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MODERN BUSINESS

Capsizing Antiquated Business Thinking

Executing the Revenue Strategy

This Post is aimed at C.E.O’s, Directors, Sales, Product and Marketing Managers i.e. individuals that are responsible for the Financial Health and Future of the Company.  The prior posts is my take on business, with a confidence level for success of +90%.

Blog Posts, Text-Book’s, Theorizing, endless Product, Sales and Marketing Strategies and Plans, the mandatory “Team Building” will get you, as the Person Responsible, so far.

If you’re one of the fortunate 1% of Top Managers and Directors that is a Strategic Appointment, beloved by the C.E.O and Board alike, read no further. You are in the tremendously fantastic position of being able to do no wrong and your bonus and share options are guaranteed.

If, on the other hand, are an Appointed Individual, which the Company actually expects results from, than we share a past, present and future, and I’d like to talk to you.

Why, you may ask ?

The short answer is that I’ll charge you for my services.  I need the cash !

I’m not proposing “Shooting the Breeze over Drinks at Six, but a genuine evaluation of your Business and how to Execute a Workable Strategy to attain those results.

There is only the Short Answer. Making Money is about action, rather than Talking about making money.

That’s all Folks !

Santosh

 

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Sale on Design and Build of Projects and Plants !

sale
Investing in a depressed Environment

 

sale

Part 3 : What does a Porsche 911 have in common with today’s Project Developers?

Ever tried to decide on what model Porsche 911 to buy? It’s a daunting task for it’s not like selecting a model like other cars where one has a few base variants (Engine, Transmission and Fuel type) to choose from and bob’s your uncle. No, a Porsche 911 has so many base options dealing with everything from power, to Turbo’s to 4WD vs. 2WD that one needs a flow chart just to make sense of it all, select a base from which to start, and ONLY THEN look at the options list.  One needs HELP ! So what does this have to do with Project Development?

For a start, we’re still in a Capital Constrained quagmire because the world is not buying, as can be seen from the Cape Class Shipping index (Baltic Dry Index) which I’ve included below.

10-year-bdi-comments

Back to the Porsche. Like a lucky prospective purchaser of a 911, he (or she) needs someone to “hold hands” and bring it all together to give one what one wants and point one in the right direction before laying down one’s hard earned cash.  Imagine buying a 911 only to find out that this is really not what you want or ever wanted.  It’s about marrying the need with the right solution.

The traditional approach, while stupendous at risk management and spending an inordinate amount of capital, is cumbersome and expensive for the modern small Project Owner.

I’d summarise the process some thing like this …

1

In my recent experience, I’ve seen the need for this approach rather …

2

See the “Consultant”. That’s me and what I’m able to bring to the industry. A Hand Holder bringing all the relevant entities together be it Design, Infrastructure, Equipment, Financial Structure to help the smaller guy get the project underway.

Call it an Owners Engineer, Project Manager or hey, the Porsche Consultant, it’s a service the industry is hungry for !

And that is where I’ll conclude this three part journey.

The Future of Plant Design and Project Development (Part 2)

Part 2 :  The Market-Space

If you’re still into reading my views on the Project Development space, welcome back.  You’re probably wondering

“Where’s this guy going with this ?  What make him an Expert ? Why am I wasting time READING THIS ?”.

Yeah, I know, I feel the same way half way through reading someone’s, whom I’ve never met, and will never interact with, blog post. But I can answer these questions with

(a) I am building up to an idea/concept, just be patient – it’s Fuzzy Logic being applied here and right now it’s more Fuzzy than logic !

(b) I’m no Expert – just very knowledge and opinionated about a wide range of stuff

(c) In answer to the last question, you got anything better to do ? Well, go ahead and do it; just be sure to return to finish the read.

Onto Business.

Porter, the father of Marketing, among others, broadly defines the Market-Space (MS) as a place (which can be either Physical or  in today’s term’s, Digital/Cyber) as a “Place where Buyers and Sellers Come Together to Exchange Goods or Services“.

As applied to the Industry, this will constitute Owners of Assets (Mining companies, Individuals or Consortium that own an Ore, Gas or Oil Reserve/Deposit)

These are the Sellers.

 

The Buyers are those that purchase said commodities either in Raw for (e.g. Australia Direct Shipping Ore (DSO) of Iron to China for beneficiation, or processed e.g. Selling 99.9% Refined Gold bars that’s been Mined, processed via CIL/CIP, refined at Rand Refinery before hitting its target market, which could be the Indian jeweller’s).

Plant Design and Projects work closely with the Seller and provide the SOLUTION that the BUYER seeks from the SELLER. The deliverers of this Solution are the OEM’s and EPC/M Houses or Equipment Suppliers and Consultants respectively.

 

One could call this a Multi-Level market space as it exists between multiple entities each playing an important part in this Horizontally Integrated Supply Chain.  Note that if the Seller’s had no need for the OEM’s and EPCM’s, this would imply Complete Vertical Integration, which I won’t touch on here, as that is a separate discussion falling into the realms of Business and Corporate Strategy, of which each company has it’s own.

 

The traditional approach has been “Sales Engineers” from OEM’s “calling on the mines an project houses” to peddle their wares.  Coffee visits to “shoot the breeze” and maintain the relationship was (and still is) the norm.

Consultants bid for Concept, BFS, DFS studies (FEL 1 to 4) to their traditional clients, most of these being the large Blue Chip mining houses.

I need not go into the details; you know the process.  I’ve done this so often during my career, that I deem myself as an expert and have during the course of time, build up invaluable relationships within the industry, something which I personally treasure.

It’s worked well (especially in resource dependant nations like Australia & South Africa) up until 2009.  My Global experience though has taught me that this is the approach everywhere from India to Germany and USA.

This is great if the Blue Chips are the one’s investing cash, but not so great if you’re a junior with a quantum-lower cash balance on the Balance Sheet and non-existent revenue on the Income Statement. What the latter does have however, is the desire to invest in beneficiation of its asset, however small it may be, and some finance, usually debt.

These guys can’t afford the traditional approach to Project Development, which is frequently far too Capital Intensive.

There has to be a better way to Project Development, tiered and tailored to the strength of the Balance Sheet that’s being dealt with.

In summary, this Market-Space requires a different solution that will deliver, while MANAGING (not eliminating) Risk and Execution … and this is what I’m seeking to offer.

Watch this space for Part 3.

Santosh Gunpath Pic2

Gendustry and Gendustrialist’s

Gendustry : General Industry referring to and Industry that requires a broad level of thinking and expertise and implantation of best-practice and learning’s from other related industries.  Examples include developing business growth strategy in servicing the Engineering industry by taking examples from the Automotive Industry.

Gendustrialist : One who has a broad high level understanding and insight of various organizations and industries AND the ability to integrate this understanding to the benefit of his or her clients, to help them improve and grow their organizations.

The Future of Plant Design and Project Development

Part 1 :  The State of the Resources Sector

With the lackluster performance of commodity prices over the past 6 years, many capital projects have been shelved.  There are many reasons for such decisions being taken by CEO’s of both small and large (read bluechip) companies, but the underlying factor is that projects that would have yielded economic Net Present Values (NPV) a decade ago do not make for a sound investment at today’s commodity prices.

Over the past 5 years, the Satrix RESI, a benchmark ETF for the local resources and mining sector is 33% lower, which represents an annualized yoy return of approximately 6%! This implies that an investment made in the sector in 2011, would have not only NOT kept up with the usual 6% inflation, but eroded your capital by a further 6% year on year. It’s akin to losing 12% yoy in real terms.

For those reading this article not familiar with the Satrix RESI, allow me to quickly summarize it as an ETF (Exchange Traded Fund) made up the General Mining, Gold Mining, Specialty Chemicals, Paper and Platinum & Precious Metals stocks that’s listed on the JSE.

At the time of writing this article, the RESI constitutes the following top 10 counters

Share name Weight Industry
BHP Billiton plc 28.17% General Mining
Sasol Limited 16.39% Specialty Chemicals
Anglo American plc 16.15% General Mining
Anglogold Ashanti Ltd 10.16% Gold Mining
Mondi plc 8.19% Paper
Gold Fields Ltd 5.83% Gold Mining
Sibanye Gold Limited 4.07% Gold Mining
Impala Platinum Hlgs Ltd 3.22% Platinum & Precious Metals
Sappi Ltd 3.00% Paper
Mondi Ltd 2.64% Paper
Anglo American Plat Ltd 2.18% Platinum & Precious Metals

Globally, companies are having to becoming increasingly innovative to grapple with rising costs, governmental and environmental legislation, taxes, falling product prices etc. all while trying to increase, or at least maintain earnings, and deliver shareholder value.  This can be met in a number of ways, some of which include cutting costs associated with labor, maintenance, overheads; all of which can only be “cut” so far.  One could “optimize” production in search of the ever elusive lowest R/t production cost.

I have a theory that this can only be taken so far and while managerial economics teaches us that there is an optimal point for any production process whereby maximum efficiency is attained for the associated optimized input parameters, this is rarely achieved in an imperfect world that’s mired by the unknown and unforeseen events that characterizes life.  Who’s to say what will cause the price of Zinc to rise or fall 67 days from now or when a Black Swan will cross our path and wipe out the Dow Jones, thereby sending us all piling into cash, gold and fine art.  Great if you’re a gold miner, but not so if you’re holding say copper when the infrastructure developments are halted!

Another solution to massage the balance sheet and income statement is to simply cease any and all  investment in capital projects and sit on the cash, as is currently being done, particularly in the financial sector.  However, the fastest way to move backward is to stand still, and let’s face it, who runs a race to finish last!

Perhaps this industry is ripe for a change to way of doing business, both for these tough times, and for the future, when the good times are back – which is inevitable, just very difficult to predict it’s timing.

When it applies to Project Development, we need to not only be brave enough to think out the box, but hey, throw the box away.

Santosh Gunpath Pic2

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