Growing a company is never easy. But in the energy and B2B industrial sectors, the context is even more complicated. There are at least seven factors that generate distinctive challenges to grow.
- Capital intensity and long investment cycles: energy and industrial projects usually require massive upfront investments that may take years to start-up and decades to payback. The complexities related to heavy assets can reduce the speed of action and make it harder to rapidly scale.
- Infrastructure dependencies: growth often require infrastructure developments, with decisions that go well beyond the boundary of a single company. Manufacturing facilities, automated warehouses, pipelines, transmission lines, dedicated logistics, connection to other systems, etc. Managing investments, permits, operations, etc. can be really tough.
- Supply chain complexities: there can be hundreds or thousands of interdependencies to forecast, plan and coordinate with suppliers, partners, authorities, etc. Sophisticated engineering, elaborated co-design, specialized equipment, highly competent and stable technical workforce, etc. are all elements that have to be carefully manage over a long period of time and can hide many vulnerabilities.
- Regulatory framework: government approvals, environmental regulations, safety standards, procedures and approvals from different authorities, severe standards for worker safety, protocols for product development, etc.. All this add costs, risks and uncertainties to the growth process.
- Market volatility and commodity exposure: industrial and energy companies often face volatile input costs. Oil, gas, electricity, raw materials, commodities, components, etc. can heavily fluctuate, generating unpredictable patterns, pressure on balance sheets and requiring the ability to adjust pricing, delivery times, contractual commitments and then change all over again.
- Environmental and social pressures: ESG requirements may become mandatory in certain businesses creating additional layers of costs and complexities. Sustainability, emission reduction, environmentally friendly policies can all be great concepts and indispensable commitments but are extremely difficult to intersect with goals like profitability, growth, efficiency.
Geographic and geo-political constraints: To be successful in other countries, many energy companies have to duplicate their business model in order to have the necessary sales, generation, distribution, integration, service, etc. The factors that determined an effective operation in certain markets may vary in others. Industrial companies usually face other challenges: different tax regimes, tariffs to import goods, export controls, requirements for domestic ownership, contractual complexities, etc. In both sectors, many projects and operations cross international borders and operate in countries with unstable or hostile political/regulatory systems.
OPG is a part-time management company made by veterans in the industrial/energy sectors that is entirely focused on growth.
Please contact us to discover how we can accelerate and potentiate the growth of your company.
Co-pilots@opg-group.com
