The Deepwater Horizon explosion and subsequent oil spill created an opportunity for innovation at its best for the worst possible reason. BP’s leadership at the time, was not prepared to handle the Gulf of Mexico environmental crisis. Media took advantage of the situation and provided the perception of BP as a big bad oil company. Subsequently it was up to BP to change its company culture, ethics, innovation and media presentation to sustain its viability in a volatile market.
After a long and difficult search, Anglo-Persian Oil Company finally struck liquid gold in Persia in 1908. Explorer George Reynolds and investor William D’Arcy had a return on their hard work and investment within days of the discovery (BP.com, First oil, 2013). Over one hundred years later Beyond Petroleum leads the industry in innovation and exploration in crude oil production.
Experiencing numerous and continuous setbacks the Anglo-Persian Oil Company persevered through its early years. Innovation became part of its foundation as the company had to continually look for ways to improve the technology needed to refine and transport crude oil. The use for crude oil was limited to mostly home heating until World War l. During World War l, Britain became the chief investor in the company as the country needed vast supplies of crude oil to fuel its newly designed ships (BP.com, Early history, 2013). During World War II, the name British Petroleum was used by a German company to sell crude oil to Britain. The assets of British Petroleum, seized during the war, were sold to Anglo-Persian Oil. Using this brand, Anglo-Persian Oil Company sold refined crude oil throughout Europe (BP.com, Through World War II, 2013).
After World War II, the Anglo-Persian Oil Company built numerous refineries in Europe. It created advertising and marketing plans to encourage people to use newly developed automobiles to travel great distances thus increasing sales of refined crude oil. The company created research laboratories to develop better refining processes. Encountering political upheaval in Persia, now known as Iran, Anglo-Persian Oil Company continued to assert itself as a major crude oil producer. By 1954 the board members agreed to change the name to British Petroleum (BP.com, Through World War II, 2013). Through these early years of crude oil exploration and refining, BP implemented incremental innovation by staying focused on its oil production in the Middle East and its refining business in Europe (Davila, Epstein, Shelton, 2012). These revenue sources remained fairly constant with very small increases in technology.
A need for a new way for searching for oil became apparent as oil in the Middle East was no longer available. Innovation for British Petroleum now became semi radical as substantial change in technology was necessary to advance the extraction and delivery of crude oil (Davila, Epstein, Shelton, 2012). The Alaska North Slope was soon discovered to hold a large supply of crude oil. Producing, in a single day, 400,000 barrels of crude oil. BP continued to be a major player in oil production (BP.com, Post war, 2013). Designing production platforms that were tall enough to withstand the stormy waters in an Alaskan winter became a priority for BP engineers. According to the BP.com (2013) late century webpage, “The pipeline to a terminal at Firth of Forth would be the largest deepwater pipeline ever constructed. It needed the built-in security and agility to survive intense currents and corrosion” (para. 10). A civil engineering masterpiece, the Trans-Alaska pipeline prevented warm oil from melting the permafrost. The engineers also took into account the migration habits of the caribou when planning the pipeline. Concerning the environment, the BP.com (2013) late century webpage states: “More importantly BP found within itself a passion for confronting environmental challenges with ingenuity and determination” (para 13).
Lustgarten (2012), in the book Run To Failure: BP and the making of the Deepwater Horizon Disaster, provides a different and less optimistic look at BP’s history. John Browne was a company man. He grew up with his father working for BP, he gained his education from scholarships provided by BP and when it came time for him to go to work, he went to work for BP. He worked his way up, first as Chief Financial Officer for the American Division to eventually be Group Chief Executive for the company. His attitude was take risks now and answer questions later. According to Lustgarten, (2012) BP spent an enormous amount of time and money exploring offshore oil and developing the technology to drill in remote waters. Compelling technological advancements were being used by BP in the Gulf of Mexico at Browne’s initiative (Lustgarten, 2012).
Desire to make BP number one in the global crude oil industry lead Browne and his leadership team to allow many, many shortcuts in the company’s safety procedures. During Browne’s tenure with BP the EPA fined the company millions of dollars and charged them with four federal crimes (Lustgarten, 2012). Lustgarten (2012) writes the company demonstrated
...a pattern of disregard for regulations and for the EPA. The company had repeatedly cut out key safety processes and let equipment languish to save a few thousand dollars at a time. It had taken risks at its wells in Alaska, on its platforms in the Caspian Sea, and at its refineries in Scotland. Undoubtedly, … it did the same in the Gulf of Mexico, too (p. xiii).
On April 20, 2010 the Deepwater Horizon experienced a combustible gas leak that caused an explosion, seventeen people were injured and eleven died. This incident was not the first major catastrophe for BP. A much more deadly explosion occurred at the Texas City Refinery in 2006, in which 15 people were killed and over 100 people were injured (Lustgarten, 2012). In the Gulf of Mexico, BP, with it’s long history of ups and downs, discovery and exploration, profit and loss, generated an oil catastrophe that required radical innovation at its best to resolve. The game changed for BP on April 20, 2010, BP could no longer adhere to the strategy play to win. Their hand was forced and their strategy quickly and drastically changed to playing not to lose (Davila, Epstein, Shelton 2012).
TimeUSA magazine (time.com, 100 days of the BP spill: A timeline, n.d.) provides an interactive timeline of the first 100 days after the initial explosion on the Deepwater Horizon. The timeline includes the innovation BP used to stop the massive amount of oil devouring the Gulf of Mexico. Throughout the 100 days, over and over again different attempts to activate, repair or seal off the blowout preventer valve, fail. One of the first attempts is remote controlled undersea robots. These robots, an earlier innovation by BP, are used in exploration and drilling. The attempt fails. Either unwilling to admit the amount of oil leaking into the Gulf or unsure of the extent of the environmental damage; BP isn’t quick to announce plans to stop the oil. Instead they began drilling two relief wells. The wells would not be completed until August. There purpose is to deliver mud and cement to stop the leak (time.com, 100 days of the BP spill: A timeline, n.d.). This plan, although stable, does not address the immediate environmental impact on the Gulf of Mexico.
By May 16, 2010 an estimated 5,000 bbls of crude oil a day was destroying the Gulf of Mexico and left thousands of animals dead or dying. The estimation of crude oil polluting the Gulf grows to 19,000 bbls a day (time.com, 100 days of the BP spill: A timeline, n.d.). BP, in an emergency reaction to the oil flowing into the Gulf, spews the idea of a containment dome for the valve. This innovative idea fails.
Within a few more days BP develops another idea to stop the flow of crude oil. Two attempts are made to insert a tube into the pipe to collect some of the crude oil. The third attempt succeeds and gathers about 2,000 bbls a day. In another effort to validate even the most absurd of innovations BP pumps a mud like liquid, shredded tires and golf balls into the valve. None of these stop the flow of oil spewing into the waters. Failures have provided BP with a myriad of useful information. Going back to the basics, BP returns to the use of the remote controlled robots to remove the riser pipe and install a new containment cap (time.com, 100 days of the BP spill: A timeline, n.d.). On July 12, 2010, 84 days after the first explosion on the Deepwater Horizon, BP is successful in using remote control robots to install the containment cap. They have stopped the leak but it is only a temporary fix until the relief wells are completed. BP continues to investigate different ideas to prevent and stop further oil entering the Gulf of Mexico (time.com, 100 days of the BP spill: A timeline, n.d.). The learning experience is later shared with other industry leaders (McMurry, 2012).
In his speech, Innovation, Adversity and Resilience, at the World Biofuels Markets Conference on March 13, 2013, BP Vice President of Biofuels, Phil New outlined the company's strategy for the future. The focus of his speech revolved around innovation with biofuels. New points out “innovation is one of the wellsprings of human progress, the creative force driving growth and solving problems” (para. 2). Pointing out the the overwhelming amount of criticism and stricter regulations for the oil industry he remains focused on innovation for biofuels (BP.com, Innovation-adversity-and-resilience.htm. 2013).
New summarizes BP’s current innovation strategy when he states, “Adversity is a great prompt to inventiveness and resourcefulness” (para 13). He continues to describe how the company must now make smaller, slower, safer and more reliable moves in innovation in order to keep moving forward. New’s philosophy is to return to an incremental innovation strategy to sustain BP in the oil industry (Davila, Epstein, Shelton, 2012). New also advises that the company must look closer at risk, biology and engineering. New states, “Innovation still happens in the lab - but it doesn’t just happen in the lab (para 13).
New gives his most profound statements about innovation near the end of his speech. He affirms:
Now it is about innovation borne of a thousand details, borne of being an operator at scale, of knowing your business and your factories, your fields and your customers inside out, and having to scrape for the last cent of margin, in the commodity world that a company like BP knows only too well (para 14).
BP uses a rough sketch of metrics to monitor it’s risk for accidents in an industry whose products are highly flammable. The BP.com (2013), webpage Preventing and responding to accidents and oil spills lists the measures the company takes to monitor their progress. These measures include inspections, maintenance and tests of equipment. Reports are gathered quarterly and presented to a risk committee. The information is analysed and used to ascertain areas of improvement by the committees. The web page also states that the company’s metrics are evolving in order to better understand performance. This metrics follow some of the governing rules of metrics including building a system that meets BP’s strategy, knowing the desired outcome, and creating incentives to build leadership who will strive to meet the metrics requirements (Davila, Epstein & Shelton, 2012).
BP’s incentive program is based on the team effort. Executive Vice President and Chief of Staff, Dev Sanyal, explains BP’s incentives to Houston investors on May 8, 2013. In the speech Sanyal explains the criteria for rewards is based on performance of the group, the individual at work and the individual. Included in their evaluation are the individuals contributions to the management of safety and risk. Sanyal states that BP has five core values that include safety, respect, excellence, courage and one team. Within these values, Sanyal summarizes, are behaviours that can be demonstrated, observed and evaluated on a metrics system (BP.com, Speech_by_Dev_Sanyal.pdg, 2013). Neither Sanyal nor BP’s website give any specifics as to the incentives either the team or the individual receive when meeting the metrics objectives.
BP has followed a strategy of innovation development based on the current conditions of the industry. Incentives as well as the metrics needed to measure the company requirements seems to be at the beginning stages of incorporation in the company culture. There is no indication that metrics or incentives have been established prior to the Deepwater Horizon explosion.
Prior to his rise in power, Lord John Browne, spent several years in Alaska following company orders to look for new oil. Browne lead by example in innovation by developing new ways to look for oil and by “writing computer models, for instance, that improved accuracy and efficiency of exploration there” (Lustgarten, 2012, P. 6). Browne became BP’s Group Chief Executive (GCE) in early 1995. His competitive aggressiveness made him stand out among his colleagues in the industry. As GCE he orchestrated the biggest oil company merger of its time. In his boldness, Browne in 2001, renamed British Petroleum to a more dynamic - Beyond Petroleum. He is credited with creating and leading one of the first and largest global businesses (Holmes, 2013).
The Texas Refinery spill in 2005 pushed Browne to take a much closer look at the risk involved in his business. As a result BP invested millions into research of biofuels and climate change. In order to make a significant change in attitude, BP had to change its hiring strategy so that it could recruit more people interested in saving the environment. Browne credits himself on spurring the conversation about environmental footprints. Homes (2013), quotes Browne as saying;
The best way to earn the trust is to be radically transparent. This puts a huge premium on having the right measurement and performance management systems inside a company. If you get that right, you make it easy for people to report what’s going on in a consistent and thorough way” (p. 27).
After twelve years driving BP on a successful climb to the top of the crude oil industry; the aftermath of the Texas Refinery spill and personal choices resulted in Browne’s departure from BP. In 2007, Tony Hayward took the helm of BP and remained in the position until July 27, 2010, almost ninety days after the Deepwater Horizon Explosion. Robert W. Dudley had been sent to the Gulf of Mexico to oversee BP’s interests in the area. At the departure of Hayward, Dudley immediately took over the leadership position of Group Chief Executive of BP ( Lustgarten, 2012).
In Chicago on January 13, 2012, Dudley gave the speech A Safer, Stronger BP. He began by giving a brief history of the company and its development as a global company. He went on to expound the Deepwater Horizon explosion effects on the community, the environment, the crude oil industry and on BP’s stakeholders. He explained that the largest loss was in public trust resulting in a loss in shareholder trust and revenue dollars. BP, according to Dudley, had to be rebuilt on trust. He stated that trust makes the world go round much more than money. Dudley went on to point at that he believes trust in everything from local transportation services to banks to corporations is the biggest factor in sustainability for any company today (McMurry, 2012).
BP’s leadership strategy is now based on the belief in rebuilding America's trust. A difficult task of a company that cost human lives and created some of the worst environmental damage of its time. Dudley, during his Safer, Stronger BP speech, pronounced that he, as Group Chief Executive of BP, created the company policy, “three R’s. Respond, Reinforce, Restore” (McMurry, p. 96). In addressing the respond “R”, Dudley talked about spearheading the Gulf of Mexico disaster. Of the innovation required to finally and permanently seal the leak, Dudley confirmed BP invested in company engineers, other company’s engineers, the government, the military and academia. Outsourcing information during the Gulf of Mexico spill and now sharing information with other oil industry company’s creates an opportunity for BP’s to return to a play to win strategy (Davila, Epstein, Shelton 2012).
Reinforcing what BP has learned from their failure to provide adequate safety measures, Dudley states, “We knew we had a responsibility to embed the lessons from this accident across BP’s business world wide. We had to advance and continuously improve our safety and operations based on that knowledge” (McMurry, p. 97). The company has gone on to develop a leadership strategy that includes stronger organization safeguards and procedures to prevent crude oil accidents.
Finally, in order to restore America and more importantly investors trust in BP, Dudley talked about the company’s plans to explore alternative energy sources, areas to drill that will cause the least amount of environmental damage. The company leadership also pursues opportunities to develop and share safety strategies that will prevent further loss of human life (McMurry, 2012).
When studying the attributes of corporate responsibility BP has not met those standards. Under the leadership of Browne the company expanded at an exponential rate while at the same time taking unnecessary risks in safety management. As a result of its desire to cut corners in order to save money BP was forced into a playing field that required it to develop it’s most creative innovations. Most American’s were observers of the Deepwater Horizon Explosion and the subsequent environmental disaster, and so the familiar image of BP is that of an ugly oil giant. According to Lange, (2012) there are several attributes that affect an observer's view of an organization. Those attributes include judgement, bias and sensitivity. A company’s intent and foresight are observed as to conditions of social responsibility.
The leadership of BP including New, Sanyal and Dudley are doing their best to meet the demands of the public and shareholders observations as to the company’s current policy toward social responsibility. According to the BP.com webpage on sustainability and society the company is developing ways to minimize their operations social and economical impact, build stronger relationships within the company and the community, and finally respect human rights (BP.com, sustainability/society, 2013). Only time will tell if those things actually take hold in the company culture.
In a general discussion, bringing up the name BP almost immediately elicits a negative response. It remains the big, bad oil company. The company’s overall strategy to change American’s perception of, if taking effect is happening very slowly. The overall perception is that a company as big as BP isn’t concerned with the individual but only those numbers that reflect a sizeable profit share.
Beyond Petroleum has an amazing ability to enlist the resources of a multitude of talent inside its own corporate structure and throughout the world. Using this ability to further social responsibility in communities would be the greatest culture shift and return on investment dollars for BP. That culture shift, in my recommendation, would include BP being first responders in a natural disaster, working with communities to feed and house the poor, and developing animal refuge facilities in every area of the world it operates. In developing media coverage of BP being a first responder in a community destroyed by a natural disaster, BP now becomes a neighbor and friend willing to go above and beyond it’s daily operations. Helping communities build homes for humanity, not only in the U.S. but around the world, creates for BP a culture of concern for society. Developing animal refuge centers employs people in a very different aspect of BP’s overall business direction. This type of innovation lends itself to a more socially responsible BP.
In following through on incentives and metrics, my recommendation for BP’s website would be to include more personal accounts from people who work for the company. These stories can either be in written form on recorded on video. Everyone from the janitor who cleans the corporate office to the Group Chief Executive should have an opportunity to describe the benefits of working for BP. These accounts can then be used to further BP’s image in the media as a great place to work and create a culture that stimulates and appreciates creative innovation.
Finally, I would like to recommend reading Oil and Water, a graphic novel by Dunn and Wheeler. This book illustrates the social and environmental impact the Deepwater Horizon explosion had on the Gulf of Mexico. It is insightful in giving realistic accounts of the people, animals and industry affected by the disaster.
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