Management: Building the High-Performance E&P Company

Abstract

In the E&P industry, the product is the same for all companies: oil and gas, or some form of them. So unlike, for example, the automotive or pharmaceutical industry, E&P companies cannot differentiate themselves by producing a new and exciting product. Rather, E&P companies differentiate themselves based on their ability to find and produce oil and gas more efficiently than their competitors. Even though the E&P industry is in many ways unique, there are lessons to be learned from studying other industries and the characteristics of their high-performing companies. Lessons Learned From Dell and Wal-Mart Michael Hammer is a well-known business author who has written a number of books and articles on high-performing companies. He has studied in depth companies such as Dell and Wal-Mart, two companies that are held up as shining examples of high performance and leadership in their respective industries. What might Dell and Wal-Mart have in common with the E&P industry? First, like oil and gas companies, these companies are not differentiated by their products. Dell is the leader in the personal computer industry, an industry the product of which is considered to be a commodity. Wal-Mart is the premier retailer in the world, but Wal-Mart does not sell unique products. In both cases, the products they sell are not easily differentiated, so these companies have had to establish a competitive advantage in other ways. Certainly, they have developed unique features in their business models and customer interface. For example, Dell has focused on a mail-order or online customer interface and delivery mechanism. Wal-Mart, on the other hand, is known for its friendly service, employee training programs, and store greeters. But surely, these are characteristics or strategies that could be replicated by competitors. Moreover, in both the computer and retail industries, competition is fierce, and margins are paper thin. What is it that consistently sets these leaders apart from their competitors in such a tough environment? Hammer refers to a characteristic he calls "operational innovation," which he defines as "the invention of new ways of doing work." When examining Dell and Wal-Mart, one finds that these companies did not grow through diversification of businesses, nor did they grow through merger and acquisition. On the contrary, both companies have "stuck to their knitting" and have grown by systematically and organically increasing market share. They have been able to do this because they have practiced operational innovation, which has produced superior profitability compared with their competitors. For example, both Dell and Wal-Mart are recognized leaders in supply-chain management. They have integrated and innovated the processes for engaging and communicating with their suppliers, and have done so in a way that their competitors have been unable to replicate. That is because the process changes are not incremental or evolutionary; they reflect a completely new way of interacting with suppliers. They are revolutionary.

Application of operations management modelling towards optimising research and development performance processes in the oil and gas industry: the case of SINOPEC Corp. and NNPC

“…This is typically applied in a case were two institutions are coming together with respect to an advanced research cooperation. In accordance with several authors, (Close, ; Jugend and da Silva, ) without this conceptualisation, it becomes impossible to adequately determine cost, time line and processes which may mutate during the execution phase. Once the scope is defined, detailed planning and execution can be carried with reduced risk for error.…”

A conceptual model for project management of exploration and production in the oil and gas industry: The case of a Brazilian company

“…In turn, drilling engineers cannot prepare cost estimates until they receive the expected bottom hole location from the geoscientist. Close (2006) notes three critical factors that cause gaps in E&P projects: i) functional expert/staff members do not understand how their contribution impacts other steps in the larger process; ii) individuals have many tasks to perform on any given day, and it is not always obvious that a particular unfinished task is delaying the overall process; and iii) there is no automated way to communicate with various team members in order to inform them about the status of the overall process, as well as the impact of their individual tasks.…”

“…Table 1 is a starting point for applying SEM in E&P project management. Although the E&P industry is in many ways unique, there are lessons to be learned from studying other industries and the characteristics of their high-performance companies (Close, 2006).…”

Supply-Chain Management Issues In The Oil And Gas Industry

“…Operational innovation has been defined as "the invention of news ways of doing work" (Close, 2006). This can also be thought of a process of inventing new ways of solving old problems.…”