Ian Vann was fuming. The performance and cost data was a terrible reading. It was the annual review time at British Petroleum (BP) and as the head for Global Exploration, Ian and his team were also charting BP’s strategy for the next 15 years. Costs were escalating and they were hitting more dry wells than ever in their history. As he walked to the room where his team was trooping in, a few deep breaths helped bring calm. The change had to be triggered.
As the world leader in oil exploration BP had a dream run in the 60’s and 70’s when they hit large, untapped reserves which were easily detected by their explorers. That run ended in the 80’s when the wells got smaller and were tougher to spot. BP also relied heavily on the explorers who had an average accuracy rate of just 1 out of 5 – already a global standard. Now the explorers behaved like salesmen and put pressure to drill every well. Because they knew that their payoff on hitting one big well was big enough to cover for the ones they did not hit. They tinkered with the accuracy math and rationalised it with sound logic and experience.‘Guys, look at the explorer accuracy and the hit rates’ Ian was pointing to the data on the screen: ‘When accuracy is more than 75% , we have a certain hit. Between 20% and 70%, it is just good enough. For scores less than 10%, the hit rate is just 1%. But we drilled every well with less than 10% score last year. And hit zero. Those guys are killing us with pressure. And we aren’t using the data we have’
‘So, we first attack costs. Get down the per barrel cost from $5 to $1’.
Ian then delivered the sucker punch: ‘And from now onwards – No Dry Holes’
Explorers revolted. It shocked the employees. Outrageous and impossible, they said. But it was the diktat. And it shook everyone in BP out of false comfort. No one could use the language of probability anymore. No Dry Holes meant all the fudge and taking random shots got elliminated.
Everyone took off their explorer hats and began to think like geologists. Which meant new sciences were used and systematic tests were devised to indicate a definite hit.
But No Dry Holes created an even bigger shift in BP’s culture. No one rationalised failure by saying ‘Oh, we hit a dry well, but we learned’. And no one hid under the excuse of a ‘strategic call’ anymore.
When there is no place to hide, people do not try to hide.
By 2000, BP achieved an unprecedented 2 out of 3 hit rate – tripling their success rate. And the costs per barrel were down to $1.
This story appears in ‘SWITCH, How to Change things, When Change is Hard’ by Chip and Dan Heath. It is a book that you must be reading if you are tackling change management at every level – for an organisation, your team or at a personal level.