Disruptive Innovations in Statoil Corporation (Equinor)

Background

Statoil, which was formerly known as Den Norske Stats Oljeselskap AS was formed in 1972 in Norwegian. The company is a Public Limited Company that exchanges stock in New York Oslo using a ticker symbol of STO, STL, and a workforce of approximately 17,115 employees. Some of its operations include Support Activities for Oil and Gas Operations, Drilling Oil and Gas Wells, Natural Gas Liquid Extraction, and Crude Petroleum and Natural Gas Extraction. It is a member of the UN global compact, headquartered in Norway and is now known as Equinor (Advameg, Inc., 2019).

The overall objective of Equinor is value creation and growth both for society and the owner. The company has moved from being a petroleum company to an energy organization. For many decades, the company has operated following the “Building New Options” strategy, which helps in exploiting the current business of the company while exploring new business opportunities (Advameg, Inc., 2019). The aim of this work will be to explore how Statoil established New Energy Solutions (NES), determine how the new solution is likely to be designated as disruptive innovations for the organization, and explore positive and negative impacts of NES as a disruptive innovation for Statoil. 

Response to Change

In 2015, Statoil held the 21st annual Conference of Parties (COP21) in Paris where the government of Norway wished to be actively involved in the fight against climate change. Advameg, Inc. (2019) explains that the Norwegian government is a shareholder of Statoil and this is in collaboration with the company’s goal to reduce carbon footprint contributed by the actions and activities undertaken by Statoil before and after COP21. The change was commenced by six CEOs of major oil and gas companies – Statoil, Shell, Eni, BP, Total, and BG who jointly admitted to having more climate responsibility. 

Kongsnes (2015) argues that the CEOs’ were influenced by carbon pricing as an incentive or remedy to drive energy and ambition of oil and gas into the development of low carbon technologies. They went ahead to campaign for one joint carbon emission at the forthcoming climate summit. Generally, the innovative disruptions in Statoil were influenced by the following quote. “Our companies are already taking a number of actions to help limit emissions, such as growing the share of gas in our production, making energy efficiency improvements in our operations and products, providing renewable energy, investing in carbon capture and storage, and exploring new low-carbon technologies and business models. These actions are a key part of our mission to provide the greatest number of people with access to sustainable and secure energy.” (UNFCCC, 2015).

Ways in Which the Changes Were Disruptive

The impact of changes following the regulatory space led to a greater focus on sustainability and the energy transitioning, which led the organization to turn to low carbon solutions. Some viewed the changes as challenges to sustained competitiveness, others viewed the change as disruptive for their operations, and the changes also resulted in new entrants, which enhanced competitiveness. Statoil (2017) explains that the disruptive changes led to a new objective for the company, “Climate Roadmap- creating a low carbon advantage”. Statoil (2017) argues that the changes will increase renewables from the current 2% to  5-15% of the energy mix by 2040. Statoil embraced this business opportunity to increase their profits and expand to other sources of sustainable energy (renewable energy). 

The changes have led Statoil to work towards the generation of competitive energy that is secure and sustainable, which means the production of cost-efficient and green energy solutions. The changes are the trigger for the introduction of New Energy Solutions (NES) in 2015. Equinor (2019) explains that the introduction of NES in 2015 Statoil increased their contribution to energy transitions and also diversified the portfolio and strengthened their role in future as an energy company. In this journey, Statoil was faced with business models, policies, market dynamics, competitors, and technologies, which they previously were unaware. Generally, new entrants who disrupted the energy industry, climate policies that shifted in unexpected ways, and game-changing technologies, influenced the changes. 

Strategies Adopted

Statoil introduced NES as a strategy to respond and benefit from disruptive innovations. NES was introduced on 1 June 2015, as one of the eight business areas of Statoil. Another objective of establishing NES is to increase profits within renewables, which is a reflection of the company towards complementing their gas and oil industry through profitable renewable energy and other low-carbon energy solutions. The company commenced by collecting all the assets in renewables, which were previously placed in varying departments. The NES strategy is aimed at developing and strengthening the position of Statoil in energy solutions through business operations, business development, and venture investments.

Additionally, NES led to the incubation of different ideas where they identified and developed varying business models and investments theme within the identified energy solutions. Statoil (2017) explains that the mandate was attained through varying NES departments – Wind and Carbon Capture and Storage (WIC), Ventures (VEN), Business Development (BD), and Strategy and Innovation (SI). The four departments are a representation of the four activities within the business area.

Effect to Stakeholders

In its unit of business development (BD), the NES strategy identifies, develops, and executes business development opportunities within its theme. Statoil (2017) explains that the company actively engaged the employees in each phase of development. One of the main shareholders of Statoil is Norwegian State majorly influenced the climate actions and focus on the implementation of technologies and strategies. The Norwegian State greatly influenced the reduction of Statoil’s carbon-footprint. Statoil (2017) argues that before the disruptive innovations, the company was more influenced by opinions from different stakeholders of their external environment but the innovations came from opinions from employees, regulators, politicians, and investors.

However, Statoil has experienced challenges with its stakeholders, particularly in some specific projects. Equinor (2019) explains that Statoil faces challenges while establishing collaborations with externals beyond their internal and external partners. According to a study carried by Statoil (2017), one of the respondents identified, “…Statoil requires a way which these ideas could be matured, either internally or, indeed, working much closer with the external parties to allow them to be developed. And that’s something that’s lacking beyond just in NES”. The external approach is also threatened by the physical and geographical position of NES employees, which greatly influences how the company accommodates its external approach. Another aspect is that the introduction of NES in 2017 has not been operational for long and it hired its employees internally from the corporate organization. The stakeholders are thus, following cultural aspects that are different from the corporate culture. 

Impact of Change on Interdepartmental Collaboration

The introduction of NES in Statoil led to the establishment of four departments – Wind and Carbon Capture and Storage (WIC), Ventures (VEN), Business Development (BD), and Strategy and Innovation (SI). The four formed the units where the core activities of NES were conducted.  Statoil (2017) explains that NES, which apparently has 170 employees, is organized as a small, flat, and focused unit.  These employees are fairly distributed in each department. Through a collaborative approach, the four departments work individually towards the goal of NES, which is secure, sustainable, and cost-efficient renewable energy. 

The strategic and innovation department operates towards the identification of megatrends by linking them with strategic thinking, innovations, and analytics to help in the identification of new ideas. In collaboration with other business areas, the innovation groups aim at identifying solutions for specific issues for particular problems by forming a link between the external and internal ideas and developing business models. 

Response of Leaders Towards Change and Recommendations

The leadership system of Statoil responded positively while faced with disruptive innovations. Its response was followed by the formulation of NES to disruptive innovations within new energy solutions where they prepared processes for COP21. NES is the strategy that leaders require to push in order to successfully respond to disruptive innovations. Nonetheless, the work has identified several aspects of the drawback of NES in tackling the aspect of disruptive technology. One of the identified issues is that there is no sufficient autonomy between departments and stakeholders. In addition, the company’s operations are greatly influenced by corporate organization’s culture. One of the recommendations for Statoil is including a dual presentation of the disruptive innovations to form an expedite commitment and allocation of resources.  The leaders should follow an opportunity driven frame to provide the stakeholders with time and allow the aspect of flexibility in forming the best innovative strategies.

References

Kongsnes, E. 2015. Oljetopper vil betale for utslipp. Bergens Tidende, 02.06.2015.

Statoil. New Energy Solutions [Online]. https://www.statoil.com/en/what-we-do/newenergy-solutions.html. [Accessed April 8th, 2019]

Statoil 2017. Statoil’s Climate Roadmap – Creating a low carbon advantage

UNFCCC. 2015. Six Oil Majors Say We Will Act Faster with Stronger Carbon Pricing, Open Letter to UN and Governments [Online]. newsroom.unfccc.int. Available: http://newsroom.unfccc.int/unfccc-newsroom/major-oil-companies-letter-to-un/ [Accessed 08.04.2019 2019]

Advameg, Inc. (2019). Statoil ASA – Company Profile, Information, Business Description, History, Background Information on Statoil ASA. Advameg, Inc.. [online] Available at: https://www.referenceforbusiness.com/history2/17/Statoil-ASA.html [Accessed 8 Apr. 2019].

Equinor (2019). Renewables and CCS. Equinor ASA. [online] Available at: https://www.equinor.com/en/what-we-do/new-energy-solutions.html [Accessed 8 Apr. 2019].