With what appears to be another “better days” event on the horizon, now is a good time to avoid getting caught up with the profit euphoria. In fitness they say, “80% per cent of what you are is what you eat,” and “listen to your body.”. The same applies with our oil and gas sector. Listen to your business and listen to the industry.
So what are we hearing? For one thing, Alberta has returned once again as a place to do business. Out on the street, there are sighs of relief, that the crisis pundits are being throttled back and the economic drivers of this province are being respected once again. There is an evolution taking place and this time, perhaps we can be wiser in judgement.
Additionally, we are heading towards a skilled labour shortage, however this time we have artificial intelligence at our fingertips. Sam Altman, arguably the global lead voice in AI, is focused on dreaming big, picking dreams that will return value, implementing quickly and opening up to the world. In a nutshell – innovation.
Nothing “rocket science” about that strategy. Innovation has always been and always will be the biggest contributor to sustainable business, investor attraction, employee retention and profitability. The key difference in Altman’s strategy is “opening up to the world,”, which is a reversal of past practices of protecting innovation through patents or other legal means.
If you think about it, the expense of protecting invention, could limit your ability to invest in fresh innovation. It’s a tough call. Should you vehemently protect an innovation, or should you get it out to the market, maximize the opportunity and continually improve, all the while staying ahead of your competitors?
Another relevant thought for our sector can be captured in the Charlie Munger quote from 2022:. “The world is not driven by greed; it is driven by envy.”. He added later that pretentious expenditure doesn’t provide any lasting happiness. Greed is never good. Envy if harnessed correctly can be effective.
Canadians are a fickle lot and for the most part they don’t take kindly to garish displays of profit taking. Nobody knows this better than the big banks, which are all regulated. Banks today are masters at marketing how lean and mean they are, while quietly producing good returns for their shareholders and others.
Practicing restraint and carefully managing our industry this time around will be beneficial to the sector as a whole and to all of those earning a living from it.
Back to the word profit. A few decades ago, I learned the term Maximized Utilization of Assets from Dave Leach, former President president of Greyhound. Leach knew that ensuring his rolling stock was being fully utilized at all times was critical. Also, he knew that no bus should be sent to the grave without being “miled-out” and that key metrics needed to be reviewed every single day. He knew that measuring activities was more important than measuring results, because activities lead to results…it is as simple as that.
BTW, it was regulations that eventually crushed Greyhound, not the market.
Here in the patch, where the highs and lows can sometimes create the earlier mentioned profit euphoria, we can benefit from this practice. We can learn from strategies that are executed in tight profit industries like transportation. They turn over ever single dime.
Attending a conference a few years ago, I heard Jeff Immelt, Chairman chairman of GE say; : “Nnever mistake a tailwind for good management.”. I have kept that front and centere ever since. His point was deafeningly clear. Don’t get sloppy. Inspect and respect capital. Think twice. Be aware of your business environment. Be sure that you are maximizing every single opportunity and leave the ones that have poor potential to the side.
How does all of this relate to our beloved oil and gas industry? Back to Sam Altman and his strategy, now is a good time to go big. Hell, it is always a good time to go big!
It is a well-known fact (see Edleman Trust Barometer), that Canadian companies have great global respect. We are highly trusted, and our innovations are regularly given an advantage during due diligence because of this.
It just takes time to build the relationships. NOCs and IOCs require a lot of time investment. That means getting key people, especially scientists, out of the office and into the field, meeting clients and connecting.
All of this is not just good business sense, it will entrench Calgary even further as a global leader in the sector.
Chuck Bean is the Founder founder of The Method Effect, a Calgary based consultancy. In his 40-year career, he has led large corporations and worked with over 40 Capstone teams in 20+ North American universities, providing strategic business and innovation support and consulting. www.themethodeffect.com
