Organizing for New Markets

In 2015, even before its new strategy was publicized, Statoil had begun to investigate low-carbon, high-value energy opportunities. Rather than conduct research from within the existing organizational structure, executives decided to set up a new business area, New Energy Solutions (NES), to consider these businesses. The CEO tabbed Rummelhoff to head the new group. The division’s charge was to develop a path for a new full-fledged business to "complement" the oil and gas business, for both climate and business reasons. The press announcement described the change:

Establishing NES as a separate business area reporting directly to the CEO reflects the aspirations to gradually complement the oil and gas portfolio with profitable renewable energy and other low-carbon energy solutions. A more detailed plan for the business will be developed as an integrated part of Statoil’s strategy… As a starting point the existing offshore wind portfolio will constitute our activities in this area.^[1]

Starting a new business area from scratch was a novel experience within Statoil. As Rummelhoff recalled, the company’s normal approach was to define a strategy goal and then create an organization to implement the strategy. But in this case, the process was reversed. The company decided to first create an organization, and then ask that organization to create a detailed implementation plan defining the steps to create a new business. Many employees across the company expressed interest in going from oil and gas into NES. Rummelhoff picked her group from across Statoil, bringing on individuals with a wide range of skills and backgrounds.

The group spent over a year exploring and evaluating possibilities in alternative energy. They began with several questions. For example, what were the most viable renewable solutions, and which would most easily move into commerciality? Should the company invest in multiple renewable options or focus on a limited set? What unique skills within Statoil could create a competitive advantage in specific markets? Where should Statoil focus across the energy transition and climate change environment?

Representatives of the new department spoke with and listened to multiple points of view and evaluated new ideas. They held conversations with individuals across the energy industry and around the globe. They sought out people involved in alternative energy in many forms and countries - from electric utilities to regulatory and governmental agencies, to NGOs and other nonprofit groups.

They spent a large amount of time with electric utility companies, the major customers and developers of renewable power. Statoil had historically sold natural gas to electricity utilities, so they already had several longstanding relationships. The conversations were with large European incumbents, including:

• RWE (DN), which had begun as a small utility for the city of Essen, Germany, and had grown into a major electricity distributor and renewable developer.   
• Enel, Italy's national entity for electricity, which had grown to be a major player in the international renewable power sector.
• E.ON, a European multinational electric utility headquartered in Germany.

The team also made exploratory visits to the U.S., India, China, and several emerging economies to understand what was going on in those areas. They spoke with politicians and universities. Rummelhoff remembered that they tried to speak to someone in every area of the energy sector – everyone except other oil and gas companies.

Torgrim Reitan, former senior VP for Finance and Control in the Renewables business area before becoming Equinor’s CFO, said that Statoil had recruited quite a few people from the renewable industry and expected to build up skills through new employees and retraining experienced employees. Not only did the new strategy require competencies and experiences related to renewables, but it required other changes in mindset are required. He said,

We need to appreciate more that the renewable business is very different. Trying to shoehorn the renewable business into an oil and gas company with its processes and cost basis and all of that, is very hard. What we are in the process of doing is setting up the renewable business as a much more fit-for-purpose business, with much larger freedom to respond to their industry realities, with much quicker processes with a different cost basis and a much more commercially driven mindset, rather than Statoil’s traditional technically driven mindset. What we hope to do is to combine the best of two worlds.