Technology, adaptability are key to keeping US industry on top

By ADRIENNE BLUME, Hydrocarbon Processing

Presenting the first keynote address of the AFPM Annual Meeting was Rich Karlgaard, Editor of Forbes, who discussed what leading companies must do to maintain their edge in an ever-changing world.

In a keynote address at AFPM New Orleans, Forbes Editor RICH KARLGAARD cited four adaptability characteristics that today’s companies must adopt to not fail.
In a keynote address at AFPM New Orleans, Forbes Editor RICH KARLGAARD cited four adaptability characteristics that today’s companies must adopt to not fail.

Mr. Karlgaard likened the present state of the US economy to something that has been thrown into a centrifuge that is sorting out business models that work and those that do not. According to the Editor, several dominant megatrends can be seen in the economy. Economic megatrends.

The first megatrend, explained Mr. Karlgaard, is that “technology is not slowing down, it is speeding up,” specifically digital technology produced in Silicon Valley. Shale drilling has also seen profound technological revolutions, especially over past 10 years, he noted.

The entire energy sector is poised for significant transformation between 2016 and 2030, with big impacts coming from the Internet of Things (IoT), artificial intelligence (AI), predictive analytics, big data and other advances.

Another megatrend is that extreme valuation differences create asymmetric warfare. Companies that are born digital—such as Google, Amazon, Facebook, etc.—have a high capitalto-revenue ratio. However, Mr. Karlgaard noted that “asymmetric venture capital funding leads to repeat assaults on profit models of legacy companies, which cannot get the funding to conduct multiple defenses.”

Some fast-growing companies, such as Uber and Airbnb, have found ways to work around regulatory barriers. “It is pretty illuminating,” the Editor added. “But sustainable advantage is becoming more and more perishable, regardless of what you do to preserve it.” Four adaptability must-haves.

Next, Mr. Karlgaard pointed out four adaptability characteristics that today’s companies must adopt to not fail. The first is digital fluency. “Be in the top quartile, or perish,” he warned. “How digitally fluent is your supply chain? Is it giving you information in real time? Are you able to act on it? Are you able to make tangible improvements on a regular basis?”

For AFPM member companies, digital fluency means the use of Supply Chain 2.0 (particularly if oil and gas prices remain modest), IoT, next-generation Big Data algorithms, Cloud computing power and AI’s predictive power. “Being able to analyze data in real time is a huge, huge advantage,” Mr. Karlgaard asserted. Another adaptability must-have is cultural clarity. “Have a clear corporate culture that explains what you are all about,” the Editor recommended.

The most adaptable cultures are organized as triangles of equally strong sides, with the lines representing strategy, execution and values. A company’s most critical problems will always be execution issues, Mr. Karlgaard said, while values represent a “soft edge.” A third adaptability factor is the preservation of small working teams at an everyday working level. Mr. Karlgaard cited Jeff Bezos’ rule: “Working teams should be small enough that no more than two pizzas can feed them!” It is important to limit the number of connections and size of teams to eliminate those employees Mr. Karlgaard referred to as “slackers, assassins and those who subtract from the team rather than add.” “Everyday working teams can get too big, too fast, and a company may not even realize it,” he said, “So keep your team as lean as possible.”

The fourth adaptability must-have is human development. Mr. Karlgaard advised attendees to hire for talent, character and culture, as a means of developing the best organization possible. Partnerships between refiners and automakers.

Following Mr. Karlgaard’s keynote, Vice President of Global Propulsion Systems for General Motors (GM), Dan Nicholson, spoke about GM’s perspective on the future of automobiles, particularly the internal combustion engine. Mr. Nicholson noted the importance of talking about how the automotive and refining industries can work together to keep their relationship strong.

The automotive industry, in particular, is changing at an unprecedented pace, which will require all stakeholders to be coordinated and make changes together. “Collectively, we must ensure that consumers benefit while our industries remain strong,” Mr. Nicholson said. New technologies in the automotive sector include improvements to driving safety, fuel efficiency and internal combustion engines; shared mobility services; and the electrification of vehicles. These changes, Mr. Nicholson explained, are shaping the way customers think about and interact with automobiles. He quoted GM Chairman and CEO Mary Barra, saying, “The automotive industry will change more in the next five years than it has changed in the last 50 years.”

GM is working to rapidly adopt new technologies. The automaker is improving propulsion system efficiency with downsized turbocharged engines that will reduce losses without sacrificing power and torque. Also, new multispeed transmission technologies are being designed to improve fuel economy while reducing cost.

Dynamic fuel management is another technological breakthrough. New GM trucks coming out in the summer of this year will be able to run on zero to eight cylinders, in any combination, to improve fuel efficiency. GM is also combining higher octane with new engine designs to meet fuel economy targets while providing better value to consumers and society.

It is working to extend the horizon of internal combustion engines using liquid fuels, while providing consumers with vehicle affordability and performance. Collaboration between the refining sector and the automotive sector is imperative, Mr. Nicholson said, and it must be done in a way that makes sense for consumers. It is not advantageous for industries to be working on separate efforts, as this creates confusion.

The industries must be coherent in their efforts to develop new fuels enabling improved engine efficiency, customer value and environmental benefits. “The window of opportunity is open right now, and it won’t stay open for long,” he urged. Mr. Nicholson also addressed the subject of vehicle electrification, saying, “There is a general assumption in the electrification movement that liquid fuels will remain how they are today, without any improvements.” However, he pointed out that the EIA’s 2018 Annual Energy Outlook forecasts that gasoline vehicles will remain the dominant vehicle type through 2050 in the reference case. In closing, Mr. Nicholson said, “Many facets of the traditional automotive business are changing quickly, and we believe that this creates exciting new opportunities. Rather than fear this change, we at GM are leading it.” 


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