Three big Ideas for Shell

The UK Election is in two days time. There is been a lot of noise. But precious little debate or policy about anything that really matters. What to do about the repeated surveys that show the UK as one of the developed world’s worst countries to be a child? How can a medium sized country effectively influence global power? What can we do about climate change? Why do we need more than 200 MP’s when Europe makes most of our law? The whole thing seems outdated, somewhat dishonest and lacking in ideas.
Does that sound a bit like the IOC’s? Perhaps it is a stretch, but at times I sense a collective sleepwalking along over-trodden paths. A couple of months ago I bemoaned the lack of serious strategy competence and option generation in Shell.
It is all very well to moan, but it does create some obligation to try to do better. So I’ll have a go. Here are three ideas for potential five-year strategies for Shell. Are they fully thought through? No, especially in how they might link together and in how to manage transitions. Would they add value? Possibly not, but I’d like to try to prove they can, and I do believe that the current dearth of true strategy will consign Shell and IOC’s to irrelevance within 20-30 years. Will they happen? Don’t hold your breath.
The first idea is to try to form a true environmental coalition across industries and allow this to lead policy (rather than create sound bites or boxes to tick on investment proposals). I believe there is a niche available, and the third hard truth will bite back sooner than we think to make it potentially a winner. I suggest GE, the Economist, The World Bank, Toyota and Microsoft as potential partners. After gaining credibility with publics and governments, early tasks for the coalition would be to create globally excepted metrics and tax/subsidy policy proposals. Transforming our own companies would happen simultaneously. It is possible – remember assets are easily bought and sold in our industry.
The second idea is to break the company up. Where is the value of integration? I’ve seen far more diseconomies of scale than economies during my career, and markets tend to agree. The interfaces can easily be managed via open market trading. The resulting upstream and downstream companies would immediately be more nimble, focused and coherent, and could develop cultures appropriate for their goals. The upstream culture is currently a major drag on the downstream, while the brand requirements from downstream are a drag on the upstream. And integration adds cost and hampers speed. An option exists to create a third company for services.
The third idea is to Go East with intent, focusing on services. Why on earth are most of our engineers in Rijswijk or Houston? It is just about justifiable now, but in ten years time this will cripple competitiveness and under current direction the balance will hardly have changed in that timescale. India I believe as the best location, given the availability of talent and acceptable IP laws. And therefore I think approaching Reliance industries for a major partnership makes sense, since they have the talent, the local connections, the money, and a need for IP. Over time more and more of the services for both Shell and Reliance could be sourced from this India-based partnership. Other agreements between the players on assets could happen in parallel but are not essential to the basic idea.
Brave, I agree. What about the criticism that this is typical Shell dreaming, and it detracts from operational excellence? Fair enough, operational excellence has to form the backbone of any strategy implementation. But is operational excellence going to be enough? And I believe the second and third ideas would themselves be engines for operational excellence, given the external focus and clarity of purpose they would lead to.
Why will none of this happen (assuming they would be workable)? The short-term nature of the market could be a blocker. A bigger blocker is inertia among our leaders – there would be an element of turkeys and Christmas to each of these. Inertia driven by personal incentives, being a slave to markets, strategic poverty and cultural complacency. All good excuses, the sort quoted by companies and industries with potentially a shorter life expectancy than they think.