For an industry built on innovation, future innovation will be more important than ever.
Meeting the world’s need for energy could become the biggest global challenge of the 21st century.
Innovating to meet that challenge won’t be easy. People in the oil and gas industry today are almost too busy to think, much less think outside the box.
And industry consolidation has produced a leading echelon of huge companies, often made up of tens of thousands of employees, with any number of languages and cultures.
“We realized several years ago that as big as we were getting, we needed to make an effort to ensure that we were as innovative as we were when we were a smaller company,” said AAPG member Rod Nelson, vice president-innovation and collaboration for Schlumberger in Houston.
That’s easier thought than done in any organization. Companies have to make a serious effort to foster, capture and nurture innovative thinking if they want improvement.
“You can’t snap your fingers and say, ‘80,000 people are going to be more innovative overnight,’” Nelson noted.
There’s also a serious side effect to not enabling innovation.
Companies run the risk of discouraging innovative thinking when they don’t support new ideas – or acknowledge new ideas at all.
“In some companies, when people give an idea or make a suggestion they never hear about what happened to it. It sort of falls into a black hole,” said Kevin Paylow, innovation and commercialization leader-Baroid Fluid Services for Halliburton in Houston.
“What we’ve found is that the most energetic, creative people will feel it’s just a waste of time and stop doing it,” he said. “They’ll stop sharing those ideas.”
How can companies foster innovation in their own organizations?
Here are a half-dozen suggestions:
- Have a formal, recognized path for innovative suggestions.
So, your company has a suggestion box? People need to know what happens to their suggestions out-of-the-box.
Both Schlumberger and Halliburton have a process for accepting ideas online and evaluating their potential. At Schlumberger it’s called “Mariner,” and it accepts online suggestions from employees everywhere.
“The strength of it is that anybody anywhere in the world can put in an idea,” Nelson said.
Although idea evaluation varies by product line in Halliburton, the company does have an online resource for submitting innovative suggestions, according to Paylow.
“At Halliburton we have a system called IDEAS – that’s the Innovation, Description and Economic Assessment System. It’s more or less an online idea collection tool,” he said.
Then, when a formal process is in place, make sure there’s also enough flexibility to develop ideas outside the system.
“Part of it is having a process, and part of it is allowing things to happen outside that process,” Nelson said.
- Set up an effective suggestion-evaluation system.
At Halliburton the screening is a two-step process, Paylow said.
“In Phase One it’s a small team. We have an objective scorecard. Is it a strategic fit? Does it create value for the customer? Does it create value for Halliburton?” he said.
“What we’ve found is that about half the ideas get knocked out at that stage,” he added.
In the next step, a cross-functional team of Halliburton people with different expertise and backgrounds review the surviving ideas and recommend action.
“We come in once a quarter and spend a full day reviewing the ideas that made it past the first stage,” Paylow said. “The goal here is to try to get diverse review.”
Schlumberger also has a standard process for evaluating innovative business suggestions, according to Nelson.
“We have what’s almost like a venture capital committee made up of senior technical people,” he said.
Evaluation time shouldn’t be a burden, and it might turn out to have added benefits.
“The team that we put together was so excited after the first one that every single one of them committed to coming back and doing it again. They committed and we had fun doing it,” Paylow explained.
“So those folks on the ‘phase two’ review become ambassadors to the organization, where they’re pushing their colleagues and their peers and employees and bosses to participate in the process,” he added.
- Actively encourage and support innovative thinking.
Some organizations see innovation as inefficient and risky. They’re right on both counts; companies have to make room for innovation and support it in order to progress.
At the same time, individuals have to understand the need for innovation-producing ideas should be part of the assignment.
“People are busy,” Nelson said. “I think left alone, a lot of people’s tendency is to just do their job. To be innovative almost by definition is to take a risk that might not work.
“Individuals have a responsibility to look for ideas outside their own little corner of action,” he added.
Introducing an innovative environment likely will be a gradual effort.
Don’t be discouraged if the going is slow, especially at first.
“Even in the last year the demands on people’s time have gone up, which I wouldn’t have thought possible a year ago,” Paylow noted. “It’s difficult to get people engaged in any new process or initiative.”
Having a formal suggestion-gathering and evaluation system helps people understand that a company values innovative ideas. Communication and feedback are essential.
“We’re trying to make it much more transparent,” he added, “so people can see when they put something in it could really have an impact, that it gets consideration in a fair and consistent manner.”
- Draw on the power of groups for creative breakthroughs and concept assessment.
The oil and gas industry long ago figured out the value of teams from different functional areas dedicated to exploration and production projects.
That kind of group effort works for innovation, too.
When you look at the history of the industry, “most of the big innovations have happened when people of very different backgrounds have come together to discuss a common problem to tackle a challenge,” Nelson noted.
In that regard, the large size and diverse cultural mix of some companies doesn’t have to be a handicap.
“That’s actually an advantage from our point of view, because you’ve got a lot of people from different backgrounds with different perspectives coming together to discuss problems,” Nelson said.
Paylow has written papers and made presentations about tapping into the creativity of the group. He said the idea came from concepts in the book The Wisdom of Crowds, by James Surowiecki.
“A diverse population can almost always come up with better solution than a small group of experts or an individual, over time,” he said. “The group consensus comes to a better decision or resolution when you average out their recommendations.”
That approach has led Halliburton to try to engage many people in developing, assessing and adopting new ideas, according to Paylow.
“Rather than just trying to collect ideas from individuals and push them through the product pipeline, whenever possible let’s take those ideas and push them out to the wider employee base,” he said.
- Collaborate and look for ideas outside the company – or even the industry.
Schlumberger takes a two-part approach to collaborating for innovation, Nelson said.
“One part of it is to engage with our suppliers and with industry leaders. The other end is to engage with universities and start-ups, or university spin-offs,” he explained.
The company stays involved with research in many areas, Nelson said, and finds itself “working with universities in Russia on some topics, working with universities in Boston on other topics.”
This approach to innovation includes keeping an eye on new ideas outside the petroleum world. Nelson used current work in nanotechnology as an example.
“There are people working on nanosensors for the medical industry for targeting drugs, for instance, that might also work in our industry,” he said.
Collaboration often involves partnerships and is usually well defined, but some companies also are pursuing broader forms of cooperation. They might work with inter-industry groups or invite general public input.
“There is open collaboration as well. That’s when you have an organization that collaborates with customers and/or suppliers and/or channel partners to work together on some innovative projects,” Paylow noted.
“There are some companies in this industry that are really, really good at that and are pushing forward with it – Shell, for example,” he said.
- Invite and focus on relevant, applicable ideas.
Paylow said some companies put out a general request for new ideas or conduct a one-time campaign to encourage suggestions.
“The request is so broad that most of the stuff that comes in is neither actionable nor has a strategic fit,” he said.
“If someone has an idea for a solar-powered diaper disposal system, that might be a great product but it doesn’t fit our industry, and it certainly doesn’t fit our company,” he noted.
The better approach is an ongoing program to encourage and develop highly relevant thinking, Paylow said.
“We decided that we wanted to focus on very specific, defined strategic challenges that are basic to our organization today,” he said.
“We’re going to try to do innovation events several times a year,” he added. “We’re going to put a strategic challenge out from a high-level sponsor and then push the organizations to help come up with solutions to meet that challenge.”
But note that a focus on applicable and actionable innovation does not limit the search to practical ideas. Requiring ideas to fit some notion of practicality can be death to innovation.
“Practicality is one of our lesser measures,” Paylow said. “There are things that aren’t practical today that may be practical in three or four years.”
Instead of starting small, those companies just beginning the path to innovation probably can benefit most by thinking big – not limiting ideas or excluding too much from consideration.
“Companies tend to equate innovation with invention, specifically patents,” Paylow said. “I think it’s dangerous when that happens, because it assumes that the only innovation you’re going to have is built around a product or technology.
“Innovation goes well beyond that, into incremental improvements into processes, or brand-new business models,” he said.
One always helpful question to ask:
Is this an innovative place?
Everyone in the organization should be able to answer, “Yes” – even if that means reshaping the corporate culture toward innovation.
“Part of it is cultural,” Nelson said. “You have to make it part of the DNA.”