Credit: Zbynek Burival / Unsplash
According to a report in the WSJ, Exxon Mobil is “is considering a pledge to reduce its net carbon emissions to zero by 2050.” The report describes the move, with considerable understatement, as “a significant strategic shift by the oil company.” This news comes as the oil company faces increasing pressure from investors to reduce emissions, and a recent proxy fight that resulted in the election of three new board members backed by a green activist hedge fund. Exxon, however, remains an oil company, and that fact alone seems to place it at odds with net-zero pledges.
In his classic HBR paper ‘Marketing Myopia,’ Theodore Levitt argues that businesses fail when they lose sight of what their customers want. He demonstrates his point with a pithy line: “People don’t want a quarter-inch drill. They want a quarter-inch hole!” The story of Blockbuster Video provides a textbook example and cautionary tale (though, admittedly, is less pithy)
Blockbuster created the best, most convenient way to browse and rent movies on VHS and DVD, and vastly improved the viewing options that came before it (whatever was on TV, going to the movies, purchasing a VHS). It was wildly successful. At its peak in 2004, Blockbuster Video ran more than 9,000 stores worldwide, and had a market cap of $5 billion.
When Netflix showed up with its DVD-by-mail subscription, Blockbuster took note, seeing the value in such a service. In 2000, offered to acquire the young startup for $50 million. Netflix declined. No matter, as the world leader in physical media renting, Blockbuster simply rolled out their own DVD and BluRay-by-mail subscription service. Netflix, meanwhile, saw DVDs as a means to an end. Sure, mail is more convenient than going to a store, but customers just want to watch the movie. Netflix doesn't rent DVDs through the mail, they deliver content to screens. The mechanism by which the content gets to screens is irrelevant, which is why Netflix found it so easy to discard its DVD-by-mail service as soon as something better came along (streaming) and rode it all the way to a market cap today of $231 billion. All that remains of Blockbuster is a single location in Bend, OR.
Apply this logic to Exxon. Exxon sells oil, therefore Exxon customers must love oil, right? Have you ever purchased a barrel of oil? Just for the fun of it? Don't you love feeling the spray of gasoline—straight from the pump—on a hot day, cooling everything in sight with its sweet summery scent? Customers don’t want oil they want energy. If Exxon’s mechanism (oil) to deliver its product (energy) becomes uncompetitive, it will go out of business. A kilowatt hour from solar energy is already cheaper than that same unit of energy produced from oil. By 2030, half of all new cars sold will be fully electric. The thing about electric cars is that their batteries don't take gasoline, try as one might. That’s not to say they don’t need energy though.
Sparrows Point in Maryland was once the site of the largest steel mill in the world, producing things like the girders that support the Golden Gate Bridge until it closed in 2012. Now, in a partnership between the United Steelworkers union and US Wind, the plant will reopen as a clean infrastructure plant, manufacturing massive wind turbines.
Creative redevelopment 🤝 green jobs. Read more.
Tell us a little about you and one of our experts will reach out to you to learn more about your needs. We look forward to hearing from you!