Defend & Extend Disaster – British Petroleum (BP)

by | Jun 25, 2010 | Current Affairs, Defend & Extend, In the Swamp, Leadership, Lock-in

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?

It’s the One You Don’t See That’ll Kill You – BP, Tribune Corp., GM, Lehman Brothers, Sun, SGI

by | Jun 24, 2010 | Current Affairs, Defend & Extend, In the Swamp, Leadership

How widely do you plan for a different future?  Do you think British Petroleaum's (BP's) engineers and managers knew there was a chance of a major problem coming from deep water drilling?  It seems illogical to think they didn't know the chance existed.  Yet, they seemed pretty ill-prepared for the problem.  As did the federal government agencies and responders – as well as all the businesses that make a living out of cleaning up water-based oil spills.  Critical-Thinking.com sums up the issue pretty succinctly in the article "What is Your Company's Deepwater Horizon?" According to the article, the problem at BP is one that lots of companies have; most businesses simply don't put enough effort into planning for worst case scenarios.

Actually, the problem is worse than that.  Most companies only plan for one scenario – more of the same.  Planning processes rarely do more than extend past performance.  In today's fast paced, global, highly competitive world it would seem that is about the least likeliest scenario.  But it's the one that dominates how businesses plan.  That so many businesses have been turning for the worse, or failing, is testament to how smart people are let down by planning processes that simply don't consider alternatives strongly enough.  Look at the old AT&T, Tribune Corp., GM, Sears, Lehman Brothers, Silicon Graphics, Sun Microsystems, NCR, RCA, Unisys, Zenith, International Harvester, Brach's Candy…..

But planning problems are even worse than this!  The first order problem is simply thinking about the potential scenarios and planning for them.  Like the military does before a campaign.  Even though nobody knows what will happen, by planning for a range of contingencies any business can be far better prepared.  But what about the contingencies – the outcomes – you don't think about? What about scenarios you don't want to think about? 

According to the New York Times there's "The Anosognosic's Dilemma:  Something's Wrong but You Don't Know What It Is."  Have you ever been in a meeting and someone, usually from the outside – like a vendor – said "but what about this _______" and they describe something going really, really, wrong — completely not as anticipated?  And then somebody, usually somebody that's been around the company a long time and has both stature and influence says "well, if that happens then we're all dead.  All bets are off."  And with that, the conversation ends.  It was a scenario, regardless of probability, that he simply didn't want to consider.  His position was basically "hey youngster, that's crazy talk so let's not honor it with discussion."

Now we have a whole different scenario planning problem.  One where we know, and will admit there are things that could happen, but we don't know what they are.  Where we are so locked-in to our existing thinking that we don't even see these scenarios.  We don't know what we don't know, and we're not asking what we don't know.  We can't visualize an outcome that is possibly very different.

This is called the Dunning-Krueger effect, for the two psychologists who discovered it (David Dunning and Justin Krueger of Cornell.)  Basically, it says we ignore options.  We lose the spark to explore options that don't seem obvious.  We lock-in on the way we think about the problem so strongly that potential solutions which are on a different vector – come from a different source – are simply not even considered.  As if they could never exist.

And that's why all organizations need outsiders.  And not just customers – who are heavily biased toward a better, faster, cheaper status quo.  The Dunning-Krueger effect means that all organizations need boards, lawyers, consultants, advisors, friends that don't have their lock-in.  People that can come up with scenarios that don't have their lock-in.  People that can come up with scenarios that your own organization would simply never consider.  Like a drilling rig blowing up in deep water and leaving a spewing hole of crude oil that has to somehow be capped —- that could shut down drilling in a major oil producing area, fishing, and all sorts of other businesses.  Possibly wreck part of the ecology for decades.  And wipe out the company dividend and customer goodwill while looking for a solution.