For several years, energy giant BP has been exploring ways to deal with the ongoing challenges facing the energy industry. Issues such as climate change, demographic shifts, changes in commodity flows, and even geopolitical trends are remaking energy markets, requiring companies to keep pace or risk being left behind. “The question was how to accelerate BP through the energy transition,” says Stephen Cook, chief commercial officer, group technology, at BP. “How can we navigate the confluence of trends and disruptions all at once?”
One answer is Launchpad, which BP created as a standalone company in early 2019. Launchpad’s goal is to build and scale five billion-dollar businesses that address two key global energy challenges: the need for more energy and the need to produce that energy with fewer greenhouse gas emissions. Launchpad’s current portfolio includes four companies focusing on solutions, such as advanced data analytics for energy exploration and predictive maintenance for wind turbines. Cook, who serves as managing partner at Launchpad, says the company isn’t an incubator; nor is it a venture-capital firm. Rather, it’s an innovative model to take viable ideas and build them into full-blown businesses. “We’re treading new ground and still learning,” Cook says.
These kinds of business-building groups are rare in the corporate world, says Dieter Kiewell, a senior partner at global consulting firm McKinsey & Company. But they carry considerable appeal, offering companies a well-orchestrated way to expand their portfolio and even, in some cases, redirect their future. Like any new initiative, however, companies need to make sure startup-minded ventures such as this don’t get bogged down in bureaucracy or stalled by the parent company’s more strait-laced corporate culture. “Larger companies are well positioned to drive these startup ventures, but they need to be set up in the right way,” Kiewell says.
THINK LIKE A STARTUP
A business-building group should be many things: agile, creative, fast-paced, and innovative. What it should not be, Kiewell emphasizes, is a direct extension of the parent company. For instance, companies can’t afford to take the bureaucratic approach to business building that they may take to, say, creating a new internal department or initiative.
Most important, these startup groups need to be as autonomous as possible. Take Launchpad: The company is 100% owned by BP, but is governed by a senior-level board within BP in order to shield it from more bureaucratic or territorial tendencies that often exert themselves when startups are managed by a particular corporate division. And funding comes from the top level of the company’s capital allocation. “That’s important so we don’t have to negotiate for individual funding of the business from other areas of BP,” Cook says.
Kiewell also notes that business-building groups must adopt a venture-capital mindset that can quickly distinguish an idea that has the potential to grow into a billion-dollar unicorn from one that simply represents a small step forward for the company. That requires a highly focused, agile strategy rather than a more conservative, bureaucratic approach. “Figuring out if you have a real business opportunity on your hands takes short, sharp due diligence rather than a long and winding assessment process,” he says.
Finally, people matter—a lot. While business leaders understand that in principle, the temptation is to staff startups with many of their own people. That is often a mistake. Because having the right personnel on hand to both kick-start the new venture and keep it running is a crucial ingredient, Kiewell recommends that companies start by looking outside the organization. Begin by finding people with relevant startup experience as well as experts, such as data scientists who can create an integrated data strategy, or IT pros who can design the right technology stack. Those hires can get the company off on the right foot while more permanent staff is sourced and hired. And strive to make the hiring process as smooth as possible. At Launchpad, that meant working with BP’s human-resources department to accelerate the hiring process, reducing it from several weeks to a seven- to nine-day window. “That longer process doesn’t work in the startup world,” Cook says, “especially with the digital talent we need to access.”
SUPPORT FROM THE C-SUITE
While business-building groups need their autonomy, “over-correcting” and being totally hands-off is not the answer either. Startups need resources and support from the top of the corporate ladder. Launchpad, for example, has the backing of BP’s most senior executives, who have been not only vocal in their support but have dedicated time and resources to make the new venture successful. Cook says it would have been nearly impossible to build a venture like Launchpad without such broad-based—and high-level—support. To repay that trust, however, Launchpad must perform. “This isn’t a free-for-all,” Cook says. “We have to deliver on our promises. There are heavy expectations.”
But wait—isn’t the whole point of the startup culture to move fast and make mistakes? And isn’t that precisely at odds with the expectations from BP’s leaders? Not necessarily, Cook maintains. Meeting those expectations doesn’t mean Launchpad has to rein in its approach. And it doesn’t mean that failures are verboten—as long as those failures are in service to the ultimate goal of building business that can outpace disruption. “It’s okay to fail incrementally on a daily or weekly basis, but you have to learn and adapt from that,” he says. “That’s agility in a nutshell. Fail, but learn from it quickly.”