Advancing the Spirit of Collaboration

Abdul-Jaleel Al-Khalifa, 2007 SPE President • president@spe.org

The SPE Industry Summit on Talent and Technology will be held 28-29 June of this year. The summit is championed by BP, Total, Shell, Hydro, Repsol, Baker Hughes, Schlumberger, and Weatherford. A total of 100 senior industry executives will be invited to attend this summit. The program committee met in Paris on 16 February and decided to focus on talent and technology, with a theme of “advancing industry collaboration to maintain growth and prosperity.” There are excellent examples of industry collaboration, such as professional societies, joint industry projects (JIPs) with academia, data trading, and spinout joint ventures. However, those fall short of meeting the gigantic challenges facing our industry. Why is our aspiration to collaborate extremely high but our real implementation of collaboration is low? Does the industry need to go through a fundamental change to reinvent itself and spearhead a more serious collaboration effort? Before I address industry-wide collaboration, let me first talk about internal collaboration across silos within the same company. Simply, if a company cannot be successful with its internal collaboration, external collaboration is only wishful thinking.

Internal Collaboration

The best organization in nature is the human body, where the brain instantly assimilates knowledge and makes all decisions. The process takes nanoseconds and actions follow immediately. There are definitely no silos or turfs among all the “business units” of the human body (hands, legs, heart, etc.). There is no bureaucracy and no hierarchy between the CEO (the brain) and the frontline employees (the senses). The transparency, the oneness, and the integrity of this organization are beyond any stretch of imagination. With all our super computing power and the intelligence of organizational behavior, can we assemble a business organization that behaves more like the human body?

The objective of collaboration is to capitalize on the multiplying power of synergy among different business units and or-ganizations (the whole is much more valuable than the sum of the parts). This synergy results when senior management infuses and encourages internal collaboration throughout the organization. Such collaboration adds value at the organization level to the value already generated at the business units. Kaplan and Norton1 eloquently illustrated this concept:

Customer added value (at the business units)+Company added value (at the organization levels)=Total value creation.

At the business units, the added value is the product or the service delivered to the customer. At the organization level, the company added value is in the form of brand publicity, shared service centers, and financial and human resources that support all business units. In general, if the corporation’s headquarters does not add value, then it has to be dissolved to minimize cost and bureaucracy. In our industry, asset teams are the business units responsible for developing, producing, and managing assets. Company added values can be transporting, processing, refining, marketing, accounting, computing, human resources, etc.

Internal collaboration takes place among business units as well as across organizations within the same company. Obstacles to effective collaboration include a rigid organization with an inflexible infrastructure; organizational silos with insufficient cross-access to information; turfs, job insecurity, personal conflicts; and a lack of shared values (“their gain is our loss”).

Breaking Down the Walls. There have been significant strides toward enhancing internal collaboration over the past 20 years. Companies were reorganized into leaner and flatter organizations (higher ratio of employees to managers, 20:1 as compared to 7:1 before). This required remolding the traditional command and control structure into self-directed teams.2 Functional or discipline departments, for example, were reorganized into fully empowered asset teams. These asset teams have full access to field data and therefore assume full ownership and accountability. As a result, the bureaucracy of multi-layer management was minimized and organization silos were broken down.

Thanks to computing technology with its advanced virtual control rooms, or so-called “real-time operation centers,” multidisciplinary data are integrated, visualized, and examined by all team members remotely via satellite. The team then makes intelligent decisions regarding well geo-steering or reservoir production and management strategies. This has indeed revolutionized the work environment and broken down the walls of time and space. Data standardization and sharing among different platforms is still challenging and time-consuming and therefore deserves further industry focus.

Leadership’s Role. Internal collaboration is far from optimal and significant improvements can be achieved. Company leadership needs to continually examine the soundness of the organization’s structure. The objective is a nimble and responsive organization, so leaders need to break down organization boundaries and transform silos into “rubber bands.” This organizational plasticity is essential to coping with the changing topography of our industry landscape. It is the leader’s role to re-engineer the culture of the organization into an innovative, collaborative environment. This may be easier said than done, but it is the only way to seize opportunities, pre-empt threats, cut cost, and avoid reinventing the wheel.

External Collaboration

Following the example of shared service centers that support all business units within a company, we can think of industry-wide efforts that support all enterprises. At this high level, the image of the industry is equivalent to the brand of the company. As a company strives to polish its brand, the industry needs to defend its image. Currently, there are bright examples of shared industry efforts (e.g., professional societies such as SPE, JIPs with academia, consortia, and a few joint ventures). These are examples of external collaboration that add value at the industry level. We can revise Kaplan and Norton’s value equation to reflect this industry-wide value addition as follows:

Customer added value (at the business units)+Company added value (at the organization levels)+Industry added value=Total value creation.

This explains the significant value and opportunities of internal and external collaboration. Such collaboration has become imperative as our industry faces massive challenges that can be tackled at all these levels.

There are areas where we can collaborate effectively without the fear of losing our competitive edge of intellectual properties. For example, consider the widespread belief that climate change is due to fossil gases emission. Addressing this issue calls for urgent development and deployment of CO2 sequestration technologies. An equally important and urgent matter is the erosion of our industry image, which severely affected our ability to attract new talents to our workforce. In many regions, our industry is mistakenly perceived as a sunset, rusty, and polluting business. This image has to be widely repaired at all levels, from kindergarten through college students and on to the public of all ages.

New areas of collaboration can expand to include shared knowledge base where industry best practices are amassed and cultivated. Cross-exchange of intellectual properties can also allow better alignment and streamlining of the industry technology spending.

External Collaboration Case Study. A good example of openness and global collaboration comes from the gold mining industry.3,4 Traditionally, gold mining is highly proprietary. It is also costly and time consuming. Goldcorp Inc. was aiming to find six million ounces of gold in one of its prospect areas. The company wanted to tap into the global mining talent to confirm and add to its own analysis and to find the best mining locations. In March 2000, the company announced a global virtual mining competition, the "Goldcorp Challenge,” with more than US$500,000 in cash prizes. All geological data were posted on the Web. The contest drew responses from 1,400 prospectors from 50 countries. Goldcorp selected 25 semi-finalists to submit detailed proposals, and each received US$10,000. Submissions exceeded 600 pages. Four winners were selected in March 2001 and were awarded another US$325,000.

This example illustrates a few important observations:

The power of virtual knowledge sharing and global connectivity that breaks the walls of geography and organizations.
The serious intent of Goldcorp Inc. to break the barrier of fear and share its data.
The cost-effectiveness and timeliness of the results.

The Way Forward

Does our industry have a serious intent for external collaboration? Yes, provided that the rewards of external collaboration far outweigh the risks of losing intellectual properties. Our industry remains very competitive in many areas, such as access to resources with regard to operators and competitive edges with regard to service companies. Therefore, to move forward, the industry needs to develop a common approach to what should be open for collaboration and what should be proprietary. The industry then needs to develop a business model that demonstrates how all the players, such as academia, industry, and capital ventures, can share the risks and rewards of collaborative projects. It is wise to take the path of least resistance and work on industry image and CO2 sequestration, where competition is low and the rewards of collaboration are high. The SPE industry summit will aim to advance industry-wide collaboration in these broad and common issues.

References

Kaplan, Robert S. and Norton, David P.: “Creating Value from Organizational Alignment,” Special Book Preview, Harvard Business School Publishing (November-December 2005), 7, No. 6
Blanchard, Ken: Leading at a Higher Level: Blanchard on Leadership and Creating High Performing Organizations, Pearson Prentice Hall, Upper Saddle River, New Jersey(2007).
www.goldcorpchallenge.com/challenge1/mediaclips/media_frameset.html.
“Expanding the Innovation Horizon,” IBM Global CEO Study 2006, www.ibm.com/innovation/ceo4.