extraordinary value from technology

Information based Intelligent Organization

How organisations of the future might look like - A structured scenario planning based approach to organisation design.
by Saif Rahman, Martin Trewhella and Michael Simioni
Organisation design underpins the management of collective effort in an organisation and provides a framework of optimal resource utilisation. In the past, organisation re-design has often been a response primarily to falling oil prices. Different companies have taken different approaches to achieve operational efficiency. The three dominant organisational designs that emerged - Exxons functional organisation, BPs asset based organisation and Shells matrix organisation were effective in their own right and allowed the respective companies to successfully tide over difficult industry circumstances. There has not been an outright winner either, as both organisations needed to adapt and learn from each other. Even ExxonMobil and BP, the torch-bearers for functional and asset based organisation designs respectively, have had to deviate from their standard designs to capture growth opportunities. Exxon had to introduce a cross functional deepwater growth unit to ensure smooth project hand-off between different functions and BP has recently restructured its E&P division into three distinct divisions - Exploration, Development and Production. This is aimed at deepening functional expertise. Apart from administrative and management efficiency, organisational restructuring has also been a means to extract maximum benefit from advanced technology.
Information based Intelligent Organization

As an example, commonalities in critical issues related to the development and application of new technologies and desire to share best practices was a prime motivation for the creation of separate

information based intelligent organisations that have inbuilt flexibility to re-form and adapt to feedbacks received from the industry? While past case histories of organisational re-structuring might offer

This idea marks the maturation of the intelligent concept from wells to fields and finally to the entire organization. It is underpinned by the ease of information flow that is likely to make region based organization irrelevant.
business organisations during Shells re-organisation of 1995/96. A company sensing the need for organisation redesign is therefore faced with some difficult choices. It should avoid the pitfall of re-organisation being driven by existing resources and entrenched processes and endeavour to let its business strategy guide the process. Given the very different business environment likely to be faced by E&P companies in the next decade and beyond, we question whether or not these traditional organisational structures, which appeared so effective in the 1990s, will continue to be so going forward. For example, might the E&P organisations of the future be useful insights, any new re-restructuring should be based on current situation in the industry, perceptions about the future and consideration of company culture.

The changing E&P business environment

OTM regularly works with clients, helping them to better understand the emerging factors that will likely shape the future E&P business landscape, and to develop scenarios to help companies respond appropriately to these opportunities and threats. During the course of such work, we have come to recognise the likelihood of dramatic changes to the E&P business environment that are cur OTM Consulting Ltd 2012

H
Climate change Technical challenges Human capital

Communications technologies, Remote area drilling, Information management Responsible corporate citizenship

Likelihood (10 yrs)

Movement away from vertically integrated IOC

Increasing role of service companies

L L Impact on organization (10 yrs)

Figure 1: Scenario mapping analysis framework

geography) and people (note the impact of facebook and twitter on recent world events) offer the potential to transform the way companies choose to organise their resources. Since the beginning of the industry, one organisational challenge has been the need to locate a large number of staff near to physical assets (i.e. oilfields) which, in turn, has driven many oil companies to organise along geographical lines. The Inter-connected world scenario may offer oil companies the chance to re-visit the assumption that geography is one important dimension of organisation design. Might a truly inter-connected world offer new organisational possibilities, independent of geography?.

rently underway and will likely accelerate in the future. Some, such as climate change, the rise of international NOCs, new demands from resource holders, and the possible intergration of service companies into the E&P realm (e.g. beginning with multiple service contracts) have the potential to radically alter the whole structure of the industry. In terms s ent pm of organisational design, however, ilithe elo ties v Fac De effect of these transformational factorsn uctio Prod are difficult to predict.
Inf ras Ex truct plo ur ra e L tio ea n d
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frequently emerge. For example, highly likely / high organisational impact factors often fall into three broad categories: Inter-connected world - Increased connectivity and a networked world facilitating information flow across Plateau Earlygeographical boundaries
Production
nd Pro re/Ta Challenged demographics du il cti on Human resource issues such as changing workforce demographics and shortage of specialist skills
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e There are, however, other sets of emerg-reveoriirng Res in Eng ing factors that have the potential to gical and Responsible corporate citizenship olo Ge physical Geo - the ever increasing imperative exert major impact on how major E&P to satisfy diverse sets of external companies might best be organised. stakeholders; likely to change from To help companies understand these a nice-to-have to a very survival factors, and their organisational implica- Corporate Centre issue tions, we use a structured scenario planIT R&D HSE Finance ning based approach. These factors (the Corporate Planning Legal list of which we co-develop in a bespoke Inter-connected world Figure 2: Information manner with each client) are screened based Intelligent Organization for likelihood and potential organisa- We are already living in an information tional impact, and then mapped onto a age. Expanding data transmission capa2 X 2 matrix ( Figure 1), with particular bility, ever more sophisticated network attention being paid to those which are architecture, advanced software enboth likely to occur and that will have hancing information synthesis capability a high impact on how companies might and a burgeoning high quality IT workbest be organised. force is set to expand the boundaries of capabilities that information can bring While the specifics of such an exercise to an organisation. Likewise, the sheer vary from company-to-company, reflect- inter-connectivity of both systems (offering their different business environ- ing the potential for genuine real-time rements, a number of common themes mote control operation, independent of

The Inter-connected world scenario may offer oil companies the chance to re-visit the assumption that geography is one important dimension of organisation design.
Challenged demographics
Gas Shale

am tre ng ds si Mi oces Pr

Frontier Exploration

It is well known that the E&P industry hiring cycle broadly follows the oil price and general state of the industry. However, there is a lag in enrolment in technical education. The current sustained high oil price comes at the back of a 20 year long state of depressed oil prices and low levels of hiring. As a consequence, some regions of the world are faced with a very tight labour situation where a significant number of people with specialist skills are close to retirement and people in the workforce younger than 45 are in a minority (NPC, 2007). Although recent sustained high oil prices and increased
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Information based Intelligent Organization

hiring has provided access to fresh talent, dearth of specialist experience still remains a major factor. The organisational challenge here is not just how to make the E&P industry attractive to the best and brightest (compared to, say, industries such as IT, electronics and even consulting) but also how best to leverage the skills that already exist within companies and to address work-life balance and quality-of-life aspirations. Historically, oil company personnel have frequently been required to work in non-hospitable locations, placing the industry at a competitive disadvantage in its drive to attract the best people. We feel that this imperative, together with advances in communication technologies (see above), will act to further drive the trend towards more networked and better skills-leverage across E&P organisations.

see the likelihood of a reverse in the decentralisation of certain corporate functions and shared service that occurred in some companies during the 1990s.

Organisational implications
There is no doubt that major changes are occurring within the E&P industry environment, and these changes will continue over the next decade. Some companies already have a clear view of these, and are in the process of re-designing their organisations accordingly. Others, however, appear less sure about how the E&P business environment will play out H over the next decade, and the most appropriate organisational response to Climate change any such changes.
Technical challenges Movement away from Our work with E&P companies suggests vertically integrated the factors noted above will likely act to IOC

organising resources. Here, we postulate that organising assets along resource lifecycle lines (with some exceptions to account for special needs and challenges for certain hydrocarbon types), as shown in the outer rim of fig 2, may promote more commonality, and therefore opportunities for leveraging know how and experience, than organisation based on geographic location. Increasing interconnectedness, together with the imperative of better leveraging shared skills across a geographically dispersed asset base, will also act to promote more effective functional networks, which forms the second dimension illustrated in fig 2. We term this the information based intelligent organisation.
Communications technologies, Remote area marks the maturation of the drilling, Information management intelligent concept from wells to fields Human capital This idea

While good corporate citizenship has long been seen as important, recent events (e.g. Macondo, and the climate change debate) are turning this into an issue of survival for E&P companies. Excellence in this aspect of performance is further complicated by the ever increas-

One final feature of this design reflects the need for explicit corporate control of critical activities that are too important to be delegated to individual operating units.
ing imperative to satisfy diverse sets of external stakeholders, some of whom may have conflicting interests. The significance of this (for organisational design) is that it is becoming apparent that some activities (e.g. HSE, corporate standards, stakeholder engagement, and, increasingly we believe, responses to the opportunities and threats posed by the above and by continuing advances in technologies), cannot be delegated to E&P business units. We therefore
Information based Intelligent Organization
nts me lop ve De
ities Facil

Likelihood (10 yrs)

Responsible corporate citizenship

and finally to the entire organisation. This Responsible idea is corporate citizenship by the ease of inforunderpinned promote new organisational forms, over mation flow that is likely to make region Increasing role of and above the traditional functional, ma- based organisation irrelevant. Specialservice companies trix and asset/regional models. In the ists having functional expertise are no increasingly inter-connected world envis- longer required to be located on-site to aged in OTMs base-case scenarios, we solve site specific issues, as informaask whether this gives E&P companies tion technology is likely to facilitate real the opportunity to eliminate the geo- time knowledge sharing. Furthermore, graphic organisational dimension and, if since optimal development and deployL so, whether or not there is a better way of ment of technology and consequent opL Impact on organization (10 yrs) H erational efficiency is one of the primary Figure 1: Scenario mapping analysis framework objectives of any re-organisation effort, it would be beneficial to replace regions with resource lifecycle. This is because it can be anticipated that the technical challenges related to each stage of the lifecycle will be much more similar and therefore strong organisational capabilEarly Plateau Production

uction Prod

M End atur Pro e/Ta du il cti on

Inf ras Ex truct plo ur ra e L tio ea n d

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am tre ng ds si Mi oces Pr

ervoir Res ering ine Eng ical and olog Ge physical Geo

Frontier Exploration

Corporate Centre
IT R&D HSE Finance Legal Corporate Planning Figure 2: Information based Intelligent Organization

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Gas Shale

ity in that sphere of activity can quickly be developed (e.g. mature/tail end production technical challenges across the world are likely to be more similar as compared to all encompassing challenges in the Middle East). Such a structure also provides the company the flexibility to align, hive off or just specialise in one or more parts of the lifecycle. This is also consistent with recent industry developments when companies such as ConocoPhillips and Marathon Oil have preferred to split or spin-off their downstream and upstream functions to form smaller companies with greater focus and specialisation. Similarly Cairn Energy has reduced its holdings in conventional plays in places such as India and Sri Lanka in order to focus on frontier exploration in the Arctic.

To this end, it could be argued that the intelligent organisation is little more than the traditional matrix organisation (seen in companies such as Shell, at least until their 2009 reorganisation), with the geographic dimension replaced by a resource lifecycle dimension. However, one final feature of this design reflects the need for explicit corporate control of critical activities that are too important to be delegated to individual operating units. These include key activities such as HSE, corporate standards, stakeholder engagement, and, increasingly we believe, responses to the opportunities and threats posed by the above and by continuing advances in technologies. The net effect of this corporate centralising is to warp the lifecycle/functional matrix into a fan-shaped configuration, with a much stronger Corporate Centre than currently seen in most asset/regional and matrix organisations.

Conclusions
Clearly, there are other factors than those considered above that could also impact organisational design. Some will be specific to the company, its operational philosophy, capabilities and its heritage. Although greater flexibility, streamlined accountability and lean organisation are desirable features for any organisation, the ways to achieve these could vary. No one architecture will be suitable for all companies across the world. Organisation design needs to be tailored and customized. However, the process of organisational assessment based on scenario mapping can be utilised in a range of different situations. OTM has strong capabilities in scenario mapping and assessing the impact of different scenarios on organisational design. This capability and OTMs proven process can be deployed in organisational assessment and re-design in a range of different companies.

For further discussions on organization design, please contact the author or any of the contributors.

Author: Saif Rahman (saif.rahman@otmnet.com) Valuable contributions from Martin Trewhella (martin.trewhella@otmnet.com) and Michael Simioni (michael.simioni@otmnet.com)

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Information based Intelligent Organization

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