In the early 1990’s BP was in trouble, and the financial crisis of 1992 nearly resulted in bankruptcy. By the early 2000’s the firm recorded some of the highest profits ever reported by any firm in history. The question that Roberts asks is how BP managed the transition. The transition began in 1989 when BP hired Robert Horton as CEO.
When Horton was hired, BP’s corporate headquarters was a 32 story building filled with staff people. The company’s performance was declining and the company was heavily in debt. Horton’s initial days were focused on meetings with some 86 different executive committees.
Horton’s first decision was to focus on the organization’s core business and to sell businesses that didn’t support that focus. As a result of several executive meetings, he decided that BP was comprised of three "business streams." (I would have called them processes, but more on that later.)
The three streams were:
● Upstream Oil and Gas Exploration and Production
● Downstream Petro Refining and Marketing
● Downstream Petrochemical Products
The Upstream process fed both of the two Downstream processes. Horton concluded that there was no special value generated by internal transactions among the three streams and that they could be decoupled and run independently. Put a different way, BP’s Upstream unit could sell to any of several Refining companies and BP’s Downstream Petro Refining and Marketing unit could buy oil and gas from any of several production companies.
In all cases, the only important consideration was getting the best price.
Once Horton reached this conclusion, he changed the management structure and appointed individuals to head each of the three "streams" and then proceeded to assign responsibilities to the three stream managers while simultaneously eliminating jobs at the corporate headquarters. (In effect, Horton had identified three