The UK energy industry was already facing many challenges and now Brexit has added to the overall uncertainty. Whether the industry likes it or not change is ahead and those leaders that embrace change leadership and build that capability in their organisation are those that will see their companies grow and succeed.
Business Models are changing: The US shale industry has radically increased production and shaken up the way oil and gas is produced in 2014. Consider that in 2014 the US produced 9MMbbl/d which is almost what it did at its peak production in the 1970 (peaking at 10MMbbl/d in 1971)[1]. The Shale production model can be flexed ie produce at high price, something conventional oil and gas isn’t able to do. Demand is no longer coming from the west it is coming from the east and the mix of sources of energy is increasingly changing with the improvement in renewables and climate change demands. To address these factors keeping an open mind as to the future business models, being adaptable and building a flexible business model will allow you to change with the environment.
How the industry uses Technology: Technology has always been a key part of energy however the time taken to adopt new technology is slow compared with other industries. For many years the industry has had digital oil fields, compared to what is happening in the internet of things the changes have been much smaller, and it is likely that bigger changes are a head. Watson the IBM super computer is now better than some clinicians at diagnosing cancer[2], who or what will digital oil fields be doing for us? Also who really understands the technology? The young graduate but do his manager and senior leader really get it? Historically operators have wanted a technology USP to gain entrance to new resources however with increasingly operators are going to partners to help [3] with the development like BP and GE on digital fields. In a low oil price world compromises on what technology and design are increasingly needed to be made in order to achieve profitable operations which require a culture change and potential new ways of working. All this requires a different mind-set and approach.
Leadership styles and capabilities are changing: Companies are facing more external challenge than ever, consider the challenge to BP this year on Bob Dudley’s pay package by shareholders which even the Institute of Directors challenged[4]. Environmental legislation and increasing challenges from shareholders and other stakeholders means leadership in an organisation needs not only to manage internally but increasingly externally too. Increased diversity and managing the millennial generation is meaning that leadership styles that worked in the past aren’t as effective now. Think it won’t happen to you? Brexit is seen by some that the UK has stopped listening to advice from politicians[5], can you afford for your staff to stop listening to the leadership? So consider what type of leadership you need for the future.
The Business challenges are changing: Whilst oil prices have risen a bit recently, most commentators are predicting a long period of low oil price[6], easy oil has been found and now the extraction challenges are getting more costly and technologically demanding. We are seeing a shift towards gas not oil, consider shell’s acquisition of BG. Non-carbon fuels are also on the rise. Whilst the industry has always strived to find innovative solutions, and delivering on projects to achieve this, we are not good at implementing as a recent Industry study showed 78% of E&P projects are being unsuccessful[7]. Can we afford to keep operating the way we have been?
So how do you build change capability?
The first critical element is to identify why you need to build it for your organisation and engage your leadership team and senior management. Involve them by building a joint vision of where you are going or what is business problem you are solving. As you do that this is the time to start explaining the change journey and how critical it is to engage the whole organisation. Remember rather than do what you always do changing the way of operating and embedding this is how the solution becomes sustainable.
Next you building the transition plan, at this point it is essential to start involving the rest of the organisation as that is how you build engagement to the plan and through these key individuals (often call change agents) you can build capability which they can start transferring to the organisation. Here it is important to understand what has worked in the past, what is good about what you currently do as well as what doesn’t work. Bringing in a diverse group of people not only helps with the engagement, it also helps to bring the best solutions as you get a wide set of options to create the best plan from.
Now you are ready to implement you plan. For successful implementation, build in regular check points and metrics so you have early warning if results are not occurring as planed and can take action. This is particularly the case in a changing environment where external influences may change what is going on. In a changing environment there is a risk of “change fatigue” where people simply get overloading with change and can’t cope so remember to stop project or activities that aren’t aligned to the effort and through your monitoring activities you can adjust the speed of implementation to take this into account.
If you always do the same things, you will get the same results- can you afford to do this in a changing world? What will you do to build change capability in your organisation?
[1] EIA figures
[2] http://www.ibm.com/watson/watson-oncology.html
[3] http://www.offshore-mag.com/articles/2016/01/ge-oil-gas-partners-with-bp-paradigm.html
[4] https://www.theguardian.com/business/2016/apr/13/institute-of-directors-bp-chief-executive-bob-dudley-pay-award
[5] Peter Mandelson “Brexit result reveals that both Conservative and Labour politicians are “not trusted” by the public and “do not have the connection that they thought they had”. ITV news 24th June 2016
[6] https://www.eia.gov/forecasts/steo/report/prices.cfm
[7] Improving Mega Project Outcomes Mary Ellen Yarossi June 2015 London SPE conference
