Innovation in Royal Dutch Shell - Assignment Example

? Royal Dutch Shell FINAL WORD COUNT: 4337 Innovation is the current trend of the world. To stay ahead in the fast race of innovation and technology, practices need to be looked into, new ideas catered and old schools of thought reformed. Innovation is a multi-organizational and multi-departmental process that involves the cooperation of departments like research and development, financial, and marketing; whether the innovation be related to products, organizations or processes (O’Connor). Any organization that is open to innovation, secures its future in this ever changing world. Any organization that caters effectual and efficient process of innovation, and supports an innovative organizational structure leads to their fast adaptability and launch of innovation (Rolf-Christian). Royal Dutch Shell is a trend setter in innovation. From a large, but weak and mediocre company to an innovative multinational, now being 2nd largest in revenue and highest in profits (Rijnbach), and with services in more than 90 countries, Shell has definitely revolutionized the concept of Energy Business. Shell uses multi innovation practices to enhance its innovative tendencies and maintain its name as a brand in the energy business. It has a Projects & Technology organization which heads research into different technological aspects for Shell’s Products and services, and aims at providing solutions for the technological hurdles faced by the upstream and downstream product organizations (shell). Like any organization, the Innovation Structure at Shell has its strong and weak aspects. Strengths of Innovation Management Structure The innovational structure at Shell manifests strengths not only aimed at energy but also at the well being of the Planet, its customers, and employees. Here is a look at the strengths of Shell’s innovation management structure. 1. Innovation Supporting Senior Management The senior management at Shell is highly supportive of innovation, be it internal or external. The management at Shell is not against innovation and is not one of those who like to stick to the old school. With a management that is non-supportive of change and advancement, innovation cannot be achieved. Innovative organizational structure can only be achieved by removing this hurdle. The management at Shell is not only an advocate of change but also takes initiative in this regard, by all means possible. Special departments have been constructed, to research and propose new avenues of change. The senior management is involved in activities that show risk taking tendencies, an important characteristic of innovation; and also try to bring together groups and people that brainstorm (Ruth) and introduce new ideas and concepts. The Shell Australian Innovation Challenge is one of such attempts made by Shell. It is a joint venture of The Australian and Shell. The challenge allows you to enter whether you are a scientist or not. There is also a category of backyard innovation, which is open to general public, and has prize money of $10, 000 (The Australian). 2. Scenario Planning Strategy Shell has been following its innovation strategy for the past 40 years. Shell utilizes scenario planning in its aim to tackle the energy problems of tomorrow. It first implemented the said strategy during the 1970’s oil shock (Rijnbach). With the uncertainty of future growing with every passing day, scenario planning is a strong way to devise strategy. The world is faced with resource, market, organization, and technical uncertainty, the proper management of which leads to radical innovation (O’Connor). Scenario planning refers to the orchestration of probable certain scenarios in the future result from social, economical and political factors (Rijnbach). Shell has a Scenarios Team, which has six members. These members look into different versions of the plausible future (Shell). They do not predict future, rather analyzing different facts, create plausible future scenarios taking place between now and 2050 (Mainwaring). Scenario planning at Shell follows two methods: one is Scramble and the other is Blueprint. Scramble scenarios sees such future scenarios in which drastic measures are required by the cooperation of governments and businesses to ensure energy availability and which do not pay much heed to the environmental element (Mainwaring). Blueprints are more environment friendly scenario solutions, paying attention towards taking measures like concentrating on pollution reduction: it involves taking tough decisions like promoting electric vehicles and their becoming phenomena in the market by 2030 (Mainwaring). 3. Organizational Culture that Accepts Change Shell is prompted by an organizational culture that promotes and accepts change. The culture at Shell represents a shared vision of the management, employees and stakeholders. The innovative culture is that which is attractive to inspirational and innovative people so much so that it seems attractive to them; a place where the ideas of such people are accepted and implemented, allowing them to perform at the best of their ability (Kotelnikov). Shell is a company driven by innovation. Whenever an innovation is introduced, either internally or externally, the culture of the company prompts a natural attitude towards change, without much resistance. They have management, employees and teams converged into working towards the goals and aims of the organization, all the time being scattered around the world, but still working with operational excellence (Octavio). Innovative ideas at the company; be they from an employee or from someone outside the company are not shunned, rather are properly rewarded and encouraged. Game Changer Program The Game Changer Program at shell is an excellent example of an innovative culture that is followed by the company. The game changer can be anyone inside or outside the company. All the inventor has to do is submit his/her idea on the game changer website, if the idea scores merit with the management and can be of use on mass and multinational level, then the inventor is invited to present his/her product in person. The only condition is that, that the idea should be unique and novel, hold potential and have beneficial outcomes for the company (Shell). Swellable rubber seals, used widely all over the world, are an innovation resulting from the game changer program. 4. Social Audit Many companies do not pay heed to the values that are an essential for doing business. Only in the recent times have companies and organizations have started to take into account how they do business. Shell is setting new standards and promoting innovation further by producing a social audit to determine if it is achieving its principles (Glor). Social Audits are mostly conducted by an independent third party, for the purpose of its credibility. The Social Responsibility Report (SRR) sketches the social responsibilities of the organization per regard to its activities (Glor). Shell is one of the pioneers in terms of administering corporate social responsibility. Shell adheres to the law and makes every effort to take care of its social responsibilities, including but not limited to environmental factors and employee treatment (Glor). The company takes care of the disposal of its wastes, so that they may not result in damaging the environment. As shell quite specifically states in its aims that they want “to meet the energy needs of society, in ways that are economically, socially and environmentally viable, now and in the future” (Shell). The company also takes into account its own consumption of fuel and how it can be reduced (Glor). Weaknesses of Innovation Management Structure Although the management and innovation trends at Shell have changed the way people view the energy business and market, yet its innovation management structure holds some discrepancies. 1. Lack of Cross-Functional Teams Although Shell has specialized departments for R&D, and for innovative idea generation and other innovative practices; but it is devoid of the presence of cross-functional teams. Cross-functional team in an organization is an employee group that has members from all departments of the organization: focusing on the organization’s specific goal and working together for its attainment by improving and promoting cooperation and innovation, and sharing knowledge to overcome barriers and problems (Kotelnikov). Different departments of the organization e.g. research, finance, marketing, human resource etc. all work in collaboration towards the desired goal. Cross functional team maintains equilibrium between social collaboration and the creation of concepts and their propagation (Kotelnikov). When such teams start to work and collaborate, new ideas and concepts immerge relating to diverse areas of the organization. 2. Technologically Focused Advancement Shell since in the business of energy, has also had its focus mostly on improving the technological aspects of its products and organization. The Shell Australian challenge and The Game Changer are both highly innovative techniques employed by Shell, yet are aimed only at technological advancement with regards to energy. Shell website states the Game Changer’s focus areas as: Increase in production of energy Management of Carbon Storage, Distribution and Conversion of Energy Transportation fuelling Shell should also focus on environmental pollution reduction and bettering the quality of its equipment. E.g. Shell faces a law suit in Netherlands by citizens from Niger Delta where Shell is being held responsible for oil spills. These oil spills have endangered the communities as well as the environment, also leading to the destruction of the livelihoods of the local people (Usman). The oil spills are a result of the ill maintained and corroded pipelines. Shell is also to pay $ 3.3 Million to the United States in civil penalty as part of clean air act settlement (Environmental Leader). 3. Bureaucracy and Innovation At shell the final word rests with the board members, if any innovative measure or concept is to be undertaken or not. The innovation cord should be in the hands of think tanks and the decision should also rest with them. If an organization is to be truly innovative in spirit and deed, and encourage the innovative process, then it needs a balance between its bureaucracy and creativity. Shell’s Innovation Activity Sources Shell utilizes multiple sources to keep the innovation activity going. It has various programs and collaborations going on around the world to channel new and innovative ideas into the company. Shell encourages not only employees, stakeholders but also general public to siphon in ideas and concepts that can make a difference. They have a chief technology officer and a chief scientist who work together towards improved technology (Shell). Currently Shell utilizes following methods for siphoning novel ideas and concepts: i. Technical Centres Technical centres are located all around the world. they are situated close to either the main markets or the resources of oil and gas, where they work together for achieving their goals by sharing their knowledge and expertise (Shell). Technical centres are of two kinds. Technical centres focusing on innovation. Such technical centres have their main focus on introducing and improving technologies. The other kind of technical centres are the ones which focus on product development, marketing and support (Shell). ii. Game Changer The game Changer is another revolutionary idea employed by Shell. If a person has any idea related to energy and the idea is in its early stages, then shell funds that idea, provided that the idea has potential and promise of benefit. The game changer can be anyone from within or outside the company. All that needs to be done is that the idea is posted on the game changer website, and if the idea is worth it than the person will be requested to present it in person. The game changer allows influx of ideas from creative minds even if they are without resources. iii. Scenario Planning Another approach that is adopted by shell to promote innovation and change is Scenario planning. Shell has executed the successful use of scenario planning since the early 1970’s after the oil shock. Its scenario planning approach kept the boat floating for shell while many others hardly suffered. Scenario planning allows for creating plausible future scenarios in light of facts and available data and; then proposed solutions and management techniques for the scenarios. New ideas and concepts stem from the need of the scenario. Shell has utilized scenario planning for 40 years and has planned scenarios till 2050. iv. Shell Australian Innovation Challenge Keeping up its advent of innovation, Shell collaborated with The Australian and came up with the Shell Australian innovation Challenge. Shell Innovation challenge is open for all, whether a scientist or not. There is also a backyard innovation category allowing even a layman to enter with his/her innovative ideas and solution to the current energy problems. There are also seven professional categories for innovation. Teams or individuals can participate. The ideas which have a high potential for the company or is generally intended towards the good and well being of the society is recognized (Australian). Critical Analysis and Suggestions Shell being a trendsetter for innovation, comes up with new and genuine ideas simply to promote the process of innovation in the company. Shell is highly dedicated towards its goal of novelty and innovation. Schemes like the game changer and shell innovation challenge are clear proof of shell’s passion for newness and novelty. Such programs along with scenario planning, not only enable the highly skillful teams at shell to come up with the problem (scenario), but also the solution. Opening up the doors of innovation to the general public and people from versatile fields opens new avenues of success and innovation for shell, enabling it to siphon ideas and concepts from sources more than one. The technologies and award winning ideas from game changer and shell innovation challenge are used worldwide. Award winning swellable rubber seals are an example of such ideas. While focusing on siphoning of ideas from the public sector and following the scenario planning paradigm, is healthy for its innovative genius, at the same time Shell falls a victim to restricted approach when it comes to accepting a change without a chaotic situation. Scenario planning or thinking allows an organization to undergo change when encountered by a certain scenario or event for which they had planned. Until and unless that scenario occurs change does not take place. In the absence of a crisis it becomes extremely difficult for the change to take place within the organization. The aptitude of the organization to promote well managed crisis rather than encouraging the prevention of the crisis altogether is another hurdle in the innovative process (Kotelnikov). The company should promote concepts and ideas that relate to averting the crisis altogether, especially when it comes to internal issues. Extraneous factors coming from the environment, politics, economics etc. cannot be controlled, but crisis from within the company can surely be averted. Shell needs to look into building cross functional teams where people from all fields and departments can give vent to their ideas and brainstorm. When experts and professional from all fields related to the company, be it R&D, marketing, financial, will brainstorm for a better solution than that will be a “Game Changer”. Rather than just overcoming the hurdles in the field of technology, attention needs to be paid to innovation across the board. The hierarchy in any company dominates even the brightest of ideas. The ideas and concepts leading to change need to be approved by either the executives or board of directors, which creates a hurdle in the innovation process. The monopoly of strategy should be let go off (Hamel and Skarzynski) and ideas generating from cross-section of employees should be promoted. Innovation Concepts and Shell Multiple innovation concepts can be seen demonstrated in Shell’s innovation strategies. Lead User Innovation and Shell Lead User Innovation is a concept discussed by Von Hippel. According to Hippel, lead users have been often found developing what later on became best selling products in the market. He also believes that innovative tendencies have been found highly subjected to lead users. Thus lead users can be a valuable source of generating ideas and innovative concepts. In simple terms lead users are those whose strong needs in the present will become a necessary requirement of everyone in the future (Hippel). Lead user innovation is welcome at shell. With projects like the Game Changer and Shell Australian Challenge, Shell welcomes its lead users and consumers to present their ideas and concepts that could benefit the customers in the future. Open Innovation and Shell “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” (Chesbrough) Henry Chesbrough put forth the concept of open innovation. He believes that in a growing world of growing innovation, companies and organizations cannot prosper solely on their own research and development. An organization should focus on internal and external flow of ideas. Companies should arrange to hold either joint research ventures or buy already developed technology to further their own knowledge. Shell also believes in open innovation and organizes joint ventures with other universities and companies to further their knowledge and better their products (Shell). Shell has partnerships with hundreds of universities around the globe. One example is its collaboration with State Key Laboratory of Coal Conversion in Taiyuan, China. Doctoral and Post Doctoral research is being sponsored in multiple areas including carbon dioxide mineralisation and enhanced coal-bed methane recovery (Shell). Shell also has collaborations with following universities Delft University (Netherlands) The Massachusetts Institute of Technology (USA) Imperial College London (UK) Shell believes and promotes the exchange of knowledge and ideas. In this global village of today co-operation is an assured way to innovation and success. Disruptive Innovation and Shell “Disruptive innovation, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors”. Clayton Christensen developed the concept of disruptive innovation. Disruptive innovation refers to any product, concept or innovation that is introduced into the market as any other, but due to its feasibility and user friendliness, ends up displacing actually established products in the market. e.g. cell phones are an example of disruptive innovation which disrupted the market for landline phones. Shell has proved itself in this field as well. Recently shell was awarded with the inaugural Chairman’s Innovation Award for its show of disruptive technology in Shell’s Prelude Floating LNG project. LNG refers to liquefied natural gas. With the demands of energy ever rising, this sleek vessel can transport as much energy as the largest LNG vessel, but with 20% less emission. It can also tackle rough seas. Diagrammatic illustration of Shells Innovation Strategy The diagram shows companies’ utilization if its scenario planning strategy. The company orchestrates a number of scenarios with an increased energy demand. Then the scenarios and their complexity is taken into account. Then according to the scenario a probable solution or plan is devised, which presents how the company will react to the scenario and how will the company come out facing it. Improved Innovation Strategy at Shell Shell has led the way in scenario planning strategy. Many companies and organizations have tried to follow shell’s lead and implement the same. Where scenario planning has many positives, it can still be improved upon. 1. Integrated Research and Development and business departments An integration of the research and development department into the different business units can have an effect well into the future. When the business units are integrated with the Research and development department of the organization it leads to better management of the innovation process (Wentz). Such collaboration results in the joint efforts of research and development and the different departments of the organization, leading to innovation of services and products for customers with specific focus on customer need. 2. Innovative Teams Shell has units called technical centres. These technical centres are located close to the il and gas deposits and in some cases close to the markets. These centres focus mainly on the technological aspects of energy. Innovation centres should be created in the organization for furthering innovation within the organization. The decision power and the allocation of funds for innovative technology should also rest with these innovative teams. The innovative teams should decide if an idea is worth working upon. The senior management should only be involved as the last step of approval of the technology (Wentz). The innovative teams should also have their share of funds for propagating innovative ideas and concepts. This way everyone will have a chance of having their ideas worked upon even if they have are only in a conceptual state and not yet ready for physical submission. 3. Departmental Co-Location. Locating relevant departments and innovation teams in the same place can lead to faster generation of ideas (Wentz). A place where people can share thoughts and ideas without resorting to electronic communications, can definitely serve as a hub of innovative ideas. This way distortion of information is prevented and spontaneous idea sharing is encouraged (Wentz). 4. Acquisition Department An acquisition department in a large organization can be an even greater opportunity of innovation. Purchasing of diverse companies opens up new ways of innovation (Wentz). Companies like IBM, google and Cisco all own Merger and Acquisition departments. This is also a way of furthering open innovation into the organization. Implementation of Improved Strategy The implementation of the improved innovation strategy will require the following steps to be taken. i. Feasibility check of the strategy The feasibility and the profitability of the strategy should be checked. This can be done by implementing the strategy in a sub-division of the organization. Cross-functional teams will be created in the sub-division, and innovation teams will be formulated, with co-locating all the departments. After implementation of the proposed strategy, survey and research can be conducted to check the feasibility of the strategy. How happy the employees are with the changes in the department? etc. ii. Calculate increase in Efficiency and Effectiveness A calculation should be made of the changes in efficiency and effectiveness of procedures as a result of the implementation of the strategy. It should be taken into account if the proposed changes have had a positive or negative impact on the efficiency of the processes in the department. A positive trend in the efficiency of the output of the department means that the proposed strategy has had a positive impact on the department. also it should be taken into account that the cost for implementation should not exceed the profitability and efficiency in the long run. iii. Suggestion to Board of Directors The findings from the research and surveys conducted; and the calculated increase in efficiency would be presented to the board of directors, and the change in innovative strategy will be suggested. The findings will be presented as proof of the success of the strategy to the board of directors and executives of the company. The change will be proposed in the whole of the organization. iv. Organization wide Implementation When the strategy has been approved with the necessary funds required to implement the change, the strategy will be implemented from top down, throughout the organization. First the change will be implemented in the upper levels of the organization, including the executives. Then the implementation will trickle down from the higher levels to the lower departments. Potential Challenges in Implementation of Strategy Whenever a new strategy is implemented within an organization, hurdles and challenges occur naturally. Especially when the scale of the organization is large, the hurdles faced will be great as well. Shell being a large scale multinational presents great challenges in the implementation of a new innovation strategy. Following factors could Affect the implementation. 1. Cross-Cultural Differences Since Shell is a large multinational which operates on a world wide scale, cross-cultural difference can present a great hurdle in the implementation of the innovation strategy. Every country has its own employee psychology; the strategy will also have to be compliant to the rules and regulations of operation, of the country. The employees in a particular company may not have an inclination towards the process of innovation and feel content with the current approach. Due to this the cost of creating multi departments might probably be too much. 2. Cost Effectiveness The new innovation strategy will constitute of training costs and can lead the profit to diminish for a while. But with the passage of time the training will have positive impact on employee efficiency, which will help the organization in the long run 3. Continuous Monitoring Since the strategy will be introduced in the whole organization, thus it will require continuous monitoring and guidance, to ensure smooth functionality. Continuous monitoring also adds up to the cost. New softwares will also be installed through-out the organizations and their innovative departments, which will also require continuous monitoring by professionals. Continuous monitoring can be tedious and costly. 4. New Staff Hiring and Training When new departments are created within the organization or company new staff must be hired. Professional staff will either need to be hired or proper training shall be given to existing employees. Hiring staff for organizations sub offices all over the world requires a whole lot of planning and management. It also has to be taken into account that an employee might be trained with much expense of the organization but is near his/her retirement can be a fatal loss of knowledge. 5. Research and Development Cost The cost of research and development for the new innovation strategy can be overwhelming. During the implementation period the R&D cost will be high and will require extra funds allocation from the board of directors. Monitoring the New Innovation Strategy The implementation of the setup can be monitored by an Audit. An Audit conducted by an independent agency can help in monitoring the strategic procedures implemented. An external as well as internal audit will be helpful in the monitoring process, highlighting the strengths and weaknesses of the strategy. Theories Related to Module Following theories can be seen playing a part in the innovation strategy module. 1. Lead User Theory Lead user theory mainly focuses on the process by which commercial products result from the innovative suggestions of the user (Stevens). Lead user innovation can be seen playing its part in the innovation strategy at Shell. 2. Open Innovation Paradigm Open innovation paradigm encompasses the innovation that results when organizations benefit from research and development that is done by other organizations and is outside their area of expertise References Archangelo, A. D’. (2012). Shell Recognized with Inaugural Chairman’s Innovation Award. totalenergyUSA.com. 29 Nov, 2012. Web. 19 Dec, 2012. B, Octavio. (2009). what are the barriers to innovation in your organization--are they connected to other challenges- culture, information overload, incentives, and ownership? Linkedin.com. 28 July 2012. Web. 18 Dec, 2012. Christensen, C. (2012). Disruptive Innovation. claytonchristensen.com. Web. 18 Dec, 2012. Hamel, G. & Skarzynski, P. (20012). 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