After nearly a decade in LNG I tend to believe that I should have seen everything under the sun – but that conviction turns to shreds just an instant after when I see the next hilarious piece of LNG news.
When I started to get serious on the matter in 2005, I quickly realized that attacking new businesses such as LNG would require entirely new skillsets, entirely new teams to work the new business and of course changes in the chain of command.
The job would be to get the right people ON the bus, the wrong people OFF the bus and everyone into the right seat.
The first requirement comes out as the most obvious and is readily understood. New business means new skills and if they cannot be quickly acquired by the wannabe LNG players, new people need to come on board. Senior management usually buys into this pretty quickly. After all, its new worker bees under the decider’s wing and old style managers still often define their power by headcount they can make sweat.
Still, this is often a challenge as many companies are stingy and try to get those new brains on the cheap. You sure know the saying – those who give peanuts usually get elephants.
The second requirement is far more difficult to implement. Old players attacking new lines of business usually have established chains of command and structures which are cast in concrete. Those structures have evolved and lived through countless intrigues, copious backstabbing and lots of managerial posturing and scheming. Needless to say, that those in position will not appreciate the new competition and tend to keep the new business firmly under their wings.
This is most of the time the wrong decision as the old managers have grown in the established business and usually are pretty good at it. They usually don’t want to learn new tricks – you know the saying with old dogs and news trick, don’t you? So they see only risk, danger, work and lots of problems. Not the best way to attack new business.
Assuming that the first two requirements have been observed to the letter, everyone still needs to get into the right seat which often is the biggest challenge. European energy companies track record when it comes to all of the above is dismal.
But then, you will retort, even the established management can grow into the new business if they only have plenty of expert support from within and from outside. This, in theory, is possible. But it’s not very likely to happen.
Established managers are where they are for a reason. They have gone through plenty of crap in order to get into their current positions. They have spilled plenty of blood and they are always afraid that anything could unsettle the delicate balance they think they have created in their respective domains.
They will pay lip service to the new business domain as the top brass wants it and they are afraid to confront the board openly. So they are going to keep shut and make life for those who are eagerly pursuing the new business hell.
Negative power is about 10 times as potent as positive power. This means that it takes 10 times less effort to get something blocked than it takes to get something positively done.
This blocking power often is overwhelming and slams the new projects to ashes. That’s what the old line management wants. They want to prove to the world and to themselves that this new fad is just that, a fad that is basically worthless and that the old business lines and structures are the superior way.
But if the old business model – however successful it may have been in the past – is irremediably wounded, they kill the company slowly as they prevent healing mechanisms to set in.
A great example of this old business digging in their heels and making a stand in defiance of overwhelming reality is playing out at its worst in Central Europe now. Finally, after ages of defiance player come to the realization that oil linked purchase contracts are dead and that they should be scrapped altogether as the new reality of liberalized markets turns it to shreds.
Still, line managers and top brass alike have staged a furious fight to keep them alive and they reap the harvest now. Their world has vaporized and their businesses are mortally wounded. They should have it seen coming for many years but they chose to turn a blind eye.
Maybe you know another saying. “Why should one not try to make a pig sing? Because it cannot be done – and it irritates the pig.”
The only way to break the logjam is to put bespoke structures for the new business in place and let them thrive without any interference possible by the existing line management. No participation in meetings, no information except the general stuff that everyone gets and certainly no voice in the project.
Utility type energy companies often have the wrong people in place when they embark on the LNG journey. By the way – this frustrates the good people they tend to have on board – good people exist everywhere and even in the stiffest, most uncompetitive and unfair environments. Don’t piss them off – you will need them.