To approach this topic properly, I think it is essential to understand the nature of BPs business in particular, the nature of competition in our sector.
As we see it, we compete for just two things. We compete for access to resources distinctive positions in the development and production of oil and gas. And we compete for customers through the development of distinctive positions in particular market segments.
The competition is intensive, global and unremitting. In both cases, our success is determined to a very important degree by trust -- the degree of confidence with which we are viewed by those with whom we want to do business. Having been, in the past, very much a business driven by physical assets, we've become more and more conscious of the value of intangibles the value of confidence and trust both in securing access to assets and in allowing us to develop market positions. That's why marketing, in its fullest sense, has become progressively more central to BP as a company.
Crisis of Confidence
We're also coming to terms with the loss of confidence caused by the reemergence of economic cycle the decline in the rate of growth after the sustained boom, particularly in the U.S., during the 1990s, and the correction in stock values.
And we've still to come to terms with the loss of confidence in globalisation and with the growing belief that the gradual opening of markets and the expansion of trade is a force for the concentration of wealth and power rather than for increased choice and opportunity.
And then, of course, we have to come to terms with the loss of trust and confidence in the security of day-to-day life caused by the terrorist actions on September 11, 2001. It was a day when, as one American wrote, the boundaries of ordinary life were violated and certainty was destroyed.
All those factors, in different ways, have destroyed part of the trust which is at the heart of any open society. Trust is the basis of relationships and investments and almost every other human interaction. And when trust is destroyed, the result is an uncertain world where the future is not just unknowable but frightening, and where people cling to what they have for fear that any change will be for the worse.
Those developments, which have compounded one another over the last couple of years, have, at least for the moment, brought us to the end of the long wave of liberalisation that began in Europe and in the U.S. in the early 1980s.
Uncertainty and distrust have created a desire for certainty and attempts to control as many elements of the world around us as possible through regulations, rules, codes of governance and enhanced security. All this is entirely natural in a world where volatility is giving people the impression that the ground is moving beneath their feet.
In the corporate sector, too, I think were seeing a desire for control and a search for certainty, which is equally natural but which works against the taking of risks and, therefore, against growth and expansion.
Cautious Attitudes in Uncertain Times
In the last few months, that caution, and the focus on constraint and security, has been reinforced by the war in Iraq. The outcomes and repercussions of this conflict remain unknowable. But they could alter numerous relationships not just in the region around Iraq, but also between the United States and Europe.
Investment relies on trust and on confidence in both the present and the future, and both are in short supply at the moment. That's a gloomy way to start, but I think it is a realistic description of the context in which were operating. It is also realistic to hope and believe that this will be a temporary phase.
I'm struck by considering our own long history as a company. BP is 95 years old this year and well be 100 years old in 2008, which is the anniversary of our first discovery of oil in a country that was then called Persia. It has been a century of wars, of dramatic changes in politics, of economic and industrial cycles, of volatility in oil prices, of huge technical progress and of fundamental changes in the structure of the industry of which were part.
In 1948 BP published its first statistical review of world energy. The picture on the front cover was of the dominant energy supply being taken to market -- a picture of a horse drawing a cart full of coal.
When I joined BP at the end of the 1960s, OPEC had just been created, but our reserve base was still predominantly in the Middle East in Iran and Kuwait and, of course, in Iraq, where BP and its predecessor companies had made the first discoveries 30 years earlier.
And who knows what the nature of the industry will be in 2008, the year when I'm due to retire. Almost certainly China will have become one of the world's main energy importers. Natural gas has almost overtaken coal as a source of supply worldwide, and it looks set to become as important as oil in many parts of the world. But who knows what else will have happened.
Change through the last 95 years hasn't been smooth or continuous or linear. Changes have often been sudden, unexpected and highly disruptive. Volatility has been the norm, and we’ve had to adjust to that again and again.
BP may have a longer history than most, but I think there are many companies in all sectors that have had to learn to respond to change, including the most dramatic and disruptive changes, and that have had to adapt in order to survive. In general, they have survived, adapted and indeed thrived.
For all that volatility, the world economy has grown eighteen-fold in real terms over the last century. In the last 50 years, per capita income has grown by 170 per cent, despite a growth in population of 3.5 billion.
The Power of Adaptability
Adaptability relies on two things. First, of course, it is important to be secure against volatility -- to be prudent, to hold to a very disciplined financial framework, to plan with prudence and caution and to maximise flexibility. But it is also essential to be clear about the objectives and purpose of the business and to understand the balance that has to be sustained in order to deliver on those objectives in all circumstances.
We are a particularly long-term business. The investments we're making now in our new growth areas -- the Caspian, the deep water of the Gulf of Mexico, the gas business in the Far East and, of course, Russia -- are comparable in scale to the investments we made in Alaska and the North Sea. Those investments, made 30 to 40 years ago, continue to pay dividends. They provide the funds now for the renewal process were going through. And our investments today will be the sources of revenue for 10, 20, even 30 years to come.
That timescale means that our sustainability -- our ability to continue to thrive and to grow through times of great uncertainty beyond anything we can ever predict -- depends on maintaining the confidence of a whole range of different groups.
Although we are different, BP is not unique. The overwhelming majority of businesses are long-term enterprises. The transactions they make on any particular day are just part of a continuum of activity stretching into the future. Business is very rarely about a single, final transaction. Given that long-term perspective, winning trust and maintaining confidence isn't just a matter of financial results and the ability to maximise shareholder value. Those are important objectives but not the only ones, because to thrive, we have to balance multiple objectives and sustain multiple relationships with customers, partners, staff, governments, lobby groups and so on.
One of Britain's leading economists, Professor John Kay, has written a tremendously insightful article on this subject. In it he describes the thought process of a major oil company which for some reason he calls Swell Oil as it invests in a new and complex country.
"Swell Oil," Kay wrote, "is one of the world's most successful corporations but it does not have a single objective. It delivers good returns to its shareholders, investors and has done so on a consistent basis. It satisfies the needs of its customers. It provides rewarding and fulfilling employment for around 100,000 people around the globe. Success in all these dimensions is the measure of Swell's achievement. We are a great company because all the people touched by our activities benefit from them.
"If we knew far more about the world than we do know, or ever can, we might be able to calculate how to maximise shareholder value in a precise and instrumental way. We would calibrate just how much to spend to sustain our reputation, we would spend just the right amount on developing the skills of our people, exactly where to invest and so on. But we cannot make those calculations with precision. Reality is different.
"A great company depends on the satisfaction of all the different people with whom it does business. If we ever concentrate too much or too little on any one relationship we endanger the achievement of all of them."
I think that Professor Kays description of the balanced way in which successful companies, large and small, actually work describes what we try to do, though he expresses it much better than I ever could.
Finding that balance is a matter of judgment, informed by experience but founded on dynamic flexibility -- the capacity to observe and adjust to the changing world around you, and to maintain your balance in a way that is distinctive.
Trust doesn't come from delivering a precise number. It is not about foreknowledge of the precise outcome. Trust is about the ability of all those affected to rely on the company's judgment, just as those of us in business rely on the judgment of those who work for us. That seems particularly important in times of uncertainty.
How Marketing Drives Value
At BP we have more than 10 million interactions with customers every day, and more than 100,000 staff members in more than 100 countries. Every action and every activity is an act of marketing. We define marketing as the art of driving the creation of value through the development of relationships both with customers and with those whose decisions influence and shape the environment in which we work.
Marketing is crucial to the achievement of our competitive objectives winning access to distinctive resources and winning customers in specific market segments. Expressing our distinctive approach is where the skills of marketing come in.
We've chosen a simple expression "Beyond Petroleum" because it sums up our philosophy and direction. That expression has become a powerful motivator internally (after multiple mergers) and also increasingly a mark of differentiation externally. Beyond Petroleum isn’t about leaving behind our core business. How could we say that when were actually growing our reserves and production of oil and gas year by year? Instead, it is about defining what that core business means to the world in a very different way.
The reputation of the oil industry is hardly very attractive. The industry is widely thought to be dirty, arrogant and populated by companies that to compete have to be huge in scale, rather than human-sized, and that are therefore frightening, apparently all-powerful, dealing in huge numbers and seemingly unaccountable.
The products we sell may be essential to human life, but in too many cases they are grudge purchases. Buying petrol is generally considered a necessary chore. And driving, or what used to be (when I was much younger) called motoring, is too often a cause of stress rather than a source of pleasure.
Beyond Petroleum is an expression of a determination to change all that. It intends to show that there’s a different way of providing the means of heat, light and mobility and recognising the challenges and taking them on. Yet this is still an incomplete process. We are now doing a number of different things to put substance behind the slogan. To begin with, we're making sure that in a time of uncertainty, everything we do contributes to security of supply, because that is what our customers most need and desire. We accomplish this not by exploiting instability or weakness, but by working on the principle of long-term mutual advantage everywhere and at all times.
We're acknowledging the reality of environmental climate change and the potential we hold to help resolve an issue of which we are a part. So we're setting targets and progressively reducing the emissions from our products and our operations. We're giving people the choice of buying fuels without lead or sulphur or benzene, and we're working with the automakers to produce cars where the combination of better engines, better lubricants and better fuels can create a huge gain in efficiency.
We're being transparent -- saying quite openly what we are doing, what decisions we are making and why and using the open disclosure of information to help ensure that the wealth we create in many different societies around the world goes to the benefit of the largest possible number of people.
We're setting standards of behaviour in employment practices and in our relationships with everyone with whom we do business, based on the principle of mutual advantage because that is the only way to ensure that the business we are doing is sustainable. We're encouraging diversity -- providing equality of access to opportunities at all levels on the basis of merit alone because we believe that is the only way to show that globalisation itself is really a process of mutual advantage and not something that benefits only the powerful.
We're applying our brand values to each distinctive market segment in which we are engaged. In everything we do, people can see the values of performance and innovation, of care for the environment and of a progressive determination to always look for better ways of delivering what our customers want.
And we're using that approach to develop great product brands like Castrol and, in the U.S., Amoco Ultimate -- brands that win and retain customer confidence and loyalty and that embody trust.
Beyond Petroleum and the adoption of our new Helios symbol -- in other words, the establishment of a new, united identity -- have been important in bringing together the new team after the nine mergers we've undertaken in the last five years. More importantly, they are means of expressing BP's desire to be different and to be distinct. A constructive, positive force. A new company in an old industry.
Understanding Builds Trust
I don't see it that way. On the contrary, I believe marketing is about expressing real purpose in a way that huge numbers of people, who are not familiar with the detail, can understand instantly. Marketing is about showing people what a company is trying to do. Done well, it can change both perceptions and behaviour.
Within the company, it can help to project and deliver the values, because if people understand the intent they are more likely to align what they can do each day to the overall objectives of the business. That alignment between external words and internal actions is crucial.
Beyond the company, marketing can help customers to understand that they do have a choice. It can help them realize that companies are genuinely different and are trying to meet their needs in different ways -- ways that have a positive impact on their lives. So to me, marketing is very important, because I don't think the key to the renewal of confidence in institutions, in processes and in companies lies in rules. Rules are necessary but they're not sufficient. Enron had lots of rules.
The key to confidence lies in trust, which has to be earned again and again. Such trust comes from an understanding of intent -- an understanding of the values against which decisions in all circumstances will be taken. And it comes from the track record of actual delivery against those values.
If you can achieve that, knowing it will involve both marketing and performance, then I think there's a strong future, because trust is the gateway to aspiration. That's true for individuals and institutions of every sort. Once you have trust and know how to sustain it, there's no limit to the aspiration.
Lord Browne of Madingley, group chief executive of BP p.l.c., was appointed a managing director of BP in 1991 and group chief executive in 1995. He is a non-executive director of Goldman Sachs and the Intel Corporation and a trustee of the British Museum.
He is also vice president and a member of the board of the Prince of Wales International Business Leaders Forum.
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