Let’s start with digital disruption to explain how new technology disrupts everything else and prevails. Then we can see how the opposite happens in energy industry. When will disruption prevail in an energy sector?
Digitization and Digital Disruption are a few common phrases used in techno talks, and a lot of speculation on future based upon them. We’ve seen ipad disrupting physical libraries when it enhanced e-books sales closing over 30% physical libraries in United states in an year. Mobile phones disrupted almost everything including mp3 players, cameras, books, watches and sometime ornaments (studies suggest people gave away a few rings while carrying smartphones). Other examples include that of revolutionary apps like Uber, Skyscanner, Airbnb. So far it is completely understood how it changed the way of business, but it’s equally displaced the equilibrium of the business ecosystem. Let’s suppose when there were 100 smaller companies generating a billion dollar, and now we’ve just one company generating a billion dollar leaving rest 99 out of the league. In this case, what would they do? one option is to leave the current line of business and try something else, another would be to adopt the change and do the same thing like copying what the competitors doings, or leave the business. Out of those most viable option for me is to stay in the market imitate what competitors doing and target on a smaller scale than before to keep going, but the question is how long one shall keep going? In this world of Entrepreneurs, and in the society with technology change, and people appreciating innovation how long one can survive without swaying towards the current of change? What would be the plan of action for the small organization to help get bounced back to what they were, this is for me a mathematics question that has an answer within the equation. It is very important to understand the equilibrium and the shift from normal, it might be too impossible in some cases if the displacement is too much and the off set price to bring it to the normal would be either too much or impossible. There is nothing like a crystal ball with any strategist but yes envision technological change, and when everyone goes behind the same goal can lead to severe issues, it mostly gives one winner and rest all losers. The winner is often the most fearless and also the most adaptive of all, and losers mostly overconfident status-quo addict. Why I’m writing these all when everyone knows them all? In more than a century ago, the industry suffered from dominance by a large western market and competitiveness among a few private companies for the world’s oil reserves. Oil price saw the highest and indeed permanent increase in 2005. In respond to the trend in the oil and gas industry, other companies are now producing efficient vehicles, engines and aircraft and also going for an alternative source of fuels as a measure to capture the demands for transportation. There are new technologies available today which provide different opportunities for unconventional oil and gas in most parts of the world, however, the production of this unconventional energy is uncertain. So far I just wrote against the big fish in the market, but non-agile, non-adaptive or whatever are the most powerful among all most of the time, except a few industries these status-quo fishes can haul innovations or guide the whole world in a completely different way influencing interest of entrepreneurs. When such big firms, lets say Exxon Mobil and RDS, they are the biggest of all companies in the world in terms of sale, fortunately, there is no disruption for them except for oil price fluctuations that also wouldn’t have affected them much if they’d hedged at a safer rate. These organizations are completely dependent on one source of production and survival, and currently pumping crazily every second to suck as much as they can. While making their future and business model running, they might be preaching a different story, and wouldn’t like to see negative curbing for oil prices. Russia (loses about $2bn in revenues for every dollar fall in the oil price) is losing too along with United states with price slumps, but how far these companies have distracted others of not inventing alternate, source of energy. When big companies like RDS and Exxon focuses one source of energy it’ll for sure negate the interest of others, and of course, a lot of capital needed for research and development act as a super barrier stopping innovation. The reasons, Wharton professors and others note, are many. Fossil fuels have been in use for decades, a reality that makes a switch to another energy source very difficult, they point out. Oil as an energy source is not only practical, it has an entire infrastructure built around its use, they note. Politics has played a varied role too, sometimes helping energy innovation, but often hindering it, they add. But by far the biggest hurdle to alternative energy innovation is that oil wins as a simple matter of cost. “Innovation consists of matching a solution to a need”.
My question is how legal is to only think of profit and comfort, and not contributing in any innovation toward environmental risks. Unfortunately, there is no such regulation in United states and Europe to put the blame on such big fishes, since an environmental issue is a border-less phenomenon, and such regulations will promote technological innovations.
To be continued…
Disiuption of the status quo to acquire a temporary advantage is accomplished through exploiting the new 7-S framework (which replaces
McKinsey’s older 7-Ss):
1. Superior stakeholder satisfaction
2. Strategic soothsaying
3. Capabilities for speed
4. Capabilities for surprise
5. Shifting the rules
6. Signaling strategic intent
7. Simultaneous and sequential strategic thrusts