DTI Mentoring Initiative

PILOT / DTI Business to Business Mentoring Initiative

CASE STUDY

PHASE 1 October 2000 – May 2002

MENTOR Ron Malone, Amec Process & Energy

MENTEE Roy Burnett, Scotvalve Services

Business 2 Business - CASE STUDY

Contents

Summary & Conclusions

1.0 Introduction

2.0 Objectives

3.0 Relationship Building

4.0 Support Role

5.0 Key Challenges

6.0 Achievements

7.0 Lessons Learned

2 Business 2 Business - CASE STUDY

Summary and Conclusions

Mentoring has in Scotvalves case been successful. That is while it is likely that the company would have expanded overseas it is clear that the Mentoring Initiative has allowed Sotvalves to execute their strategy for expansion much more rigorously and much more quickly than anticipated.

There have been a few key elements to the success of the Mentoring Initiate in Scotvalves case, these are as follows: -

 The acceptance of the Mentor by Mentee and vice versa  The use of strategy formulation tools during, and following on from meetings  The acceptance and completion of individual actions  The sharing of detailed information, both in respect of personal ambitions and in terms of the business(s)

The initiative also allowed both Mentor the Mentee to have a much broader view of the Scotvalves business. The recognition that additional management and labour resource would be needed to assist with expansion plans, whether overseas or at home supports this view.

3 1.0 Introduction

1.1 SME Organisation

The company teamed with was Scotvalves an SME (Small Medium Enterprise) company based in Aberdeen. Scotvalves had an annual turnover of about £ 2.8m in 2000. Scotvalves core business is the provision of specialist welding and machine services to the offshore drilling industry. Following a series of interviews Scotvalves was selected as a candidate for the mentoring initiative by the DTI B2B team. Roy Burnett is Scotvalves owner and Managing Director. At the outset of the mentoring initiative Scotvalves had operations in Aberdeen and a JV in Egypt.

Other business areas included fabrication work, although this was generally directly related to the repair and refurbishment of drilling related equipment.

The business idea was that of a one stop shop for clients, Scotvalves was set up to repair equipment through machining and or fabrication as well as inspecting and testing the equipment to client satisfaction prior to return. This meant that there was no need for clients to get involved with multiple subcontracts and logistics.

Organisationally Scotvalves was run directly by the Managing Director, the organisation is as detailed in attachment 1.

1.2 Mentor Organisation

AMEC Upstream Oil & Gas, Aberdeen volunteered to supply one of their experienced employees to act as a ‘Mentor’ as part of the B2B initiative. AMEC is a large publicly owned international Construction Company involved in the offshore oil and gas business in Aberdeen. Its main business area is the provision of design and construct services to the oil majors as well as providing support and input to the oil majors offshore operations.

Following submission of an experience profile and one to one interviews Ron Malone a Project Manager with AMEC Offshore Services in Aberdeen was selected and paired with Scotvalves to act as their ‘Mentor’. Additionally Ron was studying for his MBA and was looking for an opportunity to relate his learning to a real business case.

2.0 Objectives

To gain the most from the initiative objectives were to be set for both the ‘Mentee’ and ‘Mentor’. The purpose of these objectives being to allow the DTI B2B team to monitor progress during the initiative as well as ensuring both ‘Mentee’ and ‘Mentor’ gained from the work.

In the case of Scotvalves the ‘Mentor’ and ‘Menthe’ objectives were set very early on, in the case of Scotvalves they were simply to try to expand their overseas business from the existing 10% of revenues to 20% of revenues. Additionally the profitability of the UK part of the business was to be looked at with a view to maximising it as far as possible.

The ‘Mentor’ objectives were in Ron Malone’s case to expand his business knowledge from his role as a Project Manager, to include the development and implementation of strategy with in a real business context.

The objectives were not changed through out the project and to a greater or lesser degree remain in place today. (Refer fig 1)

4 3.0 Relationship Building

From about November 2000 till April 2001 Roy Burnett and Ron Malone met informally every fortnight for a period of about 2 hours at Scotvalves premises. During these sessions they talked extensively about Scotvalves internal and external environment and Roys aspirations.

The relationship developed almost immediately, as the conversations became a series of sounding boards between Mentor and Mentee. Roy basically bouncing his many entrepreneurial ideas off his Mentor in return for an experienced opinion about each of the ideas.

The relationship further developed as ideas were developed, understood, and discussed. As a result of the conversations various actions were taken on by the individuals and progressed. The actions helped to drive the process forward and cemented the relationship by demonstrating a joint willingness to share information as well as experiences.

Having a Mentor who was familiar with Scotvalves market as well as external environment combined with an in depth engineering background met Roys own perception of his Mentors attributes, this made Roy comfortable with the Mentors opinions and input to his ideas. This again reinforced the relationship.

4.0 Support Role

It was clear early on in our conversations that Roy as owner and Managing Director of Scotvalves needed an experience ‘Mentor’ to relate to. Mainly to gain the confidence to proceed with his own ideas.

Through use of some MBA tools and techniques, Roys ideas were mapped and illustrated. The main tool was the “Strategic Conversation” a technique used to develop scenario plans. However here it was used to identify Roys visions and aspirations and help him rationalise these into a workable strategy both in terms of international growth and growth of his home market.

Analysis of the strategies was carried out and written up for Roy to consider. From this Scotvalves strategic options were made clear to Roy and he was able to recognise where difficulties and or risks could arise as a result of following a particular strategic route, hence take action to mitigate these risks where possible.

As noted above the conversations and the conversation mapping process was spread out over a number of months of frequent meetings. During these meetings a great number of issues were discussed and from this a great number of ideas were developed, both in terms of the internationalisation of Scotvalves as well as the growth potential of the home market. The ideas were often developed through actions and the transfer of information between the two proponents.

5.0 Key Challenges

As discussed a great number of ideas and issues were discussed, however the key challenges remained as follows: -

 The country’s identified for overseas expansion had be confirmed as suitable  FDI (Foreign Direct Investment) model option had to be developed and selected  Organisationally Roy needed more time to pursue his overseas expansion ideas  The existing home business had to be maintained and where possible grown  The risks associated with FDI had to be fully explored and understood, currency risks, transaction risks, etc

5  Country risks had to be fully explored and understood, risk of appropriation, government stability etc  Resource constraints had to be addressed and overcome

Through the ‘Mentor/Mentee’ conversations the strategy covering overseas expansion and covering the existing business environment of Scotvalves was formulated. This set out the overall business strategy or vision, the quantified objectives (e.g. increased overseas revenue), the processes to be changed or improved and the specific projects required achieving the transformation. This was as illustrated below. Refer figure 1.0

Business Business Business strategy Business Strategy Transformation Process/activity Quantified (Vision) Project To Be Improved Objectives Increase To grow the overseas business overseas to JV with xxx turnover to 20 overcome predicted Overseas marketing % of revenue decline in the UK market and sales To increase the margin obtained JV with xxx per square meter To continue to of the existing grow the UK Process for introduction factory space business through of innovations new lines of work, Organisational change To enter into at new markets and new customers least one new Utilisation of existing industry market UK workshop space To continue to reflect Scotvalves Increased sales and To increase the core attributes of marketing emphasis providing high existing market new customers and quality services to Returns on specialist Client/customer markets - UK and the oil sector welding services base served by overseas Scotvalve To innovate and identify new core competencies HR function, Training To increase the that will help develop and resource planning Overseas recruitment range of services and support further and training offered as part of UK and overseas growth. core competency

Increase in skilled Resource

Figure 1

With the overall business strategy or Roys vision of the company clearly mapped the specific transformation projects could be planned and implemented. In the case of the overseas expansion a new JV was formed, business plan developed and execution plan drawn up.

Together with the strategy mapping and to aid with the detailed execution planning Scotvalves overseas policy was developed. The policy identified in more detail the various processes and procedures that would be needed to instigate further overseas expansion. The policy looked at the external and internal business environments in the countries considered, i.e. what parts of the firm needed to be situated locally, what level of controls would be required to allow the overseas venture to operate successfully and where would resources be found to manage and operate the business. 6 The statement finally developed, while simple in its content, set the basis of the move to expand further overseas. E.g.

“ Scotvalves should adopt a geographically centred international policy, that is, the policy should be based on operating in a range of countries determined by the business opportunities presented by the existence of oil exploration and production activity. Strategically these operations should be focused on delivery of Scotvalves core competence, the provision of high quality welding and machine repair services. It should be recognised that this strategy may need to be developed into a cost focused strategy as the local market and competition develops. If first to the market in these areas Scotvalves could obtain a competitive price advantage, certainly in the short term.

Internationally Scotvalves should ensure that the country operations are self sufficient while maintaining global control of technical developments, resourcing, procurement and marketing activities. Based on the nature of the exploration activities the subsidiary needs to be ethnocentrically disposed, that is managed locally by an experienced expatriate operations manager who would be able to carry out core business operations independently. Resource issues while being identified locally will in the short term be fulfilled on a global basis, as most will be expatriates. However training needs of nationals will have to be identified and the appropriate courses initiated as the company will inevitably move towards a more polycentric set up of its operations. “

6.0 Achievements

These have been in line with the developed strategy, and have been.

 The identification of new customers  Introduction of new contracting principals  Identification of new market segments at home and overseas  A greater understanding of the overseas environments being considered  A more systematic approach to strategy realisation  Overseas revenue growth of at least 10%  Maintain UK market share

Scotvalve have moved rapidly towards achieving its aim of overseas expansion. Initially a new joint venture was formed and Scotvalves operated in two locations overseas. Subsequently the business model has been used again and further overseas expansion undertaken. Scotvalves now operates in three different overseas locations.

Scotvalves has changed its organisational structure to take account of its overseas expansion, implementing a number of strategic changes in personnel.

At home additional services have been introduced and this has increased the overall scope of the services offered by Scotvalves. This has expanded the Scotvalves capability and opened up an array of new customers. This has been with in Scotvalves current market of the oil and gas sector and further expansion into hitherto untapped markets has yet to be realised.

The growth and envisaged increase in turnover has been achieved both at home and overseas. At home despite a drop in European sales, revenue has increased 16%.

Overseas the growth in revenue has been 285%, well beyond the original 10%, which in retrospect was probably too low a target. Overseas operations have yet to reach the year- end. 7 Organisation pre-mentoring initiative

Managing Director Roy Burnett

Operations Production Engineering Manager manager UK Manager UK Egypt JV operations Operations

Organisation Post Mentoring

Managing Director Roy Burnett

Operations Operations Operations Production Engineering Manager Manager Manager Manager Manager Egyptian JV Equitorial Sudan JV UK Operations UK Operations Guinea JV

Technical Assistant UK OPerations

7.0 Lessons Learned

The ‘Mentoring’ sessions gave Scotvalves a fresh outlook and viewpoint on their current and future business plans. One of the early benefits of this was to highlight the organisational change required in Scotvalves UK Management to allow more focused time and energy to be applied to implementing overseas expansion

Considerable time and resource is needed to effectively apply the myriad of business tools and techniques that are available, this capability is often restricted to larger companies. However even with a basic knowledge of the various business tools the large amount of information available via the Internet can be readily applied. Available data covers Political, Economic, Social and Technological aspects associated with various countries and environments. Such information is the basis for any overseas strategy review and can be tapped by SME organisations provided they have the knowledge of how to apply the information to the problem.

The Mentoring Sessions have been intensive but covered a wide range of topics relating to the goals we set out. The input from the Mentor was exactly what Scotvalves needed, as it provided a fresh outlook and viewpoint to both Scotvalves current business and our future business plans.

8 In terms of increasing Scotvalves UK Business efficiency and profitability, the strategic mapping process provided a visual link between Scotvalves goals and aspirations with the company’s objectives and business vision. In terms of increased profitability it helps focus on the core business skills and differentiate Scotvalves services to reveal where the true profits were being generated. It identified possible additional sources of revenue out with current markets as well as in additional related services.

The use of political, economic, social and technical (PEST) analysis was also very useful in analysing the information obtained about the various overseas markets and assisted in allowing Scotvalves to make making an informed choice on which of these marketed to prioritise and pursue. The Mentor was able to direct Scotvalves to good sources of up-to-date information on the Internet about the various overseas locations. This provided a significant amount of information on marketing, strategy, finance, recruitment, and training.

The Mentoring Initiative has basically give Scotvalves focus and confidence to go forward with the strategic growth both in the UK and our overseas markets. While the Mentor provided invaluable knowledge and experience.

The Mentee certainly provided first hand knowledge of an SME and provided an insight in how an SME operates within its strengths (flexibility, specialisation and personnel enthusiasm) and weaknesses (restricted resources, financial limitations and organisational restrictions). These strengths and weaknesses should be recognised by larger companies when considering their supply chain and when expecting SME’s to reciprocate on contractual risk.