Covid has badly impacted mid- and long-term origination, although there are positive signs that normality is resuming, albeit cautiously.
Teams have struggled to stay motivated as the new deal pipeline has stuttered and even those who have successfully closed deals have been unable to find new opportunities and customers.
One of the biggest challenges we’ve heard is that origination is hard to recreate through virtual methods.
The purse strings are tighter, the appetite for risk is much smaller. There are difficulties with sign off from risk and credit approval committees. While the overall commodities picture is not at all pessimistic, it has become much more cautious.
For me, the pandemic has highlighted our interdependence – we are all connected. In our industry, we see an openness from businesses and individuals to support one another even as we continue to compete.
There is a fresh outlook where competitors are sharing ideas, insights, knowledge, and being honest about the challenges and struggles. It’s less about ‘beating’ others, more about getting through.
Business development is an excellent example. If we can get origination moving again, we can all benefit, and not just since Covid.
Some of our contacts are saying that the challenges in origination pre-date Covid. From a search perspective, we were already seeing the stakes raised over a year or more ago, with businesses accelerating the hunt for strong business development specialists.
“Pre Covid-19 origination was already hard in gas and power markets in Europe,” agrees Mark Simons at Total. “This is due to the efficiency of the markets, how all companies can access the same data and given the over capacity of supply. Due to all the uncertainty about the coming years, origination has got even harder. Not many companies have an appetite for signing ten-year deals right now.”
Is origination compatible with video conferencing?
Forging relationships is core to business development. Most people in the industry agree that video conferencing is only an interim solution.
Tellurian’s Marwa Nasrat agrees: “There’s a lot you can do up to the point where you have to negotiate. But when it comes down to actually negotiating, personal contact, sitting in a room and reading body language is very important.”
Video calls can facilitate the initial stages, but in an environment that is already underlined by caution, it is leading many organisations to defer decisions until face to face contact can resume in earnest.
Marwa said, “I’ve seen people at first try out VCs and then conclude that it does not replace face-to-face, especially in more delicate negotiation. There’s a lot of ‘let’s stay in touch’ and an eagerness for a time when we can actually meet and have a real discussion.”
This is especially the situation in Asia, she explained. “I’ve worked in the US and Europe and now in Asia. I’ve found the body language is so much more important where there is a language barrier. When do I take a break, when do I push harder, when do I step back? Some countries absolutely love video. Others want the meeting, the order that they’re used to. You need to respect those boundaries and understand how far you can take things and where.”
From a talent perspective, this is where experience is key. Mark Simons at Total agrees that personal contact is key but hard at the moment:
“Face to face contact, trust and confidence are all key ingredients to successful origination, but there is little scope for these at present. Although I am back at the office in Geneva, virtually all my market contacts are still working from home. To get deals done, who you know is vital right now, so it is especially tough for those with limited experience or for those applying their existing origination skills to new markets or geographies.”
What are the strategies that are working?
In our conversations, we are finding a number of clear themes emerging:
- Don’t sit on your hands waiting for borders and ‘normality’ to resume. Embrace this new world now as the business impact across our whole shared market will be much worse if originators are not proactive.
- Use this time to lay the groundwork as when the market bounces back, it will be with enormous velocity.
- Focus on ‘micro-wins’: smaller, bite-size deals either in duration and/or scale as these are easier to get executed both internally and externally. Focus on the micro–wins.
- Celebrate each win or progress step, no matter how small. This will energise and motivate the team as a whole.
- Keep it simple – focus on existing deal types and counterparties. Getting new structures in place remotely is extremely time consuming, both internally and externally. Equally, on boarding new trading counterparties is slow at the best of times but doing this remotely is even more challenging.
- Begin by solving the immediate problems and challenges of your company’s portfolio so for example, the start of the new gas year, or the winter period. Then look more long term.
- When you look long term, expect change. Use this period to read, analyse and assess how energy markets are changing and will change in the coming years and start preparing for the commercial opportunities that these changes will bring to help deliver future returns.
- Look for opportunities with your current deal portfolio. Are you getting full value or offering full service to existing contracts?
- Focus on building the human relationship, good-will, trust and loyalty. Go old school. Building connections with past and new contacts now will put the business in a much stronger footing as confidence for deals returns.
- Investigate complimentary markets and focus on proactive strategies to engage and test the waters in new territories – whether this means a geographical region, a product or deal type.
Originators create momentum and opportunity in the market, to everyone’s benefit. They bring innovation and new ideas. It may still be tough at the moment but lay the ground work now and the whole market will be stronger as full confidence continues to build.