MBB7005M Leading Innovation and Cultural Change Assignment

Introduction Of MBB7005M Leading Innovation and Cultural Change Assignment

Innovation refers to a process of implementing new methods and ideas resulting in improvements in offerings and operations. The present report will be based on Aramco, a petroleum refinery company. The report will outline the current process of innovation within the company as well as the current process of change with the help of using theories. Further, the report will highlight current and potential micro and macro environmental changes by using PESTLE and SWOT analysis to identify the impacts on the company. At last, it will furnish recommendations to manage and lead innovation and change within the company currently and in upcoming years.

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Background of the company and its nature

Aramco is officially a Saudi Arabian Oil Company and is one of the state-owned petroleum and natural gas organizations. It is considered one of the most eminent companies all over the world. Currently, in 2024 the company is the fourth-largest organization in world by the revenue. It was founded in 1933 a headquartered in Dhahran, Saudi Arabia. The company is one of the leading producers of energy as well as chemicals that direct global commerce and aid in improving the lives of people all over the world. In addition, it operates big on-shore as well as off-shore oil fields, leading to contribute mass production of oil. Further, the company entered into the field of securities offering in the year 2019, making the organization the world`s largest initial public offering. The company is a key player in Asia and acts as a main crude oil supplier to six countries in Asia including China, Japan, India, South Korea, Philippines and Taiwan. In addition, Aramco controls the biggest hydrocarbon transpiration network globally as well as controls the large quantity of unrefined petroleum reserves in Saudi Arabia and several international locations. The company`s competitors include Kraft Foods, Group Danone and so more, but from several previous years, the company performing well in the race as a result able to overcome competition in a significant manner.

Nature of organization:

• Major Producer: Aramco is one of the major producers of crude oil with the lowest cost globally specializing in producing five kinds of oil including Arab medium, Arab Heavy, Arab Light, Extra Light Arab and Arab Super Light. This variety in products leads to effectively covering demands within the global market.
• E-commerce network: Aramco have an effective e-commerce network, integrates entire purchasing process and engage millions of the suppliers from direct and indirect expenses categories (Al-Fattah and Aramco, 2021). The e-marketplace platform of the company promotes online trading within Aramco and its business partners. It leads to help business to expand its business in efficient manner.

Evaluation of current process of innovation

In the era of rapid changes taking place, it is important for the organization to do innovation within the company. Aramco by evaluating the business environment focus on doing innovation within its business, company effectively implement innovation of digitalization where the company focuses on using emerging technologies such as artificial intelligences, automation, internet of things and so more (Kitsios and Kamariotou, 2021). Disruptive innovation theory outline a process of changing an expensive as well as highly sophisticated product, service or offering into one of the simpler, affordable and accessible to broader population. Digitalization innovation of Aramco is a disruptive innovation that aids the business to operate in more convenient way. According to ten types of Doblin innovation, Aramco focus on process innovation, via the use of different technologies within the organization company enhance their efficiency by making extraction of oil effective and decline cost.

For the digitalization innovation within Aramco, the innovation process used is as under:

• Recognition of opportunities: For innovation within Aramco, the first step is recognizing opportunity. Company focuses on enhancing its productivity and efficiency to gain a competitive advantage in the market. Therefore, to identify the opportunity company do market research, get insight of its customers as well as trends analysis (Temel and Durst, 2021). For instance, Aramco do external analysis to include innovation within the business. Referring to the external analysis Aramco identify the opportunity of using artificial intelligence within the business. Within the oil and gas industry intelligent algorithm used to evaluate operational data, getting insight and automatically conduct process enhancement to increase efficiency.
• Generate idea: After identification of the opportunity, company generates ideas to bring innovation. Therefore, Aramco to do brainstorming sessions, take customer feedback as well as cross-functional collaborations. For instance, during the innovation process, company generates various ideas regarding use of AI like prediction of data to forecast demand, automation, makes easier working process, data analytics and so more.
• Evaluation and Selection of the idea: After generating the idea, company select the most promising and demanding idea. For instance, taking into the account the factors such as market potential, availability of resource in terms of finance, manpower as well as potential impact the company select innovation of digitalization. Aramco select one idea of innovation including developing an AI-powered safety product namely the i4Safety 2.0 Hazard & Incident Prediction tool. This innovative tool use historical data to forecast potential on-site hazards and incidents enable the company to increase safety as well as efficiency in operations (Digital transformation, 2024).
• Develop and Prototype: After selection of idea of innovation, company tests the technical feasibility of the innovation. For this purpose, Aramco analyze its available resources consisting staff, finance, hardware and software to identify whether the technical requirement meets for the new innovation or not.
• Implementation: After successful testing, company implements innovation by allocating resources and taking required action. The organization implement the innovation by hiring the experts of technical knowledge as well as testing that all features of innovation works in the proper manner.
• Monitor and evaluation: After the implementation of digitalization innovation, company monitor performance and influence of innovation. For this company, using KPI for evaluating success of innovation. Efficiency is one of the KPI for monitoring the innovation. Increment of 15% efficiency indicates that due to innovation chances of accidents and hazards declines which leads to increase efficiency of the business.

Design thinking theory of the innovation is a kind of non-linear, iterative process as well as a user-centered approach that leads to foster innovation in product and service design. According to the design thinking innovation strategy by redefining problems organization can create innovative solutions (Pande and Bharathi, 2020). For instance, referring to the digitalization innovation, Aramco used IoT sensors to collect real-time data from an oil well, it effectively combined with the self-diagnostic tool and digital analytics to automatically evaluate and optimize well`s performance. Referring to the innovation, company develop a new technology that enable it to detect gas by using electro-chemical sensors known as Smart Gas Detector, leads to deliver high performing self-diagnostic as compared to conventional detectors (Digital transformation, 2024). This innovation leads to enhance company efficiency to operate its business in effective manner, leads to provide comparative advantage within the industry.

Evaluation of current process of change

With the help of market evaluation as well as identifying the needs of the external environment, Aramco identified the need of minimizing its business negative environmental impacts as extraction of oil and gases leads to emission of carbon. This leads to declines the quality of environment as well as adversely impacts social and economic life of people. Referring to the environmental impacts and to effectively cope up with the changing trends Aramco focused on implementing change within its company in its operations. Aramco implement the change of the sustainability within in its business (Jrad, 2024). Referring to 10 types of Doblin innovation, based on process innovation the company begins to use low-carbon intensity technologies regarding oil extraction as well as development of nonfuel applications for crude oil, it leads to decline emission across the value chain (Leveraging technology, 2024). This change by the company leads to make the company efficient to grab the attention of eco-conscious customers and partners.To bring the change within Aramco the current process of change support by the Kotter`s change management model, it is as under:

• Build a sense of urgency: To bring the change of sustainability by using low carbon intensity technology in successful manner. Aramco first work on build a sense of urgency by effectively communicate about the need and reason for change process. For example, Aramco communicate to its employees and stakeholder that company currently not able to meet sustainable requirements as a result it is important to implement the concerned change.
• Build a guiding coalition: At this step, company build a team of experts that is necessary for implementation of change. For instance, company select experts of technology, advisory team as well as forefront workers.
• Creating a strategic vision: Aramco made a strategic vision regarding how things done in a smooth manner so that able to implement the change efficiently.
• Communicate the vision: After creation of strategic vision, it is crucial for Aramco to communicate the vision to the employees as well as stakeholders. During communicating the vision company efficiently confront the concerns as well as anxieties of the employees as some of individuals think that using technology within the company can result in loss of their job. To communicate the vision Aramco use an interaction communication theory, it is a procedure in which the participants change their positions as a receiver and sender and generate meaning by sending message as well as receiving feedback within the psychological and physical context. This theory aids the company to convey their opinion about the change at the same time understanding the concerns of the employees (Bernstein et al, 2020).
• Remove obstacle: In any kind of change, an organization has to face a resistance from the employees or other stakeholders. The reason of resistance can be lack of awareness about the change, fear of losing job or changes in job role and so more. At the time of implementing change of sustainable initiative, Aramco face huge resistance. To remove the obstacle, company focus on encouraging the employees by outline advantages get from the changes.
• Create a short-term wins: It is identified it is not possible to implement the change in once, company have to create a momentum for vision to ensure that it sticks. Thus, referring to the short-term wins company appreciate the employees who give their best to meeting the sustainable targets (Harrison et al, 2021).
• Build a change: It is analyzed that quick wins leads to create a perception in teammates and stakeholders that change is achieved but true change must be settled with expansion and repetition. Therefore, Aramco, after implementation of sustainable initiative within its operations effectively evaluate what went right or what went wrong after every victory. In addition, the company establish more ambitious goals to bring the change completely.
• Anchor the change within company culture: This step include embedded of the change into the culture of company. For this, Aramco effectively communicate the progress of sustainable change and its benefits enjoyed by the company (Sittrop and Crosthwaite, 2021).

The current change process of the company crucially assists Aramco to implement sustainable change in efficient manner within the company.

Impact of current and potential micro and macro environmental changes

Macro environmental changes refer to external changes that taking place within the outside external environment. PESTLE analysis is the best way to evaluate the factors that directly and indirectly impacts the business currently and in future: It is as under:

• Political: The political factors include rules, regulations as well as government policies. Aramco is a Saudi Arabia company. In the Gulf region, terrorism and social-political unrest is high. It leads to impacts working of the company as political unrest leads to decrease demand for the oil and gas products or make difficult for the company to supply products to its ultimate consumers (Capobianco et al, 2021). In addition, natural resources within the country controlled by the government, change in the political environment as well as government policy results in uncertainty, impacts overall business of Aramco.
• Economical: It includes factors such as change in rate of interest, inflation, economic growth and so more. Economic downturn leads to impacts the profitability of the company. During the covid pandemic, global economy declines, results in decline of demand for oil and gas leads to Impacts Company to maintain its revenue.
• Social: It includes factors such as cultural norms, values and expectation related to work. Aramco works towards improving the communities by adopting programs of corporate social responsibility. The organization use Safety management system to enhance occupational safety and health. It focus on treating all employees with fair and respect. It leads to positively impact the organization in increasing its brand image and reputation within the industry.
• Technological: In the era of digitalization use of technology increase within Aramco. The technological advancement within the external environment enable the company to use disruptive technologies such as quantum computing, automation, AI to increase operational efficiency as well as innovation within the business. Currently, use of technology by Aramco positively impacts the company to decline its cost by reducing wastage, doing prediction of accidents and hazards results in provide competitive advantage within the industry (Nguyen, Gosine, and Warrian, 2020). This macro change within the industry enables Aramco to do innovation within the business in terms of extraction of oil and gas, supply product to different consumer and so more. This leads to impacts the company to grow and expand business in effective and efficient manner.
• Environmental: The oil and gas refinery industry have several negative environmental impacts as extraction of the oil and gas leads to emits pollution as well as gases that adversely harms environment. Therefore it is important for the company to follow environmental laws. The company works towards decline environmental Impacts as greater impacts leads to make company responsible to pay penalties.
• Legal: Legal factors includes laws related to operate business, Aramco has to adhere all laws related to extraction, environment like Environmental legislation 2001 and so more. Currently, company by adhering the laws focus on decline its negative environmental impacts by operating its operation in sustainable manner via using low-carbon intensity technology.

SWOT analysis aids the organization to identify its strengths, weaknesses, opportunities and threats. It is as under:

Strengths:

• Greater production and refining capacity: One of the main strength of Aramco is its larger production and capacity to refining its materials. This leads to aids the organization to cater a large audience in the market with its products and aids in remain leading in the industry.
• Advancement in technology: Another strength is greater focus on using leading technology in its operations, production and management of the products. This strength positively impacts the company to decline its cost of operation, get competitive advantages and attract more investors, customers (Kuhnigk et al, 2022.
• Low price: Aramco has a low cost of production due to use of technologies as a result enable it to offer oil at lowest price in global market. This leads to impact the company to expand its business by attracting more customers, aids in making business more profitable.

Weaknesses:

• High dependency on crude oil: One of the main weakness of Aramco is greater dependence on one product i.e. crude oil. Economic uncertainty and decline in the demand of crude oil significantly impacts the business revenue makes difficult for company to remain competitive in future (Tetłak, 2022).
• Corporate governance and transparency: Another weakness of the company relates to the transparency of all operations regarding to the corporate governance structure set in the business. This framework leads to make one of the great barrier for the company to make future collaborations with other companies as it requires higher level of transparency from their partners.

Opportunities:

• Expansion of downstream operations: Company has opportunity to expand its downstream operations by leveraging its refining as well as petrochemical capabilities. In addition, organization can capture extra values from its oil reserves. It leads to positively impact company to make its offering more efficient,
• Technological advancement and sustainability: Company has opportunity to use more technology to make its operation proficient as well as to do business in sustainable manner. In addition, the world is move towards the cleaner sources of the energy as a result Aramco has also opportunity to invest in renewable energy technologies and diversify its energy portfolio (Bajolle, Lagadic and Louvet, 2022). Also, by increasing sustainability, the company is able to grow global energy demand, furnish opportunity to organization to meet market requirements.

Threats:

• Exploration of new product: The global market share of Aramco decline if other countries become successful in exploration of new products. It is great threat for the company as effectively impacts its profitability.

Recommendation to manage and lead innovation

Based on the above evaluation of Aramco`s current and potential upcoming environmental changes, some of recommendations are proposed to direct the organization in leading and managing change and innovation in effective manner. It is as under:

• Use of transformational leadership: To effectively lead or manage innovation and change within Aramco, it is recommended to the organization to use transformational leadership. Leader should efficiently guide, direct and motivate the employees to effectively adopt changes within the organization (Putri, Mirzania and Hartanto, 2020). In addition, to implement innovation and change successfully, leader should use open and transparent communication to brainstorm new ideas and opinion and efficiently make the employees part of the innovation, it leads to give them feeling of respect and values.
• Investment in emerging technologies: It is advised to Aramco to continually invest in emerging technologies such as AI, automation and energy, efficient technologies. This leads to help the company to innovate business methods and processes further and enables it to do more innovation to get a competitive advantage within the industry. This recommendation aids Aramco to remain in top rank in reference to innovation.
• Market research: To lead innovation as well as manage change Aramco should focus on doing market research. Organization must emphasized on established a sound research and development team that enable the company with the information of recent market trends and competitors (Tidd and Bessant, 2020). For instance, the R&D team of Aramco, provide information of new introducing technology that can use by the company to leads innovation within the business.
• Adaptive regulatory compliance: To lead innovation as well as manage change, it is advised to Aramco to adhere all regulatory compliance related to change and innovation. In addition, currently government provides incentives for adoption of sustainable technologies, thus company should grab the opportunities to lead innovation in a significant manner.
• Advanced Drilling Technologies: It is crucial for Aramco to do innovation in drilling technologies for improving precision and safety in oil extraction (Epelle and Gerogiorgis, 2020). To lead innovation, Aramco can use techniques like directional drilling as well as automated drilling systems leads to increase accuracy, decline environmental impacts as well as minimize risk associated with manual operations. This innovation leads to enable Aramco, to access to previously unreachable reserves, results in expanding potentials within the industry.
• Digital oilfields: To lead the innovation within the organization, it is advised to integrate digital technologies within the oilfields. This innovation provides real-time data analysis, forecast maintenance and remote monitoring (Sambo et al, ., 2023). The innovation improves operational efficiency, decline costs as well as enhance decision-making processes. These advancements within the organization allows to optimize resource management as well as respond swiftly to emerging challenges.
• Hydraulic Fracturing and Enhanced Oil Recovery: To lead innovation it is advised to Aramco to implement EOR techniques for increasing output from existing wells. Advanced EOR methods as well as fracking fluids leads to increase the efficiency of the company regarding resource attraction as well as increase the lifespan of the oil fields. Implementation of this innovation enable Aramco to effectively meet global energy demands while decline the requirement for new drilling projects.

Thus, this all recommendations assists the company to leads as well as manage innovation and change in 2024 and beyond in significant manner.

CONCLUSION

To sum up all, it is articulated that innovation and change within the business is crucial to remain competitive within the industry. The present study based on Aramco, a South Arabian, oil and gas company, it is major and leading producer of crude oil. The present study outlined current process of innovation of Hazard and Incident predictive tool. In addition, via the use of Kotter`s change management model, the report explained the current process of change that includes use of technologies to introduce sustainability within operations. Further, from the evaluation of micro and macro environmental changes via PESTLE and SWOT it is identified that company strength is greater refining capacity, advancement in technology while weakness is more reliance on crude oil. To lead and manage change recommendation provided including use of transformational leadership, emerging technologies and introduces innovation regarding drilling technologies and more.

REFERENCE

Books and Journals

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• Bernstein, R.S., Bulger, M., Salipante, P. and Weisinger, J.Y., 2020. From diversity to inclusion to equity: A theory of generative interactions. Journal of Business Ethics, 167, pp.395-410.
• Capobianco, N., Basile, V., Loia, F. and Vona, R., 2021. Toward a sustainable decommissioning of offshore platforms in the oil and gas industry: A PESTLE analysis. Sustainability, 13(11), p.6266.
• Epelle, E.I. and Gerogiorgis, D.I., 2020. A review of technological advances and open challenges for oil and gas drilling systems engineering. AIChE Journal, 66(4), p.e16842.
• Harrison, R., Fischer, S., Walpola, R.L., Chauhan, A., Babalola, T., Mears, S. and Le-Dao, H., 2021. Where do models for change management, improvement and implementation meet? A systematic review of the applications of change management models in healthcare. Journal of healthcare leadership, pp.85-108.
• Jrad, M., 2024. The Role of Technology in Promoting Sustainability and Business Performance in Industries and Business Models: The Case of Saudi Aramco. In Navigating the Intersection of Business, Sustainability and Technology (pp. 201-225). Singapore: Springer Nature Singapore.
• Kitsios, F. and Kamariotou, M., 2021. Service innovation process digitization: Areas for exploitation and exploration. Journal of Hospitality and Tourism Technology, 12(1), pp.4-18.
• Kuhnigk, J., Standau, T., Dörr, D., Brütting, C., Altstädt, V. and Ruckdäschel, H., 2022. Progress in the development of bead foams–A review. Journal of Cellular Plastics, 58(4), pp.707-735.
• Nguyen, T., Gosine, R.G. and Warrian, P., 2020. A systematic review of big data analytics for oil and gas industry 4.0. IEEE access, 8, pp.61183-61201.
• Pande, M. and Bharathi, S.V., 2020. Theoretical foundations of design thinking–A constructivism learning approach to design thinking. Thinking Skills and Creativity, 36, p.100637.
• Putri, S.A., Mirzania, A. and Hartanto, D., 2020. The importance of a transformational leadership model in managing organizational culture.
• Sambo, C., Liu, N., Shaibu, R., Ahmed, A.A. and Hashish, R.G., 2023. A technical review of CO2 for enhanced oil recovery in unconventional oil reservoirs. Geoenergy Science and Engineering, 221, p.111185.
• Sittrop, D. and Crosthwaite, C., 2021. Minimising risk—the application of kotter’s change management model on customer relationship management systems: A case study. Journal of Risk and Financial Management, 14(10), p.496.
• Temel, S. and Durst, S., 2021. Knowledge risk prevention strategies for handling new technological innovations in small businesses. VINE journal of information and knowledge management systems, 51(4), pp.655-673.
• Tetłak, Z., 2022. The role of innovation in reducing dependence on crude oil?. Scientific Journal of Bielsko-Biala School of Finance and Law, 26(4), pp.50-59.
• Tidd, J. and Bessant, J.R., 2020. Managing innovation: integrating technological, market and organizational change. John Wiley & Sons.

Online

• Digital transformation. 2024. Online. Available through: < https://www.aramco.com/en/what-we-do/energy-innovation/digitalization/digital-technologies >
• Leveraging technology. 2024. Online. Available through: <https://www.aramco.com/en/sustainability/climate-and-energy/technology>