Strategic Innovation And Its Application In The Oil And Gas Industry

1. Identify the difference between invention and innovation and how innovation can be successfully implemented to achieve growth in the energy industry
2. Demonstrate a critical awareness of the different models of innovation and how they apply to the oil and gas industry case studies
3. Evaluate the role of systematic risk management in the successful implementation of innovation

Strategic innovation can be defined as the process of redesigning or reinventing the corporate strategies of a company, in order to boost the growth of the business, to generate value for not only the company, but consumers as well and lastly, for creating a competitive advantage in this globally competitive market (Mootee, 2013). A number of aspects are considered under strategic innovations, for instance, the products or services which need development or reinvention; the market in which the firm wants to compete; the development of business model; the optimization of the business processes; the expansion of the consumer base; the go-to-market strategy; making the value chain and the supply chain more efficient; and the positioning of the brand of the company with regards to the targeted consumers. Such strategic innovations are led by the senior leaders and they foster the innovations as a culture, so as to encourage collaborations across the teams and functions of the business (Tech Target, 2017).

Strategic innovations can be broadly divided into seven different parts or dimensions, the details of which have been elucidated through this discussion. An emphasis has been made to discuss these seven dimensions with regards to Shell, which is a petrochemical company, and hence, is covered under the oil and gas companies.

Shell is amongst the most renowned companies in the oil and gas industry across the globe. The company has realized that even though it has internal excellence, there are technologies and smart people in the external world, which can help in value addition to its portfolio. Give the nature of the challenges which are being faced in the world, for instance, food, water and energy; it becomes all the more crucial for the companies to adopt innovative techniques (McFarthing, 2014).

Managed innovation process forms the core of strategic innovations. When a company is able to look beyond normal or obvious, it can manage its innovations, which results in the other being inspired and influenced, exploring new possibilities and finding different pathways. This dimension is a mix of the traditional, as well as, the non-traditional aspects into the strategy of business (Keathley, MerrilL and Owens, 2013).

Shell is a well known global company, and is amongst the top in the oil industry. In order to continue its leading position, it is crucial that the innovation process of the company is effectively managed. In order to foster the innovative ideas, Shell came up with a “Game Changer” programme, so as to enable the fostering of innovative ideas from its own staff, for which properly staged and appropriate financing was provided for their development. Through this programme, the company has made attempts to develop actual business which is out and between the existing lines of enterprise of the company by adoption of a process which lies out of the constraints and which had the daily business of Shell as its priority (Maher, et al. 2015).

Even though this programme has been 90% failure, the company still takes the risk of adopting this strategy. The reasons for doing do is to learn by doing, which is the right ways of instigating innovations. And probably this is the reason why this programme has also resulted in successful records for the company. In order for ideas to translate into “proof of concept”, it is crucial that innovation is driven, and this is clearly true for Shell (Ruggier, 2013).

Managed Innovation Process

This dimension denotes both the enthusiasm, as well as, the support present between the major stakeholders, in order to stimulate the organizations, in addition to making certain that everyone is focused on having the same goals, visions and actions for the company. In terms of strategic innovations, this dimension helps in building support for the innovative ideas (Rajegopal, 2012).

Shell follows a saying that its leaders develop the best people personally. This principle is based on responsibility of the managers to cultivate the required behavior. This require learning, along with the human resource professionals are required to undertake new manner of working, plus to revamp the portfolio of leadership development. This is done to make certain that the business has continued support as per its needs through learning (Ben-Hur, Jaworski and Gray, 2015). However, this does not seem to engage all the stakeholders and hence, there is a need for Shell to adopt such strategic alignment, whereby the consumers or the other stakeholder groups are also engaged.

Through industry foresight, the company gains an understanding on what drives the changes, and also helps in identification of the trends which are new for the business or the business area of the company. Through this dimension, new technologies can be identified which ultimately benefits the business of the company and encourage it to think outside the box. This dimension is related to the changes, and sets to improve upon the understanding of the people with regards to the new trends (Rajegopal, 2012).

Shell has a reputation for planning on long term basis on the basis of scenarios as it follows a particular foresight approach which helps the company in developing the possible alternative futures, through which the company is able to be prepared for uncertain futures. This has been a successful strategy for the company as it had successfully prepared itself against the impact of carbon, possible shift to gas due to increased stress of supply over conventional oil, and even the potential of biofuels. Not only was the company able to deal with the emergence of sustainability as being a key business issue, it was able to lead (Growth Champions, 2017). Hence, the company has a strong industry foresight.

The consumer insight helps the companies in gaining an understanding and a perspective with regards to the needs of the consumers. This has to take into consideration the things which have or have not been stated by the customers. Through this dimension, the needs of the consumers highlight the products which have to be innovated to fulfill their needs (Rajegopal, 2012).

Shell is a global leader in the oil and gas industry and it has used the consumer insights to benefit itself. The company promotes its products, its quick service, expert mechanics and the free internet, in addition to the oil changing services to the consumers for itself and for the competitors outlets like that of Petronas. By targeting its own and that of competitor’s outlets, Shell was able to attain a 14% jump in footfall in Philippines. The location data which was collected and driven through the mobile advertisements, helped the consumers of Shell drive the consumers to its stores and also helped the company in gathering rick insights with regards to the consumers, which the other mediums could not have garnered (Near, 2015).

Strategic Alignment

This dimension denotes the internal organizational capabilities of the business which can be put to good use after being extracted. These capabilities help in delivering the satisfaction to the consumers, along with improving upon the brand equity (Keathley, MerrilL and Owens, 2013).

The core competencies of Shell lie in the oil exploration and production (Shell, 2016). This is the area where the company has integrated skills and knowledge and which distinguishes it from its competitors by delivering the value to the customers (Bohlander and Snell, 2006). Being a globally integrated oil company, the exploring and discovering of new oil resources, exploitation of the oil resources in order to create usable oil, refining oil in gasoline, transportation of oil to refiners and other useful products, along with the distribution and marketing of refined products to retail distribution chain and wholesale consumers, are some of the core competencies of Shell. These have made it the specialist in these fields, which results in its global position. These competencies depict the strengths or the company, which it has leveraged in order to create competitive differentiation in the oil and gas industry.

By being ready organizationally, the companies are able to act on the new ideas and it is able to implement the new strategies in an organized and a quick manner. By being organized, the company is able to manage the financial and the operational demands which are followed when the innovations are used (Rajegopal, 2012).

Shell has a very clear understanding of the organizational readiness which helps the company in improving its ability for acting on the implementation of the innovation strategies and ideas. This is the reason why the company is able to enhance its abilities for fulfilling the operational, political, financial and cultural demands during the process of strategies innovation (Roos and O'Connor, 2015). Choudrie and Middleton (2013) have stated that the companies usually focus on the three dimensions only with regards to the organizational readiness, and they include operational, structural and cultural, in order for the company to make innovations based on their operational and cultural capabilities. Using this, Shell has been effectively able to produce innovative products which are able to satisfy thee wants and needs of the consumers on daily basis. Shell has a firm belief that the oil demands would peak in the coming years, even when its competitors state otherwise. This is the reason why the company is expected to stay in business for decades to come and is focused upon natural gas, and the expansion of its new energy businesses, which include hydrogen and biofuels. This is what underpins the strategic thinking of the company (Katakey, 2016).

The last and probably the most crucial dimension under strategic innovations is that of disciplined implementation. The implementation of the new strategies and new ideas is crucial and the effectiveness of the same is dependent upon the discipline of the company in going forward with the innovative ideas. The innovations fail if they are not properly communicated within all the departments and to all the employees, who are responsible for implementing them. A lack of understanding with regards to the excepted behavior or the non-aligned of the organization to the strategy can also result in the failure of innovation. Under the strategic innovation framework, the disciplined implementation is considered as a high level element, for instance, momentum, mindsets, skill sets, formal project management approach and organizational priority understanding. Through these elements, the strategic innovation initiatives are implemented by the companies in an effective manner (Bucherer, Eisert and Gassmann, 2012).

Industry Foresight

Shell is known for its disciplined engineering, and this includes the most rewards roles in the energy industry (Shell, 2017). The company had been engaged in a joint venture with Paques, known as Paqell, whereby the sulfur extracting bacteria was used for the removal from the natural gas of the hydrogen sulphide. The company follows an open approach towards innovation and by attracting more people; it aims to implement these innovations in an effective manner (McFarthing, 2014).

Conclusion

Strategic innovations are what drive the economy, as it inspires the companies to work towards creating something new and something which not only attracts, but also retains the consumers. Strategic innovations have seven key dimensions, the effective adherence of which results in the innovation being inspired and attained. The first requirement in this process is to manage the innovations in an effective manner. This has to be followed by aligning the strategies to the innovation. The innovations are to be made keeping in mind the industry foresight and the consumer insight. Further, they have to be based on the core competencies and core technologies of the company. The organization has to be ready to adopt the innovation and there is a need for disciplined implementation, for the innovation strategy to actually work.

Through the use of innovative techniques, or innovative products, the companies like Shell are able to have their presence in the global market. On the basis of the discussion carried above, it can be stated that strategic innovation framework of Shell is very strong. This is the reason why the company has been able to be amongst the market leaders across the globe.

References 

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