WHO CAN BENEFIT FROM A BUSINESS EMULATION?

Any company can benefit from a Business Emulation. The ones that benefit the most are those who:

Find themselves on a ‘burning platform’ and realise it (around 15% of any market, perhaps more in the current economic climate)
Have visionary leaders who want to extend their competitive advantage and leadership in the market (less than 10% of any market)
Have the need to cascade high velocity change within the multiple business units in their organisation

The clients we serve can be start-ups wanting to “bootstrap” a fast profitable beginning or an entity that has been in operation for some time. They can be privately or publicly owned. They can be local, national or international and they are usually medium sized to large sized enterprises.

Burning Platforms

The term ‘burning platform’ is jargon for ‘we’re in big trouble’. Burning Platform is a business lexicon that emphasises the need for immediate and radical change due to dire business survival circumstances.

The origin of the term comes from a story about a man on an oil platform in the North Sea. One night he is awakened by an explosion and resulting fire on the platform. Striving to escape the impending flames, he is able to find his way though the chaos to the edge of the platform. As the fire inexorably approaches him, his only option is to jump more than 30 metres from the fire-ridden platform into the freezing North Atlantic waters. If the dangerous jump doesn’t kill him, he will surely die from exposure within minutes if not rescued. With no other rational alternative, he jumps. Fortunately, the man did survive the jump from the platform and was rescued by boat shortly thereafter. His thinking had been: ‘better possible death than certain death’.

The point of the story is that that it took a platform ablaze to cause a major change in behaviour.

Burning-Platforms2

This story emphasizes the point that radical change in people and organisations only comes when survival instincts trump comfort zone instincts.

Stephen Elop, CEO of Nokia, famously said: “Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.” Nokia was standing on a ‘burning platform’. Like so many others in our fast changing world, companies and industries must decide how they are going to change their behaviour, or join the dinosaurs.

For those organisations on burning platforms who have tried everything else and failed, a Business Emulation may just be that rescue boat that pulls them out of the freezing sea and away from the fire just before certain death.

Visionary Leaders

Market leaders are brands or companies that have the largest percentage of total sales revenue in a market. They dominate competitors in customer loyalty, distribution coverage, perceived value, price, profit, and promotional spending.

Market leadership can be a tenuous position. Consequently, market leaders are often visionaries who are open to new technologies and ideas that can help them sustain their leadership and widen the gap between them and the competition.

Another market leader criterion is one where the investment culture is based around ROI vs. cost. Organisations that differentiate themselves on the basis of low cost or run with very low margins (e.g., Retail) are unlikely to be our target market.

We are not a low cost provider. We are a high ROI provider.

Multiple Users

Once a model is built of the first Business Emulation, it is possible to easily and quickly replicate this model to help the client achieve the same exceptional results in other areas of their business such as Exploration, Operations, Strategic Planning, Cost Reduction, Safety, Financial Planning and many others.

It is also possible to create a physical or virtual 3D Emulation environment that can be used over and over again as a training facility for employees in many different departments and geographical locations of the client organisation.

In some industries, it is also possible to create a replicable model that could be used with very few, if any, modifications to suit the requirements of practically every company in that industry segment. In addition to the Mining Industry examples we gave earlier, there are several other industries that would be well suited to the development of a Business Emulation model that could be replicated industry-wide.

A good example of this would be the State and Publicly Owned Water Corporations, most of which are composed of dozens of water authorities, each with more than 50,000 consumers, and several more local councils that handle water and sewage for smaller consumer bases. These corporations are under pressure to address and resolve the projected acute long-term water shortages across their State, and to do so while actually becoming profitable.

For such a Multiple User Group, we would develop a model that could be readily replicated in all their water authorities and local councils, and offer the same capabilities to member corporations of that industry segment in adjacent States and right across the country.

Key Industries We Serve

Our Business Emulation Technologies and Services deliver the means to achieve those “unattainable goals” like reducing costs by half and concurrently doubling throughput without adding to headcount.

One client described it with the following analogy: “We used a Business Emulation to unite a disparate group of employees, to get them to work together for their future when none believed they could or should work together. I felt like Laurence of Arabia – I had to unite the Arab tribes as one, cross the seemingly impassable NBefud desert and win Aqaba from the Turks. And we did it!”

These concepts and techniques have been used successfully in wide ranging industry sectors (ranging from Government, Education, Medical, Manufacturing, Professional Services, Transport, Engineering, Information Technology, Retail, Utility, Mining and Trade Union) across more than 50 organisations and more than 12,000 employees. In every instance they achieved remarkable outcomes and exceeded goals set.

The following data and statistics reflect the current state of the market in Australia where our headquarters are located. The numbers may vary slightly in other markets around the world, but our work with clients in other countries and continents has shown that the there is very little difference, if any, in the challenges and opportunities that large industrial clients face in their day-to-day operations.

Manufacturing

Manufacturing in Australia peaked in the 1960s at 25% of the country’s gross domestic product, and has since dropped to below 10%.

Protection and aid has been a major contributing factor to the low productivity, poor competitiveness and subsequent decline of the industry. The second factor is the parochial marketing attitudes; a small local market and failure to export prevented large-scale production and economies of scale.

The situation is serious because both the industry and Government seem resigned to the fact that the decline will continue. Little effective action has been taken, except in individual cases, to build scale, leverage automation or establish policy to support sector growth. We’ve often heard investors say, “Why would you start a manufacturing enterprise in Australia? Go to New Zealand!”

A Business Emulation has the potential to restore existing operations to profit and growth. It could turn this industry around and begin a renaissance in Australian manufacturing.

Petroleum Refining and Fuel Manufacturing

The majority of revenue in the industry is generated by four major oil refiners that process crude oil into a range of fuels and secondary products for downstream markets. The purchase of crude oil by major players dominates the industry’s cost structure.

The high operating costs, ageing facilities, and shallow berths that are not suitable for large crude carriers put Australia at a competitive disadvantage, resulting in the closure of some domestic refineries that are no longer commercially competitive. The expansion of more efficient “mega-refineries” in Asia has increased competitive pressure on local refining operations. Local exploration activity is currently modest and has declined in recent decades.

Pessimists see this as the beginning of the end for Australian refining. Business Emulation technologies have repeatedly helped operations pull back from the brink and return them to profit and growth with a bright future.

Metal Products – Steel Mills

The industry has shrunk about 8% over the last 5 years and is forecast to shrink a similar amount in the next 5 years. Limited demand from downstream markets / global steel glut, ineffective differentiation, falling steel prices, high energy and labour costs, and competition from imports have caused firms to downsize production. Arrium and BlueScope are under pressure to improve shareholder returns from sub-scale operations and to address the rumours of impending furnace closures.

The industry admits it is seeking a game-changing approach that will significantly reduce costs. In partnership with the steel industry, the University of Woollongong’s steel research hub is already trying to find the products of the future that Australia can make competitively.

Business Emulation technologies have been used with extraordinary success by a number of steel industry clients who were in serious decline. For example, Dofasco Steel turned around from declining revenues and margins and having to half its workforce, to achieving rapid growth, increasing profits, and realising a share price at a price multiple of 22 times the value of Stelco, Dofasco’s almost identical sized competitor, located just across the road.

Metal Products – Aluminium Mills

While Australia is the world’s largest producer of bauxite and a substantial producer of alumina, it ranks about fifth in terms of global aluminium output. The industry shrank 8% over the last five years and is forecast to drop even more rapidly in the future with strong competition from China’s low cost capacity, weak prices, rising energy costs, high labour costs, increased raw material and capital costs, and an anti-energy/CO2 intensive industry regulatory regime.

Historic Government industry assistance (in the form of cheap long term electricity agreements) led to non-competitive practice. With the deregulation and privatisation of the electricity industry, this subsidisation has ended. Smelters are either loss-makers or barely profitable. Furthermore, Australia’s smelters (except Bell Bay) produce 15-20 tonnes of carbon dioxide per tonne of aluminium. This is two to three times the global average. A carbon price has a noticeable impact. Only the decline in exchange rate has temporarily saved the industry – question marks still hang over the future of remaining smelters. Australia’s smelters are in the bottom 25% for global competitiveness.

Business Emulation technologies deliver those “unattainable goals”, like reducing costs by half while concurrently doubling throughput without adding to headcount or major capital expenditure. Our Business Emulations were designed to work with problems like those faced by the Aluminium industry in Australia.

Utilities

While Government is not a target market, State Owned Corporations operate as commercial entities and are likely to be sold to retire Government debt, so we do work with them.

State and Publicly Owned Energy Corporations

The massive addition to Australia’s electricity infrastructure since the late 2000s, plus the rise of privately distributed and privately owned generation and the increasing efficiency of energy consuming products have contributed to current excess generating and distribution capacity. Australia’s electricity transmission and distribution network businesses are facing some unprecedented challenges and the answers are neither obvious nor painless. In addition, further privatisation is probable.

Business Emulation technologies have been effectively employed by Utility Companies to lead substantial improvements in safety, productivity and maintenance. A Business Emulation is an ideal tool for preparing to quickly navigate mergers or the path to privatisation.

State and Publicly Owned Water Corporations

While the water sector is regarded as “working well”, the biggest issue facing the industry is the need to improve operational efficiency – to control costs and demonstrate value for money. The second major issue is ensuring water supply (augmenting infrastructure). Australia is the driest inhabited continent and is ranked fourth highest in water use per capita (OECD). Australia faces increasingly acute long-term water shortages with lower rainfall, rivers drying up and dam water levels falling. The use of non-conventional water sources will play an increasing role in Australia’s water supply, as will the development of business models that turn wastewater into profitable by-products rather than dumping it into the rivers and oceans.

Business Emulation technologies have been effectively employed by Utility Companies and many industries to lead substantial improvements in safety, productivity and maintenance. Conjecture abounds about which sections of the industry will be sold to the private sector in order to reduce State Government debts. A Business Emulation is an ideal tool for preparing to quickly navigate mergers or the path to privatisation.

Telecommunications

The Australian industry has been through significant change in the last decade around new technology, technology lifecycle, the NBN, deregulation and privatisation. Demand for and use of wireless telecommunication services have increased over the past 5 years, offsetting declining fixed line revenue and intense intra-industry and intra-subdivision competition. Revenue is forecast to fall by a compound annual 1.4% over the next 5 years.

Among the issues the telecommunication industry faces, moving forward, is whether organisations will be able to embrace the changing digital economy – for example, some are missing revenue streams going to content companies that provide video and audio over the Internet. In this industry, embracing a strategic, forward-looking business model is critical to survival and success.

A Business Emulation is ideal for strategic planning, scenario evaluation and forecasting. At the heart of the system is the means to test the development of events – to learn from “fail fast, fail often, fail cheap” in the emulation environment where there is no cost to fail. One client described the approach as teaching his people three years’ worth of business experience in three days – experience which was then taken to the job to reduce risk and increase profit in a highly fluid market.

Transportation

Domestic and International Airlines

The domestic Airlines industry is expected to grow at an annualised 2.0% over the 5 years through 2020.

The challenge for Virgin is increasing productivity and service standards while reducing costs and maintaining safety.

Qantas faces the greatest challenges. Over the last decade, new low cost operators have attracted more passengers to Australian skies and cannibalised Qantas’ customer base. Domestic rival Virgin Australia, with lower staff costs and greater productivity, is also moving into the premium domestic market where Qantas had exploited a monopoly over the past 10 years. Virgin has strong foreign airline backers with deep pockets, whereas Qantas is struggling to attract investor interest, and foreign ownership is capped by law.

Internationally, Qantas also has challenges including the inefficiency that runs throughout the organisation and high labour costs (the average wage cost at Qantas is double that for many competitors who also have higher productivity). It is now seen that buying the A380 was a mistake because the super jumbo is simply too big when travellers are demanding point-to-point services and high frequency. Not buying the 777 has blocked use of one of the most versatile, fuel efficient and reliable aircraft currently operating.

The challenge for Qantas is the huge lead their competitors have. The biggest task they face is a fundamental culture change when, as Rod Eddington observed, “Changing airline culture is like trying to perform an engine change inflight.” No matter what the government does with the Qantas Sale Act, or even if it steps in with a bank guarantee or a buy-in, Qantas is doomed if it does not aggressively address its cost base.

A Business Emulation is an ideal system for driving high velocity culture change. It has the capability to help staff see death right between the eyes so the impetus to change becomes strong enough; and it also produces the means to change. The output of a Business Emulation is the buy-in to change and the method to succeed.

State and Publicly Owned Rail – Freight

Rail is dominated by transport of bulk freight over long distances. It plays a significant role in transporting coal, iron ore, grains, rice, cotton and sugar for processing and exports. The industry has grown strongly driven by demand from Mining. Australia faces significant challenges in meeting its infrastructure needs with freight forecast to double over the next 20 years and treble along the eastern seaboard. Industry concentration is expected to increase in the next 5 years.

The Rail Freight industry is changing from a government owned collective of state based rail systems that were built to service another age to a mix of private and state owned more commercially orientated industry. The industry has a high fixed cost base and needs to increase productivity; and regulatory fragmentation across states remains a barrier to more efficient operations and a genuinely national industry. Rail is still plagued by inefficiency, creating transport costs to end users that are around 20% higher than global benchmarks.

Business Emulation technologies have been employed by a number of rail operators in the USA to reduce costs, deploy predictive maintenance systems, reduce maintenance costs and improve MTBF.

State Owned Rail – Passenger

Most of Australia’s population growth is occurring in capital cities within which these major players operate passenger bus networks, leading to growth in market share concentration over the past 5 years. There has been a resurgence in the popularity of passenger rail over the past decade, with patronage in many cities reaching record levels. Industry revenue is forecast to grow at a compound annual rate of 3.1% per year over the 5 years through 2020.

The emergence of low cost competitors (like driverless cars) means that the industry needs now, more than ever, to invest in new technologies, new capabilities and improved productivity, and deliver lower prices to consumers.

Business Emulation technologies have been employed by a number of rail operators in the USA to accelerate innovation and change, reduce costs, deploy predictive maintenance systems, reduce maintenance costs and improve MTBF.

State Owned Bus / Tram

Australia has run down their public transport in the last 50 years and is now trying to reverse this trend. One key influence on change in the urban passenger transport sector is an increasing number of low-density corridors more suitable for bus systems than rail. Increasing urban congestion and expanding networks have driven growth in the Urban Bus and Tramway Transport industry over the past 5 years.

A continuing challenge is to protect existing market share and grow new market share in competition with the car (characterised by its immediate availability, predictability, flexibility and seamless delivery door to door – in contrast, bus and train are characterised by relative inflexibility, unpredictability, and disconnectedness.) Despite this, industry revenue is forecast to rise steadily over the 5 years through 2050 at a compound annual rate of 4%.

The emergence of low cost competitors (like Uber and driverless cars) means that the industry needs now, more than ever, to invest in new technologies, new capabilities and improved productivity, and deliver lower prices to consumers.

Business Emulation technologies have been employed by a number of bus operators to accelerate innovation and change, reduce costs, deploy predictive maintenance systems, reduce maintenance costs and improve MTBF.

Information Technology

Computer and Software Design and Support Services

The industry has continued to expand rapidly as computers and related support functions in the workplace increasingly require regular upgrades and development, and many businesses outsource non-essential systems operations. Financial services providers like banks and insurers continue to be among the industry’s largest clients. Over the 5 years through 2020, industry revenue is expected to grow at an annualised 4.9%. The complication the industry faces is a reputation for a low success rate (around 34%: sources Kotter J, Prosci, Standish Group) in rapid, successful and on-budget deployment of enterprise information systems.

Many information technology companies have used Business Emulation technologies to address wide-ranging issues – including business turnaround, hardware development, software development, project management, cross-cultural complications in global projects, and change management. In one application, it was used to accelerate implementation of a new and complex IT system requiring completely new and union resisted work practices. The outcome was deployment and full uptake within 6 weeks vs. the usual 18 months.

Sources of data include: Australian Bureau of Statistics, IBIS World Industry Reports, Industry Segment Association Reports, Professor of Economics Jeff Borland.

Our Focus on Mining

We at the Centre for Applied Neuroscience in Business believe that Mining is the most important industry in need of transformation today, which is why Mining is one of our main focus areas.

Mining and Mineral Exploration touch every single one of us every day. Our modern way of life could not exist without a steady supply of minerals. However, Mining is in trouble worldwide.

In Australia, for example, the Mining Industry has moved a long way from its historic low cost advantage, and margins are very slim for most operators, especially in coal, iron ore, nickel and for some gold miners. A number of the smaller and medium sized miners are at breakeven and truly ‘on a burning platform’, staring at the daily declining commodity prices.

The global mining industry is faring poorly too. The cost blowout is so serious that miners frankly admit they need to cut their costs in half in order to be competitive and generate the sort of returns expected by shareholders and commensurate with the industry risk profile. While miners can see how they can deliver cost reductions with in-house business improvement projects, there is a significant gap where they will need new ideas and external help. And with commodity prices hitting new lows, some mid-tier players have little time to act in order to keep operating.

One of our mining clients observed that: “We miners are looking for the trend to save us. But if you look at the long term, you see the current market value is on the average trend. So we miners need to be profitable with current commodity prices.”

He also said, “After going to a recent miner’s conference, I see the Executives in our industry are confused. They know something is wrong, but they do not know where and how. I think we miners don’t understand our business. We are stuck in the past.” For an industry that adopts significant innovation, on average only once every 33 years (making it the second most laggardly in the commercial world), his last statement rings painfully true.

Our Business Emulation technologies have been employed successfully in the mining life cycle to solve “insoluble problems” and generate marked performance improvements along targeted goals. Applications include exploration, stakeholder management, feasibility and planning, operational safety and productivity, and effective asset retirement.

Here are some examples from our Mining portfolio:

Kinross Gold

We were asked by Kinross Gold to conduct the Mining Industry’s first use of the Brain Reprogramming Emulation science which called for a doubling in Kinross’ market cap in 2 years. This was to be accomplished by focusing on the direct drivers of a Gold Mining Company’s market valuation: (1) total team effectiveness, (2) production, (3) revenue, (4) cash flow and (5) proven ore reserves.

A scale model emulation of the Company was designed to be interacted with by the team under intense time pressure in order to reprogram their default mental schemas. This radical method ‘reprogrammed the brains’ of all stakeholders who took part in the exercise. This included the CEO, the C Suite, the back office personnel, the Exploration Department and the Mine Managers. Kinross enjoyed a doubling of its market cap within eighteen months after the end of the exercise.

Newmont Mining

Newmont Mining is the world’s second largest Gold Mining Company. We conducted a Mining Business Emulation of all of Newmont’s global explorations practices. The goal was to improve discovery rates by 2.8 times.

The event was attended by the Newmont C Suite, global Field Managers and Geologists, Directors and Managers of adjacent and coordinating disciplines. At the end of the session, the Treasurer said: “This Exploration Operational Simulation has been the most important and effective strategic business event I have ever attended”. Our client, Dr Steve Enders, describes his experience of the application of neuroplasticity to business here

KGHM

We were asked by the Colorado School of Mines to develop for the Senior Executives of KGHM a highly interactive two-day hands-on Open Space Mining Business Emulation focused on KGHM’s end-to-end mining activities. The design utilised the application of leading edge business brain research into Applied Neuroplasticity. The Open Space Mining Business Emulation helped rapidly develop and mature the senior executive team and has improved KGHM’s long term national and international viability.

12 months after the Emulation, we conducted some follow-up interviews with our client and key participants. The changes have been marked and useful. The participants have become more integrated and coordinated, they have employed tools and methods that they developed during the Emulation, and there has been a marked improvement in cross-functional communication and improved effectiveness in decision making.

KGHM hired a Change Management company specialising in the use of social connectivity tools to speed up communication between experts inside and outside the organisation. They started their own Intelligent Mine project focused on robotics for deployment in their underground copper mine. They also conducted a Neural Network study of a brownfield district, prioritised targets and launched a funding campaign to drill the targets.

In brief, there has been large benefits in the areas of inter-functional coordination, improved fact-based decision making, a proactive stance towards applied innovation and a greatly broadened solution set for addressing responsibilities.

Noront Resources

Noront Resources is a late stage Junior Mining Exploration Company with a large nickel deposit in Northern Ontario, Canada. We were asked by the new incoming President to use the principles of Applied Neuroplasticity to conduct two intensive Strategic Planning & Team Building exercises both at the C Suite level and at the Board level, to set goals and establish ‘rules of engagement’. Noront used the results to accelerate their mine development plans.

Our client recently had this to say about his experience of our work with Noront: “I remember the first time our CEO told me about you and suggested that I spend some time getting to know you. I remember being energized by the free flowing nature of our conversations. Completely surfing tangents that most, like 99.9%, of the Mining world wouldn’t even look at. Neural networks and their application to Exploration have kept me captivated and I still have your binder from that project. I also remember when you grabbed that egg carton and used it as a visual to describe the cluster of nickel deposits in the ring of fire … which led to the name of the deposit … the Eagle’s Nest. It was an eye opening experience to be on the outside and watch you do your magic and be the glue in those weird times at Noront which needed something, someone to bring it together. We need to do more work together my friend.”

VALE INCO

VALE INCO is one of the world’s largest Nickel and Base Metal Mining Company. For the Canadian CEO, we conducted an exploratory ‘system boundary definition’ exercise using Applied Neuroplasticity as a Change Management technology to improve the ore grade consistency coming from eight underground nickel mines in Canada. This ‘variation of grade’ problem was worth many hundreds of millions of dollars of potential profit capture when solved.

Have you ever had a problem you could not solve?

Did you ever have a Eureka moment where you woke up with the solution or answer?

Our Business Emulation technologies help organisations do the same thing for the entire management team, literally overnight, then cascade it through the organisation.