Looking beyond the window
Roy Hill, an Iron Ore mine in the far North of Western Australia is on line to achieve lift off in September 2015 when its first iron ore fines shipments will occur. This will shut the door on infrastructure development which has seen 25,000 people inducted into the project. Currently personnel total 7,000 but once the mine is fully commissioned personnel needs will fall to 2,000 resulting in 5,000 people who will need to find income from another source.
This information was gleaned from a recent breakfast presentation by the CFO of the company who gave other fabulous facts such as current changes in price and exchanges rates has reduced the cost of ore by $10 per tonne, this is great. For now. A significant part of this reduction has come from the drop in each of fuel prices, ( 53%), AUD (14%) and other elements. Exciting as it is, this is also a transitory situation. Inconstancy is one of the glorious things about life.
This fall in costs is an opportunity which is currently available to Roy Hill, but at a cost to others. For every opportunity there is an opposing situation and this is something that we often times forget. Churchill commented that a pessimist sees the problems in every opportunity, and the optimist sees the opportunity in every problem. And this is something for business to recognise.
A recent discussion with a Commonwealth Bank Manager showed this other side. The CBA sees the economy stagnating, which was reflected in the February 2015 interest rate drop by the Reserve Bank of Australia. The CBA staff have had their budgets dropped for the number of home loans written. Roy Hill is contributing to this, with these 5,000 now moving, if not to new roles, then to reduced circumstances.
I like to mull things over as you can see, and try to find how everything is intertwined, because it is as we know. Maybe not the tree falling as a result of the butterfly beating its wings type connection, but the connection between future activities of a firm the size of Roy Hill and WA business. I spoke with a few people after the breakfast and asked if the facts outlined in the presentation were known by them, and the answer was no, and then when I asked how this would impact their firms they looked at me as though I had turned into that butterfly right in front of them. They could not connect the dots you see.
And that is something that I see with business leaders who focus on the here and now. They are so busy doing the daily tasks that considering intertwined elements does not have space to breathe. Only when it jumps up and bites them is there a reaction.
I did speak with one leader who was aware of the Roy Hill facts and when I asked him what it means for his business he was able to state it clearly. Roy Hill is not a client of his, nor is likely to be, however the might of the firm and the longevity of its production will impact the economy, and as his business operates in the same economy, he wants to know what’s happening.
Granted the future is only known in hindsight, but that should not stop exploration of scenarios.
Strategic planning depends on what is happening in the environment, and tactics must change to keep the firm on strategy. Waiting until the annual strategy review is too long. If Greece sneezes we may catch a cold. The world is now that small. But its not only global issues that are relevant. Those things that are happening in the next State or country will have an effect too. I have written a previous blog on the importance of strategy in providing the most important of resources – time. The reaction of the leaders in the breakfast demonstrated that this resource was not being captured by the majority of the people in attendance. But one firm has thought about it, and is able to respond. It looks to the future and tracks back to the present. No wonder it is strengthening whilst others in its sector are finding the going to be hard.