Building a Defensible Digital Network Business
Digital data startups face many hazards, from potential customers unwilling to share data to buyers who just do not see the payoff in what they are selling.
Andrew Bruce’s path to building a digital business offers a map of hazards for those selling digital services to oil companies.
When he started Data Gumbo, he was thinking about building a business aimed at solving the data quality issues that were a constant headache when he was working on developing digital control systems at NOV.
One option was a fee-for-service business that cleaned up drilling data. While he knew that would make the engineers happy, he wondered if accountants would notice.
Clean data ultimately can have a large financial impact by facilitating the digital transformation. But, for those doing financial statements, it is easy to miss because it does not have a direct impact on the bottom line, even though it can facilitate digital changes that do.
As he searched for a better idea, he began thinking about building around a blockchain network.
At the time, blockchain was only associated with keeping a record of virtual currency ownership. But he could see uses for an immutable record of contracts and transactions in the drilling business, where contract disputes, audits, and wrangling over bills are costly, time-consuming rituals.
The plans required only specific bits of operational data, such as the volume of product loaded or the time of delivery, to measure performance based on the contract terms.
Building a service that minimizes the customer data needed removed a potential sticking point in negotiations.
Years passed as he worked to find users willing to work together to create a blockchain network to see if multiple companies could make this idea work in an oil field.
Another thing that kills many startups is time. Investments by the venture arms of Equinor and Saudi Aramco gave Data Gumbo the cash to slowly recruit buyers and sellers to create and test whether the network he envisioned, known as GumboNet, actually could deliver on its promise of faster, argument-free billing that saved money.
The most public example was the result of a test by a multicompany consortium in 2019 that showed a paperless system for tracking water or any other oilfield commodity can work accurately and deliver results efficiently.
That was the prelude to more testing, until the oil price crash forced the industry to accelerate its search for ways to lower the cost of producing a barrel of oil. The crash sped the transition from testing to field uses and helped expand the company’s customer base. Data Gumbo has added locations in the Middle East and South America.
One downside of success: It offers a model for potential competitors.
“It is always a concern. It would be naive to say it is not. Anyone can use blockchain tomorrow,” Bruce said. What is harder to do is build a network of users, such as GumboNet.
Assembling a group of users who understand the rules and trust the system—like a large group of merchants willing to accept a particular credit card—is a hard thing to replicate.
To strengthen those ties, Bruce continues to look for new ways to generate value for users. One idea that he said is on the way this year is a service that uses data associated with logistics contracts, such as water truck traffic data, to generate emissions or water use data to help answer tough questions raised by investors requiring environment, safety, and governance reports.