Wall Street Journal has an article by Gregory
Zuckerman on how the financial crisis and the new technologies for oil and gas extraction
surprised the main market players, but were understood and exploited by
outsiders. This is probably news to many, and it has interesting practical
implications and a strong link to research.
Let’s start with the practical part. Many parts of
the world were depleting their oil and gas reserves, and special concerns about
this were raised in the United States, which tends to worry about the strategic
value of energy and relations with the nations in Arabia who are richest in
oil and gas. Business people also paid attention, and started making
investments that made sense under the assumption that USA would have little energy
left soon. Oil company engineers also paid attention, and some worked to find
new oil and gas extraction techniques that would work in places where extraction
was not possible yet. This is normal for oil companies (or any company that
sees its market disappear); in fact the industry also has worked a while on how
to get more of the oil out of existing fields. But these engineers and their
managers fought a losing battle against superiors who had so much expertise
with what worked and what did not that they judged the projects to be hopeless.
Instead, it was minor – very minor – oil companies
that developed the “fracking” techniques that are now turning USA into an gas-rich
country that could soon start exporting oil. They were companies run by owners
who have earlier worked picking cotton and running restaurants: not the usual
oil executive background. For the sake of handling global warming, this
increase in worldwide burnable materials is a potential problem, but for the US
oil industry it is right now a cause of celebration.
Are researchers surprised by this? Well, we do not
expect this process to happen every time, but it happens often enough that people
have worked on it for a while. Two things happened in this case. First, the
technology was disruptive, or different enough from ordinary oil extraction
techniques that it was not a natural follow-up to the techniques that the
companies mastered. Michael Tushman and Phillip Anderson wrote about the
problems that existing companies have with disruptive technologies in 1986.
Second, the firms were faced with problems that could make them shrink or even
die. In 1963, Cyert and March wrote about how firms with problems search for solutions near the source of the problem itself and initially try conventional solutions,
the opposite of making disruptive innovations.
So, here we have it: many surprised oil executives
and few surprised researchers.
Zuckerman, Gregory. 2013. The Outsiders Who Saw Our
Economic Future. Wall Street Journal, November 3, 2013.
