In our continuing series of features and interviews on Driving Growth in Emerging Markets, NUS adjunct professor Dr Alison Eyring looks at business lessons from Shell’s venture in biofuels.
With global energy demand forecast to double by 2050 the quest is on to find the fuels of the future. Oil stocks are reaching their peak and the use of carbon-heavy fuels is unsustainable. So what is the alternative?
As a major energy player, Shell has invested billions of dollars in researching and commercialising alternative fuels, particularly biofuels derived from agricultural crops, such as its joint-venture producing sugarcane ethanol in Brazil. It’s a venture that is a strong example of a growth story from an already well-established major multinational company, but one that also has lessons for growth leaders in any business.
Recently I interviewed Mark Gainsborough, head of Shell’s Global Commercial business, who shared the story of Shell’s journey into biofuels and some of his lessons from this experience. (Watch the interview here: part one and part two)
Mark’s story – which is shared in two videos in our Driving Growing series – centres on a successful adjacency move and how leaders throughout Shell’s corporate structure were engaged to support this move.
Let me share my key takeaways for growth leaders from his story:
Sugar cane: the raw material for ethanol productionIt’s easy to become inwardly focused in a huge company that been around for a long time. But growth leaders have to focus on what’s happening outside the business.
It’s not just about understanding competitor or customer trends. It’s about having insights into how the entire business ecosystem is evolving and what that means for the business.
Like an entrepreneur, a growth leader in a large corporation needs to identify opportunities for growth that might seem implausible or unconventional. Like an entrepreneur, they must feel passionate about pursuing these opportunities even if the outcomes aren’t entirely clear.
And just like an entrepreneur, they’ll need to sell others on the value of their ideas to attract an investment of time, talent and capital.
Too often leaders think about innovation as if it’s some act of brainstorming or an act of inspired creativity.
Shell’s venture into biofuels was clearly an act of innovation. It led to an entirely new business and advanced their movement into “Future Fuels”. But the way they did it was very clever.
Firstly, they started with a clear understanding of their core capabilities. They knew how to make and distribute liquid fuels. But biofuels was grounded, literally, in a new industry – agriculture – in which Shell had no prior experience. So, they moved into an adjacent space and then, to achieve scale, they carefully sought out and selected a joint venture partner.
Once the joint venture was established, they quickly integrated it into the established business – whilst keeping an arms’ length relationship due to its governance structure.
If you want radical business innovation, ensure that this sort of discipline is part of your journey.
Shell’s Brazilian JV produces over 20bn litres of ethnaol annuallyRelationships really matter – but for a successful business partnership, there must be more than that.
In the case of Shell, the formation of a joint venture with the world’s largest sugarcane ethanol producer was a key element of their move into biofuels.
What I loved about Mark’s story was that his greatest challenge was to convince the Shell Board that this partnership would be a sustainable business.
While he didn’t use the term “inclusive growth” – this was a key element of Shell’s decision-making process. They wanted a partner who would ensure a business that cared for the rights of farmers they would work with, the workers they would employ, and the management of land use.
The lesson for growth leaders is to be crystal clear on what is important in a partner and don’t compromise on values.
Leading growth takes a lot of work. But a growth leader won’t succeed just by making a great business case, discovering a great new business, or creating a new product. Others have to be buy in too.
Mark’s story illustrates how important it is for growth leaders to have a strong network – because this network makes it possible to build the support needed to get something off the ground.
It can take years in a company to build this sort of network – so job hoppers are disadvantaged when it comes to driving growth. It takes building a reputation, establishing your credibility and then investing a lot of time asking, educating, engaging and selling. This requires great discipline and skill in stakeholder management.
In my company, Organisation Solutions, we understand that growth is hard work. Mark’s story illustrates many of the challenges in terms of strategic choices and leadership. He paints a good picture of what it looks like when done well.
I hope this is useful as you learn how to be a great growth leader. Please share your own lessons learned as a growth leader so that we can learn from you as well.
