- INTRODUCTION
The objective of this study is to evaluate and examine the British Petroleum’s innovation process. In addition, the style of the business along with the structure of the organization is taken into consideration. The study revolves highly around the innovative culture of British Petroleum due to which the innovation objectives are separately described. Moreover, the external environment of the business is also taken into consideration as it would help in analyzing the environment in which the business operates (PESTLE analysis) along with the risks involved in the business. Operating in a competitive environment surely creates challenges and opportunities for the business. The challenges and the opportunities along with the pressure group are elaborated in the study to identify the ways in which the organization mitigate or manage its risks. Strategies including corporate and innovation is the center of the study due to which both the strategies are clearly described. Furthermore, the new product development process at British Petroleum is taken into consideration in order to identify the sources of ideas and opportunities. Lastly, the future of the company’s innovations are mentioned which will help in evaluating the products and services in the forthcoming years.
- BRITISH PETROLEUM
British Petroleum (BP) is one of the most technologically advanced oil and gas companies in the world. Being the world leader, BP strives to provide its customers with fuel for transportation, energy for heat and light along with lubricants that keeps the engine moving. Moreover, the company has its very own petrochemicals department that tends to provide the customers with diverse products such as paints, clothes and packaging (BP, 2012).
In the era of globalization, BP has established its operations in over 80 countries having over 20,700 retail sites. The number of refineries (wholly or partially owned) is 15 with refining throughputs reaching 2,345 thousand barrels per day (BP, 2013b). The company highly focuses on gaining efficiency. In order to do so, BP relies heavily on innovation and technology (BP, 2012). The technological advancement has allowed the organization to lead the advanced seismic imaging technologies that eventually provides BP with an opportunity to locate and pinpoint the exact location of new sources of oil and gas. Moreover, BP has continually provided the customers with new products which will eventually be the spotlight of this study.
Particularly in UK, the upstream of business accounts for 5 percent of the global production with assets including 45 production fields, 33 platforms and 10 pipeline systems. In addition, the company operates a network of 1,200 service stations to provide the customers with fuel and everyday product to Britain’s motorists and shoppers (BP, 2013a).
Technology is the heart and soul of British Petroleum due to which the company strives for excellence. To consistently provide the customers with new and innovative products and services, the company implemented technology management practice that could significantly increase the impact of technology. In addition, the company also initiated framework for technical career development to enhance the ability to provide innovative products to meet the requirements of the customers (BP, 2013b).
Focus on innovation and creativity could be witnessed within the mission and vision statement of the organization (About, 2013). The organization aims to meet the needs of the customers in terms of energy by constantly pushing the people working at the organization to break through the boundaries of innovation through proper use of technology within the organization. To significantly enhance the performance, the organization relies on continuous improvement to increase the efficiency and effectiveness of the organization.
British Petroleum is highly aware of the importance of innovation and creativity within the business. As a result, the organization works under the strict guidelines provided to the employees regarding innovation and effective use of technology from the top management. Due to the top management’s support, the organization has consistently provided the customers with innovative and technologically advanced products from time to time. For instance, the development of Castrol EDGE with Titanium ensures that the vehicle engine would withstand any extreme condition. The management style which is focused at BP is directive style (Macalister, 2006) . This eventually means that the directions and guidelines are provided from the senior managers and the top management which had to be followed by every worker within the organization. The concept of innovation and technology has always remained the spotlight of the organization due to which the managers provide the workforce with guidelines to ensure effective technology use in the development of new products. The workers are continually pushed to focus on lean management (more for less) which has been provided to the organization due to innovation and technologically advanced machinery within the organization (Management Paradise, 2011).
- INNOVATION & CREATIVITY
Innovation has remained the source of competitive advantage for organizations operating at domestic, regional, national and international level. In simpler terms, innovation is the art and science of the exploitation of new ideas. Innovation is about altering the landscape of the business. According to Ray Meads, innovation is the altering of business model that eventually changes the basis of business for an organization (Carpenter, 2010). On the other hand, Bill Flynn revealed that innovation is a process through which an organization creates solutions to problems that are constantly creating barriers between the organization and its desired success (Carpenter, 2010). Innovation has been considered as an essential tool for organizations for its new product development which eventually helps the organization to move ahead of others even in the most challenging times and situations (Cooper and Edgett, 2010).
British Petroleum aims to create value across its chains. To make this dream possible, the organization consistently provides the customers with fuel for transportation, energy for heat and light, and lubricants to keep the engine running smoothly. Furthermore, the organization takes optimum advantage of technology to enhance the possibility of innovations so that the future needs and requirements of the customers could be effectively met. By taking the importance of innovation into consideration at British Petroleum, Robert G. Cooper’s definition would fit the organization perfectly.
Technology is the essence of British Petroleum through which the company is continually provided with an opportunity to innovate its products and services. This signifies that through technology, the organization meet its innovation objectives. Some of the most prominent innovation objectives of the company are as follows;
On the other hand, creativity is an essential concept that is continually used within British Petroleum. Creativity, in simpler words, could be defined as the art and science of using ideas for solving problems and communicating with others with an aim to entertain others (Cooper, 2011) . Similarly, H. H. Fox defined creativity as a thinking process where the original ideas are taken into consideration for the development of new products and services.
Robert Cooper in his book “Doing it Right, Winning with New Products” revealed that for organizations to succeed in a highly competitive environment, the organization must focus highly on innovation (Cooper, 2011). The organizations are in need of innovative products to distinguish their products from others in the market. In addition, he indicated that organization that does not focus highly on innovative products eventually dies because of its obsolete products in the market. According to the Cooper (2011), the organizations in United States are distinguishing themselves from the market through innovative products which provides the companies with 50 percent of the revenues from sales and accounts for 40 percent of the profits.
- EXTERNAL ENVIRONMENT (PESTLE ANALYSIS & RISK ANALYSIS)
British Petroleum is a multinational corporation that starts with the exploration of natural resources (i.e. oil and gas) and ends with the supply of energy and other essential products life fuel, lubricants and petrochemical products that have become essential for everyday life. Over the years, technology has become essential to protect the reputation and competitive advantage of the business.
The business environment in which British Petroleum operates could be identified through PESTEL analysis. The prominent factors of PESTEL analysis along with the description of British Petroleum’s business environment are as follows;
- Political
Being a multinational company having operations in almost 80 countries, the organization remains quite cautious when it comes to politics. The disturbance and upheaval in the countries could damage the organization to great extent due to which the organization has implemented a policy that restricts the organization from having any direct participation in the political activities. The political environment presents series of challenges for the organization along with variety of opportunities in the market in terms of innovation and creativity. With operations in 80 countries, the organization has to take the political stability of the country to focus highly on the innovation. In addition, the laws and regulations have to be taken into consideration in the creation of new innovative products (i.e. patent laws and regulations).
- Economic
The economic upheaval has presented variety of challenges for the organization to operate smoothly at the local, regional, national and international level. To eliminate such challenges, the organization focuses highly on Joint Ventures. The rising number of wholly or partially owned businesses in the market is an example of British Petroleum’s management of economic risks.
- Social
Providing the customers with innovative and fundamental everyday products is considered to be the responsibility of British Petroleum. In order to do so, the organization continually provides them with premium products with superior quality. This has significantly helped the customers to be satisfied beyond their expectation. This is the core reason that the customers of British Petroleum have remained loyal to the company for over years.
- Technological
Technology being the core of the business plays an essential role in providing the organization with an opportunity to cater the needs and wants of the customers effectively. The organization uses state-of-the-art technology that provides it with competitive edge within the business environment and the industry.
- Environmental
Environmental protection is considered to be the core responsibility of the organization. Being a respectable and well-known organization, British Petroleum focuses highly on the management of traffic, noise, dust and light due to which the equipment are designed and located at remote places. This significantly reduces the negative impact on the community. Moreover, the concerns of the nearby communities are taken into consideration and are addressed effectively. Protection of environment is incorporated within the mission statement of the organization due to which the organization has remained careful in the development of innovative products that could harm the environment.
- Legal
British Petroleum works with the US government, the Securities and Exchange Commission to reduce the uncertainty. This has worked well for the organization over the past years. With BP’s operations across 6 continents, the legal aspect acts as a dominant barrier in the development of new and innovative products. For instance, the design patent along with the similar features could significantly put the organization in harm’s way due to which the organization tends to be careful in the development of new products.
The corporate headquarter of the company is located in London, England. In addition, the organization has offices in around 80 countries across the globe. Moreover, the corporate headquarter of the organization for Business and Technology is located in United Kingdom (BP, 2013c). To provide the organization with an opportunity to maintain and enhance its leading edge (i.e. innovation and technology) the company invests over £130m in research and development (BP, 2013a). British Petroleum also invests in programmes with UK universities and government initiatives. This eventually provides the organization with an opportunity to understand the requirements and demands of the customers along with new and innovative ideas from graduates and professionals (BP, 2013a).
- CHALLENGES & OPPORTUNITIES
British Petroleum operates in 80 countries due to which the company is constantly surrounded by challenges along with new opportunities in the market. Some of the challenges and opportunities that are presented in the market are as follows;
- Challenges
- With natural gas concentrated in just 4 countries while 80 percent of global oil reserves are in 9 countries. This represents a challenge for the organization due to gigantic distance between the organization and the hubs of energy consumption.
- The high costs associated with the technological production of energy, fossil fuels are being burnt. This could significantly raise the local and regional pressure groups to work against the organization for air quality issues (BP, 2012).
- Opportunities from Challenges
Some of the opportunities provided to the organization from challenges are as follows;
- Being the largest oil and gas organization in the world, the organization focuses on technologically advanced products. As a result, the organization is provided with an opportunity to win the heart of the customers and the community members by providing them with environmental friendly products.
- The innovative products developed by the organization from time to time acts as a source of competitive edge for other competitors in the market. To gain competitive advantage over BP is quite difficult due to its size of operations due to which the organization operates freely within the local and international markets.
- The operation size of BP is an opportunity for the company. Moreover, the rising sales and profit level of the organization eventually provides BP with an opportunity to work towards the creation of innovative products in variety of international markets. While one country focuses on the development of new products, the other countries focus on the development of ideas and screening of products.
- Other Opportunities
- The population of the world is predicted to increase by 1.3 billion from 2011 to 2030 which will eventually double the income of the population over the same period. As a result of such population explosion, the energy consumption and the demand would significantly increase (BP, 2012).
- Increase in demand for energy with 93 percent of growth in non-OECD countries.
- The use of diverse mixture of fuels and technologies (i.e. oil sands, shale gas and deepwater oil) could significantly reduce the intervention of pressure groups.
- The design and location decisions are taken into consideration from the communities. The involvement of communities in such decisions could reduce the pressure from any kind of pressure groups that could come between the organization and its desired goals and objectives.
Pressure groups have an inevitable role in the operations of the organization. Due to such pressure groups, the challenges that the company has to face are increasing day by day. Some of the pressure groups are forcing and pressurizing the government on public finances for their personal benefits. As a result, the government might intervene in the fiscal and regulatory frameworks which will eventually lead to increased taxations, nationalization and expropriation (BP, 2012). Similarly, the oil spill accident also gave rise to variety of pressure groups due to which the innovation process of the organization had to focus highly on the protection of products and services. In order to reduce the impact of pressure groups on the innovation of the organization, the organization works in closely with the pressure groups for the identification of their wants and needs. On the other hand, the shareholders of the company play an essential role in promoting the company to work on the development of new ideas in the market. For instance, the shareholders motivate and encourage the organization to work on the development of new and innovative products by investing highly in the organization and its products.
On the other hand, the management of risks at British Petroleum has become an integral part of the business. Being a foundation to reinforce safety, build trust and grow value the organization focuses highly on risk management. In order to manage the risks effectively, the organization has a board that focuses highly on material risks. Some of the most prominent risks are managed effectively in the following ways;
- Political Risks
In order to minimize the political impact on the business, the company has applied a policy that ensures no direct participation in political activities. Moreover, before starting a business with a new counterparty the creditworthiness of the company is assessed. In addition, the counterparty is allocated with a credit rating along with a credit exposure limit.
- Financial Risks
- Economic Risks
Managing the threats associated with economics has been considered as a priority by BP. To tackle such challenges, BP has shown significant interests in joint ventures. This could also be witnessed by the rising number of wholly or partially owned business in the market.
- Industrial Risks
Continuous advancement in technology is one of the most prominent industrial risks. To overcome such risks, the organization takes the help of its Research and Development department to gain sufficient and accurate information regarding the technology (BP, 2012).
- CORPORATE STRATEGY OF BRITISH PETROLEUM
The corporate strategy of British Petroleum clearly entails that the organization strives to create a distinctive platform that would help the organization to enhance its growth over the long-term. This clearly entails that the organization continually focuses on innovation for the creation of distinctive platform through which the organization can enhance its growth (BP, 2013d).
Innovation’s role in the success of the organization is strongly pivotal as it allows the organization to improve its technological design, process and use of material effectively. As a result, the organization significantly reduces the costs associated with the new product development while increasing the efficiency and performance of the organization. In broader terms, the organization strives to provide the customers with quickest and most effective pathway to a secure and environmental friendly future while meeting every needs and desires of the customers in the domestic, regional and international market (BP, 2013d).
Innovation and technology are the heart and soul of the organization due to which the corporate strategy backs the concept of innovation. This is the fact that the organization continually invests in research and development department located across the globe (BP, 2013d).
Innovation is incorporated within the corporate level strategy of the business due to which the organization focuses highly on innovative and technologically advanced products. In order to create innovative products, the organization has introduced a research and development department that provides the engineers and scientists with effective information regarding the needs and wants of the customers. Moreover, the information is provided to the separately established innovation department of the company which works on the idea generation and rest of the process in development of new products. Innovation acts as source of competitive advantage for the company due to which it is provided with finance from the top management.
The innovation strategy followed by BP is open which reflects that the organization uses internal ideas along with external ideas to compete in the technologically advanced industry. In order to continually manage and enhance the innovativeness and creativity of the organization, the top management directs the managers and supervisors to help the workforce resist change. The support of the top management significantly helps in the management of change. Moreover, the workforce is continually provided with benefits and advantages associated with change and that how would it allow the organization to achieve its overall goals and objectives (BP, 2013f).
The organization has an innovation department which provides the top management with essential information regarding the development of new products. The top management provides the department with an authority to work towards the creation of new and innovative products. This reflects that the organization follows both bottom to top as well as top to bottom approach in the creation of innovative products and services. The corporate strategy highly supports innovation within the organization. In addition, the corporate strategy clearly entails regarding continuous improvement along with effectiveness and efficiency within the operations of the organization which is achieved through innovation and technology with the organization (BP, 2013f).
(BP, 2013f)
- INNOVATION STRATEGY & ITS BENEFITS
Innovation is implicitly engrained in the corporate strategy of British Petroleum. The organization tends to provide the customers with new and innovative products from time to time. To do so, the organization invests highly in the research and development department that provides essential insights regarding the new technology and innovative ideas to the company.
Some of the prominent benefits of such high reliance on innovation and technology are as follows;
- Innovation has provided the organization with un-rivaled competitive advantage over the competitors due to which British Petroleum leads the oil and gas industry in variety of countries.
- The ability to provide the customers with improved and enhanced products has allowed the organization to gain the customer’s trust and loyalty.
- Continuous improvements in products have resulted in increase in sales which eventually leads to increase in revenues and satisfaction of the shareholders and investors of the company.
One of the prominent products that is sold locally, regionally and internationally is Castrol. This reflects that the company is following an innovation strategy that is global as well as local to meet the needs of the consumers across the globe. BP recently launched Castrol EDGE with Titanium to enhance the quality of the product and to attract the customers to purchase it without even considering other products in the lubricants market. The core innovation strategy of the organization clearly indicates regarding continuous development and improvement in terms of products and services. This is accomplished through high reliance of BP on innovation and creativity for the development of environmental friendly products. To significantly enhance the innovation and creativity within the oil and gas industry, the organization works closely with variety of universities such as BP institute, ICAM and Energy Biosciences Institute.
- NEW PRODUCT DEVELOPMENT PROCESS
The new product development process at British Petroleum is as follows;
- Idea Generation
The research and development department at British Petroleum works on the idea generation. This means that scientists and engineers work together closely on idea generation stage. The relevant information is provided to the researchers, scientists and engineers come from the research and development department. The information contains the needs and demands of the customers along with what is expected from the workforce at the Research and Development department.
- Idea Screening
The company works in a highly hazardous environment due to which every single aspect of the idea must be taken into consideration. For instance, in the idea screening phase of lubricants, the scientists and the engineers work closely with the high vehicle engine manufacturers. The manufacturers provide the department’s workforce with every insight that they have to make the engine operate smoothly even in extreme conditions. The information provided to the organization is then taken into consideration by the researchers and the team to look for the right combination of ingredients to make the most of the materials and natural resources.
- Concept Development
Before the concept is developed, the idea is taken to the management to gain approval for the working. When the idea is accepted by the management, and then begins the concept development phase. Even though, the organization is highly centralized, the management provides the concept development team with the authority to work on the idea and to use the required resources as per their needs.
In the concept development phase, the idea is given an appropriate shape. But before doing so, the team investigates with vigilant eyes regarding the intellectual property issues along with patent database. Next, the target market for the product is decided. For instance, Castrol EDGE with Titanium’s target market is the high-end racing cars. Each lubricant or the product of the company has a different and unique target market. Furthermore, the features to be added within the product are decided by the team of scientists, engineers and quality engine manufacturers. Once the features are decided, then the benefits of the products are decided by the same team. The purpose of keeping the same team in the previous and this stage is to ensure quality and sound decision making ability. Lastly the cost for the product is decided. The cost is decided by the top management and is then communicated to the department and the vendors along with the suppliers.
- Marketing Strategies
Being an internationally reputed and renowned organization, the company also operates convenience stores. The newly introduced products are transferred from the production department to the warehouse and from the warehouse to the convenience stores. Moreover, the company’s top management along with marketing professionals decides the future of the product in the industry. The marketing mix of the products are communicated with the marketing professionals and by the consent of the top management, the product is launched in the industry.
- BRITISH PETROLEUM’S CULTURE, STRUCTURE & SYSTEMS
British Petroleum highly prioritizes the safety of its employees and the workers due to which the employees are highly loyal to the company. The organization has clear vision; where the company wants to be in the forthcoming years, due to which the company has been able to deliver its priorities of safety, trust and value effectively to the workforce. British Petroleum aims to become the safety leader across the globe which will eventually motivate the workforce to work in a highly safe and protective work environment (BP, 2013e).
Some of the most prominent values that set the culture at British Petroleum are as follows;
- Safety
The company aims to become a safety leader in the world due to which the protection of the workforce along with the delivery of products is the priority of the company. The organization cares about the protection of the environment due to which British Petroleum is striving to provide the customers with innovative products (BP, 2013e).
- Respect
Being a responsible corporate citizen, the company values and respects the world it operates in. Highest ethical standards are observed in the business and the business complies with every laws and regulations. The work of the workforce is respected along with the diversity in thinking and thoughts (BP, 2013e).
- Excellence
Being in a highly hazardous business, British Petroleum has remained committed to excellence through organized and systematic operations. The standards set by the organization are taken into consideration at every step taken by the organization. As a result, the organization has been able to provide itself with quality outcomes (BP, 2013e).
- Diversity
- FUTURE OF INNOVATION
Working in a highly competitive and technologically advanced industry, the organization tends to invest in future operations so that the intervention from pressure groups along with government could be significantly reduced. The organization aims to invest in high-profit margins, high-quality and innovative production, and not just the quantity of the products.
Moreover, to enhance the success and growth of the company, British Petroleum would tend to explore and exploit new source of natural resources. This would significantly help the organization to meet the desires and requirements of the customers in the market. The organization is strongly focusing on the use of real-time data to reduce the possibilities of any unforeseeable events while enabling safe and efficient operations.
Lastly, British Petroleum would tend to use its competitive edge (i.e. innovation) for new product development in lubricants, fuels and energy.
- CONCLUSION AND RECOMMENDATIONS
With the proper use of technology, British Petroleum has achieved competitive advantage over other oil and gas companies in the world. Although, the organization faced challenges in the past years but the ability of the organization to transform its challenges into opportunities have significantly influenced the organization to achieve its desired goals and objectives.
The organization aims to provide the customers in the market with quality and innovative products. By doing so, the quality of life of the customers would be significantly increased. As a result, the organization would be presented with loyalty and respect in the market.
Some of the recommendations that the company should take into consideration to enhance its success are as follows;
- The company should enhance the Research and Development budget from £130m to £200m. This will provide the organization with significant opportunities to understand the needs of the customers in the market.
- The company should establish Research and Development and Innovation Department in every nook and corner of the world. This will provide the organization with limitless information and insights regarding the recent technology and consumer demands. The company currently has only seven technology and innovation centers in UK, US and Germany (BP, 2013f).
- The company should establish Research and Development department in every nook and corner of the world. This will provide the organization with limitless information and insights regarding the recent technology and consumer demands.
- The organization should try enhancing innovativeness level in the products. This means that the organization should focus on perfection in every minor aspect of the product.
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