A combination of technological, economic, regulatory and geopolitical powers has transformed the global energy market. The challenge of managing energy security and future decarbonisation plans is creating an uncertain future concerning the energy industry. The energy industry is now facing several risks and opportunities. The rising pressure of climate change and reducing emissions is accelerating the transition towards a clean energy future.
Many nations and businesses are raising their commitments to net zero. Emerging organisations focusing on clean energy are leading the disruption to conventional business models and making long-term changes to these markets. However, the revival in demand for energy after the pandemic, combined with supply issues, has highlighted the extent of the challenge in achieving our climate goals. The search for secure, sustainable and affordable energy will remain a top priority worldwide.
How leaders can drive progress in the changing energy market
The rise of new challenges and opportunities must be managed by corporate leaders, from emerging organisations to more established energy businesses, maintaining traditional and new business models, varying risks and their cultures. Many factors that will determine progress and success in today’s energy industry have changed from previous years. New demands on leaders are likely to occur, and creating an agile approach to leadership will be needed for businesses, both big and small.
Overall, businesses and their leader must be capable of working at an accelerated pace and more creatively. Leaders may have to explore new ways of collaborating within their organisation and with new emerging energy systems. A challenge is attracting and retaining talent at a time when the energy industry is under scrutiny and mourning public pressure.
McKinsey recently talked with several C-Suite executives in the energy industry to gain an understanding of the leadership traits required to succeed in the new energy transition.
The results indicated a general agreement that leaders today recognise the importance of emerging leadership qualities and mindsets to progress in the future energy market while also recognising the importance of traditional leadership qualities.
Regarding emerging qualities, many leaders indicated the importance of meeting stakeholder expectations, especially with the rising pressure on energy businesses beyond delivering value for vested shareholders. There is also a belief that leaders must be capable of operating within reduced decision cycles and willing to try new approaches and take advantage of market change and other emerging opportunities.
Changing the mindset and embracing a more emerging leadership role can be difficult for leaders who follow a more traditional path. There are new opportunities that come with this approach. There is enthusiasm among many leaders about displaying greater purpose in their organisation, supporting employee empowerment and working with more agility and innovation.
What is needed to enable this leadership transformation?
Defining your direction
The purpose of any business is to deliver value for its stakeholders. With more information and supporting technology available, leaders feel more empowered to understand how their business can add value to customers, investors and other stakeholders. While profit remains a priority, we must look equally, at how their organisation will benefit society.
The energy industry, in particular, is well aware of its need to broaden its value-added solution. From a leadership perspective, the traditional leaders broadly focused on engineering, finance and accountancy, but today require collaborators and those who can work closely with people.
Focusing on purpose reinforces the identity of a business and represents what it stands for. Companies looking to the future appreciate that purpose will help attract and retain talent, and investors recognise why this is valuable and will carefully consider purpose in their decisions. Leadership transformation will help position an organisation and its culture to tackle new challenges.
Reshaping value
Business leaders looking to succeed in the new business world may need to rethink their growth mindset by exploring new opportunities and working with other customers and stakeholders to deliver solutions that lead to new products and services. Leaders must be willing to collaborate with other external organisations and explore mutually beneficial opportunities.
There are several existing and new challenges emerging in the energy market, and this all requires a new way of thinking and action. It can be hard to move away from traditional business processes, especially those that aren’t familiar. Many leaders, however, recognise that this agility and innovation will lead to future success.
Both the old and the new require consideration in the energy transition. Profit remains a priority, but leaders must be willing to explore new markets and technologies to enable further success.
Collaboration is critical
To maintain progress, energy companies and their leaders should embrace their position to ensure people feel connected. The power of trust and cohesion is increasingly important in building a resilient organisation. When employees and leaders trust one another, they will be more engaged and willing to work together.
Achieving the necessary work
Energy businesses operate in a disruptive and volatile environment where opportunities and challenges emerge consistently. As energy markets and policies evolve, companies must focus on the future while maintaining business stability and progress.
Success leaders have traditionally focused on planning and control via comprehensive analysis while minimising possible disruption. Today, leaders must become more willing to work within shorter, rapid cycles, which requires focusing on accelerated, low-risk decisions and scaling the ones that succeed.
In a market where it is becoming more challenging to drive revenue, a structured and agile approach creates opportunities. Energy leaders must become creative and act as entrepreneurs. A traditional, slow and considerate strategy doesn’t necessarily work in the new energy space.
Other leaders have emphasised the importance of enabling more employees to make decisions at various levels, empowering people to determine and make decisions without liaising with their managers. Many leaders emphasise the necessity to take risks to succeed in the emerging energy industry. Energy industry leaders may increasingly need to balance their focus between existing activities and new opportunities.
Acting as a person and a leader
Tackling the future challenges and harnessing opportunities will require the best talent available. As traditional business models change, companies must retain their core workforce while attracting new talent. Talent competition is rising, and individuals are seeking more than financial compensation in employment. Offering an attractive option for the best talent requires an inclusive employee experience.
Leaders at all levels play a vital role in creating an environment where individuals can feel valued and empowered to balance work and their personal lives. Since the pandemic, leaders have been forced to become more authentic, which remains a critical element in future leadership. It resonates with the previous discussion on flexibility in leadership and being capable of adapting business plans when necessary. The same level of flexibility applies to employees, and those who need to adjust to these conditions could gain out on the best talent available.
These adaptations in mindset and behaviours could create a more innovative and powerful type of leadership. Once leaders determine the culture they want to build, they can focus on attracting the right talent to support values and accelerate performance. This stage of transformation, however, comes with challenges and changing current operational systems will inevitably result in some disruption and resistance.
It’s a challenging but exciting period for the energy industry. Meeting the sector goals will require incorporating many of the leadership qualities mentioned. People recognise the challenges and are beginning to be inspired and adapt and rethink their leadership qualities.
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