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

1. MICROSTILL PROJECTNATALIE THOMSEN – DAVID BULLARD – DENNIS LARACY – HAMISH PRESSLAND - TONY IGO CASE STUDY CNP532 - INNOVATION AND TECHNOLOGY MANAGEMENT • 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

2. “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

3. 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

4. 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

5. What does Arthur Nommensen mean by “rigid flexibility”? MANAGEMENT STRATEGY - a unique combination of policies, practices, organization structures and the various systems to guide management and employee behaviour. - Scott Hollander • Rigid = manage a Requirer ! focuses onresults, 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 MICROSTILL PROJECT

6. 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

7. MICROSTILL PROJECT

8. 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

9. 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. MICROSTILL PROJECT

10. 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 MICROSTILL PROJECT

11. 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

12. 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

13. 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

14. 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

15. 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 MICROSTILL PROJECT

16. How will they sustain their current leadership? DIVERSIFICATION within their Niche Market MICROSTILL PROJECT

17. How will they sustain their current leadership? Mini Oil Refineries “Turn Key” Company Refining – Owner Operator Process Engineering MICROSTILL PROJECT

18. Mini Oil Refineries • Expanding the niche market • Continuous augmentation • Innovative • Progressive • Specialist MICROSTILL PROJECT

19. “Turn Key” Company From order to commissioning: • Design • Procurement • Fabrication • Project management • Installation MICROSTILL PROJECT

20. Owner Operator Refinery • Eromanga • All new technology tested on site • Insight into small remote refineries • Reliability proven in actual operation • Oilfield services MICROSTILL PROJECT

21. Process Engineering • Responsible for design and development • Provides contract engineering services to wider processing industry • Provides independent design certification and ratings for other manufacturers MICROSTILL PROJECT

22. 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

23. 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 MICROSTILL PROJECT

24. 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

25. 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 MICROSTILL PROJECT