MICROSTILL PROJECT

MICROSTILL PROJECT

NATALIE THOMSEN – DAVID BULLARD – DENNIS LARACY – HAMISH PRESSLAND - TONY IGO

CNP532 - INNOVATION AND TECHNOLOGY MANAGEMENT

CASE STUDY

Managing innovation is quite different from managing operations as:

•you always have less information available to make choices than you'd like

•innovation has not a single goal, but multiple and unclear goals, and

•each of these goals can be reached through multiple routes.

MICROSTILL PROJECT

“Every business needs one core business competency – innovation” P.Drucker

Is IOR’s management style suited to niche market creation ? Why ?

WHAT IS A NICHE MARKET?

A sector of a given market that can be defined with some precision, having customers that are accessible, offering potential for growth and is not owned by existing vendors – R.M.Beacker – 01/03

A focused, targetable portion of a market

NICHE MARKETING :-

•LINE EXTENSION – basic product taking advantage of other market opportunities•HORIZONTAL INTEGRATION – applying basic resources to offer different services & products•VERTICAL INTEGRATION – new uses for individual components of existing services & products

MICROSTILL PROJECT

WHAT IS NEEDED TO OPERATE IN A NICHE MARKET ?

UNIQUE DISTINCTIVE COMPETENCE PROPRIETARY TECHNOLOGY CREATION OF DEFAULT “ BENCHMARK” SPECIALISED MARKET KNOWLEDGE

“ – choosing a unique and reliable position that is rooted in systems of activity that are difficult for others to match “ MICHEAL PORTER

MICROSTILL PROJECT

WHAT IS THE IDEAL MANAGEMENT STYLE FOR NICHE MARKETS?

• FLEXIBILITY & ABILITY TO REACT TO CHANGE• COMMITMENT TO ACHIEVE DECLARED OBJECTIVES• MANAGEMENT STRATEGY EMBRACES INNOVATION• CORPORATE STRUCTURE DESIGNED TO SUPPORT

INNOVATION • EMPOWERED EMPLOYEES DRIVE INNOVATION• CROSS-FUNCTIONAL TEAMS DETERMINE ROUTE TO

INNOVATION• WILLINGNESS TO EXPAND INTO OTHER RELATED NICHE

MARKETS

MICROSTILL PROJECT

What does Arthur Nommensen mean by “rigid flexibility”?

Rigid = manage a Requirer !focuses on results, achievement, quality, accuracy, innovation, service and profitability.

Flexible = lead a Relater !focuses on establishing good working relationships

“Neither type of manager is “ better” than the other. On the contrary, the best managers have the ability to do both well, and know when to choose one over the other !” - Peter E. Friedes - 2002

MANAGEMENT STRATEGY - a unique combination of policies, practices, organization structures and the various systems to guide management and employee behaviour. - Scott Hollander

MICROSTILL PROJECT

 

MANAGEMENT STYLE = The extent to which all members perceive they have encouragement or permission to use their own initiative in performing their assignments, feel free to try new things and question the status quo, and feel

supported by management.

1. Organizational clarity--This is when there are clear goals as a result of a formal planning process. Planning is disseminated far down into the organization, and well-defined plans are shared.

2. Decision-making structures--Information is readily available and shared across the organization.

3. Organizational integration--There is a strong bias toward communication throughout and across all levels of the organization. Goals and expectations are clear. The impact of each unit on the work of the other units is understood and accepted.

MICROSTILL PROJECT

MICROSTILL PROJECT

What Has IOR Done to Develop Its Microstill Product

Customer Needs – Initially BP in Papua New Guinea, vary product for other customer needs.

Product Specification – Reflect customer need’s and IOR’s innovative approach.

Manufacturing, Installation and Commissioning- Suit customer requirements – complete unit transported, installed and commission generally in 6 weeks.

CUSTOMER DRIVEN

MICROSTILL PROJECT

What Methods Does IOR Use to Develop New Products and Processes?

Necessity – driven by budget constraints, eg $400k steel pipeline, developed plastic pipelene to spec $150k

Develop software in house – could have bought ‘off the shelf’. Nommensen says ‘Introduces another element of fun for designers’

Driven by constant R&D – constantly meeting and exceeding market needs by continuous improvement and innovation.

Advantage of being owner driven – allows testing and perfection before deployment.

Take advantage of Government tax breaks. 150% for identified R&D.

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Development of Micro-Refinery

Pre -1984 Issues relating to high transport costs involved with

distributing petroleum fuels to inland farming and mining communities throughout Australia

The only sources of supply were coastal refineries in major cities – thousands of miles away

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Development of Micro-Refinery

1984 - 1987 Eromanga Small Scale oil refinery developed Capable of 1500 barrels/day capacity Small Scale refineries advantageous in remote areas

where:– small demand for petroleum products – low level of infrastructure available

MICROSTILL PROJECT

Development of Micro-Refinery

Late 1980’s Due to the success of the Eromanga project BP asked

IOR to tender for a small refinery in Papua New-Guinea

IOR realised earlier on that event the small scale size would be too great a capacity and thus the MICROSTILL was born.

MICROSTILL PROJECT

Development of Micro-Refinery

IOR’s Microstill Development Process Remote locations where crude oil is available and

costs to transport fuel form large oil refineries prohibitive created the economy for the Microstill

Compact, easily transportable and could access almost inaccessible locations such as dense rainforest or deserts.

Reduce risk associated with fuel transportation to remote locations

MICROSTILL PROJECT

Effectiveness of Process

Relatively effective process– creating a new market by using an existing technology in

an innovative way Niche market created through doing what no-one else really

wanted to do Developed over a relatively short period of time

– refinery capable of creating 1500 barrels/day– to producing 150 barrels/day– extremely mobile and cost benefit compared with transporting fuel

Don’t have have long term business or marketing plan Need to specify market targets

MICROSTILL PROJECT

Niche Market Creation

Created multifunctional teams and avoided unnecessary specialisation

In-house development of process and product - more secure technology protection from rival companies

Developed using conventional techniques capable of producing more than one type of product

Developed a custom built compute software system – reduces possibility of reverse engineering

Large oil companies concentrate on the larger coastal markets and major refinery installations.

Combined with continuous incremental improvements

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How will they sustain their current leadership?

DIVERSIFICATION within their Niche Market

MICROSTILL PROJECT

How will they sustain their current leadership?

Mini Oil Refineries

“Turn Key” Company

Refining – Owner Operator

Process Engineering

MICROSTILL PROJECT

Mini Oil Refineries

Expanding the niche market

Continuous augmentation

Innovative Progressive Specialist

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“Turn Key” Company

From order to commissioning: Design Procurement Fabrication Project management Installation

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Owner Operator Refinery

Eromanga All new technology

tested on site Insight into small remote

refineries Reliability proven in

actual operation Oilfield services

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Process Engineering

Responsible for design and development Provides contract engineering services to wider

processing industry Provides independent design certification and

ratings for other manufacturers

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Is IOR likely to be challenged by market followers? WHY?

In house development of process and product technology

Harsh environments Cost effectiveness of IORs services Competitor failure

MICROSTILL PROJECT

The Russian OrdersMicrostills Project Management Plan

From an operational & processing context IOR positioned well financially, strategically and technically

Extensive Overseas 13 units sold only two in Australia Corporate Monitoring during the international

commissioning process Bilingual computing systems software Superb product A commitment to quality and service

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The Russian Orders

However!!! From an holistic business and strategic management

context they appear under prepared They have by entered into the market by chance

MICROSTILL PROJECT

The Russian OrdersRecommendations

Longer period of assimilation into the local culture

Engage with a local entity in the form of a contract Alliance or Partnering Agreement

Pre arranged financial mechanisms and guarantees

Preparation of a marketing strategy to investigate further opportunities