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 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."

Valuable patents

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 floes.

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 electric cars.

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 cause.

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 and intermittence.

"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 solution."

Mr. Matthews is a Wall Street Journal reporter in Houston. He can be reached at


(END) Dow Jones Newswires

November 22, 2019 10:51 ET (15:51 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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