MFG 2.0

The World Learned From BP's Mistakes -- Why Didn't BP?

Tom Davenport has led research centers at Accenture, Ernst & Young, and McKinsey, and now writes about productivity, process and knowledge management for the Harvard Business Review.

So when he weighs in with an "after-disaster review" concerning the BP oil spill in the Gulf of Mexico, it's worth taking a hard look at his conclusions.

According to Davenport, in the 1990s, the much-maligned BP was considered to be ahead of the management curve because of an unrelenting focus on organizational knowledge-sharing and learning.

"BP was all the rage in management circles, in part because it was one of the very first firms to take the notion of 'knowledge management' seriously. John Browne, its then-new managing director, was . . .both enthusiastic and alert about what changes might allow his people to make better decisions based on insight and experience BP had already gained, and to keep building those stores."

By the early 2000s, however, things had changed -- KM as an organizational discipline had been scrapped, and a series of disasters (the Texas City refinery explosion in 2005, the Toledo refinery explosion in 2006, and the Alaskan pipeline rupture in 2006) not only confirmed the true costs of this cost-cutting behavior, but set up a situation in which BP was unable to learn from its own mistakes:

"A series of lesser disasters with no systemic and widely understood learning taking place enabled more and greater disasters. The lanes were widened for what risks were permissible without punishment; rewards were primarily for cost-cutting and not withdrawn for risky behaviors."

(Incidentally, the lack of withdrawal of rewards for risky behaviors was also a prime driver of the global financial crisis.)

As Davenport describes it, in the new BP, "the parameters of decision-making were set up to reflect the emphasis on short-term costs and benefits". This short-term focus meant that the same mistakes could be repeated without teaching BP anything as an organization, casting the die for more disasters to come.

TAGS: Innovation
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