Books

Book Extract: A steady ship in a steady current

2019-11-06 13:08

Sweat Scale $ell by Pavlo Phitidis

Published by Pan Macmillan

260 pages

R290

‘Pavlo, I can’t do it any more,” Themba said when we met for a review session.

Themba had left corporate life to start and build a business that supplied and serviced pumps to the mining and industrial sectors.

“I’m run off my feet. I have 230 pumps operating in 13 mine shafts. Never mind the miles and miles of pipes, and the number of pumps and valves in play. It’s madness. I positioned my business to solve the customer’s problem of removing waste water from their mine shafts, ridding them of the costly need to constantly replace their pumps. Instead, I would remove their waste water for them, which they would pay me for per hectolitre.

“And instead of simply replacing broken pumps, as the mines used to do, I would fix and reinstall my own pumps, but, more importantly, I would maintain the system so that we could prevent breakages in the first place. My business was premised on a preventative-maintenance model as opposed to a break-fix model, but now it feels like I’m fixing things all the time, being torn from one mine shaft to another, often hundreds of kilometres apart,” he grumbled, embarrassed that he was breaking our covenant, or so he thought.

I could see that there was a problem before Themba said so. It was reflecting in his numbers. Just like in Jack’s business, the rate at which Themba’s costs were increasing was similar to the rate at which his sales revenue was growing. Themba’s business had grown beyond the capacity of his system of delivery.

“What’s worse is that I have been called into a number of meetings with my managers recently. They are not happy with how things are working and they want me to reduce my price,” he said.

When Themba had positioned his business to solve his customer’s problem of reducing costs by outsourcing waste water removal, the environment his customers operated in was in disarray, with a long labour strike and downward pressures on commodity prices.

Themba’s innovation was a direct response to his and his customers’ changing problems. He had been solving his customers’ problems, but their customer experience was deteriorating.

Now Themba had to decrease his price by 15%, according to a directive issued by one of the biggest mines in the country. A crisis was on the table and his knee-jerk reaction to it, as well as to his exhaustion, was to sell his business while he was ahead.

“Themba, we did not let the crisis in the mining sector that birthed your business go to waste. Let’s not waste this one either,” I said, determined to change his mind.

Sometimes a different perspective can be worth its weight in gold.

It was much cheaper to prevent his pumps from breaking than it was to repair them. Because he was paid by the volume of waste water he removed from the mine shafts, the longer his pumps worked, the greater his revenue was. The less often they broke down, the greater was his profit.

What a neat business!

Themba’s preventative-maintenance model was managed on a complex spreadsheet. Maintenance teams rotated according to schedules.

These teams would go out to inspect the pumps, literally by putting a stethoscope to a pump, listening to how smoothly it was operating and deciding if it needed to be repaired, replaced or left alone. This was one of the biggest bleeds in cost in Themba’s business.

It was an inefficient system, with teams having to respond to many unnecessary calls along miles and miles of pipes. The mines were also grumbling about having Themba’s teams come on to the mine grounds daily and interfere with mining operations such as blasting, clearing and hauling.

Sweat Scale $ell by Pavlo Phitidis

I arranged a meeting between Themba and Brian, another entrepreneur I was working with whose business designed and developed “internet of things” devices and solutions. Simply put, Brian embedded computing devices into objects, enabling them to send and receive data via the internet, enabling the user to collect and interpret information on the object and the system it was part of.

We began by collecting months and months of data, trying to identify what caused the pumps to break down. Patterns began to emerge. In the pumps, wear and tear was first experienced in the ball bearings. Worn ball bearings began to vibrate and rattle the pump, which in turn displaced fasteners and dislodged gaskets, resulting in other issues.

This was great news. I was thrilled. Brian was more so and Themba was full of anticipation.

After some experimentation, Brian built a series of rugged devices that he installed in the pumps, pipes and valves. These measured the intensity of vibrations in the pumps and the volume of waste water flowing through the pipes and valves.

“Right,” Brian said when we next met, “I can use this data to determine the tipping point for when vibrations in a pump will exceed a certain threshold, at which point the pump is about to break.

“At this point, you will be alerted by an automated preventative-maintenance call.”

“For real?” was the full extent of Themba’s reply.

It took a short while to determine the vibrational tipping point that would trigger the preventative maintenance call. Furthermore, Brian and his team developed software that enabled Themba to identify each pump and check its individual performance.

After running the new system for four months, tweaking it and optimising it, Themba reduced his crews and vehicles. This process of digitising his maintenance system was only the beginning. More importantly, Themba forgot that he wanted to sell the business.

“I still reflect on that period with amazement, Pavlo,” Themba confessed to me in our most recent session. “If I was not feeling glum and burnt out, if there was no crisis in my business and if the mines weren’t forcing me to reduce my pricing, we would not be where we are today.”

I smiled and nodded in agreement. Necessity truly is the mother of most inventive and industrious actions.

When Themba had positioned his business to solve his customer’s problem of reducing costs by outsourcing waste water removal, the environment his customers operated in was in disarray, with a long labour strike and downward pressures on commodity prices.

He continued: “Here we are today, controlling my business literally through my cellphone.

“I can tell you in a flash which waste water removal lines are working well and which need preventative maintenance. I can tell how much waste water from which shaft is being removed and I can see how much waste water will be removed this month. My revenues are almost completely predictable.”

I replied in agreement: “A smooth, steady ship in a smooth, steady current.”

“You and your ships,” he laughed.

Themba’s innovation was a direct response to his and his customers’ changing problems. He had been solving his customers’ problems, but their customer experience was deteriorating.

It was that understanding and the response to it that led to developing an internet of things solution for Themba’s business.

His innovation was led by his customers’ experiences, not by a great new idea that he or one of his team dreamt up.


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November 17 2019