The Innovation and Change of British Petroleum - Research Paper Example

Integrated academic report-the innovation and change of BP (British Petroleum） Table of Contents Introduction 2 Part 1: The organization’s need for innovation 2 Part 2: The organization’s vision and strategy for innovation 5 Part 3: Context, competencies and culture for innovation 6 Part 4: Learning for innovation 8 Part 5: Potential change management issues 10 Conclusion 15 Reference 17 Introduction In today’s business environment, most organisations recognize the need for innovation. A number of organisations have shown outstanding innovation in their fields of operations while some have shown less improvement. The project aims to bring forth the reasons why organisations need to be innovative. The organisation chosen for the purpose of the project is British Petroleum, which is a global oil and gas corporation based in London. The project presents the experience of the organisation through the process of innovation and change and benefits that it has been able to gain through the process. The main area that the project tries to explore is the organisation’s present innovative position in the industry. This includes the changes that it has incorporated since the last five years. It also explores the company’s future vision and strategies towards innovation and the components contained in the vision. The next part of the project aims to identify the various competencies and cultures that organisations must to enhance and remain innovative in its operations. Following this, the project identifies the different avenues of learning existing in British Petroleum. Finally, the entire process of change management has been explored which includes the role of change agents, the different barriers and enablers and the internal and the external communications. Part 1: The organization’s need for innovation The new age of 21st century also demands a fresh understanding of the nature of its society and its responsibilities. A shared responsibility should be taken by all the citizens of the world in order to have a sustainable development for its own future. Adaptation efforts are going on and it must be expanded also, but these adaptation techniques are very costly and less effective with the growing magnitude of the climate change. The global climatic change has been recognized as the most intractable and most dangerous of all the environmental impacts of the energy. Another problem adding to it is the macroeconomic vulnerability which is arising due to the oil dependencies overall. It’s high time to innovate new processes now to cope with the situation. On an average worldwide, 12 warmest years out of the last 150 years have occurred since 1990. The warmest 50 years were the last 50 in 6000 years. Over the last few years it is also seen that sea ice shrinking, places like Greenland, Antarctic ice is melting. Wildfires, heat waves, storms and flood damages have also get increased in the last few years. On the other hand Oil dependencies are also rising for different countries. According to reports in 2005 United States was dependent for about 65.4 % of its total oil required on imports. This was the highest amount of oil dependence percentage in imports in US history. The cost incurred for this oil imports in 2005 was around $231 billion which accounts to 30% of the U.S net trade deficit on the same year (Holdren, 2006, p.7-10). One of the major motivations for innovation in British Petroleum is the need to retain or increase its profitability which will provide incentives for innovation to cut costs provide new services and thus in turn improve their market share. With the new innovation strategies there is better quality services and also gaining trust with the shareholders. Over the last 10 years BP has radically changed its strategies in every aspects of the company. After the tragic events of 2010 there is a severe impact on the BP trust. In order to gain trust again from the people and gain market share BP is developing and then implementing comprehensive processes to strengthen more safety and risk management. More powerful operational and safety function are developing complying with the operational management system. A careful review of the whole process of risk management is going on for improvement. BP have re-organized their business into three separate divisions namely exploration, development and production for an increased visibility on each divisions and understanding their performance on managing risk. The values and behavior of the BP employees are also renewed and enhanced. A review on the relationship with the contractors of the business both on shore and offshore are carefully carrying out to understand the prospect of future relationship and to optimize management of safety and also operational risk. To meet the growing energy demand of 21st century safely, technology repositioning is also going on by focusing on the science base of the firm and standardizing the technology management systems and other processes (BP Global-c, 2011). Most of the organization has a more innovative process of addressing the problems that can arise in future and have the solution ready for the problems. BP needs to divide and evaluate the problems of different departments that can arise by discussing with the stakeholders and others related to the business. Collective innovation is the main advantages of the other more innovative organizations who can adapt any situation when needed. Part 2: The organization’s vision and strategy for innovation With the growing need for heat, light and more mobility British Petroleum aims to produce more energy that is secure, affordable and doesn’t harm the environment. BP wants to be a responsible, progressive and innovative organization of the world. To accomplish this vision of the company they need to explore in all departments and to innovate new possibilities. Responsible BP is committed to the development and the safety of the people and the societies. Progressive BP tries to develop mutual beneficial relationship with the partners and customers. Innovative With new advancement in the technological department company want to develop new system in order to reduce cost and to be safer and find an alternate source of energy for oil and gas which in turn will reduce the carbon emission in the environment. The company’s innovation strategy is not always implemented in a simple manner. Various factors can effect which might clash with the corporate strategies of the firm. First of these issues is the development of the companies scope and its reach. Size and reach are very important tool for the realizing the benefits of the innovation. A company with international reach has a great advantage in understanding this scope otherwise every possible innovation are needed to be forecasted. Secondly the change in the whole organization structure is needed with the process of innovation. Changing the whole organization structure according to the global need is not always easy for the firm. The structure designed 40 to 50 years ago cannot be changed all of a sudden for the future market thus it takes huge time for the shift. Third problem for the development of new strategy is the cost involved in the change in technology for new innovation. Innovation strategies are like forecasting for the future thus there is a huge risk of cost as nothing can be predicted for its success of implementation. Various factors like geographical, political, and economical and many more can create problems for the organization for its implementation in future. Lastly, strong relationship with different customers and stakeholders are required by the company to generate profit from the business and give it for incentives into the innovation process. Corporate strategies are well understood by different firms and there are implementations of this for long time thus the result can be predicted for its implementation and it’s not also so costly for the company (BP Global-a, 2011). Part 3: Context, competencies and culture for innovation Innovation, in the company is considered to be essential for remaining competitive in the market. Innovation and competition goes hand in hand accounting for the key success factor for the company. The company takes rapid strides in adopting innovative techniques and is substantially influenced by the success of innovation in the USA (BP Global-a, 2011). It also takes various approaches for advancement in the fields of innovation. It must be agreed that innovation in the world of business is not just about creating new products, new technologies or new gadgets. Innovation in the real sense means much more than that. It is the way companies today are organised which contributes to the innovative process. The organisation of companies allows making technical advances and also enhances application of new technologies. International organisations have shown the ability to acquire knowledge from a particular operation and apply it effectively in other parts of the world. The size of an organisation and its scope and reach accounts for some of the critical factors in realizing the potential and benefits of innovation (BP Global-a, 2011). The second most important aspect which supports the innovation process in organisations is ‘change’ which includes changes in the structure of companies and also the industries on the whole. Organisations belonging to all sectors must be able to adapt to the changing requirements of the global economy. The belief is that if companies are to thrive in the present global scenario, they must be able to accept change more willingly than they have been doing in the past. Change must be perceived as a source of opportunity creation than a threat to the existing status quo. In fact, a number of successful organisations have found that the status quo is not a favorable place to rest. The third most crucial aspect of innovation includes relationships. The extent and ability of companies to cooperate with others comprises of a determining factor towards its success or failure. This is the reason why the company takes the challenge of working in different places in the world like China and Russia and also entering into a various mergers in the world (BP Global-a, 2011). In today’s business scenario, change acceptance accounts for the most critical aspects for a company to succeed. Business requirements keep changing along with the changes in technologies and peoples’ requirements. Upgrading oneself with this change is the best possible way of retaining competitive advantage in the market and succeeding also. Part 4: Learning for innovation The strategic planning process in the organisation is designed to keep the flow of ideas constant and to stimulate thinking. The company perceives the strategies and applies them in such a framework that helps in reexamining the way the company proceeds in relation to what the world offers and in comparison to what its competitors are doing (Steven, 1997). Learning has always played a very fundamental role in the company’s growth path. In fact the company ranks among the top 20 companies in world in the area of knowledge management. The avenues and benefits of learning and development were realized in the company in the very initial stage of its growth. The need to grow from a middle-sized oil company to an independent company in the middle of a hostile environment required extensive for learning and innovation. The company has undergone a lot of transformation which includes eight mergers and a number of acquisitions across the world. This transformation required a great deal of learning and knowledge management. The need for managing knowledge and learning also arises from the fact that the company operates from 100 different countries around the world and is among the 10 largest global organisations. The company operates enough pipelines which encircles round the planet. Moreover, since the last three years the company has increased its market capitalization from $60 billion to about $180 billion. Learning has played one of the major roles in this process (BP Global-b, 2011). In order to progress in the field of learning and development, the company has entered into partnerships with some of the major organizations in the world which demonstrate virtuous relationships between learning and performance. Some of these organisations are General Motors, Kraft Foods, Xerox, Lucent Technologies, and also institutions like the United States Army and the Boston University. New avenues of learning were developed through the process when the company shared valuable information with each other. The companies looked into the other’s systems and plants. These interactions effectively generated new ideas. The companies consequently developed a learn-to-learn model, which treated shared learning and knowledge management as core disciplines required in the running of the business (BP Global-b, 2011). As demonstrated earlier in the project, the company faces environmental concerns. Being an energy company, it faces tough scrutiny by its stakeholders and customers. This compels it to remain ethically responsible in terms of its decisions and operations. The rapid increase in demand for energy across the world accounts for one of the primary avenue for learning in the organisation. It opens up new opportunities of learning to be adopted by the organisation. It is apparent that the burden of the newly generated demand is about to fall primarily on the hydrocarbon based sources (Gitman & McDaniel, 2008, p.57). The potential challenge that the company faces is the impact of burning huge volumes of hydrocarbon in the overall environment and consequently the harm that it causes to mankind and their well being. Moreover, businesses are amidst the process of making scientific advances and technological transformation because of which new avenues of learning are likely to be created (Gitman & McDaniel, 2008, p.57). The company’s continuous steps towards learning and innovation gets revealed through the following efforts that the company undertook. BP’s efforts towards building the first natural gas and pipeline and terminal for distribution resulted in saving sixteen million tons of carbon dioxide emission over coal. The company has also started using the process of carbon sequestration in Algeria. The use of this process helped to trap the carbon dioxide released before it is released in the atmosphere. It is injected into the reservoirs where it cannot cause harm to the atmosphere (Gitman & McDaniel, 2008, p.57). These steps not only reveal the company’s efforts towards innovation but also demonstrate its concerns towards the community and environment on the whole. Part 5: Potential change management issues The overall change in the innovation process comprises of several changes in individual processes of the organization. The safety and the operational risk are to be evaluated and the monitored. Risk Management issues are needed to be reviewed in the process. The risk management should comprise of the whole system of tools and its methodologies that identifies and monitors the probable risk for a decision and suggests solution for the probable risk. New business exploration and development are to be done for contractor and customer management in a better way. The company needs to inform the stakeholders and the customers about the different issues that are going on inside the firm so that they can communicate with the different problems that can arise in future and can address them in a more tactful way with their ready solution for the problems. Technological up gradation is also required for the innovation process as with these changes it will bring cost cutting for the products and services for the customers. Using energy efficiently will result in the reduction of cost. This technological up gradation is not only required for the company but also all the customers and the suppliers are needed for this adoption. Innovating alternate source of energy is required for the reduction in use of oil and gas thus special focus towards research and development of renewable resources like wind, bio-fuel and also solar are to be considered. All these changes are required in the overall change process for a more secured and energy efficient future. Barriers and enablers to change For the change in the innovation process British Petroleum faced several barriers for its old business culture. BP’s initiating, implementation and the process monitoring changes are very slow, unreliable and inefficient. The processes for management of the different changes are very outdated in comparison to the world’s industry sector. Three main aspects which acts as the major barriers in the process of innovation are- 1. Cost Innovation comes with huge investment on the Research and Development process. For reduction of cost for the future the company will have to invest today which are often not available to most of the firms. Proper contribution from outsiders and shareholders are very required. The management needs to educate the whole system in order to make them aware how the changes will affect everyone in and outside the organization. 2. Performance The performance of the each department are required to be evaluated on a regular basis to find the need for innovation on a particular segment which often not done by the company. 3. Time Time is also a major barrier for the process of innovation. It needed to be implemented very fast otherwise with more damages day by day it will be impossible to meet the demand. With time the cost will also increase which will again act as a barrier for the organization. The Internal and External Communication The Internal and External Communication is very required for an effective implementation of Innovation strategy. Collaborative process helps to build strong relationship between all the peoples associated with the organization. Communicating with the stakeholders and individuals will give them opportunities to learn about the inside stories and will give them confidence to invest on the company. Collaborative process and distribution network will grow the companies’ knowledge about the market and on the other hand linking with other players in the industry will also give British Petroleum various ideas to cope with several problems with ready solutions. With proper communication and transparency of internal and external environment of the company it is much for the firm to gain trust amongst its investors and customers. Leadership and change agent roles Aggressive change management was implemented in BP since the tragic event occurring in 2010. The pipeline leak occurring in Alaska and the explosion in Texas are among the major issues which triggered the process in the organisation. The nature of the two incidents was different from another, but it was enough to affect the confidence level in the company. Major changes were incorporated in the company after the incidents. The management undertook major steps to develop and implement a comprehensive program for strengthening safety, risk management and compliance across all sectors of the company (BP Global-c, 2011). Leadership plays an important role in implementing organisational change. Organisational change can be effective only through quality leadership. Leaders have played the most prominent role in reorganizing the company’s upstream business. These have taken place with reference to three special divisions namely exploration, development and production. Each of these divisions are led by an appointed head who directly reports to the chief executive. This increases the visibility of the groups at the executive level. The restructuring is designed in a way in which the operations in each segment get enhanced. Leaders have played a special role in BP with regards to managing risks, delivering common processes and standards and building human and technical capabilities for the future. In BP, government initiatives have also played a special role in implementing changes in the organisations. These have come in the form of regulations and rules regarding various safety issues in the organisation. It has acted like an active change agent in the organisation. It has taken major initiatives and measures for the stimulation and implementation of low carbon-emission technologies (BP Global-d, 2011). Consumers have also contributed to the process of change in the organisation. Today’s’ world has shown great awareness with regards to the climate and the environment at large. Consumers are more aware of making greener choices, like solar panels, hybrid cars or micro turbines. That is why it can be said, change in the consumer’s choices have paved the way for rapid implementation of change management techniques in the organisation. Investors have indirectly contributed to the process of innovation by focusing on the long term environmental issues of the company. Authors have agreed on the fact that those organisations which have the potential to create value are those having the maximum strategic options for embracing a low carbon world. What follows from the project is that managing change is not a simple issue and must include the active participation and coordination of all agents of change. BP has demonstrated massive change through initiatives coming from the various change agents. Consequently the company has been able to effectively produce innovative techniques for the creation of low carbon production and alternative ways of reducing environmental hazards (BP Global-d, 2011). Project management and measurement requirements The change initiatives undertaken in organisations have to go through constant monitoring and measurement and for their successful implementation. For management of the projects, the Project Academy was set up along with the collaboration of Massachusetts Institute of Technology (MIT). This was done with the aim to build up high quality project management capability and improve BP’s project performance radically. The company is said to spend more than $17 billion a year for implementing new projects. Measuring the project performance plays a key issue because even a small percentage point off the bill would cause damage in savings (BP Global-e, 2011). The British Petroleum Projects Academy is a year-long program meant for handling the company’s big and complex projects. The measurement requirement centres around three major aspects, namely organisational capability and leadership, and finally engineering and technical experience. The major project management challenge faced by the organisation is value creation by taking measured risks. Also, identification of the major barriers accounts for a major challenge faced by the company. Project leaders are mostly concerned about removal of such barriers and identifying cost effective measures of operations in the company. Under the influence and guidance of the project academy, the company has been able to bring about transformation in the way it used to operate. It has developed an effective change mechanism in the system (BP Global-e, 2011). One of the major requirements in the project management system is standardization in actions. The new mechanisms created have been able to create standardized production approaches with the aim to lower the capital expenditures and the operating costs. The standardization efforts have led people to think more broadly and not just limit themselves to the single project activities. They are able to think more in terms of the performance of the business units at large. The company has implemented the standards in all its plants across the world. The standardization process has been especially successful in Azerbaijan and Mexico. The company has effectively moved from individual and customized designs to standard designs which could be implemented over and over again (BP Global-e, 2011). It is apparent that the company’s change efforts have brought about major contribution in the field of creating mechanisms for lowering operating costs and enhancing efficiencies. Conclusion While doing the project it was realized that innovation in business includes a broad spectrum of concepts which results in the formation of new and different ways of conducting a business. Today’s business scenario primarily involves innovation in the fields of technologies and communication and environmental efficiencies primarily. This is apparent from the case of British Petroleum. The company has taken rapid strides in the development of innovation in business. This is primarily focused towards reducing the environmental hazards due to its operations. Innovation has been able to create technologies which are energy efficient and causes low environmental hazards. The company has demonstrated rapid success because of the evolution of innovative techniques and adoption of new sciences. However, the company does not regard the production of new gadgets and products as a step towards innovation. Rather it strives to develop a culture and organisational structure which is aimed towards innovation and change. It is also agreed that change acceptance accounts for the main factors for effective implementation of the change strategies in the organisation. But it is apparent that the company had faced a large number of barriers in the process of innovation. The company is conscious of the fact it causes huge environmental hazards through its operations. The concern is critical but the adoption of a new technique is costly and involves time. It also requires measurement techniques for effective operation. Thus, time, cost and performance are some of the barriers that the company needs to overcome. Finally, for effective of its innovative techniques, the company designs proper ways of project management and develops measures of performance evaluation. Reference BP Global-a. (2011). Promoting Innovation and Competitiveness: a Transatlantic Dialogue. [Online]. Available at: http://www.bp.com/genericarticle.do?categoryId=98&contentId=7006049. [Accessed on March 31, 2011]. BP Global-b. (2011). "Learning in the digital era - the strategic imperative". [Online]. Available at: http://www.bp.com/genericarticle.do?categoryId=98&contentId=2000666. [Accessed on March 31, 2011]. BP Global-c. (2011). Re-earning and keeping the trust of society by operating safely and responsibly is the only way we can fulfil our purpose of creating sustainable shareholder value. [Online]. Available at: http://www.bp.com/sectiongenericarticle800.do?categoryId=9036149&contentId=7066886. [Accessed on March 31, 2011]. BP Global-d. (2011). Agents of Change: Preparing for a World Where Carbon Has a Price. [Online]. Available at: http://www.bp.com/genericarticle.do?categoryId=98&contentId=7018634. [Accessed on March 31, 2011]. BP Global-e. (2011). Masters of management [Online]. Available at: http://www.bp.com/sectiongenericarticle.do?categoryId=9017639&contentId=7031834. [Accessed on March 31, 2011]. Gitman, L. J. & McDaniel, C. (2008). The Future of Business: The Essentials. Cengage Learning. Holdren, P. (2006). The two most difficult challenges. [Pdf]. Available at: http://belfercenter.ksg.harvard.edu/files/innovations_the_imperative_6_06.pdf. [Accessed on March 31, 2011]. Steven, P. (1997). Organizational Learning in BP. [Online]. Available at: http://choo.fis.utoronto.ca/dla98/KC.BP.comments.html. [Accessed on March 31, 2011]. Read More