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Entrepreneurial strategies and organizational renewal within the offshore service vessel industry
Professor Odd Jarl BorchUniversity of Nordland.
LectureUniversity of Stavanger,
February 10, 2011
CV professor Odd Jarl BorchBodo Graduate School of Business
• Master of Science Norwegian School of Economics and Business Administration, Bergen
• Doctoral studies and PhD, Umeå university, Sweden• Post doc studies Indiana University, USA• Master Mariner studies, Bodin tekniske fagskole,
Bodø• University of Nordland since 1979• Research Coordinator Nordland Research Institute• Professor II, University of Tromsø • Research Coordinator Norwegian Research Council • Research on several industries• Advisor government institutions at different levels• Approx 150 publications
Focus in lecture1. More resource exploration in cold climate
(Arctic) environments 2. Increased complexity and uncertainty a
challenge for firms expanding into this area3. Show results from an action research study
within a ship owner company on management of change
4. Discuss barriers to change5. Emphasis on entrepreneurial strategies,
business model change and (open) innovation at business process level
Oil activity in the High North• Oil and gas a significant source of energy for the next
decenniums.• Present resources will run out in 30-40 years period• Rising prices will stimulate increased efforts towards
resource exploration• 20-25% of the unexplored resources expected to be
localized in the Arctic• Increased activity towards both research, construction
and field support in Arctic waters• Demand for vessels with high operational stability in
polar waters, icebreaking capacity and clean design • Axis Greenland to Kara Sea natural “home market” for
Norwegian OSV companies
Important to understand that you are moving into a
very different context:-North Sea
-Arctic Low Region-Arctic High Region
ARCTIC COUNCIL – AMAP DEFINITIONS
IMO GUIDELINES IN ARCTIC ICE-COVERED WATERS
Low Arctic (sub-arctic) region
• New Foundland• Greenland South• Jan Mayen• Barents Sea South• Lofoten to Barents Sea South
High Arctic Region1. Alaska-region Beaufort Sea – Chukchi2. Newfoundland to Baffin Bay3. Nuuk to Thule –West Greenland4. Denmark Strait to the Greenland Sea
(West Ice)5. North-east Greenland to Spitsbergen
East (North Ice)6. White Sea to Novaya Zemlya (East Ice)7. Kara Sea
Operational challenges
Complexity:(no of stakeholders, size ofexpedition, interlinks, rules, regulations)
Turbulence/dynamismLack of predicta-bility-weather,-darkness-ice,-security
Mexican Gulf
North Sea
Norwegian Sea
Barents Sea South/ Greenland SW
Barents Sea East and North
Greenland North East
Lofoten region
Differences operational environmentThe North Sea
The Low Arctic
The High Arctic
Polar lows ++ +++ ++++Visibility (fog, darkness) + ++ ++++Icing and sea ice - ++ ++++Distances to base + ++ ++++Lack of infrastructure - ++ +++++-navigation, SAR, communication
Lack of research - ++ ++++Interest groups + ++++ +++++Political risk + +++ +++++
Factors contributing to increased complexity
• Distances • Lack of infrastructure• Broader set of activities that each vessel has to perform• Teaming different types of new technology vessels
– Drilling ships/rigs– Stand by vessels– AHTS– PSV
• Broad set of government rules on safety and environment
• More ISO notations • More external links to sub-suppliers, interest groups
Troms Vision VS 495 Kleven 2010 Troms Pollux/Artemis VS 485 Hellesøy 2009
EXAMPLE: COMPLEXITY EXPLORATION WEST-GREENLAND SUMMER 2010
Fennica STX 1993
Balder/Vidar Viking KMAR808 Havyard 2000
Loke Viking VS4622 Spain 2010 (ICE 1A)
Stena Forth/ Stena Don
Esvagt Don/Challenger 2000
EXAMPLE 2The Shtokman project
• Field context– Large production volumes– New technology– Long project period– Long distances to base (600 km)– Poor infrastructure– Winter ice of various thickness (dimensioning for up to 2m first year ice)– Ice bergs in Summer time– Subject to harsh and unpredictable polar storms– Extreme HME-challenges
• Broader range of offshore service operations– Subsea installation support– Inspections and interventions– All year stand-by in ice– All year supply in ice– Towing of ice bergs– De-coupling and towing of installations due to ice threats– fighting of pollution and rescue in icy waters
POSSIBLE CONTEXT FOR THE SHTOKMAN FIELD
Factors contributing to increased dynamism/turbulence
• Weather –polar lows• Ice (first year, growlers and ice bergs)• Emergency-search and rescue• Several companies involved - Inter-
organizational dependency• Human factors -limited skills/fatique • Endogenous people – local government• Security threats- terrorism, piracy, action
environmental interest groups
GREENPEACE HAS BOARDED A SCOTTISH COMPANY'S DRILLING
RIG OFF GREENLAND AND FORCED WORK TO STOP!
How to cope with increased complexity and dynamism?
=>Owner-manager action
Has to consider entrepreneurial strategies,
innovative business models and business processes that
unite exploration and efficiency in implementation
(exploitation)
Entrepreneurial strategies1. Improvements in products and technology2. Introducing new products and new
technology3. Reconstruction of competitive tools4. Added business and society relations5. New business as well as social platform
(both business and social entrepreneur)
The entrepreneurial barriers of SMEs in a mature industry
• Over-emphasis on cost-cuts• A small strategic apex • Primary value chain efficiency focus• Capabilities locked to the present strategy • Lack of R&D experience• Hierarchical business model• Conservative business culture• Stick to rules-no leverage for
entrepreneurial action
How to create Business Process Management Tools for the High
Arctic:-has to start with the business
model and dig into the business process framework
Business model-organizational configuration
• Need for a more innovative approach with bottom-up experimentation and managerial commitment related to coordinating innovations
• Consider a reconfiguration of the value chain internally and its cooperative links to other parts of the value system
• The strategic potential may be enhanced through developing inter-firm links in several directions (e.g. value network configuration)
The business model (BM)Sequential value chain configuration
Value shop configuration
Value netchain configuration
Hierarchical, topdown structure
+
Vertical buyer-sellerrelations
+ ++ +++
Horizontal relationsto competitors
+ ++ +++
Reciprocalinteraction
+ ++ +++
Multiple layer interaction
+ ++ +++
Diagonal relations to other industries
+ +++
Postulate • In a mature industry external pressure is
critical to achieve dramatic change in BM (reconfiguration of the value chain)
• New owners-board members may loosen up the organization
• Pressure from important customers important ex.: oil companies
• Entrepreneurship and innovation researchers may build trust through understanding basic business processes and take it from there
Business process management• The business process management is aimed at:
– new business processes – removal or reconfiguration of existing
business processes (reengineering)– added tasks within existing business process– Linking up each business process internally
and to customers, subcontractors and interest groups
• Empowerment to provide (dynamic) capabilities for innovation within each business process
High Arctic –addition to the present and new business processes
i. Charter- extra insurance, manning and certificates, investment needs and compensation for extra equipment and manning
ii. Operation/technical- planning under uncertainty, risk management – extra capacities, limits of vessels
iii. Crewing – Arctic competence, extra familiarizationiv. Navigation vessel to/from operational area – rough weather, icev. Loading/discharging - dialogue and training base personnel vi. Transport to platform – extra time and nav. resourcesvii. DP positioning – correct signals, safety marginsviii. SAR – extra capacity and competence- special risk assessments ix. Fi-Fi/pollution prevention–ice, icing -extra tools, routines, trainingx. Towing – extra winch and engine capacity and competencexi. Ice management – extra ice breaker capacity and competencexii. Maintenance/ repairs –extra spare parts, yards, transportersxiii. Communication - other vessels and companiesxiv. Dialogue/PR – local government and interest groups
Management principles ship ownersNorth Sea Low Arctic High Arctic
Managementapproach:
Safety Management
Management of change
Business process management
Business model: Hierarchic-functional
Hierarchic-staff support
Entrepreneurial,Horizontal ad hoc
Capability : NecessaryCertificates
Adding staff Business processempowerment
Value chainintegration:
Sequential Work shop Reciprocal
Quality perspective:
Quality control Qualityimprovement
Total quality approach
Change focus: Revisions Incremental innovations
Open innovation
Risk focus: Stick to establishedrules and regulations
Risk assess-ment/changework plan
Risk management total operation and value chain
Conclusion • Change in environment puts heavy strains on
the organization• More turbulent and complex environment
implies an entrepreneurial strategy• Has to work both top down and bottom up to
adapt business model and business processes• Demanding task to secure both exploration
and implementation (exploitation) simultaneously
• Empowerment of staff and management through R&D partnership is important
Thank you!
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