Can you be “Sure of Shell” any more? Only where they “stick to their knitting”.

In his seminal business book “In Search of Excellence” Tom Peters described the main characteristics of successful companies. One of them was that they tended to “Stick to the knitting”. There are few better examples of this than Shell.

In my 40 years with Shell as an employee and later as a Trustee Director of the British pension fund I saw how good we were at things within our areas of experience and competence. And how bad at diversification. The exploration for and exploitation of hydrocarbons, oil and gas, was what we did. And we did it well. All the way from the well head to the petrol station we were on top of our game. You could be “Sure of Shell” all the way along the supply chain.

But get out of our comfort zone we were hopeless. The list of failed step out activities is a long one – from Nuclear Energy in the 1960s to the latest “Shell Energy” farrago we simply did not know what we were doing. We failed in metals with “Billiton”. We failed in electricity generation with “Powergen”. We failed in coal, forestry, solar and wind. The list is a long one.

The idea that Shell could run a Broadband business is quite preposterous – we couldn’t run an operation marketing Gas to commercial/industrial customers an area where you’d think we had some relevant competences. “Shell Energy” aimed at the domestic gas market, is yet another step out too far.

The success of Shell, the reason that Shell shares have always been a blue chip investment, is that we looked after what we knew best. We had geologists, engineers, rig builders, tanker captains, pipeline experts, oil traders – even a few marketers like me. And lots of accountants. We did our core competencies well. And we invested so much in the Oil and Gas business that for a time Shell was the worlds largest commercial capital investor – in any sector.

When we were good we were very good, but when we were bad we were awful. We once ran a corporate tv commercial lauding our involvement in Forestry which included the line “One Day it may be our biggest business”. We withdrew from Forestry the following year!

The future of the energy sector as demands to get greener and move away from hydrocarbons is complex but the reality is that the only thing that Shell brings to the Renewables table is money. There is no corporate memory on renewables just as there clearly wasn’t for domestic gas. You can buy a gas marketing company, as Shell did, but that doesn’t mean you have the competence to run it.

Can you be “Sure of Shell” any more? Only where they “stick to their knitting”.

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