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Strategic Business Planning for Energy Companies

Video Summary

During this one-hour webinar, Calgary-based business executive Doug Walker shares his business models on how to structure and plan activities to achieve common goals and build a cross-organizational roadmap for energy companies. Doug has 40+ years of technical experience across multiple industries, including a tenure as Vice President at Harvest Operations where he led development, engineering, exploitation, operations, and business analysis.


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About The Pandell Leadership Series

The Pandell Leadership Series is a collection of free webinars featuring presentations by energy industry experts in a variety of specialized fields. Topics range from global business issues to recommended best practices in oil and gas; pipelines; mining; utilities; and the renewable energy industry (including wind, solar, hydrogen, geothermal, marine & hydrokinetic, nuclear and biomass power).


Full Transcript

ELIZA FROM PANDELL Good afternoon everybody. My name is Eliza, I’m the Customer Engagement Specialist here at Pandell. This is the first of a series. We’re calling it the Pandell Leadership Series and I am so glad you could join us. Our speaker today will be Doug Walker. I will now ask Dean to pop on there.

DEAN FROM PANDELL Thank you Eliza. It’s my pleasure today to introduce Doug Walker. Doug’s got a Chemical Engineering Degree from the University of Calgary. He’s got forty plus years technical and leadership experience across several industries. He was Co-Founder and General Manager of SGS Limited Oil & Gas Partnership. He’s Co-Founder and Chairmen of the Trinity Christian School. He was Co-Founder and President COO of Tripeze.com which later became SearsTravel.ca. CEO and COO of Noise Solutions Industrial Noise Control. And he was Vice President of just about everything at Harvest Operations Corp. where I met him. Doug also has his Advanced Toastmaster Gold and President Tuesday Nooners Toastmasters. And he also has Wine and Spirits Education Trust Level Two Diploma with Distinction. That’s very close to me. On a personal level, I worked with Doug for almost ten years at Harvest Operations. Harvest Operations was a South Korean Government oil and gas company. He was most recently he was my VP and conduit to the Harvest Operations Korean C-level. Because of the very challenge language barriers, cultural differences, and significant budget reductions for the past many years. It became very challenging to manage 75 pieces of software, hardware and infrastructure, and most of all staffing. I cannot express enough of integral Doug to me. Using his tact, honesty and communication skills while dealing with our C-level. I can speak for many Harvesters when I say that Doug held the highest respect out of any of the Harvest Executive that we dealt with over the past decade. Please allow me to introduce Mr. Doug Walker. Thank you.

DOUGThank you very much Dean for those kind words. And thanks to everybody online for spending your time with us this afternoon.

I hope everybody finds this worthwhile and that there will be something useful that you can take away from today’s presentation. As Dean noted I’ve worked at Senior levels at different companies in several industries over my career. And the goal of today’s presentation is to share with you some guidelines and tools that have served me well over the years in those roles.

They are not magic formulas rather they are tools and guidelines that if properly applied should help you make sense of how to structure your teams and their activities to meet critical business deliverables.

I encourage you to take this material digest it and to decide for yourself how best to apply it in your particular situation. In other words, be a student. And this applies to all things in life really. Relationships, social issues, politics, and business of course. We need to be students. Listen and absorb but at the end of it, make sure that whatever you do and apply is the product of your own conclusion.

Today’s agenda is going to touch on the strategic business model or translating the corporate mission and goals right down to specific tasks at the individual level.

I want to show you how to start with a situational analysis to understand your team or your company’s unique situation before building out your strategic path forward. And how to do that in a map to layout your corporate or team strategy.

I also want to talk about the benefit of action registers to keep everyone on task within your team. And finally, I have a few thoughts on financial models and project look backs before we wrap up.

Mission and vision, goals and objectives, strategies, and tactics. It can all sound so confusing and I know it is for many people because I see these mixed up all the time. But what do they mean? How do they differ? And how do they relate to each other?

This visual shows you how. Starting with corporate values. Then moving on to mission and vision. Then goals and objectives. Then strategies and tactics. And ultimately to work plans and how to use staff and organize your team or company. And my experience has been that you should follow it, in exactly that order to be as effective as you can be. The executive or the board of an organization normally works from strategies on up. And teams and staff from objectives on down. With a little overlap in the middle as you can see. It all starts or should start with values. It’s how the company knows it has the right folks onboard and it’s how you as an employee should know that you’re in the right company for you. It should be what you as a team member, what your company and what your team itself all stand for and have in common.

It should unite you as team-mates and align your personal goals and commitments to those of the team or organization.

It should be why you choose to be where you are. And these are really the behaviors that you should be exhibiting daily as you work, wherever you are, to fulfill the company mission and achieve its vision.

I want to show you an example and it’s one we used at the company that I worked for a number of years ago. The acronym is obvious, it’s RICE and the key principles were Respect, Integrity, Creativity and Excellence. And every time someone didn’t treat each other respectfully or tried to cut corners in tackling a problem we reminded each other of the RICE principles.

When your values don’t align, you’ll find you can tolerate it for a little while but eventually you’re going to suffer cognitive dissonance, stress, and likely even burn-out. As a corporate executive team leader, you need to be clear about what you stand for and then you need to walk the talk consistently. Or trust erodes very quickly as their values aren’t consistent with the companies. And as a manager, you in-turn need to hold your employees accountable to those values. That’s why I believe that a company needs to decide and articulate what they stand for at the outset.

Once you have a unified team with common principles and values, then comes your team or corporate mission. A mission statement is simply, your role in the marketplace. What is the void you fill? What does your team or company exist to do that no one else is doing, or that no one else is doing properly, in which you think gives you room to step into the marketplace What would the world be missing out on? In other words, if you, or your company didn’t exist?

A couple of examples of mission statements I like is IKEA’s. Which is simply to create a better everyday life for people. Or TED, if people are familiar with TED Talks, Technology, Entertainment and Design is what the TED acronym stands for. Their mission statement is simply to spread ideas.

People and companies confuse mission and vision statements all the time, but they are very, very different things. It starts with your corporate mission, what do you exist to do? But then you need a trajectory for your company, where do you aspire to take it? What will the company or world look like if you achieve your greatest aspirations? It should be so compelling that you are excited to be apart of it. You should be fired up about it and not looking forward to Friday afternoon on a Monday morning.

Examples of key vision statements that I really like from over the years were Microsoft’s early on which was a computer on every desk and in every home. And of course, their vision was achieved. Or Alzheimer’s Association’s current vision statement, which is a world without Alzheimer’s disease.

Once you have an aspirational long-term target or vision in place, then you set about establishing specific steps to move you in that direction. In other words, goals. Goals are the direction you are heading in as you drive towards the overall vision. It’s what you want or need to accomplish to achieve the organization’s mission and vision. Goals are tangible, specific deliverables that tell you where you want to be and when. It’s the outcome you intend to achieve.

Hopefully, you folks are familiar with the acronym SMART for smart goals. Specific, Measurable, Attainable or Achievable, some people like the word Actionable, Relevant or Time bound. To be effective the goal really needs to include all five of those.

If your corporate goals don’t meet that criteria and you’re an employee inside the organization, you should feel free to challenge your leadership team for clarification. So, that you in-turn can be as effective as possible as you can be, in your goal.

Objectives are sub-sets of goals. They’re also specific, measurable steps you make to achieve the goals. I find folks are often confused by goals and objectives. Intertwining the terms.

So, I’ve given you an example here of the difference between a goal and objective. If your goal is to increase revenue, say by ten percent within one year, then objectives would be how are you going to do that. It could involve, improve your product pricing by a certain amount. Reducing your cost of sold by another amount. And an increase in production or sales by yet another amount. And the combination of all those three objectives, if achieved would enable you to meet your goal of a ten percent revenue increase.

With goals and objectives in place you need a roadmap now to get you there. Here’s where strategies and tactics come in.

Strategies are simply the high-level plans to achieve your long-term goals. It’s the path to fulfill the organization’s mission. It should focus on the end result or goal and they should guide your decision making.

Generally speaking, there are three broad categories of corporate strategies. There is Growth, which of course is how you expand your business or sales. There are Stability strategies, which are how you maintain your core business such as, production levels or revenue, or how you retain your staff. And then there are Renewal strategies, which are designed to target shortfalls in the business. Things like turn-around strategies.

I don’t have it here because there wasn’t room on the slide, but an interesting corporate strategy example for you is Tesla. They’ve set the goal of becoming the worlds biggest car manufacturer. Their strategy to achieve that is to kill the low-end consumer car space. Their tactic for doing that because they couldn’t develop and compete at that level initially was to create the worlds most luxurious, expensive, full feature sports car, most people will be familiar with it, it’s the Tesla Roadster and it clocks in at well over a quarter of a million dollars. It was a deliberate tactic on their part to then start working their way down from that as their business scales and eventually takes on smaller and smaller cost segments of the market.

And that leads us into Tactics. Which are really the list of initiatives to support your strategy.

A tactical plan really just describes the steps and actions that you are going to take to achieve the goals of the strategic plan. And I find the same way folks struggle with differences between goals and objectives, they also frequently struggle with the difference between strategies and tactics.

So, again I’ve got some examples here to help illustrate the difference. If your strategy for example is to improve the influence of your business by social media, the tactics you’re applying then would be the channels that you use. Or the messaging that you are going to apply.

Another example, could be that you want to reduce operating costs by a certain amount. And then your tactics could be at which cost driver you are going to focus those efforts on? And then which parts of the business or which fields that you’re operating in if you’re an oil and gas company.

Ultimately, it all boils down at the most practical level the work plans or task-lists. These are everybody’s to-do lists at every level of the organization. With well designed and articulated goals and objectives, strategies and tactics in place folks should then be able to focus their daily efforts where it will do the most, good.

We’ll come to work plans in a minute, but I want to finish working our way through the strategic business model structure first before we do that.

Finally, once you’ve decided what your company and team are going to achieve you need to determine what skill sets and staff loads you need and how best to organize the work to be done. The moniker here is Structure follows Strategy. And frankly, I am always amazed at how often companies get this part wrong and set corporate goals and strategies in place without thought as to how the organization is going to effectively pull it off. And really its also the reason most downsizings fail. Employees are let go to reduce G&A without a conscious effort being made by management is to what work will no longer get done or how the work will get done either to a different standard or in a different way to achieve company goals with your staff. Without that direction the staff are left to fend for themselves and to decide for themselves to what the priorities are. And you know how that works. It’s frequently the guy who yells the loudest that gets their priorities addressed which aren’t always the right priorities for the organization.

If you’re an employee and you find yourself in such a position you need to challenge that to determine what the priorities are. And if you’re the boss following layoffs, you need to take extra care to ensure your remaining staff know what the priorities now are.

The next two slides are going to discuss how you develop and layout your strategic plan whether at the corporate or team level.

It all starts with analyzing and assessing the environment in which you plan to operate and grow your business. In other words, performing the situational analysis. Where is your company or team currently? What skill sets do you have in place? Where do you sit in the marketplace? How are you equipped financially? What’s your team morale? Who are your customers? What’s their status? What’s the business environment you’re operating in? Is it one of expansion or recession? Are there unique regulatory hurdles that are confronting you? What’s the competitive landscape you’re operating in? Where are your competitors stronger than you? Where are they weaker than you?

Then you can lay it all out in a strategic balance sheet. I think most folks will be familiar with the term SWOT. I find that term too cliché and worn out for my tastes really, so I prefer the term strategic balance sheet because it really addresses what you are doing with the situation you find yourself in. You’re trying to balance strengths, and weaknesses, and opportunities, and threats. And here’s where you take your assessment, and you sort it out. What are the things that that make your team or company uniquely strong? For example, it could be particular products that you’re selling, operations you’re in, plays that you’re in if you’re an oil and gas company. It could be your finances. If you’re well financed, you have a strong balance sheet and strong cashflow. What are the unique capabilities or skill sets that your team has?

Then with those strengths, what doors are available to you due to those strengths? Where can you expand current operations? By taking up partners for example. Or can you move into new plays or projects, or where are there are opportunities to streamline or reduce your production costs.

Then you do the same thing with your weaknesses. What to do you need to do to address the strength in your team and company. You have cashflow issues? Do you have legal challenges? Do you have morale issues following layoffs? Or a week skill set due to the limited training budgets?

Then what threats are created by those weaknesses? Where is your team or company exposed? Both internally and externally, as well as to competitors. What new technologies or insurance in the market you need to be paying attention to? And what economic and demographic or social shifts are underway that could affect your business?

With your company or team goals and an honest assessment of your situation in place, now you can structure your strategic plan. I like doing it with a map. A roadmap really, I call it a strategy map.

And assembled here is an example with strategies in ovals, and tactics in boxes. The strategies listed you’ll see generally fit into the category of stability or growth categories. And then there are tactics listed underneath that tell you how to execute each strategy. I’ll briefly go through them for you.

If your strategy is to optimize your existing assets, then you can do it by improving per well production or if you’re a software company by reducing your cost of sales per client. You could reduce your facility operating costs, or your client acquisition costs. You many want to get GPP or EOR status on some of your fields. Or debottleneck facilities or find ways to achieve faster deployment of new releases.

If you’re looking for growth opportunities that could include your growing campaigns by field or play type. Or you may want to apply new technologies. As a company you’ll want to acquire new clients. Or you’ll want to sell more to existing clients. Going back to an oil and gas company example, it could be exploration plays that you’re working on.

Another corporate strategy could be to manage your asset portfolio. And you could do that with Halo acquisitions in existing fields, consolidating partners in current operations, acquiring companies with complimentary assets, and so on. I won’t go through the last one but it’s the same approach for how you would manage your liabilities and risks. And you see the various tactics listed there.

When you’ve got them laid out on a roadmap for you then you’re able to think about how you’re going to structure your team, organize your resources, and what support resources your need, and how are you going to prioritize all the activities to work your way through the entire roadmap of initiatives you’ve set before you.

Next, I want to touch base on a really, simple, and effective tool for keeping things on track. And, also helping you to set and clarify priorities for your team.

This is basically just a glorified to-do list. And if you’re not already using something like it in your team meetings, I really encourage you to try it. You see the key elements listed before you, you simply use it as your meeting agenda and your minutes at your weekly, bi-weekly, whatever the case may be, team meetings. It’s clean, it’s simple. You can put it on your team shared drive, and you don’t need to keep separate minutes or agenda documentation. The document serves as your agenda for each meeting. And when a task is done just archive it on a separate tab for your minutes.

There are two things about this approach that I really like. Frankly, folks are often more accountable to teammates than they are to the boss. You might show up at a meeting once or maybe twice and not having delivered on a task that was given a due date at the next meeting but it very quickly becomes really uncomfortable to look your teammates in the eye and know that you’ve let them down again. And I find by the time the next meeting rolls around folks have found a way to get that task taken care of.

The other thing that it does, is it triggers discussions about what is most important. When an employee says look boss, I can do A by that date or B by that date, but I can’t do both then you’ve got to set the priority. And if the priorities aren’t to be different for the two then that triggers a discussion about how you’re going to change resourcing to get them done. So, I find this a really simple, and effective tool for all of those reasons.

Financial Modelling is a really detailed, and complex topic. We could easily spend a full webinar. Who knows Dean maybe this is a future topic? But it is critical to strategic planning, so I do want to touch on a few key points today.

You need a financial model to go along with your strategic plan to make sure your goals and plans for achieving company goals are realistic. Can you afford to do what you want to do? If not, you need to do something about it. Are you going to raise funds? Or change your plans for example?

At its highest level, models will tell you if you’re business is even viable. And at a practical level it should be the tool that drives your budgets. Folks need to be executing their segment of their business consistent with what your financial plan needs to achieve. Sounds obvious, I know but you’d be shocked at how often that doesn’t happen. These models should be run at different levels in the organization. Corporately to ensure the overall busines plan makes sense and by team or business unit to make sure your part of the company is carrying its weight.

Here’s actually an opportunity, if you’re an up and coming manager and you really want to stand out in an organization, one way to do that is to show that you know exactly whether or not your business is carry its part of the operation. I find most effective managers know if they’re meeting their budget targets or not. But the really powerful ones know whether or not they’re part of the business is contributing positively or hurting the bottom line. And if you can demonstrate to the executive that you’re on top of that, that you know that because of your team, including the G&A and even maybe a portion, your share of the company debt that you’re carrying, that your part of the business is worth-while. You’re going to be in a much stronger position to argue for more resources for your part of the business to grow. And you’re going to stand out and create upward opportunities for you in the company.

There are three basic components to a good financial model. One is financial statements which is really just an overview of income and costs. Some people call it a profit and loss statement. And that will tell you if you are profitable or not. Then there’s your balance sheet which is really just your overview of what the company owns and owes. Your assets less your liabilities equal equity. Which is hopefully a positive number.

And finally, cashflow statements. And that is where all the cash is coming in and going out of the company each month. Not just operationally but from all your investments and financial components as well.

And finally, nobody’s crystal ball is perfect. So, you need to be sure to run sensitivities on how value and cashflow especially are going to be impacted by changes in key underlying assumptions. It’ll help you to determine your hedging and funding strategies, and it will help you to determine how much risk each part of your business can take on. Especially if you are looking at pursuing new business opportunities.

Finally, I’m going to conclude with a few thoughts about look backs. Again, a huge topic and scope, so these thoughts are just going to hit on few of the basics. Almost nothing in business ever goes as exactly as planned. Sometimes it’s you, sometimes it’s the world around you. Frequently, it’s both. You need to be constantly and consistently assessing what’s happened. Is your business model correct, are you spending your money in the right place?

You should be doing this at project or campaign level. The challenge is for it to be granular enough so that it provides meaningful analysis, yet large enough so that its statistically represented. And that requires judgement. You want to look at your actual results versus your budgeted plans, as well as the forecast at the time of the project or the campaign was approved.

A good look back should include technical assumptions, cost assumptions, production, price and revenue assumptions, schedule and timing assumptions, and execution assumptions. And I really like using the external, if you don’t have access or you can’t afford to use a third company to help you, use other teams inside your organization to perform and audit the look back. It sounds crass but the saying is nobody’s baby is ugly. It’s called proponent bias. It can sometimes be very, very hard to be objective about a play that was really important to you and so I find if you want the most honest assessment about whether or not was a good use of company resources it really helps to have an unbiased, not a hostile, just an unbiased set of eyes on the team to help you with your look back.

ELIZAThank you Doug, that was a lot of useful information and we at Pandell appreciate your time. Thanks again folks for joining us today and we hope to see you at the next in our series. Have a great afternoon.

DOUGThanks everybody.