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Alfredo Pareto and oil

February 1, 2016 Jon Allwood

I once co-authored a book with a more successful writer than I, Richard Koch. It was called "Managing Without Management" and written in a previous era, prior to ERP and information systems, when a lot of middle management was simply a very expensive means of collecting and processing data and information. Some of these principles apply today nonetheless, especially on delayering and leadership replacing middle management. Richard went on to write a more important business book called the “80/20 Rule” which extolls the virtues of Alfredo Pareto and of the value of focus. A good read.

We have tried to apply this 80/20 principle within KBC by focusing our advisory services on hydrocarbons only, on operations only, and on making a substantial difference to client's profits through the smart use of technology and technical knowledge. We leave IT, Finance, HR, and corporate strategy to others more competent than us.

Well, if ever there was a time to apply the 80/20 rule in oil and gas it is now. A re-examination of your core competencies, your quality assets, and a focus on your key leaders who can deliver is underway. The simple message is sell off peripheral assets, eliminate interesting but marginal activities and operations, be comfortable with smaller companies, incent successful leadership and seek the essence of why you exist for both shareholders and the wider society you serve.

Domain knowledge and automation of simple tasks has become the essence of good strategy and solid operations. This is hard for large oil and gas companies in particular who are desperate to remain important as sizeable, global, full scope players. Big Data and (unfocused) Scale are two dangerous mantras that could catch you out during this shakeout if you are not careful. “Small Data”, “Alfredo Pareto” and “Cash is King” could be better guidelines.

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