THE SIX NATIONS OF EFFICIENCY

To survive in the hostile business environment one key issue that many ignore is the need to be efficient. I have come up with my 6 ATIONS process (yes a shameful rip off of the 6 nations but never mind).

1. ELIMINATION. Businesses need to stop doing stuff that adds no value or is little more than a pet project.

2. PRIORITISATION. We often try to do too much and are not as clear as we should be on what really matters.

3. RATIONALISATION. Businesses should only be doing things once but it's amazing how often that isn't the case. 

4. CO-ORDINATION. If you have to do things in more than one place or business area then you  have to better at working together.

5. SIMPLIFICATION. We shouldn't over complicate things or slow them down with unnecessary bureaucracy. The larger the business, the more there is a risk of over-complication. 

6. AUTOMATION. Businesses shouldn't be frightened of technology solutions but only after they've been through the first 5 steps. 

The most important thing is to take these steps in order and not rush to automation.  

ALL I NEED IS THE AIR THAT I BREATHE

These days all we hear about is post truth, alternative facts and fake news. These are all symptoms of a breakdown in trust throughout society. We don't actually realise how important trust is to our modern way of life. Whenever we buy or use something we are placing a high level of implicit trust in the whole supply chain that led to the product in our hand. Even when we sit down we are trusting that an unknown furniture maker did a good job on our chair. As Warren Buffet said “trust is like the air we breathe, nobody really notices, but when it's absent, everybody notices”. 

Businesses obviously need to earn the trust of their customers and we see lots of examples where that trust is forfeited. However, what interests me is that within organisations there also needs to be a high levels of trust. I was reminded of this by an article in the latest edition of the Harvard Business Review by Paul Zak.  In it he says “that building a culture of trust is what makes a meaningful difference. Employees in high trust organisations are more productive, have more energy at work, collaborate better with their colleagues, and stay longer with their employers longer than people working at low trust companies"

I am particularly interested in what organisations can do to increase internal levels of trust. The article I just mentioned lists eight things including recognise excellence, give people discretion in how they do their work and induce challenge stress. This got me thinking about my version of the eight things that organisations and their leaders can do to build internal trust. Some are similar to those in the article and some are quite different but they are all based on my experience, both good and bad. Here they are.

1. Understand each other. All to often we dive into tasks and projects without really understanding the motivation and character of our colleagues. This doesn’t need to be a lengthy process but time spent early on in building confidence in each other is rarely wasted. One simple question I've used with a new team is to ask everyone to say if they had the chance, what Olympic sport they would represent their country at. 

2. Build on shared values and purpose. I believe all organisations should be clear about why they exist and what values they aspire to. If these key foundation stones are in place then it is easier to build trust. 

3. If in doubt, communicate. All too often trust is undermined by rumours or leadership trying to ignore difficult issues. Frequent communication that is both transparent and authentic and that tackles the good and the bad is a key component of a high trust organisation.

4. Working on shared challenges. If you look back I think you will find that you trust those people who you have worked with on challenging projects and tasks. That embedded trust lasts for years and years even if you don't see the team very often. If you want to build trust going forward then give people challenging but achievable tasks they can work on together. 

5. Build a shared history and stories. When we are with old friends we often remind each other of stories in our shared past. Organisations are no different. I remember when over 400 colleagues from all over the country  took part in the Maggies Bike and hike in the Highlands.  The many stories from that single event were told for years after.

6. Deliver on commitments.  Management and leaders have to do what they say they will and delivery needs to be real not cosmetic. As commitments are made and delivered on then trust builds. This may seem obvious but still needs saying. 

7. Celebrate and share success. Good news does tend to get well publicised in organisations but don't forget the small and hidden successes and make sure that credit is liberally shared around. As one of my favourite quotes from Lyndon B Johnson goes “you can achieve whatever you want as long as you don't mind who gets the credit” 

8. The tone at the top matters. If the board and senior leadership of an organisation don't trust each other and don't demonstrate that in their dealings with the whole organisation that message soon spreads. 

So those are my eight tips for building trust within an organisation. They aren't rocket science and in many respects are obvious but I believe that building trust in our complex organisations requires conscious effort and common sense otherwise we will find our selves short of breathe to use Warren Buffet’s analogy. 

A Life in the Day of Maggies

I have been a Nonexec director of the Maggies cancer centre charity for about ten years now and I finally got around to visiting our centre in Swansea. We have about 20 centres around the UK and they are all different and yet all the same. They have all been designed by different architects and therefore look and feel quite different but they all have two things at their heart. Helping people affected by cancer either directly or indirectly and the cup of tea at the kitchen table. They provide an oasis of tranquility offering a range of practical, social and psychological support  and act as a contrast to the hospital institution which is usually right next door.

I was reminded forcefully of the variety of things that happen in any Maggies centre on any given day. When I walked in the place was full as the drop in Tai Chi session had just finished. Conversations were going on around the kitchen table but someone still found the time to welcome me and make me a cup of tea. It then got even busier as the another group finished. I wangled a seat at the kitchen table and chatted to some volunteers and centre users to hear about their stories and the value they get from Maggies.  The best way I can summarise what I heard was that Maggies allows people to get control back of their life and some even  say that the combined experience of cancer followed by  Maggies leaves them in a better place than before they started on a very bumpy journey. 

The centre then quietened down as another session on coping with bereavement started. That allowed some of the staff to engage in more causal conversations. The one that really struck me was the sort of conversation that shouldn't really happen but does at Maggies. It was time for the annual fire inspection;  extinguishers that sort of thing. The obligatory cup of tea was made for the guy and then he opened up. He had lost a lot of family members to cancer and a close relative was currently going through a challenging diagnosis. It was so easy and natural for him to share that and for one of our team to explain more about Maggies and how it could help him and his family. We got our certificate but he got more than he bargained for.

The next conversation involved an emergency dash for tissues so I made my excuses and chatted instead to the benefits adviser who helps people work through the financial implications of their cancer diagnosis but that was then interrupted by someone walking in looking for help and I could see the sag in the shoulders disappearing as questions were answered and pointers given. All this time one of our volunteers was greeting everyone who came in and in a very welcoming and non institutional way found out what they needed. There are no names and no numbers at Maggies, it's all about the individual. When I looked up at this point  I saw three individual conversations going on, one group session was on, as was the kettle. Just another moment in the life of a Maggies centre. 

The three S approach to uncertainty

Life seems to be getting more and more uncertain. We are being warned about a Brexit rollercoaster and the oil price, at least in percentage terms, seems to be doing a good impersonation of an elevator; up one minute, down the next. All this uncertainty makes decision-making complex , especially when they concern long-life assets.

Against this background I have been thinking about the question of energy independence. Whilst, in my opinion, this isn’t necessarily a good goal at the national or even local level in its own right, I do believe that investing to reduce one’s dependence on and exposure to both the volatility of the global energy markets and the resilience of local energy distribution systems is something to be considered.

This is where, I believe, a combination of three Ss comes in: solar, storage and software. The cost of solar panels has come down enormously over the last ten years or so but the economics still depend upon support mechanisms, partly because of the profile of solar production. That problem will always be with us and that is where storage comes in.  Installing a suitably-sized lithium ion battery in the home or office allows much more of the solar power to be used on-site and this significantly improves the economics of the whole installation. The third leg is energy management software that can optimise on-site demand (which could include decisions on when to recharge a plug in an electric vehicle), to match the availability of locally produced or stored electricity. The same software can also be used to decide when electricity should be exported and when imported from the grid, an increasing source of value as we move to time of day pricing. Finally, the same software can work out when the stored energy can be used to provide support services such as frequency response to the local grid or through aggregation to the national grid. It really is the combination of the three that makes all this work.

Investing in solar, storage and software may not mean complete energy independence but it will certainly reduce exposure to energy uncertainty and will be an increasingly good investment in its own right. We are seeing commercial offerings starting to emerge in this space and I’m sure there will be more to come.

ELEPHANTS IN ENERGY

The 'big five' describes the animals you should see on safari.  The easiest of these to spot is the elephant but for two hundred years we have used the expression 'the elephant in the room' to describe things that should be tackled but are ignored and that is what lies behind my title of ‘elephants in energy’. My big five elephants in the Scottish energy policy environment are:

 1. An integrated energy policy that combines power, heat and transport

We need an integrated energy policy that combines power, heat and transport and which applies the full force of technology and policy to all three areas with the right emphasis.  Energy efficiency should be a national infrastructure project, managed on an area by area basis, and focussed on heat. We need to look at the energy storage and network implications of increased electrification. In assessing affordability we should look at the impact on all three bills in aggregate.  I think we should make Scotland the best place in Europe to invest in and deploy home automation, energy storage and electric vehicles.

2. Put the demand side on the same footing as the supply side

We need to put the demand side on the same footing as the supply side. The existing energy trilemma of sustainability, security of supply and affordability has been hi-jacked by the supply side.  I believe we need a new energy demand trilemma which should include flexibility, meeting of needs and affordability. Flexibility needs to encompass convenience and control and reconcile whether it should be customer or industry led. Meeting of needs has to focus on actual needs without just using more energy and affordability, on the demand side, is about managing unit consumption and not unit price. I long for the day when as much time is spent demand side policy as is spent on the supply side.

3. Scotland’s renewable energy industry needs to adopt new technologies to maximise output 

The renewable energy industry in Scotland has done a great job over the past 15 years but has to accept that its golden era is over. However, it can have a successful future if it adapts quickly to new challenges. It needs to adopt new technologies to maximise output from existing assets. It has to reduce the cost of future projects in the approval, construction and operational phases. It has to think about more than just wind with tidal power and renewable heat being two promising areas.  It has to address the growing challenge of network congestion and renewable curtailment through smart network investment, embedded storage and demand side management.

4. Scotland needs an evidence-based look at smaller ‘new (modular) nuclear’ power stations

I am strongly against the Hinkley Point nuclear power station on cost, timing, size, technology, waste, ownership and need grounds.  I believe that we should not be building this enormous, expensive piece of old but curiously unproven technology. However, we should not ignore the fact that nuclear produces base load zero carbon electricity. I have recently looked at small modular nuclear reactors. They are much smaller, should be cheaper and quicker to build, are safer by design, produce less waste and decommissioning risk and represent true new nuclear. From my research I was convinced that this sort of nuclear power was worth considering and I think that, here in Scotland, we should take a fresh, independent and evidence-based look at this emerging new generation of modular nuclear power stations. The Scottish Government should set up an expert review group to look at truly new nuclear to determine if it has a place in our energy future.

5. We need to address policy inconsistency between our low carbon ambition and maximising North Sea oil and gas recovery

We have to address the inconsistency between our low carbon ambitions and maximising economic recovery of North Sea reserves. If we are to keep the global temperature rise to 1.5 degrees as advocated by the scientists we can only use about one fifth of the world's known fossil fuel reserves by 2050. Squaring the circle between the fossil fuels abundance and climate change is the defining energy challenge of this century and in Scotland we cannot hide from that by simultaneously aiming for maximum economic recovery of North Sea reserves whilst taking a world leading position on reducing carbon emissions. It is not defensible to say that we can burn our reserves whilst other countries should keep theirs in the ground when we have enjoyed the fruits of carbon emissions for the last two hundred years. The North Sea challenge is really about undertaking an efficient decommissioning programme whilst managing the decline in production. If we get a successful decommissioning programme going then we will have the expertise to build an export industry which can create jobs that will survive long after North Sea production has ended.

... so, let’s have an honest and informed debate on Scottish energy policy 

I'm sure you will have your own list and I encourage you to make sure that your big energy issues are aired and addressed. Silence is not an acceptable response to the 21st energy and carbon challenges we face. My biggest single plea is that we have an honest and informed debate on Scottish energy policy. It's too important not to.

It is Better to Give than to Receive

I've read an interesting article in the Harvard Business Review by Roger Martin called M & A: The One Thing You Need to Get Right. He points out that all studies suggest that 70-90% of acquisitions end up destroying value and although the title oversells his idea, my experience does suggest there is a critical success factor that is often overlooked in our relentless focus on synergies and EDITDA multiples. In a nutshell he summarises his point as follows: "Companies that focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give it".  

The article lists four areas where the acquiror can give something to its target. 

1. Be a smarter provider of capital. As an example lots of start up companies I see these days struggle to raise the finance to move their idea or project from development to deployment and their management can spend many months simply trying to raise funds whereas a larger company can generally fund these incremental projects from internal resources. 

2. Provide better managerial oversight.  I would express this as maybe wider or more experienced management rather than just better but I take the point that in some situations businesses have struggled under poor management and can be freed from that constraint.

3. Transfer valuable skills. As the article says "the skill should be critical to competitive advantage and more highly developed in the acquiror than in the acquisition". It reality this means a degree of honesty rarely found in the corporate world as you have to be completely objective on what skills you actually have and whether they are truly better than in the target. If these hurdles are meet then sensitivity is needed in handling the transfer and sensitivity is another attribute is short supply. When there is an honest assessment and a sensitive transfer then this can really create a lot of value.

4. Share valuable capabilities. In this case the sharing will probably happen in both directions with both give and take. It is certainly the case that larger companies can have capabilities, systems and assets  that smaller companies can utilise with no real increase in cost to the parent company. I also find that there is value creation in sharing networks of connections between businesses. 

I can think of examples from my corporate experience which illustrate some of these features such as the acquisition of Airtricty by SSE where the fledgling Irish energy supply business gained a lot by what SSE could bring and as a result grew tenfold in a few years. However, it also applies in the start up investment phase I now find myself involved with. Before investing I always ask myself; what can we add to this company by way of experience, connections and advice and in some cases even office space!

I guess that as in life so it is in M & A; it is better to give rather than to receive. 

Small is Beautiful

The book 'Small is Beautiful' by economist E F Schumacher was originally published at the time of the 1973 oil crisis. To quote Wikipedia "It is often used to champion small, appropriate technologies that are believed to empower people more, in contrast with phrases such as "bigger is better". I think these words could usefully be applied to the challenges facing the energy industry today when we are facing different challenges that may, with the benefit of hindsight, look like an energy crisis.

The last hundred and fifty or so years have seen the energy industry fixated with bigger is better. It has been about the larger power stations, heavier and deeper off shore platforms and bigger companies. I think this is, however, yesterday's trend. The future is smaller, more distributed and local. Here are four illustrations. 

1. More and more homes, schools and offices are fitting small solar systems and now this is frequently being combined with local storage. You can now install lithium ion batteries that are smaller than conventional gas boilers and mean that all you solar produced power can be consumed on site. These are small, personal decisions which are democratising and disrupting the big centralised electricity system.

2. The rise of unconventional oil and gas has transformed the economics of the fossil fuel industry. Regardless of the controversy around fracking one thing is clear. These wells are quicker and faster to develop than the pieces of giant industrial architecture that dominated the industry until recently and this is changing the nature of the commodity cycle and the politics of the energy industry.

3. Even the nuclear industry is being affected. If the 1600MW Hinkley Point C ever gets built I suspect it will mark the final death throes of the bigger is better mentality. The focus is now on so called small modular nuclear reactors which may be a fifth to a quarter of the size of Hinkley and stand a sporting chance of being connected with words not normally associated with nuclear power; 'on time and on budget'. 

4. The market share of the big energy suppliers has been in steep decline recently and we have seen the emergence of a range of smaller competitors with different business models as well as the growth of collective and mutual owned energy suppliers. I suspect that this trend is going to be a consistent feature of the market.

The challenge for the energy industry will be how it copes with the disruption that is bound to occur as we move from a bigger is better world to one where small is beautiful and diversity of scale is a strength.