JOINT MEETING with the HOUSTON CHAPTER OF THE API

ABSTRACT

Recent technological advances in shale production have caused a “resource rush” which few predicted.  Companies caught in the rush now find themselves faced with fierce competition for limited resources and a low price environment due to increased supply as much of the industry moves into shale plays.  Changes in technology may be difficult to foresee, but those who consider competitor reaction when forging into pioneer territory are likely to be the ultimate winners.

Creating competitive advantage in a dynamic situation such as this requires a company to avoid the herd mentality and consider how other players – competitors, regulators, and energy consumers – will respond as events unfold.  In complex systems and markets, forecasting the future is impossible and unintended consequences are the norm.  Early identification of potential developments and positioning your company to take advantage of them can mean the difference between profitability and failure.

All of this means that strategy should be based on a variety of possible futures, not just one which someone has deemed to be the “most likely.”  Recognizing how your actions will alter those of your competitors will allow you to stay one step ahead of them.  Potential choke points in the value chain hold the key to profitability; identifying and gaining control of these can be worth millions.  Characterizing the option value associated with certain events which may or may not happen – and understanding what it’s worth to your company to be in position to take advantage of them if they do occur – can make a huge difference in profitability.