I was surprised to see ExxonMobil stock removed from the Dow Jones Industrial Average in August, leaving Chevron the sole oil company in the Dow. Furthermore, the energy sector now makes up a mere 2.5% of the S&P 500, compared to 16% in 2008. There are many contributing factors to this state of affairs, including short-term dynamics such as the impact of the pandemic on oil demand and prices, and longer term-factors such as growing public concerns about climate change.
These radical shifts are apparent, too, in the vehicle industry, with Tesla now the most valuable vehicle manufacturer in the world despite selling far fewer cars than its mighty competitors. This poses many challenges to the incumbents in our industries, including original equipment manufacturers, oil companies and additive companies, with regard to long-term strategy, and we have seen the different ways they are pivoting to position themselves for the future. The challenge I would like to discuss is that of staying relevant in these challenging circumstances.
What does it mean to be relevant? One definition in the Oxford English Dictionary is to be “appropriate to the current time, period or circumstances; of contemporary interest.” Why does relevance matter? I believe it matters for the following reasons:
- It will lead to continued investment in the industry from stockholders and private investors.
- It can contribute to competitive advantages for those companies perceived to be most relevant.
- It can lead to continued or renewed interest in the industry from job candidates.
My suggestions for industry players fall along three different paths:
- Painting a clear picture of the critical importance of internal combustion technology and the players in that industry for the next 20 years
- Developing and communicating innovative strategies that align with new vehicle technologies and reduced carbon footprint
- Presenting potential new hires with exciting benefits and opportunities
Let me expand on each of these three paths.
The first is not a new idea; the concept of the criticality of the oil and gas industry is well accepted in the short-term, but I believe that the general public does not have a sense of how the industry will navigate the next 20 years and may have a sense that it is a sunset industry.
There is a lot of excellent information on the websites of the major multinational oil companies about the role they will play in fulfilling increasing energy demand especially in developing economies, providing building blocks for chemicals and plastics, and supplying natural gas and supporting other avenues for growing electricity demand—including for the increasing penetration of electric vehicles. However, I believe the information could be more actively communicated and presented in simpler formats aimed at the general public and investors. Educating the public about how the industry intends to navigate the next two decades in a safe and effective way could help the industry improve the perception of its relevance.
There is also a wealth of information on both oil and vehicle OEM websites about strategies to reduce carbon footprint and innovate for long-term success. For example, the General Motors website emphasizes an all-electric future and differentiated battery technology. The ExxonMobil website discusses advanced biofuels, natural gas technology, carbon capture and fuel cells. Shell’s website focuses on CO2 capture, electric vehicle charging station investments, liquefied natural gas for ships, and investments in hydrogen power.
I commend the innovation and focus on the future that is evident on these and other websites that I viewed. It could be beneficial for these future-looking strategies and investments to be prominently highlighted and quantified.
Finally, with regard to attracting people into our industry, the pandemic offers an opportunity to rethink how to position our industry’s value proposition. Why not offer opportunities for a large portion of the workforce to work from home? This may allow companies to expand geographically the pool of potential new hires. Why not offer compelling new benefits around paying off college loans? Perhaps new hires could be excited about participating in the innovation programs designed to reshape our industry over the next 10 years.
Consider formulating that elevator speech that highlights your business criticality in the near term and how your business will shape and be shaped by future trends.
Other avenues that might prove fruitful are job shadowing, career pathing and a focus on attracting diverse candidates. You may want to increase hiring of people with different skills than you have in the past. Of course, for the foreseeable future our industry will need engineers and scientists; however, I suggest you consider whether more skills in the areas of digital marketing, communications and strategic thinking could be helpful. I am sure your human resources department could offer more tailored advice on what other industries offer to attract top talent.
In my June column, I observed that the pandemic seems to be accelerating the pace of trends such as a focus on internet buying, work-from-home arrangements, trust as a differentiator, increased attention to societal inequality, and even climate change. As you focus on your business recovery over the next six months or so, consider whether you can devote fewer resources to the everyday running of the business and more to the strategic direction of the business and how to communicate that to your stakeholders.
Take a hard look at your website and the various materials that you use to describe your business to investors, the community and your customers, colleagues and suppliers. Consider formulating that elevator speech that highlights your business criticality in the near term and how your business will shape and be shaped by the future trends. Let’s try to increase the positive buzz in our industry with an eye toward staying relevant.
Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. Contact her at email@example.com or (908) 400-5210.