1 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 THE MICROSTILL PROJECT Adding Value Through Innovation

2 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 1. MANAGEMENT STYLE (a) Is IOR’s management style suited to niche market creation? Why? YES Organic Structure Small size Niche market focus Management by projects Frameworks No long term strategy at start – organic growth has given correct method Long term goals and strategy could have derived a suitable management structure

3 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 1. MANAGEMENT STYLE (b) What does Arthur Nommensen mean by ‘rigid flexibility’? Quality design process and systems that provide product efficiency Flexibility to constantly innovate and develop products to suit market needs

4 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 Pro’s Flexible Innovative Good feedback Collective knowledge Quick decisions Con’s Marketing No formal systems Blurred responsibilities Management Style

5 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT (a)What has IOR done to develop its Microstill product? Taken good idea and successfully developed it to market Identified markets and opportunities Focused on development and innovation Introduced customer feedback to understand stakeholders needs Recognized R&D and utilized tax breaks to fund Developed core competencies Culture of innovation

6 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT (b) What methods does IOR use to develop new products and processes? Product development initially took place to meet customer needs and have also been spawned by necessity. IOR developed a customer questionnaire to determine customers expectation and needs and also assisted with further education for employees. IOR has also promoted internal cross profession learning for its employees to create a multi skilled workforce. As IOR are owner-operators of a small scale refinery, they are able to test products and perfect them before reaching the market place. Use of tax advantages to fund R&D Aligned themselves with the customers they supply Changed supply process

7 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT (c) Track development of the initial ‘idea’ of a micro-refinery through to commercial development. How effective has this process been? What changes would you recommend? The development of the micro-refinery has been effective, however concentration for looking for new and larger markets would helped to expedite its development. IOR should put in place some systems management plans to help identify which key outcomes they should pursue

8 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT Risk and strategic analysis Stage gate reviews Cost benefit analysis Further development of the customer feedback process Innovative culture and thinking & change management Definition of project roles – i.e. project management strategy IOR could also look at cooperating with other companies to seek access to their distribution network and to commercialize their products.

9 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT (d) How has IOR created a niche market? By detecting a need for their niche product and then looking for similar tasks for their technology to take advantage of a synergic effect (Scope economics). Through creation of the Microstill IOR have created a niche market within the petroleum industry as an innovative, progressive, specialist supplier focused on meeting the needs of its customers. IOR have improved their equipment to meet several customer demands. Improvements in microstill technology has limited competition in market

10 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT (e) How will they sustain their current leadership? IOR recognises the need for continuous innovative augmentation, it has integrated its R&D activities with commissioning and customer operational feedback to focus on lessons learnt for future application. If they concentrate on this, along with overlapping of products and appointing a manager with global experience they will have a good chance of retaining their leadership. Further developing their integration with suppliers whilst retaining their technological expertise.

11 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 2. PRODUCT DEVELOPMENT (f) Is IOR likely to be challenged by market followers? Why? Yes, as currently the Microstill has no real competitors as larger oil companies and refinery engineering manufacturers are apparently prepared to leave the smaller refineries and inland markets alone to concentrate on the larger coastal markets and major refinery installations. As their business is viable and they haven’t patented their products at the time of this case, they have left themselves open to be challenged by others in the future.

12 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 3. THE RUSSIAN ORDERS (a) Is IOR suited to take on development and installation of Microstills in Russia? Why? According to Nommensen “We have the personnel, the state of the art technology and importantly, a good understanding of difficulties in remote locations”. It depends if they have the understanding of the difficulties followed by the climate, the unstable political and financial environment and the security.

13 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 3. THE RUSSIAN ORDERS (b) What recommendations would you make? We would recommend that IOR be especially aware of the climate they face. Our recommendation would be that a project strategy process was undertaken, a process which would lead to defining what IOR needs from the project.

14 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03 3. THE RUSSIAN ORDERS (b) What recommendations would you make? Desired outcomes – cost quality environment technology transfer Critical success factors Risk Analysis – thorough understanding and ranking of risks involved in project Stop/Go points Vision of where project will lead IOR Development strategy Security, business law, financial/commercial difficulties also have to be examined. Local expertise and ability to test and train equipment/ operators.

15 Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 15/3/03