ANALYSIS
The Next Big Disruption: Peak Oil

"Peak oil" is a term that resonates very little with about 95 percent of the population. I discovered this by asking a lot of people and getting blank stares. A few hardy souls ventured a guess, and those guesses were not far from reality. If you take those words to a search engine you will be surprised by the number of hits you get. I got nearly 5 million hits the first time I searched on the term.

The online community is awash in blogs and publications from experts in the oil industry, economists, investment bankers, geologists, scientists and many others. Nonetheless, the term has not penetrated the mainstream yet beyond a few ads on TV that talk about the expense of imported oil.

If you are part of the 95 percent, "peak oil" simply refers to the fact that the flow rate of the world's oil fields is at or near its maximum. In other words, there might be plenty of oil "down there" but bringing it to the surface for processing and use is limited by geology and physics (in some cases, politics too). More importantly, rising demand and decades of poor exploration results indicate that demand will be outstripping supply in the not-too-distant future.

The experience of the oil industry is that once a peak occurs, the next move is downward, and many of the same experts are predicting a decline of available oil at a rate of as much as 4 percent per year. Add to that demand increases of, say, 2 percent worldwide, and you can see that oil availability will be a major challenge in the years ahead.

Tightening Market

The smart money knows this already. That's why people like Warren Buffet and Bill Gates are buying lots of shares of unglamorous, low-tech railroads. It's also why T. Boone Pickens is such an advocate of wind power and compressed natural gas, and Shai Agassi, former SAP (NYSE: SAP) executive, started a company dedicated to making electric cars a reality.

To be sure, there is no "energy crisis" per se but there is a tightening in the liquid fuels market -- the fact that gas prices came down about half a dollar over the summer provides no real comfort if you consider that prices were half that -- well under US$2 -- less than eight years ago. Since our cars, trucks, aircraft, buses and trains run on liquid fuels, it's worth considering what this all might mean to our economy. In pure economic terms, I think this would qualify as a disruption in the making. It's one of those moments when everything changes, and what worked yesterday might not work so well going forward.

As I look at this disruptive moment, my natural reaction is to ask what effect such a disruption might have on business and what CRM might be able to offer in the way of solutions. In performing my analysis, it became clear to me that there are numerous front office business processes that are highly dependent on energy, especially for travel.

The Cost of Sales Calls

Sales calls are a primary example, but they are not alone. There are energy considerations in the call center, and marketing departments can do a lot to help take some of the energy footprint out of front office business processes. Driving or flying to see customers are activities that are highly dependent on energy use, and in an environment where the price of fuel is high and volatile, the cost of selling will become more unpredictable, and so will profits.

We have just completed a new white paper, "CRM & Sustainability", which examines the challenges that this disruptive moment called "peak oil" is about to inflict on the global economy. The paper examines 10 areas in front-office business processes where innovation and entrepreneurship can be applied to develop solutions that both reduce the energy input to front office business processes and improve customer intimacy and operational efficiency.

I do not expect that our list of 10 ideas is complete -- there must be many more ideas out there too -- but it's a start. Speaking of starting, some of the ideas in the paper reflect concepts already embodied in off-the-shelf, or off-the-Internet, products and services. Other ideas will need to be built. The point of the paper is not to prescribe specific solutions, and I shy away from naming specific companies. Instead, I want to spark conversations about the business opportunities inherent in the disruption that will be caused as peak oil accelerates.

I also know that software does not get built overnight, and while the energy situation today might cause many people to feel sanguine, I know the smart money is always thinking about the future. It's time for the CRM industry to think more like Bill Gates and Warren Buffet.