Speaking at the National Minority Supplier Development Council at the Conference and Business Opportunity Fair in New Orleans in November, Chevron chairman and ceo David J O'Reilly gave his thoughts on how the internet will influence his company's abilities to provide the energy the world needs. This is an edited version of his speech.

Like most everything else today, the oil and gas business is changing to meet the needs of a changing world - a world that has christened the dot-com companies as the 'new' economy and blue chip companies as the 'old' economy. We see the tug-of-war between the new and the old played out every day in the see-saw battle between the Nasdaq and the Dow Jones.
In reality, of course, there is no such thing as a new economy and an old economy. Our economy at any point in history has always consisted of a complex mixture of new economic trends and old economic trends - there is no sharp dividing line between the new and the old.
The burgeoning use of the Internet will not spell the demise of basic industries, like energy and steel. While that may be true, I also believe the Internet-driven business-to-business (B2B) economy is here to stay, because it offers people easier, faster and cheaper ways to conduct their business. For those basic reasons, its use and influence will certainly continue to grow.

Focused strategies

The past 10 to 15 years have been a time of downsizing, restructuring and mergers in the oil and gas industry. In order to survive these monumental disruptions, Chevron had to find new ways of doing business.
First, we decentralised our organisational structure into multiple business units and operating entities, which has allowed us to quickly evaluate and try new approaches to our business. We refocused our business around several basic, long-term strategies which included building a committed team of employees, reducing costs, increasing our international exploration and production growth, and achieving top financial performance from our US production, refining and chemical operations.
Today, after many years of constant re-evaluation and fine-tuning, those strategies have been distilled down and refocused into four, basic core areas that will define superior performance for Chevron in the years ahead:
* Operational excellence.
* Cost reduction.
* Capital stewardship.
* Profitable growth.
The key to success in achieving our four strategies is organisational capability. By organisational capability, I mean combining the talents and the knowledge of our employees and our suppliers, along with the effective use of our systems and processes to achieve superior performance.
One of the key elements for improving our organisational capability has been, and will continue to be, our development and use of new technology, such as deepwater drilling, refinery catalysts, seismology, gas-to-liquids conversion and so forth. But there was something else we felt we had to do, to improve our organisational capability even more. We had to become active participants in the new, Internet-driven B2B economy, because it has been clear for some time that it it is profoundly changing the nature of business. In fact, we feel it is so important, that we have tapped B2B as one of the keys to Chevron's future success.
In mid-1999, we formed Chevron eBusiness Development Co. to launch e-business companies using a basic three-step formula - we first test the concept internally, then spin off the successful ventures, and ultimately sell shares to the public.
We started our Chevron Retailer Alliance in 1999, leveraging Web power to link thousands of investor-owned service stations. We plan to spin off this highly successful, customer-based concept and call it RetailersMarketXchange. We have high hopes it will become the industry's premier, Web-based, business-to-business, open marketplace for convenience store retailers, small-business retailers and their suppliers. We have also helped create several other independent web-based marketplaces for the oil and gas industry.
For example, there is PetroCosm, which enables companies of all sizes to buy and sell products and services that span the oil and gas industry supply chain, from drilling and electrical supplies and equipment, to professional, engineering and construction services. Then there is the Silicon Valley Oil Co, an electronic marketplace designed to connect thousands of commercial and industrial customers to the thousands of petroleum marketers who make up the USA's US$50 billion market for lubricants and diesel fuel.

Just a tool

Joining the Internet revolution has always had a certain level of risk associated with it, but we felt we had to actively participate in Web-based B2B, because it offered a great opportunity to develop new, efficient, and cost-effective ways of doing business.
Although we have embraced e-business with open arms, for us, it is only a tool to enable our core businesses to function more effectively and profitably. We are still in the energy business. We have no intention of turning ourselves into a 'dot-com' company. We will ride the Internet bandwagon only as far as it takes to help us achieve our goals in operational excellence, cost reduction, capital stewardship and profitable growth.
Of course, there are also some challenges that go along with the incredible opportunities the Internet brings. You need to be knowledgeable, creative and fast to make it in the e-business world, no matter what the size of your company or what the owners look like. And you must establish a small-company, entrepreneurial attitude to be successful in B2B.
At July's National Minority Supplier Development Council conference, Shelly Stewart of Raytheon said, "You can't automate what doesn't exist." I happen to agree with that. Before you can make the jump to e-business, first you must have strong, robust supply chains that include diverse suppliers, suppliers that bring to the table focused, innovative, cost-effective solutions.
Chevron has had and will continue to have a long-term commitment to doing business with focused, innovative, cost-effective minority suppliers. It is not only good business practice, it is in the best interest of our company, our employees and our stockholders.
For us at Chevron, we are convinced that Web-based B2B can save us money and make us more efficient in the bargain. But the Internet will not change our core business principles. We are still an energy company, as I said, and we plan to stay that way. Energy will become even more important in the years ahead than it is today, as computers and the Internet consume increasing amounts of it.
That is an important fact that people seem to forget in their headlong embrace of the 'new' Internet-driven economy. The so-called 'new economy' would not even exist without energy - it will not work if you can't turn the lights on. But, as long as there are sufficient, reliable sources of energy, Web-based e-business will continue to grow.