BP’s Competitive Advantage
Though the product they are probably most famous for in the minds of consumers, gasoline, is thought of as homogeneous, the success of BP in the companies ability to grow and maintain its standing as a multinational energy superpower lies in its management of human capital. BP’s true competitive advantage is not in the commodities or services it sells, their success stems from the companies ability to manage a less easily duplicated resource: knowledge.
Collaboration and knowledge management form the core of the BP value system.
As expressed by BP in their own words, they aim “to engage the creative talents of our employees, and develop and apply leading, cost-effective technology and intellectual creativity to enhance innovation and new ideas” (BP, n. d. ). This paper will address this unique aspect of the BP business model, knowledge management, and how it translates into financial performance. Background
BP is a global energy leader, the core components of their business are: oil and gas exploration and production, refining and marketing of petroleum supply products, manufacturing and marketing of chemicals, and the manufacture of Photovoltaic (solar) cells. They are currently in the top three internationally in gas reserves, and are the largest retailer of gas in the US, as well as one of the world’s largest marketers of aviation fuel (Corporate Watch, n. d. ).
Founded by William Knox D’Arcy from a significant oil find in Iran, they have expanded through growth and merger, currently operating in over 100 countries, employing 97,600 people with 2007 revenues exceeding $284 billion (BP, n. d. ). Knowledge Management The challenge to an organization the size and scope of BP can often be capturing the wealth of knowledge created by their people, engaged in business, learning best practices, and sharing and storing that information between business units to maximize BP’s potential.
BP’s methodology is “encompassed by a simple framework, which describes a learning cycle – before, during and after any event – which is supported by simple process tools” (Kotelnikov, n. d. , ¶ 1). The BP learning method is to treat every process as a closed learning loop; lessons learned from each experience are agreed upon and posted on the company intranet to capture knowledge and experience to be shared by all BP business units. Companies create vast amounts of valuable knowledge through practice of their employees, without a system in place to capture this knowledge; it will often leave with their employees.
Further, in a large company like BP, the potential exists for it to operate not as a collaborative unit, but as “a collection of individual fiefdoms in the form of individual business units” (Quelch & Deshpande, 2004, p. 96). To foster this sense of collaborative behavior, BP created peer review and cross business unit interaction strategies (Quelch & Deshpande). An example of how this has positively impacted the companies profitability, recently due to knowledge sharing between business units of engineers, they achieved a cost savings of $74 million in 1998 to meet their collective goal of reducing retail site construction by 10% (SAIC, n. . ).
As management of information systems flourished in the decade of the 1990’s, the success of BP’s competitive advantage in their commitment to managing knowledge will invariably lead to other organizations creating practices and infrastructure to support knowledge management in the future. Knowledge management creates competitive advantage by storing and sharing collective “on the job” learned experiences and distributing them to present and future generations of an organization that would otherwise be lost. BP has maintained their ability to grow and improve profitability through implementation of knowledge management strategy.