YOU THINK YOU’VE SEEN THE WORLD CHANGE IN THE LAST YEAR? HANG ON ... THE RIDE'S HARDLY BEGUN!

So how does a small service company chart its way through??

I have the answer.?

Well … I think I have!?

The big customer sectors in which we operate all face radical change because of the pandemic, the incidental fall-out from that, and climate change.???

Add into that tech change, and the rise in truly vast new markets, and what you have is a greater instability in the business environment than at any time in history.

No business likes uncertainty and the 'lockdown or no lockdown' soap opera has been a nightmare for some to manage - but it might pressage the nature of future planning for most companies. Some corporate leaders are more proactive than others in preparing for radical change, but hospitality, retail and the oil industry will look and feel significantly different in a few years.?

This isn’t a secret; it isn’t hard to see; it’s happening right in front of our eyes, on a scale that’s difficult to grasp, at a breath taking pace, and with absolute transparency.

Corporate leaders aren’t shy about it (they need to explain the changes to investors) and Forbes, Thomson Reuters, the FT, The Wall Street Journal and other business media are busy carrying in-depth interviews with those providing the vision, strategy and intellect.

Like many on the supply side, I keep an eye on it, because where our customers go, we’ll go, too.??

When I first entered the world of work the idea that the business model of an oil company would fundamentally change over a short period was unthinkable.?

But stable, conservative, bedrock global business sectors are engaging in brand repositioning, restructuring, and vast capex re-allocation, on an eyewatering scale.

Take Royal Dutch Shell, for example.?The Reshape strategy – which will take it to zero carbon emissions by 2050 – rolls out in August; a clear-eyed cadre of corporate leaders with a bold strategy aren’t going to let the company bob at the whim of fate, they’re taking the initiative. ?The famous Netherlands court case had an influence, but Shell’s own public statements reinforce that it has merely accelerated what was happening anyway.?Renewables offer lower margins, but arguably lower risk; the challenge for established oil companies is that the capex entry barrier for some renewable tech is lower, so they'll face competitors in greater numbers, some of them new, unpredictable, risk-taking market movers. But the market is unstable and predicting future performance is hard.

It’s expensive to put a windmill in the ocean but the R&D involved in perovskites, to quote one example (tech which enables highly efficient photovoltaic ‘sandwiches’) is on a different scale. Its immature technology, but it could revolutionise the energy sector.

There’s commercial opportunity for companies with deep pockets … but there are lots of small, nimble competitors, too. Production costs are falling fast. Once car body parts become perovskite-based pv units the world changes once again, and some in the industry say that’s not far off - one example (among many) of the destabilising tech revolution we’re all facing.?

Sinead Lynch, currently chair of the Shell UK business (you can find her on LinkedIn), will become Shell’s global head of low-carbon fuels.?Reuters is reporting extensively on Shell plans to offload $10 billion-worth of shale operations in the Permian Basin (Texas and New Mexico). They’ve secured ownership of Ubitricity, with 2,700 UK vehicle charging points, although they’ll retain reduced North Sea Oil interests (as one of nine oil and gas ‘hubs’) and reduce the workforce by 10%.

Yikes.?Big stuff.?

Shell isn’t alone.?BP is on a similar direction of travel in terms of emissions ?- it reported a 10% drop in 2020 and recently announced an additional $221m investment in US renewables.

It plans to build the UK’s biggest hydrogen plant.??Given the scale of change in recent years we’ve taken that in our stride, but just stop for a moment, and think about that, in the context of (say) the 1990s: BP is building the UK’s largest hydrogen plant.?

Gulp.?

Events like The Paris Accord, and last week’s G7 meeting in Cornwall, provide the political backdrop, but this is hard-headed commercial strategy on a head-spinning scale; being ‘across it’ isn’t enough; thought leaders want to be well ahead of it.

Change is coming to the hotel industry, too.?The impact of the pandemic is yet to be fully understood, over the longer term, but the existing pattern of change to the business model has probably been supercharged.?Radisson – one of our clients – has a clear and progressive strategy (extensively covered on the web) which seems entirely undimmed by the pandemic (they’re ultimately owned by the Chinese Jin Jaing Group, and signed-up 84 new hotels in the Asia Pacific region alone in 2020).?They have multiple brands, acknowledging the growing complexity of the global market, each with its own niche and appeal, and 245,000 rooms either in operation or under development; they operate in 120 countries. If you can marshal the capital required to scale a business at that level, you can spread your risks globally (the rest of us can dream).

Millennials (18-35 year olds) will account for 50% of business travel within 4-5 years and they’re tech-hungry early adopters who’ll reach decision-making levels in corporations earlier than their predecessors, with a lower level of socialisation in pre-pandemic business practice and greater willingness to accept change.

Hotel staff increasingly need to ‘talk their language’, which means high quality healthy food with less meat, and more organic content; a focus on ‘wellness’, and health; seamless tech connectivity; and lower levels of bureaucracy. These customers don’t mind auto check in (and may even prefer it) and (as one analyst pointed out) don’t care if the food is delivered by robot.?But they’d prefer it to be cooked by a chef who regards him or herself as an artist.

High-travelling Millennials are concerned about climate change and want to see eco-efficient heating and cooling, water conservation, and tech-led energy systems.?Air source heating and cooling is in, R22 gas and freons are out.

Consultants like Deloitte are doing their best to chart the future of retail although the turbulence in that market is akin to the ‘fog of war’ and clarity is next to impossible. But competing visions of the future from globally acknowledged experts have common threads.?

The traditional focus around ‘channels’ is being challenged and a more whollistic understanding of the phrase ‘customer-focused’ is being sought (now that it’s increasingly possible to ‘know’ a customer across channels, outlets, locations and seasons).??

There’s an argument that retailers spend too much on customer acquisition and not enough on customer retention, and that forecasting should no longer be reliant on historical trends, because the technology is changing the dynamic and enabling higher levels of predictive analysis.?

Big retailers will have to reach the rapidly growing demographics in Asia, South America and Africa (doing that entirely through real estate is a non-starter, however well capitalised); being smartphone-friendly will be an essential requirement.?

Organising your business around a retail store strategy was already difficult, but in an era in which customers are likely to be more disease and contagion conscious than ever before in history, that may be yet another trend which will accelerate dramatically; there are strong arguments that the store will still have its place, albeit a different one.?

Strategists in the car retail industry recognised years ago that the role of dealerships would change, and that process was already under way pre-pandemic.?The politics of that are fascinating (but too detailed to go into here).??

Nothing in the business world, absolutely nothing, will be stable.?We may as well take the entire notion of stability and chuck it out.?Stability is over; we need to get used to the rise of the Disruptors.*

How’s it all going to pan out for small supply companies? ??

Not a clue.?

And I know I’m not clever enough to take the place of those at the head of the global corporations which need to steer a path through this.

If instability is the norm, the days of long-term strategies being funded by inflexible capex programmes demanding predictable returns are probably history.

The nature of risk itself will change.?Strategy will need to be more nimble, and based more on principles than inflexible plans.??

Essentially, Xmo Strata is a branding company, and branding will become increasingly important, I believe (though the way it is executed may change).?

SpectisGB is essentially about managing real estate assets more efficiently, and real estate will still be required (though the uses to which it is put may change).??

By comparison with our customers, both Xmo Strata and SpectisGB are small companies. SpectisGB especially.?

But if I’ve learned anything about business, it’s that you have to have belief, and act with confidence, and seize opportunities.?

So in this uncertain world, we’re going to be bold, not nervous.?If Shell and BP can think in terms of fundamental changes to their business strategy, despite their enormous scale, so can we.

Precisely because we’re smaller, it’s easier for us to be fast-moving, nimble, agile, flexible, responsive and efficient. We can learn fast.?We’re already tech-savvy but we can maintain that edge.??We can take big decisions, too, when the need arises.?

We started being bold even before the pandemic.?A couple of years ago, we invested in a warehouse (pictured right) close to both Dover and Ashford International, which gave us more flexibility, greater control over logistics and distribution, and increased stockholding; we believed the days of reliable JIT delivery were numbered, and in that, we’ve been proven correct.

We can do more first time fixes/repairs, because we have signware on the shelf and ready to go instantly - we have the UK’s largest stock of Shell signware, including branding ancillaries and items such as tank gauges (measuring the available fuel in a tank), and we did this precisely because we wanted to enhance our capacity to be ... fast-moving, nimble, flexible, responsive and efficient.

From 2021 onwards, that just about sums up our business strategy. The future is uncertain, and uncertainty is scary.?But for those with the vision, and the entrepreneurial skills, an unstable business environment is also rife with opportunity.

We don’t know what’s round the corner. None of us do. ?Our task, at this point, is to stop obsessing about the turbulence, and embrace it.

* Addendum, June 16: A report by the independent Climate Change Committee (published a day after this article) predicts warming will hit the UK harder than first thought and the country is woefully ill-prepared for more severe heatwaves, more intense rainfall, and an increased flood risk across most of the UK. It says homes, infrastructure and services must be made resilient to floods, heat and humid nights.

Let's keep in touch through this very tough period!

Xmo?Strata's LinkedIn page (sign installation and maintenance) is?here.

The?SpectisGB?LinkedIn page (scanning and digital reconstruction) is?here.

You can check out my other articles?here.?

Please visit?my?profile?and send me a connection request if we have things in common ... and stay safe!