Guest column

Sustaining a culture of innovation is key to driving the energy industry, says this Houston expert

While most corporations should be optimizing their company cultures, energy companies specifically need to move the needle on driving forward innovative culture for its employees. Getty Images

The prevailing economic environment has made innovation essential to gaining a competitive edge in the oil and gas industry.

Global economic shifts and the unstable oil market have been considerable factors inhibiting the advancement of innovation in the oil and gas sector. Oil prices have not significantly increased in the past four to five years, while investors and Wall Street hold corporate executives accountable for capital discipline.

In light of these trends, corporate culture and innovation are key factors that hold the potential to drive novelty in the next upcycle. To bring value to shareholders, the oil and gas industry needs to nurture an environment that fosters a radically innovative culture to create new product lines and markets, unique ecosystems, product content, and processes.

Culture from the top down

Organizational culture is one of the essential dynamics that drive innovation. Employee behavior helps influence and promote the acceptance of innovation as a fundamental corporate value. Organizations are therefore admonished to concentrate on fostering an innovative culture that allows the growth of new ideas.

This culture needs to be created by deliberate action on the part of leaders of industry or by indirect measures such as composition and institutional policy directions. A model of innovative culture which translates into cultural transformation emerges as a result of this deliberate action and institutional policy directions.

Various studies over the years have examined innovative culture models focused on cultural characteristics or factors. A comprehensive, innovative culture model that incorporates cultural traits and their determinants is reviewed in this contemplative piece.

Execution  culture vs. innovative culture

In her book, "The Culture Map: Breaking Through the Invisible Boundaries of Global Business," Erin Meyer explains that "ambidextrous culture" is the concurrent search of flexibility and alignment at a business unit/sector which is linked to several organizational outcomes including improved performance and innovation.

This ambidextrous culture can be divided into two broad categories: Execution culture and innovative culture. Execution culture is a working environment that is more process- and task-driven to get things done. The oil and gas industry has typically favored the execution culture, where there is a central decision-maker at the head of the table. Research and recommendations on pertinent matters are typically presented to decision-makers who sit through a PowerPoint presentation. Subsequently, a decision is made based on the facts presented via PowerPoint presentation.

One critical demerit of this setup is that it usually leans towards low-risk conservative judgment. The executive lifestyle has worked in the past in the oil and gas industry due to the high fixed cost, and the "failure is unacceptable" approach in the industry.

With new technologies such as 3D printing, predictive analytics, machine learning, and deep learning, one can test some ideas or thoughts through rapid prototyping in a lab setting to test their hypothesis. Therefore, this type of culture as a sole approach to decision-making in the industry may need to be reconsidered.

Meanwhile, innovative culture is a work environment where leaders encourage and nurture unorthodox thinking in approaching problem solutions and applications. If the energy industry leaned more toward this style of culture, it would help foster innovation and accelerate the innovation landscape in the industry.

Innovative culture is a more design-oriented approach that generates a large pool of options and also incorporates a visual thinking framework. It enhances a creative mode for the audience, and everybody in the company ends up being a decision-maker. This type of culture fosters open innovation, eliminates the fear of expression, and pushes for more collaboration and creativity in the ecosystem.

According to a recent survey done by Accenture Strategy, 76 percent of leaders say they regularly empower employees to be innovative, while only 42 percent of employees agree. This shows an apparent disparity in more than the perceptions of employers versus employees and the belief that innovative culture is not promoted by middle management. This barrier can be broken down by instituting and enforcing an innovative culture.

Staying agile in a transforming world

The world has changed, and it will continue to transform. Various factors are disrupting traditional methods of business management across the globe, and organizational behavior is being impacted significantly. For an organization to be competitive globally, it requires innovation and creativity.

The rate at which businesses are facing competition requires agility. Employees are pressured to give their best and to come up with new ideas at a level even beyond some of history's greatest minds. For many, uncertainty and insecurity abounds. The fear of being made redundant and a resulting lack of trust prevents creativity among employees.

Trust, productive gameplay, and fun — critical components of an innovative culture — can spark creativity and increase global competitiveness. Due to the recent downturn, most teams are burdened with the same amount of work, which was meant for double or tripled their workforce and are still expected to perform at their peak capability. They need the right conducive environment to function.

Implementing action

While the energy industry should avoid trying to copy innovative practices from technology companies, oil and gas companies should review possible case studies that can be incorporated in fostering an acceptable culture for millennials to be attracted to the industry.

Presentation is important

Take a look at your marketing materials, for instance. Skip the stereotypical image of the macho oil guy on a rig operating the brake handle and showcase how the industry is adapting open innovation across sectors such as using predictive analytics and rapid prototyping to help design a safe working environment. Showcasing the conducive culture we experience in oil and gas, which challenges us to think outside the box and solve the world's energy problems will be an excellent way to create opportunities internally in companies and also attract and retain talent from different backgrounds and industries to help solve the world's energy problems.

Consider flexible work initiatives

To help establish and foster an innovative culture in oil and gas, the industry needs to embrace virtual and remote working environments, retraining and refresher courses to keep employees' skills relevant to solving problems, leaders setting a positive example on work-life balance and cutting down or avoiding long-distance travel via virtual meetings. Others essential pointers to consider are, giving employees the freedom to be themselves at work, leadership or management having a positive attitude towards failure, allowing remote work on days on which employees have personal commitments, networking events with company leaders scheduled during office hours, having an open channel for the report of sexual discrimination/harassment incident(s) to the company, among others.


I'd like to close with a quote from another influential book, "The Innovator's Dilemma," by Harvard Professor Clay Christensen. He writes, "When an organization's capabilities reside primarily in its people, changing to address new problems is relatively simple. However, when the capabilities have come to live in processes and values and especially when they have become embedded in culture, change has become extraordinarily complicated."

Establishing a uniquely innovative culture within the energy industry will be a great foundation going forward, for spurring progress in the oil and gas sector.

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Nii A. Nunoo is senior associate and management consultant within Strategy and Energy Core Operations at KPMG.

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Building Houston

 
 

Cheers Health has expanded its product line as it evolves as a wellness-focused brand. Photo courtesy of Cheers

Houston-based startup Cheers first got a wave of brand devotees after it was passed over by investors on Shark Tank in 2018. In the years since, Cheers secured an impressive investment, launched new products, and became a staple hangover cure for customers. When the COVID-19 pandemic disrupted businesses, the company rose to the occasion and experienced its first profitable year as drinking and wellness habits changed across America.

Cheers initially started its company under the name Thrive+ with a hangover-friendly pill that promised to minimize the not-so-fun side effects that come after a night out. The capsules support the liver by replacing lost vitamins, reduce GABAa rebound and lower the alcohol-induced acetaldehyde toxicity levels in the body. The company's legacy product complemented social calendars and nights on the town, providing next day relief.

With COVID-19 lockdowns and social distancing measures, the days of pub crawls and social events were numbered. Cheers founder Brooks Powell saw the massive behavior change in people consuming alcohol, and leaned into his vision of becoming more than just a hangover cure but an "alcohol-related health company," he says.

When the pandemic first hit, Powell and his team noticed an immediate dip in sales — a relatable story for businesses in the grips of COVID-19.

"There is a three day period where we went from having the best month in company history to the worst month in company history, over a 72 hour stretch," he remarks.

He soon called an emergency board meeting and rattled off worst-case "doomsday" scenarios, he says.

"Thankfully, we never had to do any of these strategies because, ultimately, the team was able to rally around the new positioning for the brand which was far more focused on alcohol-related health," he says.

"We found that a lot less people were getting hangovers during 2020, because generally when you binge drink, you tend to binge drink with other people," he explains.

He noticed that health became an important focus for people, some who began to drink less due to the lack of social gatherings. On the contrary, some consumers began to drink more to fill the idle time.

According to a JAMA Network report, there was a 54 percent increase in national sales of alcohol for the week stay-at-home orders began last March, as compared to the year prior.

"All of a sudden, you have all of these people who probably aren't binge drinking but they're just frequently consuming alcohol. Their drinks per week are shooting up, and they're worried about liver health," explains Powell.

Outside of day-after support, Cheers leaned into its long-term health products to help drinkers consume alcohol in a healthier way. Cheers Restore, a dissolvable powder consumers can mix into their water, rehydrates the body by optimizing sodium and glucose molecules.

For continued support, Cheers Protect is a daily supplement designed to increase glutathione — an antioxidant that plays a key role in liver detoxification — and support overall liver health. Cheers Protect, which was launched in 2019, became a focus for the company as they pivoted its brand strategy and marketing to accommodate consumer behavior.

"The Cheers brand is just trying to reflect the mission statement, which is bringing people together through promoting fun, responsible and health-conscious alcohol consumption," says Powell. "It fits with our vision statement, which is a world where everyone can enjoy alcohol throughout a long, healthy and happy lifetime,."

At the close of 2020, Cheers had generated $10.4 million in revenue and over $1.7m in profit — its first profitable year since launch.

During the brand's mission to stay afloat during the pandemic, the Cheers team was also laying the groundwork for its entry into the retail space. When Powell launched the company during his junior year at Princeton University, bringing Cheers to brick-and-mortar stores had always been a goal. He envisioned liquor and grocery stores where Cheers was sold next to alcohol as a complementary item. "It's like getting sunscreen before going to the beach, they kind of go hand in hand," he says.

"When we spoke with retailers, specifically bars and liquor stores, what we learned is that a lot of these places were hesitant to put pills near alcohol," he says. Wanting an attractive and accessible mode of alcohol-support, the Cheers team created the Cheers Restore beverage.

Utilizing the technology Cheers developed with Princeton University researchers, the Cheers Restore beverage incorporates the benefits of the pill in a liquid, sugar-free form. The company states that its in-vivo study found that the drink is up to 19 times more bioavailable than pure dihydromyricetin (DHM), a Japanese raisin tree extract found in Cheers products and other hangover-related cures.

"What we figured out is that if you combine DHM — our main ingredient — with something called capric acid, which is an extract from coconut oil, the bioavailability shoots way up," says Powell. He notes the unique taste profile and the "creaminess" capric acid provides. "Now you have this lightly carbonated, zero-sugar, lemon sherbert, essentially liver support, hangover beverage that tastes great in 12 ounces and can mix with alcohol," he explains.

The Cheers Restore beverage is already hitting the Houston-area, where its found a home on menus at Present Company. The company has also run promotions with Houston hangouts like Memorial Trail Ice House, Drift, and The Powder Keg.

Currently, the beverage is only available in retail capacity and cannot be ordered on the Cheers website. As Powell focuses on expanding Cheers Restore beverage presence in the region, he welcomes the idea of expanding nationally in the future to come. While eager customers await the drink's national availability, they can actively invest in Cheers through the company's recently-launched online public offering.

Though repivoting a company and launching a new product is exciting, the process did not come without its caveats and stressors. While Cheers profited as a business in 2020, the staff and its founder weren't immune to the struggles of COVID-19.

"I think 2020 was the first year that it really became real for me that Cheers is far more than just some sort of alcohol-related health brand and its products," says Powell. "Cheers is really its employees and everything that goes into being a successful, durable company that people essentially bet their careers on and their family's well-being on and so forth," he continues.

"It really does weigh on you in a different way that it's never weighed on you before," says Powell, describing the stress of the pandemic. The experience was "enlightening," he says, and he wants others to know it's not embarrassing to need help.

"There is no lack of great leaders out there that at long periods of their life they needed help in some way," he says. "For me that was 2020 and being in the grinder and feeling the stress of the unknown and all of that, but it could happen to anyone," he continues.

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