COVID-19 lockdowns, a collapse in industrial activity and global travel bans caused a substantial decrease in demand for natural resources. Oil prices crashed to the lowest levels since 2001, while gas demand has fallen by as much as 20%. The regional power markets are also increasingly at risk of a prolonged decline in demand. This uncertainty has amplified the need for C-suite executives to adjust their long-term strategies.
Energy companies may need to be increasingly agile and may need to review their strategic priorities more frequently. Many energy executives have transformed their core business operations by optimizing their cost structure, redesigning the supply chain and increasing the speed of capital and resource reallocation. Businesses want to self-disrupt before competitors force a disruption. Executives who oversee strategy are creating new roles, such as Chief Growth Officer, Chief Transformation Officer and Chief Sustainability Officer.
At the same time, strategy now likely needs to focus on all stakeholders — not just shareholders. And competitors may need to be considered as potential partners to thrive in an uncertain future. These forces are changing the way companies formulate and execute strategy. The EY Realizing Strategy survey of more than 1,000 Chief Executive Officers (CEOs), Chief Financial Officers and other C-suite executives on the future of strategy formulation shows how.
Among the key findings from the energy executives surveyed:
- 73% indicate that COVID-19 will impact, or even cause them to pivot, their organizations’ medium- to long-term strategy. And 13% say it will cause them to look to new sectors to succeed.
- 73% believe that customers are as important as, or more important than, shareholders when formulating strategy. And 70% say the same for environmental and social issues.
- 62% believe that the biggest competitive threat in the next three years will come from a company outside their current sector.
- >80% who added the roles of Chief Growth Officer, Chief Transformation Officer, Chief Innovation Officer, Chief Technology Officer or Chief Science Officer in the last five years say that those positions substantially influence strategy.
Formulate strategy with more stakeholders in mind
The survey reveals energy executives are somewhat more likely than other executives to consider environmental and social issues (70% vs 56%), suppliers (69% vs 54%), and government and regulatory requirements (66% vs 65%) to be as or more important than shareholders. Growing public concerns on climate change have magnified its importance and accelerated the pace of corporate investment. The oil and gas companies, as well as energy utilities, have long been challenged by stakeholders and investors on climate change and risk exposure. In power and utilities, with the cost of distributed generation and battery technologies continuing to fall, empowered customers are finding it increasingly feasible to pull the plug on traditional energy companies in favor of generating, storing and selling their own power.