“Exciting!” is not a word that many would use to describe the oil and gas business these days. Not with low commodity prices. And not using the assault on non-renewable fuels by energy systems run by renewables.
But it’s true: amidst the depressing news of layoffs and spending cuts, “exciting” was the word I heard several times in a small breakfast reunion a week ago. Five executive MBA students which i had taught a couple of years ago were excited about the prospects of reinventing their businesses. Their initiatives are driving highly innovative processes which are shaping the brand new realm of oil and gas C a landscape currently characterized by the blunt force trauma of lower prices, rising social standards, and cutthroat competition of all the quarter.
My former students’ enthusiasm for jousting with disruptive business forces helped me think of the pointed wit of GE’s former CEO, Jack Welch, who once said, “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”
To make sure, I meet people who are not as excitable as my former students. For a lot of of these Welch’s adage is a prognosis. In other words, the end is nigh for many high cost, high carbon energy producers which are too slow to respond to the fast-paced changes externally, be it from Texas, Saudi Arabia or Silicon Valley.
But my students were taught well and I believe “the end” is a long distance off on their behalf. They’ve brought out the proverbial white piece of paper and therefore are picking out remarkable innovations to lower cost and carbon. And I routinely meet other leaders who are embracing changes in their organizations as quickly, or faster compared to changes on the outside. They too will survive, otherwise thrive. That’s because innovation is not something that’s exclusive to outsiders. History implies that insider incumbents can change and adapt quickly too, defending and extending their market share when under threat.
I thought more about Welch’s rate-of-change statement, which has an Einstein-relativity feel into it. In other words, innovation between fierce competitors is relative. Who will innovate faster? Oil companies (the insiders)? Or the ones that wish to displace them (the outsiders)?
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To understand why perception of relative innovation, I additionally enjoy meeting with those found on “the outside” of the oil and gas business. I have long worked with executives in companies and institutions which are competing feverishly to displace non-renewable fuels. Unsurprisingly, my friends in spheres like renewable energy also routinely describe their work as “exciting.”
Objectively, I suggest to them there are big changes on their own outside too. The facts reveal that non-renewable fuels have fought off many share of the market challenges for their supremacy over the past several centuries. I can think completely back to King Edward I who banned the burning of coal in 13th century England. Records demonstrated that the emissions were, “corrupting the air with great stink and smoke, to the great prejudice and detriment of the health.” So here we’re, over 700 years later, and we’re still burning the black stuff and choking on it in places like China. My point to the challengers from the status quo is that established players don’t rollover and cede market share with no full-on share of the market battle that attracts out all of the stops on fighting back.
All of which would be to say that Welch’s adage is every bit valid to the companies that are vying to displace non-renewable fuels. Everybody need to be overlooking their shoulders at their competition.
Rapidly evolving defensive innovations are happening from upstream to downstream within the fossil fuel world too C the list is long, from robotically controlled oilfield equipment, to higher efficiency power generation, to even greater fuel economy in petroleum-powered vehicles.
In these disruptive times there are many companies that are unlikely to change fast enough. Why is that? It’s probably because their leaders are lost in their own inside world, either not listening or otherwise believing the signals of vary from their rest of the world.
Bluntly speaking, it’s called denial.
Many energy leaders, whether championing fossil fuels or renewables, have yet to tune in to the rapid innovations from their respective “other side.”
Which brings me to another Welch quote. Not from Jack, but from Raquel Welch. She is attributed with saying: “You can’t fake listening, it shows.”
For fun I place the two Welchian pieces of wisdom together. “If you fake listening to your competitors on the exterior, the end is near.”
Breakfast was over. Walking back to my office I knew one thing for sure: The energy clients are likely to be very “exciting” over the next few decades.
