Time to Look Forward

From November 2009

2009 has not been an easy year to look forward. Under pressure, we all tend to cover our rear before thinking about advancing, and this year there has been a collective pessimism hanging over Shell and much of the world.
So I’m going to force myself to focus forwards, and have a go at a blog with predictions for 2010 and 2011. By the way, real winners have been doing this and acting on it, all through 2009. This year has seen a few economies, a few companies and a few individuals striding ahead while fear gripped the majority. It is in tough times that new alignments are forged. If you don’t believe me, look at the stock market, and curse yourself for not piling in during the spring.
As for global trends in the post-recession era, let us start with China. China has had a great recession and has been building power in all directions, whether it is over US economic policy or rights to long-term assets like key commodities. No company or government will be able to ignore China from here on. Check the market capitalization of the Chinese NOC’s if you have any doubts that our own industry has shifted structurally – and while you are at it there are some other winners too, such as Petrobras (from another of the so-called BRIC’s).
I also see are strong re-emergence of trends that have been put on pause by recession. IT and communications will take more leaps forward. So will finance and financial services, where some companies (eg Tesco) are already vying to claim ground vacated by banks and other chastened hybrids like GE. In employment, globalisation and outsourcing and service centres will resume their march – India to the fore, Europe and the US losing out.
What about people and employment? 2009 has seen the chastening of generation Y and the revenge of the behemoth, but the cycle will quickly turn and the revenge will work the other way. Agile companies in growing sectors will be recruiting again soon, and the talent will flock to them, reinforcing winners and further challenging the rest.
So what about Shell?
First, have you noticed how Shell has been outperforming the peer group lately? The analysts have noticed the assets to come onstream in the next couple of years and like the cost cutting. I predict this good run will continue, especially if the oil price does trend upwards, which is very possible. Imagine if Russia really does turn off the taps this winter or Iran ups the ante further.
But don’t assume that an upswing in share price will lead to a U-turn in the employment trend in Shell any time soon. Capex will stay constrained and our leaders will seek to demonstrate prudence over an extended period, not least to stave off predators. And note that Gorgon will eat a large share of Shell capex in coming years, but won’t create many Shell jobs since we are not operating there.
Before long Shell will need to define a longer-term strategy in more detail, responding to the general squeeze on IOC’s and globalisation 2.0. My suspicion is that for 2010-11 the actual choices resulting will be conservative ones, for example with accelerated disposals in downstream, reduction of dependence on Nigeria and caution with biofuel or renewable investment, while struggling to beat off the Chinese where more traditional growth opportunities arise.
So what does that mean for you and I? My guess is that transition 09 may be extended into transition 10 and transition 11, at least in some parts of the business. There will be winners, and a new generation of future leaders will emerge. P&T and Downstream will rightly be expected to drive down unit costs, so look out for some divestments (capabilities as well as assets) and possibly a more decisive shift in employment balance eastwards than so far seen (if you are in STI don’t panic, your time may yet come). Many structures, and appointments, put in place in transition 09 may prove temporary, from the top downwards, and to be fair that would be entirely consistent with the communications we are receiving. Expect some leaders to emerge from outside Shell, as efforts to move the culture intensify.
Can I translate this into personal advice? I’ll try. Don’t assume these MOR rounds will be definitive and that the organisation will be “locked” for four years. Be ready (or not) to accept a Shell where the Employee Value Proposition is more basic, for example with a step change reduction in expatriation opportunities. Make sure your skills and chosen business area are robust to mega-trends, or be ready for intensified pressure. Look out for chances to be a next generation leader, or at least to follow one.
And, as usual, remember your customer. And be happy.