, usable, everyday value in the industrial space?

David Shannon: That's a good question. I've done a lot of studying on this area. And if you go back and you look at the credit card industry that really started this digital space and getting into analytics, so here's your credit card being used incorrectly. How that has all evolved has been pretty methodical and it's worked out well. In the industrial space, it's totally different. Our world is really controlled by what you would recognize as the Society of Automotive Engineers. The auto manufacturing world controls everything. And it also helps the consumers because it standardizes everything. Digital never got standardized into the Society of Automotive Engineers. And so the industrial internet of things, there was no standardization. Normally, you could go buy a connector, a bolt. It was standardized, and you knew exactly what you were getting. Digital is all over the place. And the challenge is that we look at digital as your iPhone, basically. This is our touch and feel to the digital world. Try doing that when every single asset you touch has a different name for the iPhone, and what it's sending to you is different than what the next iPhone is sending you. And it really gets complex. And so that's one part that's really made it difficult for the industrial world to slide into a more advanced analytics state, which is something we'll talk about a little bit later. So that's one part of it. The second part of it is, I would submit to you that the expectations of digital is absolutely upside down. And that's a bit of a challenge. You hear about analytics, and Blockchain is what you brought up the last time that we chatted. And that's all great. But the problem is, when you're talking to the executives about a digital platform, and you're going through the scoping process of developing a digital platform, they get bought into this predictive analytics and reliability. Well, we're building that into the product and the manufacturing process. They don't buy a platform to watch things break. So really, the shift has to go from digital as being this icing on the cake, is what I call it, into really the planning, the optimization, the reliability is the last one on it. And that helps feed the business. And it justifies digital. So you got all this money being spent in the trillions. They're not seeing value out on the other end because they look at the reliability and the analytics when they have to start focusing on the planning and the optimization elements of digital.

Sergio Tigera: Exactly. Because things get more competitive, and you got to get more granular and more detailed in your planning and your predictive analytics and things like that. And the ones who do that will then be able to translate that into profits, into growth and so forth. We know that mechanics, you can't just hire a mechanic anymore. You almost need to hire a programmer so to speak. So we're definitely going down that road. We're not going back anytime soon or ever again.

David Shannon: No.

Sergio Tigera: And so that's definitely becoming a bigger part of it. So tell me a little bit about Cat Oil and Gas Digital Services. Now tell me why do you guys exist? What is it that you guys do as an organization, as a division? What's your mission here in helping the organizations and the customer succeed?

David Shannon: Our mission is to utilize our digital platforms, to be an enabler, an enabler to the services game that we focus so much on, to play to our strengths, which is the distribution network, having the right parts in the right place at the right time, being able to optimize by having everything in the right place. Predictive analytics would be the last part of that, but really using our platforms to enable that optimization and planning for the customer to make more money. And that's a tricky game because that's not the culture that digital is in. Culture of digital is all about trend analysis and anomaly detection and predictive analytics. And then when I show up at the doorstep and say, well, I want to know how you take 4,000 assets across your fleet and do the dance so that all the parts from the right place at the right time, and you know when to shut an asset down that runs over 8,000 hours a year and get it back up and running? That's really where we bring value to the table. And that's our mission. Digital is the enabler. It's not the lead in. And I think that's a subtle difference.

Sergio Tigera: Right, right. And so you're orchestrating behind the scenes in order to get the result you want. And I think an analogy that I like to think about this is Formula 1 and Formula 1 teams and the amount of technology that goes into... You're talking the difference in 1/10 of a second or 7/10 of a second is the difference between being on the pole and being third on the grid. And you're talking these little minor changes that on the surface seem insignificant, but they do start adding up and create significant value at the end for the customer.

David Shannon: Sergio, you're spot on. And Formula 1's a great analogy. I'm a fanatic myself. Formula one

Sergio Tigera: Next year

David Shannon: I'm excited about that. I tell you. What you said is spot on. It's the downstream impacts. So if you have, let's take, for example, one of our platforms, Cat Remote Fleet Vision. If you have one platform that you're able to see all of your assets, you're able to see all the health of the assets and how they're performing, you can start lining up when you are supposed to do something with, whether it's an automated report that's coming to you to say, all right, I've got 100 out of my 4,000 assets that are coming up for a PM interval. What do I do with that? That's the downstream impact. You've got to make that one move that impacts the entire fleet. And that goes to setting up that enabler. The front end loading is what I call it. When you're doing this digital game, you've got to really front end load it to make sure that the project is set up for success.

Sergio Tigera: Yeah. Yeah. And it's funny, another interesting analogy or story is the one where, I don't know if you've heard of this, but it was a nuclear power plant and it got shut down. They couldn't figure out what was the issue. And so they bring in this one expert, and he looks around and looks around and looks around and tightens this one bolt. And then everything begins to work. So he sends the bill, and it's$ 10,000. And the guys are like$10,000? Why $10,000? You just tightened the bolt. He says, well, $1 to tighten the bolt $9,999 to know which bolt to tighten.

David Shannon: That's really it.

Sergio Tigera: Well, and then, so front end loading, you're having that visual as to okay, how are we going to run this planning ahead and then working the plan? So yeah, you are making the deeper time and money investment on the front end, but you're building a much more robust, reliable, and tactical system that's going to help you out in the end.

David Shannon: Absolutely. That's the name of the game. So that it goes back to that concept of having digital as an enabler versus being the lead item, where you go in and talk about the product, and this is the platform, and this is how we can look at heartbeat data and compare lines. That's nice, but that really isn't the mission. The mission is to use those platforms to orchestrate what happens downstream for the customer. And reliability, you look at the standards of Caterpillar for our reliability. We manufacture, design to be reliable. And so the predictive has a place, but it's not the lead in. And that's quite a change for the digital space. Look at what you see out in the market place, Sergio. You're always seeing trend analysis and anomaly detection. You're starting to see more about Blockchain, data scientists. But that's looking at the forward. Me, we need 24 to 48 hours advanced notice to make sure all the parts are in the right place. So an asset that's maybe $10,000 an hour pumping in a gas compression station, we can shut that down and get it back up in 15 minutes, half hour. That's the name of the game. We have customers that have contracts, Sergio, that say, you've got to have parts in the right spot in one hour. Consider a pipeline that covers multiple states. It's a big deal. So digital can really support all of that, but more than just the reliability part.

Sergio Tigera: Right. And because it's a bit of a now industry in the sense that when things go wrong, you need things now. crosstalk. By the time you hear about it, it's too late. You're scrambling and everything else. So having that reliability that those parts available, those services available to you when you need them is tremendously valuable. Because you said that your per hour costs are astronomical to have some of these assets down.

David Shannon: Well, and you don't get the clock back. So when you're running an asset an entire year, almost the entire year, it's up and running. When you look at one of our larger gas compression pipelines, those assets run 24/7 for an entire year. So they're not shutting down. When you lose an hour, you don't get that hour back. You can't make it up.

Sergio Tigera: You can't make it up.

David Shannon: You can't make it up.

Sergio Tigera: You can't turn it up and then say, yeah, let's make up for an hour.

David Shannon: Exactly. You can't pump more gas. So it's quite a dynamic situation getting the digital platforms and the customers to create the best value stream we can with digital as an enabler, honestly.

Sergio Tigera: Fantastic. And so we're talking about the Cat Remote Fleet Vision and the foresight, predictive analytics as well. What else are you guys working on? Where else is this going? What do you see as the future for digital as we continue down this path?

David Shannon: Wow. That's a big question. That's a big question because as we said at the start, digital is so fast paced and where it's moving. I would submit to you that right now, we're in the fine tuning stage of digital. When you look at Remote Fleet Vision, we are part of the Cat Oil and Gas Marine division at Caterpillar. So this platform supports industrial power systems, marine, oil, and gas. We even do loose rail engines with this platform. And what that means is, we have a group of developers, so we can be nimble. And this is going to get to the answer of where are we getting our ideas and where's it going? We're getting them from the world. We believe in the crowdsource and through the platform, I don't think the best ideas have come up yet. We're fine tuning Remote Fleet Vision to work across all these different industries at Caterpillar, we're fine tuning the predictive analytics so that we can bring more assets in and look at them and maybe buy a little bit more time to have the parts and the service ready. But I really don't think that the best ideas are here yet, because we've just now got this platform out to, well, it's over 65 dealers globally, and all the customers with 15,000 assets in it. So the world is really starting to feed us back what the next grade ideas are going to be.

Sergio Tigera: Interesting. Interesting. And so with so many dealers out there supporting the product and Cat on the side, it really gives the customer a fantastic chance to be as successful as possible. What would you say is, sorry. What would you say if a customer was running full out 100% for the year, no downtime, nothing, that'd be 100%. What is a typical Oil and Gas customer, at what rate are they typically running at when when you include everything, all the perhaps unplanned downtime and unforeseen issues that come up? Is that crosstalk-

David Shannon: That's a great question. It depends on which segment you're in. So if you're in the gas compression segment, and that's where we're moving gas along a pipeline, basically natural gas, along the pipeline, those customers are operating their assets at anywhere from 97% to 99% uptime over a year. So they looked at the Caterpillar product because the Caterpillar product is, first of all, it's the reliability, the robustness of the product, knowing that they have to operate the entire year, they cannot-

Sergio Tigera: Nonstop, yeah.

David Shannon: Shut down. And then when you look at that type of a duty cycle, now you see why digital becomes so important, not in the reliability part, but knowing that dance of an entire pipeline. How are you going to get all those assets for the preventative maintenance intervals, the scheduled oil sampling of what's the right maintenance when you have to do a major overhaul or just on a regular scheduled, let alone any bizarre thing that happens out of left field? So massive uptime. And that's really no different than looking at the drilling segment or the well service segment. It's the same. Uptime is the name of the game. Efficiency's the name of the game. I would tell you, digress just a second back to what we're doing, we're starting to use digital to do a better job of predicting what the customer's costs will be, forward looking. And I see that's where the data harvesting is really coming in, not so much predictive analytics, but that harvesting to say, Mr. Customer, this is what it's going to cost you over the year for the asset, for the region, for your fleet. And Sergio, we haven't even touched on how we're starting to integrate the environmental, social, and governance part, ESG. We're starting to pull that into our digital platforms as well and demonstrating that so they know what their carbon footprint is and how we're improving it.

Sergio Tigera: And that is a huge, huge component right now for these companies, that they're getting a lot of spotlight on is, how are you energy efficient? And we're seeing that in Blockchain, for example, in cryptocurrencies and Bitcoin and how inefficient and energy consumptive they are. And so these companies are under the microscope as well.

David Shannon: 100% of the customers that I've talked to in the last six months have asked, "Can you provide that environmental social governance reporting out of your digital platforms?" And then, can you show the footprint for a given area and then the improvements by using the Caterpillar product, how we make a cleaner engine and a cleaner environment? That is absolutely right at the tip of digital right now. 100% of the customers are asking for it.

Sergio Tigera: And that's a tremendous added value that if quantifiable, is just, like you said, it's an icing on the cake because the original intent is to make you as efficient as possible in terms of moving that gas. But if you also have an environmental value that you're bringing to the table, that's just unbeatable.

David Shannon: Oh, that's absolutely it. And that goes back to the health of the engine. You're talking about the cycle time and having to run 24/7 for an entire year. Well, if you're burning clean, think about, if you've burned clean over a year versus you're burning dirty over a year because your engine isn't tuned correctly. And then you exponentially take that over 4,000 assets. crosstalk. The ability to report that back out to a customer and say, hey, in Remote Fleet Vision, you can look at your ESG metrics. You can see exactly how you're incrementally improving. That's just going to continue to build. And that's absolutely not going away. It's the right thing to do, it really is.

Sergio Tigera: Yeah, yeah. It's the right thing to do. And it's something that we need to do as responsible organizations. You need to show up in that manner. So David, you guys are doing some incredible things, like you said, enabling the success, not being on the leading edge, but it's obviously a very integral and critical component to the customer's overall success and viability and longterm success in the marketplace.

David Shannon: It really is. It's a lot of fun being with these customers that are giving you the ideas, how to get better, where they're going. Digital's a little different than dealing with prime product sales and engine. It took us several years to develop an engine and get it out the door. Digital is immediate. You sit with a customer, they're going to give you the ideas. They're going to tell you how to be successful. You just have to grab that feedback and then implement what will work globally and how we can get the best benefit for it. And that part of the game, I just truly love, interacting with the customers to make them successful.

Sergio Tigera: Fantastic. Well David, thanks so much for being on my brother. On the Cat Power Podcast here, David Shannon, commercial manager of digital services for Cat Oil and Gas. I hope you enjoyed this, and we'll see you next time. Thanks David.

David Shannon: Thanks Sergio. Have a great day. Take care.

Sergio Tigera: Thank you so much for listening. If you enjoyed this episode, please follow and rate us. And be sure to share it with a friend so that you can power up their life and their career.