“I live in a state of permanent dissatisfaction. I always believe there must be someone doing something better than we are.” That statement by Colin Goodall, CFO for British Petroleum (BP) affiliate Sidanco and formerly CFO for BP/Europe, may explain his role as a pioneer of key business process outsourcing deals. For the past decade or so, Goodall’s search for ‘someone doing something better’ has led him to a number of innovative outsourcing deals, including a joint venture with major competitor Mobil.
That seeker approach has worked well for BP, according to Goodall. “We operate a very flat organization structure,” he said. “If you’ve got an outsourced back-office operation, it makes it easier to run a flat organization and to be responsive to changes in the environment…Outsourcing has been one or our catalysts for change and has enabled us to see the heart of the business a lot more clearly.”
That heart, as defined by Goodall, is the business of being profitable and efficient producers and marketers of oil and gas. “We do whatever it takes to do that,” he said. “We make a judgment of what we can do and what others can do.”
In Search of Answers
The importance of any one British Petroleum outsourcing deal pales in comparison to what the company has achieved through its overall embrace of the concept. Goodall’s outsourcing journey began in the late ’80s while he was working for BP in the United States. Goodall and other BP executives, responding to cost pressures, began — under the leadership of John Browne and Rodney Chase, now BP’s chief executive and deputy chief executive — to look at companies outside their industry for examples of how business processes could be used more efficiently and effectively.
“We looked at companies like Motorola and ABB, mostly companies outside our industry,” said Goodall. “We view our own industry as very conservative, so we watch other industries to see what the trends are, what other people are viewing as core activities, what sort of leverage they’re getting, and what value they’re creating from what they are really good at.”
In 1989, this analysis led to a big step in the U.S. BP spun off its assets in the lower 48 states into an operation designed to look as much as possible like an independent. That action, said Goodall, “was our first attempt to take a company that was big oil and make it skinny. We found we could do that† and make a lot of money doing that.”
In 1991, BP outsourced all of its accounting operations in the North Sea area, then accounting operations in South America, North America and the rest of Europe. With that move, said Goodall, BP “got better service — and got it cheaper.” Those successes made a true outsourcing convert of Goodall.
Ideas Tailored to Fit
Key to implementing that philosophy is being able to adapt ideas from other industries to fit BP. “You start with the premise that a lot of what we all do can be reduced to its basics and that the differences between industries are really less than they might appear to be,” said Goodall. “Saying our industry is different is a good excuse for maintaining the status quo. But if you start from dissatisfaction with the status quo, you get more energetic about stealing good ideas from others.”
Goodall’s philosophy meshes with an oil industry tradition of contracting for some services requiring high levels of technical expertise. He points to BP’s relationship of over 70 years with oil services giant Schlumberger and other drilling contractors.
“Very few companies these days do their own drilling, so the fact that we’ve now got somebody else to do our accounting, and other people providing tax services and other infrastructure is just an extension of something we’ve all been comfortable with,” he said. “You just have to be very careful to understand what is confidential — and there’s a lot less that’s confidential than there might appear to be on the face of it.”
The Keys to Success — and Failure
Considering the scope of BP’s outsourcing, the fact that some of the deals have not worked is not surprising. The reasons for those failures are varied, according to Goodall.
“Some things we’ve taken back because the deal didn’t work or because the organization that it went to wasn’t up to it or didn’t share our values,” he said. “But it’s more likely the problem was that we may not have paid sufficient attention to making it work. Outsourcing is not an easy option. You don’t just throw it over the fence and let the other guy get on with it. It can require more effort up front than doing it inhouse.”
Overall, the decision to outsource business processes has delivered strategic advantages to BP. Chief among those, according to Goodall is the ability to work within time frames that others find onerous. That ability increases the likelihood of achieving difficult goals and decreases the need to make compromises. To Goodall, that final point is a telling one. “Every time you make a compromise,” he said, “you’re exposing yourself to the competition.”
Lessons from the Outsourcing Primer
- Dissatisfaction with the status quo can be the beginning of successful strategic outsourcing.
- Be certain you have a clear understanding of the heart of your business.
- Look outside your own industry for ideas that can be adapted to your needs.
- Be aware that outsourcing is not an easy option. It requires a significant investment of effort in the beginning.