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Royal Dutch/Shell, the Anglo-Dutch oil giant headquartered more than 6,000 miles from Silicon Valley, is seldom mistaken for a lithe and nimble upstart. With $138 billion in revenues and 102,000 employees, it's the epitome of a lumbering industrial behemoth — the last place you'd expect to find entrepreneurial zeal. Within its balkanized organization, which one employee has compared to a maze of 100-foot-high brick walls, access to capital is tightly controlled, investment hurdles are daunting, and radical ideas move slowly, if at all. Shell's globe-trotting managers are famously disciplined, diligent, and methodical; they don't come across as wild-eyed dreamers. Indeed, employees with an entrepreneurial urge would probably prefer skinny-dipping in the North Sea to confronting Shell's conservative bureaucracy.
But a band of renegades, led by Tim Warren, the director of research and technical services in Shell's largest division, Exploration and Production, has been intent on changing all that. Warren and his team have been working hard to free up the flow of ideas, capital, and talent — to make E&P an innovation-friendly zone. Their initial success suggests that it is possible to imbue a global giant with the kind of damn-the-conventions ethos that permeates Silicon Valley. Here's their story.
By late 1996, it had become apparent to Warren and some of his colleagues that E&P was unlikely to meet its earnings targets without radical innovations. In recent years, his team had been under considerable pressure to align its R&D spending with the immediate needs of Shell's national operating units. Long-term projects had been reined in and short-term priorities given more weight. Warren understood the rationale for those moves, but he wondered whether the existing R&D process could be counted on to help Shell invent entirely new businesses and dramatically different business models. He sensed that a wealth of imagination was bottled up in Shell's employees — imagination that might help the company find its way into new, high-growth opportunities.
Looking to stir up some new thinking, he had already encouraged his people to devote up to 10% of their time to "nonlinear" ideas. The results were less than he'd hoped for. His frustration was the genesis for an entirely new approach to innovation, one that was both simple and slightly deviant.
He gave a small panel of freethinking employees the authority to allocate $20 million to rule-breaking, game-changing ideas submitted by their peers. Anyone could submit ideas, and the panel would decide which deserved funding. Proposals would be accepted not just from within E&P but from anywhere across Shell. In this way, unconventional ideas wouldn't have to run the usual approval gauntlet or justify their existence in terms of existing programs and priorities.
The GameChanger process, as it came to be known, went live in November 1996. At first, the availability of venture funding failed to yield an avalanche of new ideas. Though bright and creative, employees long accustomed to working on well defined technical problems found it difficult to think revolutionary thoughts. Hoping to kick-start the process, the GameChanger panel enlisted the help of a team of consultants from Strategos who designed a three-day "Innovation Lab" to help employees develop rule-busting ideas and to dole out a half million dollars of seed money. Seventy-two enthusiastic would-be entrepreneurs showed up for the initial lab, a much larger group than the panel had anticipated. Many were individuals no one would have suspected of harboring an entrepreneurial impulse.
In the Innovation Lab, the budding revolutionaries were encouraged to learn from radical innovations drawn from outside the energy business. They were taught how to identify and challenge industry conventions, how to anticipate and exploit discontinuities of all kinds, and how to leverage Shell's competencies and assets in novel ways. Groups of eight attendees were then seated at round tables in front of networked laptop computers and encouraged to put their new thinking skills to work. Slowly at first, then in a rush, new ideas began to flow through the network. Some ideas attracted a flurry of support from the group; others remained orphans. By the end of the second day, a portfolio of 240 ideas had been generated. Some were for entirely new businesses, and many more were for new approaches within existing businesses.
The attendees then agreed on a set of screening criteria to determine which of the ideas deserved a portion of the seed money. Twelve ideas were nominated for funding, and a volunteer army of supporters coalesced around each one. Invigorated by their participation in the Innovation Lab, the teams vowed to move quickly to turn their GameChanger ideas into concrete business plans. A second Innovation Lab was held a month later with a new tranche of nascent entrepreneurs, and it produced a similar outpouring of fresh thinking.
Realizing that GameChanger had to be more than a brainstorming exercise, Shell put mechanisms in place to ensure that the ideas were turned into actions. At the conclusion of the Innovation Labs, internal transfer payments were made to cover the time of the employees serving on the idea development teams. A five-day "Action Lab," again designed with Strategos, was held to teach the teams to create credible venture plans. In the Action Lab, team members were taught how to scope out the boundaries of an opportunity space, identify potential partnerships, enumerate genuine sources of competitive advantage, and identify the broad financial implications. Next, they were coached in developing 100-day action plans: low-cost, low-risk ways of testing the ideas. Finally, each team presented its story to a "venture board" consisting of the GameChanger panel, a sampling of senior managers, and representatives from Shell Technology Ventures — a unit that funds projects that don't fall under the purview of Shell's operating units.
Since the completion of the labs, the GameChanger panel has been working hard to institutionalize the internal entrepreneurial process. It meets weekly to discuss new submissions — 320 have come in so far, many through Shell's intranet — and its members serve as coaches and advocates for prospective innovators. An employee with a promising idea is invited to give a ten-minute pitch to the panel, followed by a 15-minute Q&A session. If the members agree that the idea has real potential, the employee is invited to a second round of discussions with a broader group of company experts whose knowledge or support may be important to the success of the proposed venture. Before rejecting an idea, the panel looks carefully at what Shell would stand to lose if the opportunity turned out to be all its sponsors claimed. Ideas that get a green light often receive funding — on average, $100,000, but sometimes as much as $600,000 — within eight or ten days. Those that don't pass muster enter a database accessible to anyone who would like to compare a new idea with earlier submissions.
Some months later, each accepted project goes through a proof-of-concept review in which the team has to show that its plan is indeed workable and deserves further funding. This review typically marks the end of the formal GameChanger process, although the panel will often help successful ventures find a permanent home inside Shell. About a quarter of the efforts that get funded ultimately come to reside in an operating unit or in one of Shell's various growth initiatives. Others are carried forward as R&D projects, and still others are written off as interesting but unsuccessful experiments.
Several of the GameChanger ventures have themselves grown into major corporate initiatives. Indeed, of the company's five largest growth initiatives in early 1999, four had their genesis in the GameChanger process. One team was granted a charter to work with people throughout Shell to explore an entirely new business focused on renewable geothermal energy sources. GameChanger has also had a significant impact on Tim Warren's own division. Fully 30% of E&P's 1999 R&D budget is focused on ventures that have emerged from the process.
Yet the GameChanger program is still fragile. The 1998 slump in oil prices threw Shell into a frenzy of cost cutting. Whether GameChanger will survive in its current form remains to be seen. But it has demonstrated unequivocally that entrepreneurial passion lurks everywhere — even deep in the canyons of a 92-year-old oil company.
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