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The architecture of value creation
I was interested to read a recent chief executive officer study1 by IBM that found that the world’s top companies – IBM called them “outperformers” – are those that innovate with external partners.
Süleyman Özmen, Vice President, Refining and Chemical Licensing, Shell Global Solutions International B.V.
Shell Global Solutions' value creation architecture hard-wires both the owner’s business objectives and the current (or impending) external pressures affecting the owner into the decision-making process.
The report says that the outperformers are “embracing new models of working that tap into the collective intelligence of an organisation and its networks to devise new ideas and solutions for increased profitability and growth”.
This resonates with me because, at Shell Global Solutions, we also believe that you can never bring too many different perspectives to bear on a problem.
When we engage with refiners to, for instance, help them to improve understanding of their options for processing a wider range of crude oils, enhancing their yield of high-value products, improving their environmental footprint, or achieving long-term sustained operational excellence, we follow a highly diagnostic protocol. This involves working with the refiner at various levels in order to benefit from the expertise, experience and fresh thinking that exist within their organisation. There is evidence that this collaborative approach can help customers to achieve their business objectives more effectively.
This is highly relevant because the increasingly volatile nature of the refining industry is taking its toll. According to one report, nearly 40% of the European Union’s 104 refineries are in need of refurbishment. Analysts have predicted refinery closures of some 4.3 MMbbl/d of global distillation capacity between 2009 and 2014, which is about 5% of global capacity. The mothballing of Petroplus’s refining assets earlier this year took the closures to about 2.7%, according to Deutsche Bank. Tough times appear to loom for other refiners.
Moreover, wherever you are in the world, you are likely to find the financing market exceptionally difficult, with capital short and expensive. So, when you do commit to a project, it is vital that the initiative is the right one, that it delivers what it was designed to and, equally, that the objectives are robust to future market changes. There is no room for error.
At Shell Global Solutions, our approach to technical collaboration is designed to mitigate these risks. We call it co-creation, but there is a myth in the industry that co-creation simply entails seeking the input of another party. Co-creation is much, much more than that. It is a sophisticated approach to technical collaboration that brings together distinctive viewpoints to provide a fundamentally better understanding of a customer’s problem and to evaluate the widest possible technical solution set.Co-creation is built into an architecture that hard-wires both the owner’s business objectives and the current (or impending) external pressures affecting the owner into the decision-making process.
Another key feature of this framework is that it is designed to facilitate high-quality interaction between the owner and our consultants and technologists. This helps to merge the customer’s highly valuable site-specific knowledge and marketplace perspectives with our global operational and technical expertise.
The external pressures and customer objectives feed into four key decision-making areas. The first is identifying the projects that could achieve the refiner’s objectives. Improvements can be made right across the value chain, from crude evaluation and procurement through operations and processing to investment planning, and experience can help to identify the widest possible technical solution set. We call this area value creation.
Co-creation is built into an architecture that hard-wires both the owner’s business objectives and the current (or impending) external pressures affecting the owner into the decision-making process.
The second key area is optionality. There are usually many ways in which a solution can be delivered. For instance, if the objective is to enhance the yield of high-value products, the refiner should evaluate the benefits of a unit revamp, the possibility of upgrading existing hardware and the feasibility of building a new unit. This is also the fundamental point of the Shell Global Solutions Multiplatform Pentagon Model, which you may have heard me discussing in recent years.
The third area reflects today’s rapidly changing world where the decisions we make today will be measured in terms of how they play out tomorrow. We sometimes find that executives base their decisions on a narrow premise that reflects the current situation but that may be at odds with either their longer-term objectives or potential future market conditions. Reliability considerations also come into play here, as they help to determine the plant’s ability to generate returns. These considerations are designed to help prevent regret decisions and are crucial in today’s fast-changing world. We call this area of the architecture sustainability.
The fourth area is execution: ensuring that the plant starts up on time and on budget, and works in concert with all the existing pieces of hardware and the interfaces that make the current refinery work so well.
Underlying all of these factors are health, safety and environment considerations. These issues are of great importance to Shell Global Solutions and are therefore central to our thinking.
Outperformers, IBM says, do not work in isolation. They understand that good technical ideas often bear fruit through technical alliances with organisations whose strengths differ from their own. As you will see throughout the issue, this is a view shared by Grupa LOTOS, Shell Scotford and Ukrtatnafta – and Shell Global Solutions’ value creation architecture helped them to foster a rich exchange of knowledge, ideas and perspectives.
Vice President, Refining and Chemical Licensing, Shell Global Solutions International BV
- Shell runs more than 30 refineries and chemical plants, produces 3.2 MMbbl of gas and oil every day, and is active in over 130 countries and territories worldwide.
- Shell Global Solutions is a strategic licensor providing technical support to over 50 sites worldwide and is part of Shell Projects & Technology. Many of our professionals have operational and technical experience across a broad range of petrochemical processing and production industries. Their expertise and perspectives help to create a deep level of understanding of our clients’ business challenges and enable us to provide effective solutions.
- Criterion Catalysts & Technologies (Criterion) has a track record of over 50 years and is wholly owned by Shell. Its catalysts can be found in about 60 of the world’s hydrocracking units and approximately 850 hydrotreating units. Criterion is also the market leader in catalysts for diesel dewaxing. A large proportion of the ebullated-bed residue upgrading units around the world contain its catalysts, as do the majority of tail-gas treating units.
- Zeolyst International (Zeolyst) is a global leader in commercial and speciality zeolites. Its advanced hydrocracking catalysts are currently installed in more than 70 of the world’s hydrocracking units.
1 Leading Through Connections: Insights from the Global Chief Executive Officer Study, IBM, 2012