Report: Innovation and Risk Management in the Energy Sector

This report delves into the crucial aspects of innovation and risk management within the context of the oil and gas industry, specifically examining the application of the seven dimensions of strategic innovation. It begins by defining innovation and risk management, highlighting their significance for companies like Shell-Mex and BP in maintaining market competitiveness and mitigating financial risks. The report then thoroughly analyzes the seven dimensions of strategic innovation: a managed innovation process, strategic alignment, industry foresight, consumer insights, core technology and competencies, organizational readiness, and disciplined implementation. Each dimension is explored in detail, with examples and implications for the oil and gas sector. The report emphasizes the importance of these dimensions in driving growth, adapting to market changes, and fostering a competitive edge. The analysis includes the role of technology, customer needs, and organizational capabilities. Finally, the report concludes by summarizing the key findings and reiterating the importance of integrating these dimensions for sustained success in the energy industry. The report is a valuable resource for students seeking to understand the complexities of innovation and risk management in the context of a dynamic industry.

Innovation and Risk Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
SEVEN DIMENSIONS OF STRATEGIC INNOVATION...........................................................1
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Innovation is the new idea or method which are used to find out the better solution to
meet the new requirements according to the needs of the market. The management of risk can be
considered as the process of identifying and controlling the threats which is faced by Shell-Mex
and BP. Innovation and risk management are very essential for any firm in order to meet the
demands of market so that they will be able to sustain in the market and reducing the risk of
income deficiency (Nikolova, Kuporov and Rodionov, 2015). This assignment contains different
models of inventions which can be applied by the oil and gas industry to reduce the market risk.
Further, it shows the importance of innovation to achieve the growth in energy industry.
SEVEN DIMENSIONS OF STRATEGIC INNOVATION
Innovation is very essential for Shell-Mex and BP, so that they will be able to improve
their position in the market. This can be considered as the approach used by the organizations to
bring together their assets and capabilities, so that they will be able to enhance their services and
products to drive the growth of the company in the oil industry. The dimensions of strategic
innovation are as follows:
A managed process of innovation
The first and foremost dimension of the strategic innovation is in context with the
properly managed innovation process. This will be having various activities which have to be
followed in sequential manner from the beginning through execution. Shell-Mex and BP is using
this, so that they will be able to identify the faults or defects in their new idea of innovation. This
process will be including both conventional and unconventional elements. It contains the current
market trends, the demands of consumers and the competitive analysis (Brunswicker and
Vanhaverbeke, 2015). This process will be helpful for the organization to develop the strategic
thinking which will be based on the new idea and innovative technologies. The company will be
able to think new working ways, so that they will be able to work with their consumers and
business partners in more effective ways and in very short duration of time.
The process of innovation which is managed will play a critical role in the development
of the core of strategic innovation. This will give proper direction to the company, so that they
will be able to create more innovative products which will help them in achieving the growth in
the market and in oil industry. It may happen that the company will think about all the
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perspectives, it will be more costly and time consuming. This will also affect the oil productivity
of the organization. This will be helpful for the employees as they will be able to improve their
skills and knowledge which will be related to the innovative production techniques, so that more
idea of quality product generation can be developed, which ultimately helps Shell-Mex and BP
in achieving growth in the current oil and gas industry.
Strategic alignment
In the framework of strategic innovation, this is the second dimension which helps the
organization to generate support for their new idea. This will help the company in aligning their
senior management team, external stake holders and board members in the development of new
and innovative idea. All the members can give their views and ways of improving the idea which
was generated, so that the best idea can be developed by shared vision of all the members
(Cortimiglia, Ghezzi and Frank, 2016). It will take high level of commitment and investment to
build the strong foundation for implementing the new idea successfully. In contrast, the firm
have to select a cross functional team which will have energetic agents, inspired individuals and
visionary leaders in their management team for implementing the new idea successfully.
Shell-Mex and BP can sometime face the issues while selecting the right person for the
role of leadership. The company is using the strategic alignment dimensions very effectively by
improving the allotment of their resources and assigning the roles and responsibilities to all the
departments, so that they will work together to improve the growth of the company in the
market. It is essential for the organization to engage all their stakeholders in the most appropriate
way to build the support for their new developed idea (Klingebiel and Rammer, 2014). It will be
done with suitable frequency. The alignment of all the members should be such that they are
working together for achieving the goals and objectives set by the organization.
Industry foresight
This dimension is mainly concern with changes taking place in the organization as well
as in the market. It will be used in improving the understanding of all the people in the company
about the new trends which are going on in the oil industry and which are new to the business.
The foresight of the industry will be useful in analysing the success rate of innovation and its
grounds in the market. It will also help in enhancing the process of innovation, so that Shell-Mex
and BP can achieve more success in the industry (França and et.al., 2017). As per this dimension,
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different industries will be having different driving force, trends and dislocations which will
ensure that the smooth operation of the business activities.
All the industries including Shell-Mex and BP must be having their own boundaries and
limitations. The company have to take all these into consideration to introduce new perspectives,
potential growth of improvements, challenging thinking and the innovative models of business,
so that they will be able to enhance their growth rate in the market. The company have to
develop its proprietary view for the near future (Zeschky, Winterhalter and Gassmann, 2014). It
will support the company to develop their visionary participation and leadership strategies to
sustain in the market. This dimension will help the organization to put more focus on the oil
industry, so that they will be able to develop innovation which is more effective. This will be
helpful in gaining the competitive advantage in the market.
Consumer Insights
It is very important for any organisation to understand and identify basic needs and
requirements of customers so that they could be provided with products and services of their
choices. When they are taken into consideration, quality outcomes could be generated. It also
aids in assisting with their preferences and expectations from the company. Thus, ventures are
provided with the information and encourages them to produce innovative goods. In Shell-Mex
and BP company, when they would be able to provide services with optimum quality to the
customers, more of them will get attracted towards their brand and as a result there will be
significant growth in the marketplace. According to the Wu, Chen and Olson, (2014), for
strategic innovation framework, customer's viewpoints are very essential as it avails to the firm
the attitude and behaviour of the consumers. By analysing those needs, oil and gas company
could make and enhance development process in order to achieve success (Wu, Chen and Olson,
2014).
Johnston and Marshall, (2016) also supported in this context by accepting importance of
customer responses in the product and services development procedure. Thus, it also enables
ventures to introduce improvements in the advertisements and promotional strategies. With this,
firms can also identify and communicate new products to the customers in order to acquire
growth and success in the existing market (Johnston and Marshall, 2016). Effectiveness of the
commodity gets enhanced with the introduction of innovations in the product.
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Core technology and competencies
Strategic innovation framework also takes into account technology use. With the effects
of globalisation, one can find that market has filled with innovative products and services.
According to the Mortimer and Mortimer, (2015), it has been found that analysing and
examining need of adoption of technology in the work has enhanced capabilities of firm and its
management team. As we know, to remain competitive in the marketplace it is very essential for
the firm to identify potential areas of improvements and introduce technology innovations in the
products and services offered by them so that huge number of customers could be attracted
towards the firm to buy their goods. Every try to implement technical enhancements so that they
could be presented as unique from others and attracting consumers towards their brand
(Mortimer and Mortimer, 2015). In this context, there is requirement of effective leadership and
management team that could manage work accordingly along with the employees. Leaders are
responsible to identify potentials of the workers and accordingly they could be engaged into
work.
Chenhall and Moers, (2015) also supported by saying that with the objective of building
good relations with the suppliers, customers, and bring innovations in the work, it is very
essential to use the latest technology (Chenhall and Moers, 2015). Long termed relations could
be established by stakeholders.
Organisational readiness
This is also one of the contributing factor in driving company's growth and success in the
marketplace. Organisational readiness represents how capable and ready firm is to implement the
innovative products and strategies for the betterment of it. It also helps in identifying areas that
requires improvements along with trending patterns. It is also helpful for the venture to improve
its capabilities so that operational and financial needs of the strategies could be fulfilled. Cultural
and political demands could also be fulfilled by the help of it. According to the Bi, Huang and
Ye, (2015), Shell is an oil and gas industry whose workings gets directly impacted by the various
political and environmental factors. Thus, many times situations arise when ventures are not able
to execute innovation in the strategies and products offered by them to the customers due to
funding issues or many other factors (Bi, Huang and Ye, 2015). The reason behind this could
also be that firm has invested most their resources and time for identification of opportunities
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where they could grow which ultimately resulted into reduction of effectiveness of the products
that has been developed by introducing innovations.
Euchner and Ganguly, (2014) opposes that there are only three major areas on which
organisation focuses that are operational, cultural and structural readiness for the implementation
of innovations in the strategies. With the utilization of this, innovative and productive products
could be developed so that needs of customers could be satisfied. For example, in Shell to
introduce new machineries it is necessary to adopt the latest technology which should be flexible
enough to incorporate change in the future as well.
Disciplined Implementation
According to the Nagano, Stefanovitz and Vick, (2014), implementation process
constitutes wide variety of activities that should be supported by the venture along with the
involvement of shareholders in the development of innovative products and services. They
should be considered in every stage such as technical enhancements, designing process, testing
of developed product and taking feedbacks from customers so that required improvements could
be introduced to enhance productivity (Nagano, Stefanovitz and Vick, 2014).
The disciplined implementation process basically have following elements that are:
strength, implementation of power sets and mindsets, project management approach and
understanding priorities of the firm (7 Dimensions of Strategic Innovation, 2016). All the stated
elements helps in implementation of innovations in much enhanced manner. When capacity of
the organisation gets improved, it benefits them to effectively execute strategic innovations with
the aim of holding competitive benefits as well. Thus, company also makes growth in the market
by giving tough competition to the competitors. Implementation of strategy gets affected when
there is absence of required skills and employees that does not posses knowledge as per the
demand of the situation. Thus, as a result, firm's competitive advantage would get affected.
Strategic innovation framework supports production of innovative ideas and concepts so that
customers could be avail with quality products and services.
CONCLUSION
From the above report it can be concluded that to develop innovative and productive
products seven dimensions of strategic innovation framework could be utilized that helps in
development process of goods considering needs and requirements of customers in order to bring
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innovations in the work to hold competitive advantage in the marketplace as well. All the
dimensions helps in varied way at each stage of product evolution procedure. Technology
advancement has greatly benefited organisations to produce quality services for the consumers.
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REFERENCES
Books and Journals
Bi, K., Huang, P. and Ye, H., 2015. Risk identification, evaluation and response of low-carbon
technological innovation under the global value chain: A case of the Chinese
manufacturing industry. Technological Forecasting and Social Change. 100. pp.238-248.
Brunswicker, S. and Vanhaverbeke, W., 2015. Open innovation in small and medium‐sized
enterprises (SMEs): External knowledge sourcing strategies and internal organizational
facilitators. Journal of Small Business Management. 53(4). pp.1241-1263.
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, Organizations and
Society. 47. pp.1-13.
Cortimiglia, M. N., Ghezzi, A. and Frank, A. G., 2016. Business model innovation and strategy
making nexus: evidence from a cross‐industry mixed‐methods study. R&D Management.
46(3). pp.414-432.
Euchner, J. and Ganguly, A., 2014. Business model innovation in practice. Research-Technology
Management. 57(6). pp.33-39.
França, C. L. and et.al., 2017. An approach to business model innovation and design for strategic
sustainable development. Journal of Cleaner Production, 140, pp.155-166.
Johnston, M. W. and Marshall, G. W., 2016. Sales force management: Leadership, innovation,
technology. Routledge.
Klingebiel, R. and Rammer, C., 2014. Resource allocation strategy for innovation portfolio
management. Strategic Management Journal. 35(2). pp.246-268.
Mortimer, S. T. and Mortimer, D., 2015. Quality and risk management in the IVF laboratory.
Cambridge University Press.
Nagano, M. S., Stefanovitz, J. P. and Vick, T. E., 2014. Innovation management processes, their
internal organizational elements and contextual factors: An investigation in Brazil. Journal
of Engineering and Technology Management. 33. pp.63-92.
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Nikolova, L. V., Kuporov, J. J. and Rodionov, D. G., 2015. Risk management of innovation
projects in the context of globalization. International Journal of Economics and Financial
Issues. 5(3S).
Wu, D. D., Chen, S. H. and Olson, D. L., 2014. Business intelligence in risk management: Some
recent progresses. Information Sciences. 256. pp.1-7.
Zeschky, M. B., Winterhalter, S. and Gassmann, O., 2014. From cost to frugal and reverse
innovation: Mapping the field and implications for global competitiveness. Research-
Technology Management. 57(4). pp.20-27.
Online
7 Dimensions of Strategic Innovation. 2016. [Online]. Available through:
<http://www.1000advices.com/guru/innovation_strategic_7d_ip.html>. [Accessed on 19th
July 2017].
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