The origin of BP's aggressive style lies in a management structure that is less hierarchical than its competitors. Once a rigid, state-owned company, BP's structure shifted dramatically after the British government sold its final 30 percent share in 1987. When new management took over in 1992, the company was split up into 150 business units with managers' pay linked to their unit's profits. Now, ambitious managers like Leggate must demonstrate a business case for each investment. Leggate describes his task of assuring top management that money is wisely spent on IT projects as a "restraint model" that involves both challenges by outside experts and a robust debate within the senior leadership team.
Even after the disappointment of the Internet bust, Leggate retains a hard-to-restrain glee when talking about technology's promise. (Cross, who is in regular touch with Leggate, says the CIO's enthusiasm helps him sell BP executives on the importance of IT.)
For a presentation on radio frequency ID tags to Browne and 40 other executives, Leggate invited colleagues from Procter & Gamble and the brewer Scottish Courage to talk about how they had used RFID to verify the age and freshness of a product and to track pallets and crates. "Our people went away really enthused," Leggate says of the meeting. "We decided to harness that energy level and launch four major projects." BP is implementing sensory networks using RFID chips for applications such as tracking rail cars in the chemical business. "It's important to see, and to show, whether there is a business case, as opposed to just chasing a technical dream," Leggate says.
In August 2003, Browne made BP the first Western oil company to buy a major equity piece of an integrated Russian oil and gas company, giving BP a 50 percent share in a venture dubbed TNK-BP. Two months later, the arrest of Mikhail Khodorkovsky, president of Yukos, the country's largest oil company, roiled the Russian financial markets. Browne voices confidence in the investment, but analysts say the jury is still out.
Risk, however, is integral to BP's strategy. To Leggate, the culture of risk-taking means that projects such as those using RFID are adopted quickly and wholeheartedly if they can help the bottom line. New deals like the one with Russia's TNK mean the integration challenges will continue. Leggate prefers to delegate systems integration details to Daru's team and focus on strategy and cost controls.
Leggate's team is moving away from proprietary systems toward commodity computing and open-source architectures. The group is looking at using a new class of software that will allow far-flung employees to access applications over the Internet and to download only the piece of an enterprise program they need. According to Daru, this type of software-on-demand would involve SAP and some other types of applications but is still in experimental, although promising, stages.
From the outside, BP appears to have embraced risk more than its rivals by doubling in size, venturing into unstable regions or diving headfirst into the Internet and other technologies. And many of the risks seem to have paid off. For example, the Amoco buy turned BP into a major supplier of natural gas, which has tripled in price since 1998. Soon after, Exxon bought Mobil and Chevron took over Texaco. Today, BP vies with Royal Dutch/Shell for the title of second largest integrated oil company after Exxon Mobil.
At BP's London offices, however, recklessness seems a foreign concept. "Our natural bias for innovation has to be handled carefully so that we always find the business point," Leggate says. He adds later that BP "undertakes a high and rigorous degree of analysis and testing before it places its bets". Although Leggate relishes discussing BP's philosophy, the CIO post at Britain's largest company can be a lonely one, Leggate has told Cross. "It's dangerous territory because, like a CEO, you are always getting shot at," Cross says. "John is an ebullient character, though. He's like a big rubber ball that can take the knocks and keep bouncing along."
Lessons from John Leggate
- Know your CEO's strategy and priorities.
- Make sure IT strategy reflects your company's corporate philosophy.
- Take advantage of any non-IT business experience you have had to better communicate IT needs with business executives.
- Outsource aggressively, but don't sign lengthy contracts, and work to keep control of key strategy and core intellectual property.
- Don't force alliances between outside vendors.
- Don't lose enthusiasm for new technologies even if burned in the past.
- Choose your CTO carefully and develop a close relationship.
- After a merger, focus on integrating the front end so that employees can effectively communicate on day one.
- When integrating two companies' systems, make sure it's clear who is in charge.
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