begun to invest in renewable energy technologies, such as solar and wind, to diversify their
portfolios. Second, companies are shifting their
hydrocarbon investments away from conventional mega-ventures towards smaller more
flexible projects, such as shale wells, which can
be scaled up or down in response to market
changes. These strategic changes have been
accompanied by organisational adjustments.
New, smaller investments are more reliant on
trial and error, agile local teams and rapid coordination. Recognising this, oil and gas companies
like BP and ExxonMobil, are adopting flatter
organisational structures that allow for greater
local autonomy.
However, oil and gas companies are at the
start of a long journey. It is, therefore, useful to
study responses in comparable sectors that have
faced similar structural shifts for longer. The
postal and power sectors are good examples as
they, like oil and gas, are heavily regulated,
capital-intensive industries dominated by large
state-owned enterprises. Furthermore, they have
faced structural shifts similar to those expected in
oil and gas. The postal industry has faced falling
letter volumes in the past decade and companies
in the sector have already adapted their organisational structures and strategies. Likewise, the
electric utility sector can be seen as a frontrunner
for oil and gas; it has long been challenged by
large technology disruptions in the form of
increasingly price competitive renewables. These
parallels make postal and power companies’
useful cases for exploring future strategic and
organisational changes in the oil and gas
industry.
The postal and power cases show that
company-specific motives and context can lead
to different but rational strategic responses to the
same structural shift. Some companies, such as
United States Postal Service (USPS) and RWE
(circa 2004), changed very little in response to
structural shifts, while others, such as Deutsche
Post and DONG Energy (now Ørsted), transformed or diversified their companies completely. Little strategic change was observed
in situations where owners valued security of the
existing service and nearer term profits. In the
case of USPS and RWE in the early 2000s, their
strategy was to harvest the short-term value of
legacy assets. In companies, such as the UK’s
Royal Mail—where stakeholders valued
longer-term profitability but were constrained by
regulation, conflicting interests or limited capital
—business strategy focused on streamlining and
redirecting resources to new capabilities. In cases
where owners sought to expand the business, had
relevant capabilities and sufficient capital, the
strategic shift was more aggressive than for those
acting later or facing resistance. As an example,
both Deutsche Post and DONG Energy moved
early and used rents from legacy activities to
finance their strategic transformation to international logistics and offshore wind respectively. In
contrast, late movers such as RWE and
Innogy SE suffered from capital constraints,
which slowed their strategic transition.
Organisational change needs to align with the
adopted strategies and business models. In all our
cases, companies started out with relatively
hierarchical, top-down organisational structures.
Where the strategic focus remained on the traditional business model, as with USPS and
RWE, organisational change was limited to
making the prevailing structure more effective.
Where new business growth was the main priority, all companies first ensured some separation
between new and old—this gave the new business sufficient autonomy to grow. Where new
businesses had similar underlying characteristics
to the traditional business, as with Royal Mail
and DONG Energy, organisational change
focused on reorienting the existing structure and
flattening the hierarchy, but not on a radical shift
to a horizontal structure. In contrast, radically
new product or service models involved
far-reaching organisational change. As Deutsche
Post transformed from a German mail delivery
firm to an international logistics company it also
changed its organisational model. Notably, it
shifted focus from production to consumers and
organised itself around a series of relatively
autonomous divisions supported by cross-cutting
service divisions. Innogy’s split from RWE in
2016 resulted in a more radical turn towards
business unit autonomy focused on customers,
50
W. Xiaoming et al.
portfolios. Second, companies are shifting their
hydrocarbon investments away from conventional mega-ventures towards smaller more
flexible projects, such as shale wells, which can
be scaled up or down in response to market
changes. These strategic changes have been
accompanied by organisational adjustments.
New, smaller investments are more reliant on
trial and error, agile local teams and rapid coordination. Recognising this, oil and gas companies
like BP and ExxonMobil, are adopting flatter
organisational structures that allow for greater
local autonomy.
However, oil and gas companies are at the
start of a long journey. It is, therefore, useful to
study responses in comparable sectors that have
faced similar structural shifts for longer. The
postal and power sectors are good examples as
they, like oil and gas, are heavily regulated,
capital-intensive industries dominated by large
state-owned enterprises. Furthermore, they have
faced structural shifts similar to those expected in
oil and gas. The postal industry has faced falling
letter volumes in the past decade and companies
in the sector have already adapted their organisational structures and strategies. Likewise, the
electric utility sector can be seen as a frontrunner
for oil and gas; it has long been challenged by
large technology disruptions in the form of
increasingly price competitive renewables. These
parallels make postal and power companies’
useful cases for exploring future strategic and
organisational changes in the oil and gas
industry.
The postal and power cases show that
company-specific motives and context can lead
to different but rational strategic responses to the
same structural shift. Some companies, such as
United States Postal Service (USPS) and RWE
(circa 2004), changed very little in response to
structural shifts, while others, such as Deutsche
Post and DONG Energy (now Ørsted), transformed or diversified their companies completely. Little strategic change was observed
in situations where owners valued security of the
existing service and nearer term profits. In the
case of USPS and RWE in the early 2000s, their
strategy was to harvest the short-term value of
legacy assets. In companies, such as the UK’s
Royal Mail—where stakeholders valued
longer-term profitability but were constrained by
regulation, conflicting interests or limited capital
—business strategy focused on streamlining and
redirecting resources to new capabilities. In cases
where owners sought to expand the business, had
relevant capabilities and sufficient capital, the
strategic shift was more aggressive than for those
acting later or facing resistance. As an example,
both Deutsche Post and DONG Energy moved
early and used rents from legacy activities to
finance their strategic transformation to international logistics and offshore wind respectively. In
contrast, late movers such as RWE and
Innogy SE suffered from capital constraints,
which slowed their strategic transition.
Organisational change needs to align with the
adopted strategies and business models. In all our
cases, companies started out with relatively
hierarchical, top-down organisational structures.
Where the strategic focus remained on the traditional business model, as with USPS and
RWE, organisational change was limited to
making the prevailing structure more effective.
Where new business growth was the main priority, all companies first ensured some separation
between new and old—this gave the new business sufficient autonomy to grow. Where new
businesses had similar underlying characteristics
to the traditional business, as with Royal Mail
and DONG Energy, organisational change
focused on reorienting the existing structure and
flattening the hierarchy, but not on a radical shift
to a horizontal structure. In contrast, radically
new product or service models involved
far-reaching organisational change. As Deutsche
Post transformed from a German mail delivery
firm to an international logistics company it also
changed its organisational model. Notably, it
shifted focus from production to consumers and
organised itself around a series of relatively
autonomous divisions supported by cross-cutting
service divisions. Innogy’s split from RWE in
2016 resulted in a more radical turn towards
business unit autonomy focused on customers,
50
W. Xiaoming et al.