Big lessons for supermajors as they face existential crisis

The climate crisis has become the climate emergency, and ours could be the final generation to avoid the worst effects of global warming. Businesses still perceived as part of the problem are facing greater pressure than ever before.

Big Oil has been one of those sectors under recent sharp focus. It’s no longer just green activists targeting the supermajors, but activist investors too. This clamour is opening the oil and gas sector to another problem too: for the first time, challenger brands are on the horizon.

As oil and gas faces up to this new existential crisis, what can it learn from those who have undergone their own transition and what does it need to do to survive this moment of great change?

After more than 150 years of being production obsessed, feeding a guaranteed demand, most supermajors are stuck in a commodities mindset. But the energy mix is changing, and hydrocarbons are challenged. Society won’t allow our reliance on oil to continue, and our planet may not survive it. The sector has to change; the biggest risk is doing nothing.

Its future must, therefore, lie in delivering customer-centric products and services – something new competitors entering this space are already doing. Take a lesson from the telcos in the 90s. At the turn of the century, 95% of homes had a landline and BT was the single biggest provider.

But the telecom monopolies were caught napping when the mobile phone providers swooped in. The challengers recognised customers didn’t want old services and tired deals, like cheap evening and weekend calls. They wanted new handsets and data packages. This revolution turned out to be significant and lasting, with BT’s shares today trading around 80% below their all-time high of December 1999.

Empowered customers can now wield the power of choice and their decision-making will be based on seeing which companies are doing something that makes a valuable difference. Breaking the herd mentality and being differentiated by brand-led action has never been more relevant. This is the new era for action and the tankers must turn faster.

As the industry starts to focus on the customer, how the supermajors speak needs to evolve. Kilowatt hours, calorific values, MBOE/d, upstream vs downstream. This is not understandable, let alone sexy stuff. What does it mean to me, in my home or while driving my EV? Oil and gas businesses need to turn customers on to energy, to make it interesting and make the customer feel smart.

Take a look at the state of flux the retail banking industry has been in since the challenger brands arrived, with their colourful cards and uber-convenient apps. Today Monzo has 3.9 million customers, while late last year Starling Bank moved into the black for the first time. And Revolut is now valued at $33bn that’s bigger than high street giant NatWest.

Big Oil may claim to be in a ‘low interest’ category. But this will no longer wash when new, digital and sustainable native brands step in. They’ll talk to customers as humans, putting energy into terms they can understand and appreciate.

They will create exciting experiences, allowing customers to access and use energy in new ways. As the EV revolution keeps turning, people will be considering who they buy that car from and what branded charger they install in their garage. Energy companies that can’t make energy matter will quickly find that they don’t matter.

Transitioning to a future of renewables is no small feat. It is certainly complex, costly and its speed necessarily measured. But customers don’t care about complexity – they just want to know what progress is being made.

Tesla is transforming everyday mobility, on a mission to make humanity a multi-planetary civilisation though SpaceX. It sent a rocket into space and landed it back down on earth, safe and intact. How often do we hear Elon Musk moan about complexity or difficulty?

Supermajors need to convince customers they have the ambition, and the clarity of vision, to make the greener future we all urgently need a reality. This requires a clear sense of purpose, transparent communication and a set of measurable goals.

Elon Musk has laid out a roadmap for delivering his ambitious vision, starting with taking four citizens to the space station next year. This offers an example on how to make people believe and engage in your mission.

The supermajors have faced a bumpy road for some time, and especially in the last 18 months, with negative prices and increasing levels of activism from a wider bench of stakeholders. Many are already on the journey to change and will help us secure a greener recovery.

But now, with the barrel and balance sheets back in the black, the sector needs to accelerate that investment into the renewable space – and it needs to do so in a way that is meaningful, tangible and unique.

As we’ve seen from others who’ve faced similar moments of existential crisis: change happens slowly, then all at once. Supermajors need to heed these big lessons to spearhead the change we all demand in order to remain relevant – or disappear slowly into obscurity.