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Complex Services Benchmarking represents substantial complexity and a large level of absolute expenditure in most companies, yet it is an area which is often misunderstood and undervalued.
There is a constant pressure to reduce costs but, simultaneously, to ensure that benchmarking aids the strategic objectives of the business, contributes to profitability, shareholder return, efficiencies and distribution of resources.
Imagine a new approach to Complex Services Benchmarking that recognises its impact on cost and margin leadership and that builds a culture of excellence into your company.
Over more than two decades, Fulcrium has built expertise and reputation in helping board executives to extract maximum value from their critical in-house and outsourced complex services on local, national and global levels. However, we only work with organisations with global complex services expenditure running into billions.
We use our unique, proprietary database to benchmark our client organisation against only best-in-class companies in the same or different sectors.
We translate that intelligence into recommendations that will best serve organisational goals.
Then, we work with executive leaders and teams in key areas to ensure a collaborative approach that produces the best outcomes across the business.
Paul Beijer – Vice President Strategy, Planning & Assurance at Shell talks to Fulcrium, explaining how Oil & Gas benchmarking is used to make Shell a leader in the industry.
We used Fulcrium to determine whether or not to dispense with our in-house rig and FPSO construction capabilities. Their benchmarking showed unequivocally that we already had substantial competitive advantage and that outsourcing in this instance would not be of benefit to us.
Fulcrium’s exceptional complex services benchmarking laid bare the ongoing operational and maintenance costs on a particular platform. Multiple problems were revealed, many originating in initial design flaws, but also in current people and processes.
The intelligence Fulcrium provided enabled us to determine what steps to take, based on indisputable evidence, and had a multi-million dollar positive impact on the business.
There is no doubt that Fulcrium provides significant value-add in benchmarking. No generic benchmarking firm that we encountered can match it for methodology or, more importantly, for domain specificity in the upstream oil and gas technology industry.
Their in-depth knowledge was a key factor in them being able to deliver a granular, multi-geography benchmarking engagement of considerable scale in a very tight timescale.
We had been using a particular specialist provider for almost five years, but over that time costs had jumped dramatically and there did not seem to be adequate justification for that. Our annual spend with them exceeded £20 million, and we needed to know urgently whether we were obtaining value. Fulcrium’s benchmarking showed that our market arrangements were suboptimal as the category specialisms needed to be realigned.
Our competitors were obtaining much better value and higher levels of performance. With the leverage supplied by Fulcrium, we were able to rectify the situation without alienating a core value chain supplier and instead of a relatively poor value we are now benefiting from substantial breakthroughs in performance.
Fulcrium’s unique benchmarking service gave us the hard data we needed to decide how to upgrade our legacy systems to cope with today’s most challenging problems.
It also showed the extent to which, for many years, we had failed to regard IT as a competitive differentiator. Plus that we couldn’t just emulate the IT installations of our nearest competitors. If we had taken that route, the consequences could have been commercially disastrous.
The five largest, non state-owned energy companies worldwide (ExxonMobil, BP, Royal Dutch Shell, Chevron and Total) are termed supermajors and hold about 3 per cent of global hydrocarbon reserves. They were created from the late 1990s to hedge against oil price volatility, achieve economies of scale and reinvest cash reserves. While the supermajors got bigger, so did the challenges they face, with implications for their survival.
The good news is that scale is an advantage when exploring for hydrocarbon resources in the most inhospitable and inaccessible parts of the world, in developing technology, in undertaking mega-projects.
The bad news is that “diseconomies” were inherited with consolidation. These include issues of corporate governance, and trying to manage merged behemoths; the reduced accuracy of information flow; slower decision-making; greater responsibility for the safety of staff, contractors and for the environment; and increased emphasis on performance management.
The supermajors are now going to have to up their game to avoid being relegated to lower-value service providers – or eventually face extinction.
“Winning” is often defined as gaining access to and exploring the largest hydrocarbon basins, replacing the produced reserves, successfully developing mega-projects, optimising production, and managing reservoir decline. In addition, decommissioning mature fields, health, safety and the environment have become more important. “Winning” is also defined as being able to strike partnerships with host governments, national oil companies (NOCs), other international oil companies (IOCs), and contractors.
The supermajors are positioning themselves to win by renewing their strategies for corporate governance, organisation, technology, projects, engineering and contracting.
ExxonMobil, for example, is known for its centralised management, while some supermajors give greater autonomy to business units. Both models can work, but the decentralised approach will need robust delegation and accountabilities, otherwise there is a risk the corporate centre, business units and the functions will end up tripping over each other.
BP has embarked upon an aggressive simplification programme. Shell’s corporate mantra over the last few years has been ESSA – eliminate, simplify, standardise, automate.
As part of the simplification drive, every division, function and business unit will need to become a focused contributor to the business. Functions in particular, such as technology, procurement/supply chain, finance, human resources and legal must be organised and managed to world-class standards.
Technology is critically important, but the supermajors do not have exclusive influence over it. The value they add is in screening it in the marketplace, R&D and testing.
Having outsourced some core skills and competencies, the supermajors have become “super contractors” and “super project managers”, bringing together partners, managing and integrating huge programmes and disciplines. In effect, they are managing budgets, risk, delivery, health and safety, quality, timescales and pushing technical limits.
Whether or not they are relegated to becoming low-margin service contractors, they will still need to foster a service mindset. This means becoming agile, responsive and competitive in order to be selected as partners of choice by NOCs and host governments.
The oil-producer cartel Opec and the NOCs are growing sophisticated. They, too, are hiring the best technology and brains in the industry. The supermajors will be obliged to offer propositions that are a lot more compelling when compared to near competitors – pure service companies such as Schlumberger or Halliburton.
When all is said and done, one question remains: are the supermajors just too sluggish to leverage their scale profitably?
Raju Patel is chief executive of Fulcrium (a London-based global benchmarking specialist).
“Winning” is often defined as gaining access to and exploring the largest hydrocarbon basins, replacing the produced reserves, successfully developing mega-projects, optimising production, and managing reservoir decline. In addition, decommissioning mature fields, health, safety and the environment have become more important. “Winning” is also defined as being able to strike partnerships with host governments, national oil companies (NOCs), other international oil companies (IOCs), and contractors.
The supermajors are positioning themselves to win by renewing their strategies for corporate governance, organisation, technology, projects, engineering and contracting.
ExxonMobil, for example, is known for its centralised management, while some supermajors give greater autonomy to business units. Both models can work, but the decentralised approach will need robust delegation and accountabilities, otherwise there is a risk the corporate centre, business units and the functions will end up tripping over each other.
BP has embarked upon an aggressive simplification programme. Shell’s corporate mantra over the last few years has been ESSA – eliminate, simplify, standardise, automate.
As part of the simplification drive, every division, function and business unit will need to become a focused contributor to the business. Functions in particular, such as technology, procurement/supply chain, finance, human resources and legal must be organised and managed to world-class standards.
Technology is critically important, but the supermajors do not have exclusive influence over it. The value they add is in screening it in the marketplace, R&D and testing.
Having outsourced some core skills and competencies, the supermajors have become “super contractors” and “super project managers”, bringing together partners, managing and integrating huge programmes and disciplines. In effect, they are managing budgets, risk, delivery, health and safety, quality, timescales and pushing technical limits.
Whether or not they are relegated to becoming low-margin service contractors, they will still need to foster a service mindset. This means becoming agile, responsive and competitive in order to be selected as partners of choice by NOCs and host governments.
The oil-producer cartel Opec and the NOCs are growing sophisticated. They, too, are hiring the best technology and brains in the industry. The supermajors will be obliged to offer propositions that are a lot more compelling when compared to near competitors – pure service companies such as Schlumberger or Halliburton.
When all is said and done, one question remains: are the supermajors just too sluggish to leverage their scale profitably?
Raju Patel is chief executive of Fulcrium (a London-based global benchmarking specialist).
If you want undeniable data and exceptional value-identification in Complex Services then contact us today.
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