English
中文I. Executive Summary
This report tries to convey how much the proponent has understood on the issue regarding innovative organizations. In order to objectively evaluate an organization’s level of innovativeness, one must be familiar with the various characteristics that should be present in any innovative organization.
In this review, the proponent realized that the subject company, i.e., Shell, was indeed a very innovative organization based on the nine elements of an innovative organization. Among its innovations, the oil from sand in Canada is what I consider one of the major breakthroughs of the company for the world in addressing the global fuel shortages.
After completing this report, the proponent learned various areas in the oil industry and probable areas where he can contribute in the development.
II. Introduction
Shell has a major presence in the United Kingdom (UK), employing around 9,000 people directly in the UK alone. The contributions of Shell impact on the areas of providing products and services to customers, employment, tax revenues and investments which boost the economy.
Shell is a key provider of the energy that millions of people use for heating and powering the entire UK. Shell operates about twenty-five (25%) percent of the UK’s oil and gas supplies, it used to produce about 16% of the nation’s petrol and diesel. The most common contact of the public with Shell UK is through the service stations and the rites in the UK. At the heart of Britain’s oil and chemical industry is the Stanlow refinery near Ellesmere Port in Cheshire. This refinery produces a range of transport fuels, including Shell V-Power and chemicals for industry.
The two main businesses of Shell UK are Shell U.K. Exploration and Production, which is an operating division of Shell U.K. Limited; and Shell U.K. Oil Products Limited. Each business has its own board of directors and is a subsidiary of Shell Holdings (U.K.) Limited. Shell businesses in the UK are part of The Shell Group, a global group of energy and petrochemical companies. The Shell Group operates in more than 110 countries and employing approximately 104,000 people.
In 2008 alone, the reported earnings of Exploration and Production reached $ 20,235 million. This is 38% higher than that of 2007 and 39% higher than that of 2006. Industry data shows that the increase in 2007 over that of 2006 was mainly driven by the impact of higher-realised oil and gas prices on revenues. However, this was largely offset by the
A number of key performance indicators are employed by Shell in the measurement of the overall performance of Shell. Among the perspectives used in these key performance indicators are financial, efficiency, social and sustainable development perspectives: (Shell Review 2008, p. 13).
To remain a global leader in the downstream business, the competitive strategy of Shell is to:
1) Ensure continued asset integrity and operational safety;
2) Continue reshaping portfolio by investing selectively in key markets and divesting non-strategic assets;
3) Enhance focus on delivering operational excellence, being a cost leader in the downstream businesses;
4) Reinforce leading global brand position across the downstream businesses by focusing on initiatives, such as
differentiated fuels, lubricants, and building a material alternative fuels business;
5) Continue to maximize value of integrated hydrocarbon value chain by working together towards a tighter integration of the Oil Sands, Oil Products and Chemicals businesses;
6) Maintain discipline in capital spending;
7) Continue to develop human resources;
Shell puts in a lot of emphasis on research and development (R&D). In the year 2008 alone, Shell spent $ 1,266 million on R&D, compared to $1,201 million, in 2007 and $ 885 million in 2006 (Shell Review, p. 13). Shell’s operations and earnings are subject to risks from changing conditions (Shell Review, p. 13).
Shell employs almost 30,000 technical staff, including contractors. Of this figure, around 30% are directly involved in research and development. Moody’s Investors (Moody’s) affirmed in early 2008, the status of long-term issuer, of the “Aa1” of Royal Dutch Shell with stable outlook, as well as the guaranteed programmes, outstanding debt securities of its issuance Shell International Finance B.V. Further more, on September, Standard $ Poor’s (S&P) rating services (Shell Review 2008, p. 16).
III. Discussion: The Characteristics of an Innovative Organisation
According to Cook (n.d.), there are about nine characteristics common in every innovative organization. In the foregoing section, the proponent will try to compare assess if these characteristics exist in the selected organization, i.e., Shell:
b. Appreciate the Whole Individual – while innovative companies try to spread their values across the organization, it is however a part of their culture to allow people to act as individuals within the organization. By doing this, they are able to extract valuable suggestions and out-of-the-box thinking from their people, which mostly come from the individual’s experience in his personal life. Without this freedom, innovation simply will not thrive or even exist at the very least. Shell has shown that while they have inculcated in the minds of their people their values, each of their employee retain their individualism. This trait has allowed the company to explore new ideas that apparently would not have been made available if all the people in the organization were thinking alike in this regard.
c. Encourage Openness and Playfulness – an organization can only harness the innovative minds of people if they allow them to go out of their stiff and no-nonsense attitude towards work. While the proponent does not suggest that seriousness has no place in the corporate world because it is one of the cornerstones of the corporate world, to facilitate an innovation process however, people have to be very comfortable and for a short time, even forget about the work per se. This allows them to move back and re-think the process that they are involved in and how they interact with other processes. Shell’s liberated style of management encourages their people to express their ideas not only to their direct superior but even to any level of management along the corporate ladder. They have for quite sometime now avoided protocol in terms of the flow of information.
d. Celebrate Successes – another key element in any innovative undertaking is how the organization deals with small successes in the course of the innovation. Innovation is a long and tedious process and results do not come overnight. With this in mind, constant cheering is necessary to sustain the drive towards that goal. Part of this cheering activity is to acknowledge the significance of small successes along the way. This is obviously a trait that Shell has and has been observing for quite some time now. They do not let a small achievement in the organization go unnoticed ensuring that due reward or recognition is given accordingly.
e. Clearly Communicate History – while this may seem trivial, integrating the company’s history in the orientation of new employees helps establish a sense of stability and pride for these new hires. Being able to know the past of a certain organization will aid them to visualize and project what the company is likely to become in the future. Shell is no different in this program for new hires. They ensure that every individual that goes in to the organization are well briefed with the company’s profile that includes the history.
f. Maintain Intense Customer Focus – the drive to innovate is attribute mainly to the desire to satisfy the customer’s ever increasing level of need. Most organizations pay huge amounts to specialists just to train their people in the area of Customer Oriented Selling and Customer Service Excellence. While it may seem to be a training fit only for sales people, it should be noted that all the people in the organization, including the CEO is a salesman of the company in their own respective capacity hence, these workshops are vital in their stay in these companies. Similarly, Shell provides these trainings periodically for their people.
g. Focus on Trends – innovation can only be realized if the organization is equipped with the latest equipment to begin with. Failure to comply with this very obvious and rudimentary requirement entails failure to encourage innovation in the area. Shell ensures that it provides the latest hardware and software for its people. This enables their people to spend more time thinking rather than in trying to compensate for the outdated equipment and programs that are provided to them.
h. Cross Functional Teams – innovative organizations are somehow aware of the advantages of Cross Functional Teams. Cross Functional Teams are basically a team composed of people coming from different departments or divisions of the organization. This grouping style allows for a more holistic approach towards formulating a recommendation and action plan for a particular problem. Shell has always adhered to this idea and has always ensured that project teams are composed not only of people concerned with the project, e.g., Engineering project should be composed of Engineers only, but also people coming from other departments like finance, logistics, sales and many others.
IV. Conclusions & Recommendations
Based on the discussions above, I have come to the conclusion that Shell in one of the most innovative organization in the world.
I believe that the most innovative efforts made by Shell so far is the one that tries to address the looming global fuel shortage. Shell has been known to spearhead such undertakings most especially in trying to look for alternative sources of fuel. Among their list of endeavors however, I feel that oil sand is one of their major breakthroughs in trying to cope with the ever increasing demand for oil. The extraction of this type of oil required state-of-the-art technology and has actually been contributing to bridge the gap between supply and demand for fuel (Shell, 2008).
As previously discussed, the fuel shortage of the world has forced the oil industry players to search for supply to cope with the demand. In their search for additional supply, they were able access untapped territories before and one of which is the sand from oil in Canada. At present, they are planning to produce 500,000 barrels every days and this means additional fuel for the consumers (Shell, 2008). The development of this innovation has placed Shell virtually on top of the fuel race so to speak.
After being able to study the innovativeness of Shell, I realized that I can helpful to this organization by engaging in independent researchers with regards to the complete study.
