Leadership
BP's Only Hope For Its Future
It must throw out its formula for success.
"Beyond Petroleum?" BP looks anything but that now. How could a
company that spent so much money trying to make us think it was
something else remain so tied to, and now so damaged by, that product?
Was it just trying to fool us with those ads? Or is there something more
fundamentally wrong here? Perhaps something wrong in the management
system used not only by BP but by almost all companies today?
That's the first paragraph in my latest column on Forbes.com (Read BP's Only Hope For Its Future here). British Petroleum's situation was avoidable – if the company hadn't simply remained so dedicated to "Defend & Extend Management" – the practice of doing more of the same because it's what the company does best. Unfortunately too many companies follow this "best practice," sticking to their "core," and don't use White Space to find new opportunities for growth. All the way into disaster!
The Harvard Business Review web site describes the mismatch between BP's claim of heading in a new direction versus company reality in "The BP Brand's Avoidable Fall." British Petroleum's campaign is now a decade old, trying to convince everyone they weren't just an oil company. Looking back HBR recalls that authors then claimed about BP's campaign "this [strategy] seems to be at variance with organizational reality
and the [firm's] actual identity….[BP's] stated corporate aim of
being green-oriented…is an aspiration which to us bears arguably
questionable resemblance to near-term reality. At the time,
environmentalists estimated that only one percent of BP's activities
came from sustainable sources…Now, the stark contrast between BP's image and reality has substantially
weakened its reputation."
BP simply couldn't quit drilling for oil – because it was so dedicated to Defending & Extending the BP legacy. So it kept moving into more difficult fields, at higher cost, with lower yields. Now all those billions of dollars in advertising are lost, along with all the money for the clean up. Costs it will take shareholders years to recover. Even while leadership knew it had to move in a different direction – and advertised the need!
The spill costs of course move well beyond BP. For example, the network of small businesspeople that run BP refilling stations have been hurt as Crain's Chicago Business reported, "Chicago Gas Station Owners Hit By BP Spillover." Miles, and billions of dollars, removed from BP headquarters decisions, thousands of independent small businesspeople are losing revenue, due to the brand destruction created by BP taking greater and greater risks to Defend & Extend their oil business. Customers have a choice, and when a reputation is sullied many often change suppliers. Remember how Toyota car sales tanked as reports of their safety mishandling became available?
Despite the problems of Defending & Extending a business, leaders don't give up easily. The Daily Caller reports "Experts Say Obama's Drilling Plan Could Cause Another Disaster." Amidst this huge clean-up effort, there are many who want to maintain drilling activity – because short-term they want the jobs and economic benefits such drilling creates. Just the sort of marginal, Locked-in decision-making that is now hurting BP. The region is already losing fisherman, tourists and other businesses from this disaster. When will the Gulf Coast identify other ways to grow besides the economically and ecologically risky deep-water drilling activity?
BP, and the states affected by this disaster, desperately need to move "Beyond Petroleum." But doing so will require extensive use of White Space for finding and cultivating new businesses. It can be done. Yet so far, despite the horror of this disaster, there is more effort being expended to find ways to continue on the same route than disrupt old behaviors and find new sources of revenue. Not even a disaster of this magnitude disrupts those really dedicated to Defend & Extend their locked-in success formula.
As the article says, once you succumb to a Locked-in Defend & Extend strategy – like British Petroleum – management just can't help itself but to do "more of the same." Dedicated to Defend & Extend Management, no company could move "Beyond Petroleum." Are all (or most of) your resources dedicated to Defending & Extending your legacy business? Do you have White Space in your organization to move beyond your legacy? Or will it take a disaster to demonstrate how risky your strategy has become?
The main problem was how to position the company to handle this crisis. The most technical positioning was to be a petroleum company that knew how to run petrol platforms. But with all the failures… it mismatched completely.
The second option was to use this crisis to enforce a major identity swap. BP as a “green company” defending nature. BP already has a lot of business activities in the field but by telling everyone… this is an ecological disaster, we are going to do everything to stop it, they got were taking a “green cap” and not an “oil drill helmet”. They not longer spoke about new technical inventions but about element to stop polution, to reduce/eliminate the risks…
One thing is clear, BP didn’t posses a disaster recovery plan that could have given them – even through the disaster – a strong marketing advantage. Now it will take a long time to recover with a bad brand image.
This is an environmental crisis, a tragedy for those killed and injured and a political football being played out between the US Government and an international company called BP, Not British Petroleum, and it has not been called British Petroleum for over 10 years.
The Obama administration should back off and allow those involved to deal with the crisis and resolve the situation.
By making this a political football the US Government has picked a fight with the one nation on the planet that actually likes the USA and is both a historic friend and ally and a a true market driven economy in the true anglo-saxon model like the US.
If the US Government does not stop the direct attacks on BP and by definition Great Britain then there may well be a wholes sale re-evaluation of the relationship between Britain and the US on this side of the Atlantic.
US companies have been responsible for major environmental catastrophes around the coast of Britain over the last decades, but never once did the British Government blame or demonise the US, only deal with the spills. If we analyse the Gulf of Mexico crisis properly we find a host of US companies involved, but no apportioning of blame by the US Government or Obama.
Be careful what you wish for you might get it and more. The USA needs friends and we might decide to pull out of Afghanistan and lave you with it. Friends are friends – but it has to cut both ways.