Challenges for leaders in this fast moving world

John Browne, Singapore

The last 50 years have also brought dramatic changes for business. In the 1950s and 60s, to be an international company was exceptional. To trade and invest internationally was considered rather exotic, and something done only by businesses in particular and rather specialist areas.

The patterns of international investment were principally dictated by the need to access resources, including oil, to meet the needs of the developed, industrialized countries of Europe and North America.

The transformation is remarkable and, of course, continues. The growth of companies is itself one of the most evident features of the last two decades. In 1985, the world's top 20 private companies were capitalized at $390 bn. Now they are worth 10 times that - over $3,900 bn.

For the moment, much international investment comes from the OECD world, but that is changing too. Asian-based multinationals are growing dramatically, and companies, including state owned companies, are beginning to compete internationally.

Asia is now the motive force of the global economy. Last year Global GNP rose by four percent, with Asia accounting for a third of that.

In our own business the facts are equally dramatic. Only 25 years ago, only one barrel of oil in seven was consumed in Asia. Now it is one in three. By 2020, it could be one in two. So a rapidly changing, fast moving world.

What, then, are the challenges for business leaders in that environment? We don't have all the answers. And indeed the unfinished nature of leadership is an important message in itself.

The first point is about understanding the reality of the context in which we are working, and the importance of developing the right relationships with other key participants in the market.

I suspect some people believe that, because of their size and scale, multi-national companies don't have to worry too much about relationships. They probably assume that we just exercise our power and get what we want. That, of course, isn't true.

Any company, large or small, depends for its success on the choices of others. Globalization widens the range of choices available to everyone. That's why the quality of relationships is so important.

They range from the relationships we have with suppliers and the communities in which we do business, to the relationships we have with customers and partners. In our industry, those partners and customers include the state companies who now dominate the industry worldwide. Eight of the ten largest companies in our sector are state-owned.

BP is a pretty large private sector business. We produce 4 million barrels of oil and gas every day, which equates to 3 percent of world demand, but we are still only the tenth-largest company in our sector. Apart from Exxon, all the others are state enterprises including Saudi Aramco and Gazprom. The role of state companies is not limited to countries which produce and export oil and gas. State companies are just as strong in a number of key importing countries.

And that means that this is not a simple, open market in which we can invest freely, or on the basis of reciprocity. To participate, international business has to develop partnerships with the state-sector, and to do that we have to bring something substantive to the table. Relationships -- in this area as in so many others -- have to be based on the principle of mutual advantage.

What can we bring to such relationships? The answer, I believe, lies in one of the key defining attributes of a multinational business -- the ability to access and apply knowledge very rapidly on a global scale. We couldn't develop the resources which lie in deep-water off the west coast of Africa if we hadn't learnt a huge amount from deep water projects in the Gulf of Mexico and the Western Atlantic.

That process of learning which is spread very rapidly, thanks to the advances in communications technology, enables us to keep costs down, and to improve the efficiency of every dollar invested.

Leadership involves an understanding of the needs of others, and the development and application of the technology which enables us to engage on the basis of mutual advantage.

The third strand is about the company's position in the world. I think this comes back to a very fundamental point, which is about the purpose of business. BP exists to provide energy, in various forms, to people who want to buy that energy at a price which they can afford, and in a manner which is sustainable. If we succeed in fulfilling that purpose, we will thrive and reward the investment of our shareholders.

Are we providing products and services in a way which is sustainable? We've taken steps to reduce our own emissions, and to stabilize the level of emissions as our business grows, and now we are looking at ways in which we can apply business skills to the development of a lower carbon economy.

That will cover a large range of activity -- including solar and wind power and it will, of course, include the very interesting pilot projects involving hydrogen fuel cells which we've developed here at two service-stations here in Singapore.

The point is not to claim that any one business can solve the global problem of climate change.

The point is simply that business can take a leadership role -- showing what is possible; investing for the future and providing answers, rather than trying to pretend that the problem doesn't exist, or leaving it as a mess which someone else has to clean up.

Equally, we have to ensure that we take steps to expand the circle of those who benefit from what we do. Behind everything I've talked about there is one crucial issue -- for multi- nationals and indeed for any business, wherever they work. That is the role and quality of people.

Technical advances in drilling and reservoir management are not produced by computer -- they come from the creative brains of individuals. The ability to do business in complex areas, such as Russia, is the product of a remarkable team of people under great leadership.

Global business, in particular, relies on the quality of its people. It simply isn't possible to run a company spanning 110 countries, on the basis of centralized command and control. The authority to take decisions has to be delegated.

People have to be given clarity on their roles and responsibilities, and a clear sense of the values of the company -- an understanding of what is expected of them. But they can't be given a manual -- because events and circumstances are always unpredictable.

That means they themselves have to become the leaders -- not a group of people thousands of miles away in something called a "Head Office".

As we develop the next generation of people -- men and women from all around the world -- the process of change is proving to be very productive. New people bring new ideas and new perspectives.

So leadership in a global economy involves dealing with a complicated set of challenges.

This is the summary of the speech by John Browne at the International Leadership Lecture in Singapore on Nov. 4. The writer is CEO of BP plc.