The debate about technology in sport seems to be rearing its head again following some controversial incidents at the World Cup. Here are a few loose thoughts on the relationship between innovation, performance and the 'business' of sport.
Innovation in Sport
· Performance improvement is a fundamental feature of both sport and business
· Innovation is key to performance improvement – doing things differently and better, challenging conventions, applying technology, changing business models
· Innovation is normally regarded as a good thing
· However, recent examples in sport and business suggest that innovation is not always good:
- e.g., ‘go faster’ suits at the world swimming championships,
- e.g., global banking crisis caused by innovation in financial products
· Incidents of controversial innovation in sport seem to be happening more frequently – driven by increasing technological and market intensity
- e.g., F1 car innovation; ‘blade runner’ Oscar Pistorius;
· Problems arise when innovation outpaces regulation – in ‘rules or tools’ of the game, in sports or markets
· Yet at the same time changes to rules and tools are used by regulators and governing bodies as instruments to meet their strategic and commercial objectives such as raising participation levels, TV revenues or winning gold medals:
- e.g., the 20/20 cricket format
- e.g., ‘hawk eye’ ball tracking in tennis
- e.g., the investment in equipment innovation by Sport England and Sports Institutes in Scotland and Australia
- e.g., the development of ‘competitive’ regulatory regimes in financial services
· There seems to be a double standard – innovation introduced by the regulator is okay but not when it is a ‘surprise’
· Naturally this is a source of dispute and a potential PR disaster waiting to happen
· Ethical and philosophical questions are also raised by innovation in sport and business:
· When is equipment innovation sporting and when is it cheating?
· Is a performance improvement and ‘win at all costs’ culture good for a company? Is it good for a market system and society? (Post-banking crisis, do we aspire to a different kind of market system – more egalitarian and Nordic?)
· What policies should a company have on performance enhancement, e.g., employees using legal drugs to help them work longer hours?
· Does permitting advanced equipment innovation in sport make is socially exclusive and therefore undesirable?
· These are difficult issues for governing bodies
· Often they are in a ‘no win’ position – criticised for being either too conservative or too radical or simply indecisive
· They need to get in control of the situation and demonstrate leadership
Wednesday 30 June 2010
BP Deepwater: a performance disaster
The cause of the BP Deepwater Horizon platform explosion and oil spill has yet to be fully revealed, however, from the information that has emerged from workers on the rig it would appear that a fundamental performance problem was at the heart of this disaster.
The oil industry is a highly evolved example of industrial capitalism. It generates profit at a frightening rate through large scale production, trading and diversified downstream businesses. It is also very focused on cost control. Lord Browne pushed BP’s organisation hard on this component of their business model and his legacy has persisted under current CEO Tony Hayward. From a strategic perspective, BP and the other oil majors have moved to a point in the supply chain where they are more investors rather than hands-on oil producers. In mature fields such as the North Sea, third party companies such as Petrofac operate most of the assets on behalf of BP and others. In the Deepwater case, the ownership and operating responsibilities were complex, involving BP, Transocean, and Anadarko amongst others. BP says that Transocean as the rig owner was responsible for the operation and maintenance of the ‘blow out preventer’ (BOP) that was the key item that failed. Yet BP accepts liability for the outcome and faces potentially crippling losses as a result.
In terms of the Effectus Performance Framework, this looks like a high reliability situation being managed according to high combat performance measures. BP took unreasonable risks with cheaper design options in order to save money and time. Safety should have been the highest priority and dominant performance outcome. Also the lack of clear ownership for the safety environment on the rig meant that potential sanctions were vague and ineffective in guiding performance choices. BP now accepts responsibility for the cost of damages, however, is adamant that it was not solely responsible for causing the accident.
Oil company executives and regulators would do well to consider the typical performance structures in the industry today and the potential risks implied by these on high reliability situations, in order to reduce the chances of a repeat incident in the future.
The oil industry is a highly evolved example of industrial capitalism. It generates profit at a frightening rate through large scale production, trading and diversified downstream businesses. It is also very focused on cost control. Lord Browne pushed BP’s organisation hard on this component of their business model and his legacy has persisted under current CEO Tony Hayward. From a strategic perspective, BP and the other oil majors have moved to a point in the supply chain where they are more investors rather than hands-on oil producers. In mature fields such as the North Sea, third party companies such as Petrofac operate most of the assets on behalf of BP and others. In the Deepwater case, the ownership and operating responsibilities were complex, involving BP, Transocean, and Anadarko amongst others. BP says that Transocean as the rig owner was responsible for the operation and maintenance of the ‘blow out preventer’ (BOP) that was the key item that failed. Yet BP accepts liability for the outcome and faces potentially crippling losses as a result.
In terms of the Effectus Performance Framework, this looks like a high reliability situation being managed according to high combat performance measures. BP took unreasonable risks with cheaper design options in order to save money and time. Safety should have been the highest priority and dominant performance outcome. Also the lack of clear ownership for the safety environment on the rig meant that potential sanctions were vague and ineffective in guiding performance choices. BP now accepts responsibility for the cost of damages, however, is adamant that it was not solely responsible for causing the accident.
Oil company executives and regulators would do well to consider the typical performance structures in the industry today and the potential risks implied by these on high reliability situations, in order to reduce the chances of a repeat incident in the future.
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