By Roger Anderson, Columbia University
Nathan Edmonson’s thought-provoking comment on my last Blog entry “Implementing the Lean Smart Grid” had me thinking all last week about my dear friend Rick Smalley of Rice University. First, he discovered the “Buckyball” or Carbon Fullerene and won the Nobel Prize in Chemistry in 1996. Then, as his newly found freedom of thought took him on a crusade to convert the discovery into practical science to solve the world’s energy problems, he was struck down by cancer.
He died in 2005, but his crusade to produce and transmit enough energy to satisfy the needs of everyone on the planet continues. In his “remission years,” Rick was convinced that one of the biggest impediments to abundant and cheap energy for all was that there simply were not enough scientists and engineers choosing to work in the profession. Many more would be needed to invent the discoveries necessary to keep up with energy growth, let alone produce the required abundance. Computer-Aided Lean Management consists of a set of tools and techniques to fill this gap by empowering the best and brightest to do more with less. However, Lean concepts are often misconstrued by management to think it empowers a company to do the same with less. More below the fold.
Back in 1998, I wrote an article called “Oil Production in the 21st Century” for a special issue of Scientific American on the “End of Cheap Oil.” I was feeling optimistic about the technologies for production growth keeping up with international demand in the energy industry. Unfortunate and short-sighted management trends that were decidedly not Lean have since affected my optimism. When the oil price collapsed from $25 to $12/barrel at the end of the 1990’s, energy industry management slashed their technical and scientific staffs. These cuts were on top of the merger-mania layoffs of the 1980’s. They were so extreme that when the companies finally began, belatedly, to hire again in 2005 (when oil passed $40 barrel), an entire generation of knowledge-workers had been lost, leaving the industry technically crippled. Today, even after that heart stopping peak in oil price of $147/barrel last year and an international recession pumping billions into energy projects like the Smart Grid this year, too few new scientists or engineers are entering the profession. And that includes electric utilities as well as oil and gas companies. The graying and massive retirements of the old, experienced generations and the failure to hire and train several new generations of the world’s “best-and-brightest” could be devastating to the continued development of the energy industry. Where is the next Rick Smalley to sound the warning now that we really need it?
Energy is not an easy business to manage well. Whether it is oil, gas, electricity, or renewables, the energy industry requires long-term, massive investments in not only people but also in inter-dependent, heavyweight infrastructure. It also requires intelligent management of market forces that are dominated by risks from uncertainties such as weather, price and cost variations, governmental actions, wars and terrorism, global logistics problems, and asset reliability. There have been numerous advances in Computer-Aided Lean Management practices that have revolutionized the risk/reward performance of industries such as aerospace (Boeing and Lockheed Martin), automotive (Toyota and Honda), retailing (WalMart and Procter & Gamble), computers (Microsoft and Apple), heavy manufacturing (GE and Siemens), and the internet (Google and Amazon). Yet few comparable Lean Management innovations have come out of the energy industry in the last 10 years. Today, Computer-Aided Lean Management routinely transforms the information flow in these businesses into efficient optimization of decision making in an uncertain world. Without these Lean tools, energy companies are experiencing crippling difficulties in efficiently collecting, handling, comprehending, and converting their operational information into real options for future growth. Such knowledge transfer is the enabler that will ultimately result in optimal management of assets and people in the energy industry as well.