notes from the lab

March 10, 2003 Strategy Magazine

Brand Matters

Oil co's think green because they have to

by Will Novosedlik

page 14

In the last issue of this publication, long-time columnist Barry Base asked the question "Why are oil companies going green when people don't care?" After speculating over a couple of possible reasons, including self-defence against government intervention, or hiding from the "tiny tyrants" at Greenpeace, Mr. Base poses the implausible: that oil companies "actually think people will go out of their way to buy green products."

In what appears to be the golden age of the SUV, our columnist can be forgiven for his cynical tirade. And for guffawing at the irony of the "eco-certified" car wash. Let's hope he never has to buy "petrol" at one of the U.K.'s newest BP stations - the ones that sport small wind turbines for generating part of the station's electricity.

But such apparently lame demonstrations of environmental concern are symptomatic of something more profound than a desire to make people feel good about internal combustion. It's not about spin. It's about statistics. Since the oil shock of the early '70s, debate has raged over just how much crude is left in the world. More recently, the statistical models which forecast depletion within the next half century have won the day. Duh! Whoever thought the gushers would last forever?

The oil - I mean energy - companies have simply come to the bitter realization that if they don't start thinking about alternative energy sources and environmental impact now, they will not be here in 25 years. Not to mention their co-dependants, the manufacturers. Take the auto sector. In Canada alone, it is responsible for almost 15% of the GDP. That's one in seven jobs. Think of the economic impact we would experience if the wells went dry tomorrow.

The likes of ExxonMobil and BP are thinking about it, and thinking about it very hard. So are the auto companies. Aside from the race to produce a practical hydrogen-fuelled vehicle, there are attempts to repair some of the environmental damage done by 100 years of rust-belt mass production.

In the February issue of WIRED magazine, you can find an article about the collaboration between Ford Motor Company CEO William Clay Ford and architect Bill McDonough to clean up one of the world's biggest and dirtiest industrial sites, that of the former River Rouge Plant on Detroit's west side.

Once home to over 15 million square feet of factories scattered over a site the size of Central Park, it is now home to a vision of environmental remediation that may serve as a model to many such post-industrial wastelands in the not-too-distant future.

The important word here is "vision." In their 1994 book, Competing for the Future, Gary Hamel and C.K. Prahalad criticize the limitations of traditional industrial models of business strategy which strive to position companies for competitive advantage within stable industry structures.

Recognizing the imminent end of industrial stability, they proposed that companies should imagine a future comprised of markets that don't yet exist, and customers with needs that have yet to be foreseen, and then orient themselves towards the imagined future. Or, to paraphrase Wayne Gretzky, to "skate to where the puck is going to be." They called it "strategic intent," or "strategy as stretch."

Companies like BP, with its very controversial slogan "beyond petroleum," have employed this kind of strategic intent by looking at what a future without oil will mean for them. They have taken the bold step of using their brand as a signal of that intent. But it is a lot to live up to.

Wind-powered gas stations aren't going to cut it.

Exploring for gas deposits within striking range of the Alaskan National Wildlife Reserve isn't going to help either (in BP's case).

These are the challenges faced by global companies, which for so long have been environmentally blind. They will have to align all of their operational decisions to live up to the brand promise reflected in their strategic intent, or suffer profound consequences.

Mr. Base is right when he says that true ecological concern cannot be trivialized. But he is wrong to say that people don't care. Not all of us drive SUVs.