By Christopher M. Matthews
Exxon Mobil Corp. may not reside in Silicon Valley, create the
latest tech devices or manage the world's largest delivery service,
but it is one of the most innovative U.S. companies, according to a
new ranking of the country's best-run corporations.
The oil giant is the only nontech company among the five most
innovative in this year's Management Top 250, a ranking from the
Drucker Institute at Claremont Graduate University that uses the
principles of the late management guru Peter Drucker to identify
the most effectively managed companies.
Exxon ranks No. 5 for innovation, behind top-ranked Amazon.com
Inc., which is followed by Microsoft Corp., Apple Inc. and
International Business Machines Corp. Exxon ranks ahead of tech
stalwarts like Facebook Inc. and Google parent Alphabet Inc.,
ranked 10th and 15th, respectively, for innovation.
That the largest energy company in the Western world is
innovative may not come as a surprise, but the focus of its
research -- and breakthroughs -- sets it apart. At a time when
other large producers of oil and gas are contemplating dwindling
demand for fossil fuels and investing in renewable sources of
energy, Exxon is pouring money into making oil and gas as
competitive as possible, believing the world will need fossil fuels
for the foreseeable future.
"Others can make an impact somewhere else, and we think that's
fantastic, " says Vijay Swarup, who heads Exxon's research and
development efforts. "Renewables are part of the mix. But it's all
of the above, not one or the other."
The Drucker Institute evaluates companies on five dimensions of
performance: customer satisfaction, employee engagement and
development, social responsibility, financial strength and
innovation. Exxon's innovation score was exceptional, based on its
high level of research-and-development spending and how the stock
market values its patents, among other criteria, says Zachary
First, Drucker's executive director.
Overall, Exxon ranked as the 23rd best managed company, with
roughly average scores for the four other performance measures,
when compared with other companies in the ranking.
Exxon's workforce is filled with engineers and scientists who
excel at making existing technology better, Mr. First says. "They
are optimizers, " he says. "They want to know the rules, then they
go out and win."
While many people associate energy innovation with the
transition to greener options like solar and wind power, Exxon has
mostly eschewed the pursuit of renewables. Instead it's focused on
shorter-term discoveries that are incredibly lucrative.
"What some may think innovation in energy means isn't what Exxon
thinks it means," Mr. First says. "Innovative, to them, does not
mean 10 years from now every filling station is going to be an
[electric vehicle] charging station."
Exxon especially excels at filing and monetizing patents,
according to finance professors Dimitris Papanikolaou of
Northwestern University and Amit Seru of Stanford University, who
help analyze patent values for the rankings.
Exxon had nearly 50 trademark filings in 2019 as of November and
received 350 patents in 2018, according to public data. Two of
those patents have over 100 citations, a high number that reflects
the patents' importance, say Profs. Papanikolaou and Seru. Among
the company's most valuable patents: a lubricant to improve engine
wear, a method that can help separate oil from water, and a
floating modular structure to protect oil tankers from ice
A brief flirtation
Despite the staid reputation of the oil and gas sector, Exxon
has a long history of innovating. Its roots trace back 149 years to
John D. Rockefeller's formation of Standard Oil Co. A former Exxon
scientist won the Nobel Prize in chemistry this year for helping to
make the first functional lithium battery in the 1970s, touching
off a technological revolution that gave rise to cellphones and
In the 1960s, the company created an in-house venture-capital
division called Exxon Enterprises that looked for ways to diversify
its business. Exxon invested in technologies outside energy,
getting into everything from computer chips to fax machines. It
even invested in alternative energy sources, including solar power,
following the oil-price volatility of the 1970s, and helped develop
some of the first commercially viable solar cells.
But the flirtation with renewables didn't last. The company sold
its solar venture in the 1980s, refocusing on its core business of
pumping oil and gas and refining them into usable fuels.
Mr. Swarup says his mission today is to ensure world-wide access
to energy while minimizing the impacts of climate change. Exxon has
invested $16.5 billion in research and development since 2000. Much
of that investment has gone toward biofuels with a lower carbon
footprint, technologies to improve energy efficiency and lower
carbon emissions from industrial facilities like chemical plants,
and a process called carbon capture and sequestration, which aims
to funnel greenhouse gases emitted from burning fuel into
underground caverns or other closed-looped systems where the carbon
can be reused.
Many in the oil-and-gas industry have pinned their hopes on
capturing the carbon emissions from burning fossil fuels. Exxon has
developed special fuel cells to capture carbon from
natural-gas-fired power plants; the cells can then produce power
without combustion, using the carbon from the captured emissions to
power cars or supply electricity in buildings not connected to the
grid. Exxon says it is responsible for 40% of all captured carbon
since 1970 -- more than any other company. Environmentalists and
others have criticized the practice as a Band-Aid solution that may
help mitigate carbon emissions but doesn't address their root
The long view
Mr. Swarup says he believes Exxon's all-of-the-above approach is
needed to tackle the dual challenge of supplying the industrialized
world the energy it requires while curbing climate change. He
acknowledges a role for alternative energy sources, but says fossil
fuels -- roughly 100 million barrels of which are burned every day
-- will remain important for the foreseeable future because wind
and solar power face limitations due to the challenges of storage
"The problem is, we are going to have nine billion people on the
planet who need energy and we want to stay within a 2-degree
[temperature] curve," he says. "From a company standpoint, from an
R&D standpoint, we are confident that we are part of the
Mr. Matthews is a Wall Street Journal reporter in Houston. He
can be reached at email@example.com.
(END) Dow Jones Newswires
November 22, 2019 10:51 ET (15:51 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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