Every industry is evolving in this uncertain climate; companies across all industries will need to become nimbler to survive and thrive. The Energy Transition has both near-term and longer-term implications, and businesses should invest in agility via talent, product, and modern data to build the necessary capabilities for the climb ahead.
As we engage with companies within Oil & Gas, Retail Electricity, New Energy, and Cleantech, it is striking that there is much more consensus about the future of energy within the industry than you would expect based on TV or social media. For instance, are you aware that ExxonMobil, Chevron, Shell, bp, and ConocoPhillips all support the Paris climate accords? The industry has shifted due to an understanding that the model of the future is now better explained by Peak Carbon than by Peak Oil.
For many years, Peak Oil was seen as the energy hurdle of the future. In the Peak Oil future mindset, the amount of hydrocarbon in the ground is limited and we are using it up quickly. Cheap energy fuels the motor of the modern economy, and so an ever-diminishing supply will wreak havoc on human well-being. Hence the need for “renewable” energy. This concept has lead governments and businesses to hunt for new discoveries of cheap hydrocarbons, for new ways to extract the hydrocarbons we know about efficiently, and for new materials that we can burn to generate energy.
Recently, clearer evidence of the impacts of heavy hydrocarbon consumption has brought about political, scientific, and environmental pressures to reduce our carbon dependency. In the Peak Carbon future scenario, unless we transition to “alternative,” “new,” or “clean” sources of energy that don’t release CO2 and methane into the atmosphere, we will face ever greater societal and economic threats. See https://climate.nasa.gov/effects/ or the Intergovernmental Panel on Climate Change for the most up-to-date science on this subject.
This mindset represents a fundamental shift in the business model for forward-thinking companies in the energy industry. These companies include all of the Oil and Gas Supermajors, Midmarket Oil and Gas services companies, Retail Energy Providers, traditional Utilities, and New Energy rising stars. We are also discussing the impacts and opportunities created by the Energy Transition with other industry leaders, such as Telecom, Construction, and the Automotive sector.
While there is broad recognition that the Energy Transition has already started, each company’s expectation of the pace of the transition varies. This directly impacts the strategies they are choosing to take for the short and long term. There are also various viable paths for disrupted companies and new entrants to explore as we set off on this unprecedented global economic trek.
There are some key themes across industries that come from the need to be nimble for the uncertain future.
- A Talent Capability to acquire, retain, and develop talent that is motivated and engaged through autonomy, mastery, and purpose, but also to identify and cultivate the Solutions Architects that can navigate white space and design high value, highly adaptive solutions
- A Product Capability to effectively ideate, design, develop, continuously evolve, and service-innovative products that delight customers and respond to the changing needs of the energy grid, andÂ
- A Modern Data Capability to provide people with the knowledge, insights, and understanding they need to adapt to forces both internal and external to the organization
Talent Capability
The energy transition will require shifting people into roles where their past experience only partially applies. For instance, Oil and Gas companies routinely execute large, complex capital projects with a decades-long return on investment timelines. These skills are clearly relevant and sorely needed to carry out the massive infrastructure investments predicted by a Peak Carbon mindset. Organizations will need future-thinking enterprise architects to help them build resilience; reimagining all of their interacting systems and processes and to recognize and re-apply core strengths into new domain areas. Additionally, companies will be better served in most cases to retain and retrain their existing workforce for many of the roles needed in the reimagined organization, as relevant expertise will be rare or in areas that do not even exist yet.
Product Capability
At the ground level, the energy transition will involve many companies retiring their existing products and services and replacing them with alternatives that still fulfill the underlying Job To Be Done but in a carbon-neutral manner. Companies will need to try a lot of different product ideas and strategies, and likely most of them will fail. Building an organizational capability to keep innovating so as to overcome inertia will be essential for success.
Modern Data Capability
As mentioned earlier, the pace of the energy transition is unknown and will be important for organizations to monitor closely. Combining internal and external information to uncover meaningful, trusted insights in a relevant timeframe could mean the difference between success and undue difficulty. Experimentation with predictive intelligence models may also prove valuable. A combination of tying analytics to business value, carefully architecting the data platform, and applying fit-for-purpose automated governance will help transitioning organizations achieve insight-driven results.
There is broad recognition that the Energy Transition has already started, and industry leaders have fundamentally shifted away from the “Peak Oil” mindset of last decade. Many viable paths exist in the future. Which path companies choose, and which capabilities they choose to grow is largely connected to their expectation of the pace of the Energy Transition. Will there be major technological and financial obstacles that keep the pace slower, or are we at a tipping point of reinforcing systems building towards a steeply sloping S curve?