BUSINESS & NETWORKING: Frankston | Mornington Peninsula | Dandenong
MAY 2015 | FREE
MENTOR: A STAR TO GUIDE US EXPERIENCE AND AN EXTRA PAIR OF EYES MAKES A DIFFERENCE
NBN LAGGING SLOW ROLL OUT IS HURTING BUSINESS, SAYS SURVEY
REFERRALS
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THEY’RE EVERYWHERE, BUT WE’RE NOT SEEING THE OBVIOUS
WHO/WHAT/WHERE
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ISSUE 56 / MAY 2015
FRANKSTON / MORNINGTON PENINSULA / DANDENONG
TONY MURRELL KEITH PLATT MARG HARRISON DAVID HILET MELANIE LARKE SIMON BROWN Design MARLON PLATT Finance ANITA HILET
Publisher / Director Editorial Director Sales Director Managing Director Material production / Prepress
FEATURES
COLUMNS
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NBN CRAWLS OUT: Councils call on government to accelerate rollout of high speed broadband to business.
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BULLFROG FULFILLS A DREAM:
Networking: Ivan Misner Social Media: Jessica Humphreys Law: Jacqueline Conquest Health: Mike Ellis Markets: Richard Campbell Managing: Hamish Petrie
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An Alladin’s Cave of furniture helps out not-for-profits, starting with dolphins.
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COVER: After two successful start ups, Ken Jungwirth is well placed to mentor young entrepreneurs. P.12 Cover photo: Keith Platt
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MenTOr a sTar : TO guide us
experience and an pair of eyes makes extra a
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Makers of the iconic Hills Hoist are experience a profit slump that traces the path of an economy reaching the end of its economic model. SEE P. 19
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Make sure every business knows your business. For advertising, contact Marg Harrison on 0414 773 153 or marg@businesstimes.net.au
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PROFILE
n Bizzquiz My first paid job was ... serving cakes and pastries over the Christmas break at Bay Cottage Tea Rooms in Frankston. My first “real job” was a clerk at the Stock Exchange of Melbourne. In 10 years ... I hope I will still be happy and healthy. I am constantly inspired by ... many things and many people – always by those simply carrying on when the chips are down; and by the basic decency of most people. My mother always told me ... that I could be whoever I wanted to be, and I could do whatever I wanted to do, that I should not ever accept there were limits just because I was a girl. (My father wasn’t quite so sure about that!) I wish I had not ... spent so much time worrying about things – so pointless and achieves nothing anyway. Anyone starting a business should ... do extensive research first, get the right operating structure in place, have a passion for what they are doing, and not just buy themselves a job. They should also ensure that work is not all there is to life.
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DEREEN WALLACE Partner, MBA Business Solutions, accountancy practice.
Dereen Wallace is a partner in the accountancy practice MBA Business Solutions, 342 Main St, Mornington. Dereen has been there for just on six years, after working for more than 30 years with a Frankston firm; so it can be safely said, she knows the area well. At MBA Business Solutions, Dereen’s focus is providing quality of care for her clients, mainly small businesses, investors, multi-generational family groups, self-managed superannuation funds; and a growing number of businesses with overseas operations and interests. A long term resident of Frankston, Dereen is married with three adult sons and eight grandchildren. She is active within the local community, being an executive director of the Frankston Business Network; and serves on the Community Advisory Committee of Peninsula Health and is passionatelyconcerned with the delivery of person- centred care.
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Frankston / Mornington Peninsula / Dandenong | May 2015
BROADBAND DELAYS
Call for speedier NBN roll out Councillors from Greater Dandenong, Frankston and Kingston are reminding Small Business Minister Bruce Billson of his 2013 election commitment that the roll out of the National Broadband Network (NBN) would be a priority. Mr Billson reiterated his commitment at a post-election business breakfast on 22 November 2013 that industrial, commercial, health and education precincts would have the NBN within three years. Councils are concerned that the lack of high speed broadband is hurting business after reviewing the findings of The need for High Speed Broadband in South East Melbourne’s Industrial Precincts: Study of the economic effects of lack of access to the NBN. The study was commissioned by Regional Development Australia (Southern Melbourne) in partnership with Frankston, Greater Dandenong and Kingston councils.
In March Mr Billson issued a news release saying about 5400 homes and businesses in Mt Eliza and part of Frankston South “are next in the [NBN] rollout”. He said other parts of Frankston, Baxter and Mornington were due to have work start by mid- 2016. He added that areas of “pressing need” in his electorate (Dunkley) “includes neighbourhoods with poor or no broadband service and commercial areas, because businesses rely on up to date technology to be competitive and succeed”. The study commissioned by the three councils found there was “minimal scheduled NBN rollout” for industrial “nodes” at Carrum Downs, Braeside and Dandenong South “Since the 2013 election the rollout of NBN has not shifted significantly, with delays nation-wide while the government explores different technologies for NBN rollout,”
Frankston’s corporate development manager Sam Jackson said in a report to council. Meanwhile, fibre-to-the premises NBN rollout is continuing in an ad hoc way ...” Ms Jackson said the study “identified that significant employment could be created and economic benefit generated if NBN is rolled out to key industrial nodes in Melbourne’s south east. There currently is minimal scheduled NBN rollout in these nodes”. The study’s survey of 60% (322) of businesses in Carrum Downs, Dandenong South and Braeside showed more than 30% having “poor or very poor internet speed and reliability” and that 25% would consider relocating to gain high-speed broadband. The report estimates access to high speed broadband would create up to $186 million in increased productivity and 1024 more full-time equivalent jobs (increase of 9%). More than 3600 Frankston residents work in Greater Dandenong and Kingston and its 7.6% unemployment is the highest level since 1999.
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May 2015 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 5
BUSY BITES
Get your paws on these SouvenirsAustralia.com investigated its recent sales to Australian and international customers and came up with a list that included a couple of surprises. While many are familiar with koalas, boomerangs, T-shirts and the like, lately there has been an increasing demand for products that are a little different – like kangaroo scrotums, cane toads and kangaroo paws (not the plant).
Rail corridor upgrade More people will be moved faster along the Dandenong rail corridor after an increase in the number of trains and removal of nine level crossings between Caulfield and Dandenong. The state government announced it would buy 37 high capacity trains to increase services. Welcoming the government’s announcement, RACV public policy manager Brian Negus said: “Several of these highly congested level crossings have regularly been nominated by thousands of Melbournians as part of the RACV Redspot Survey, with the crossing at Murrumbeena being number one on several occasions.” The government project includes renovation of Clayton, Carnegie, Murrumbeena and Hughesdale railway stations; improved rail infrastructure including signalling upgrades, and a new train depot at Pakenham.
Bankruptcies in Australia fell 11.2% in the March quarter 2015 compared to last year. Bankruptcies have fallen in four consecutive quarters compared to the same quarters in the previous year. All of these falls have been more than 10%. There were falls in all types of personal insolvencies in the March quarter 2015 compared to the March quarter 2014. As a result, total personal insolvency fell 8.7%. In the March quarter 2015, 15.5% of debtors entered a business-related personal insolvency. This is the lowest proportion since the September quarter 2009 (14.1% of debtors). Three states exceeded the national proportion of debtors entering a business-related personal insolvency in the March quarter 2015: Western Australia (21.0% of Western Australia’s debtors); Victoria (16.4% of Victoria’s debtors); Queensland (16.0% of Queensland’s debtors). The most common causes of insolvent debtors entering a personal insolvency in the March quarter 2015 are economic conditions where the personal insolvency was business related (390 debtors); and unemployment or loss of income where the personal insolvency was non-business related or unknown (1932 debtors).
HELP WITH PRIVACY POLICY RMIT researchers have developed a free online privacy policy generator designed to help small businesses whose websites are not compliant with privacy laws. Simple Privacy is now live and available for use by all small businesses – which make up 96 per cent of Australian businesses. Researchers have spent three years working with small businesses, government and industry to develop the generator. Emeritus Professor Margaret Jackson from
the Graduate School of Business and Law said while most of Australia’s small businesses were not legally bound to have privacy policies, they should if they were online. “It’s a reputational risk for companies if they cannot tell people how they will use the information they give them online,” Professor Jackson said. “But most small businesses don’t have access to the legal advice of bigger firms to help them develop privacy policies. “Simple Privacy is an easy tool that small businesses can use to show their online customers what will happen to the personal information they collect, presented in a way that their customers can understand.” Online businesses are required by banks and credit providers to have privacy policies for their transactions, and they have strict rules about ensuring companies’ privacy policies are compliant with federal regulations. To create their own privacy policies using the generator, business owners simply answer seven questions about their type of business, the type of information they collect, how they secure that information and what they do with the information Information about the company is not kept once the policy has been generated and posted. An appropriate, legally compliant privacy policy is then generated with an icon and link that can be put on their websites, along with a short summary.
RELIABLE AND FAST I.T. IS OUR WISH Global workplace provider Regus says its research shows that 86 per cent of start-up and small business respondents cited reliable and fast ICT services as their number one location criteria. The report, which canvassed the opinions of more than22,000 respondents in 100 countries,
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RACV is urging the government to follow through on its pledge to have the new rail services delivered by the end of 2018.
BANKRUPTCIES FALL
6 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2015
WARNING ABOUT BAS AGENTS Australia’s Association of Accounting Technicians (AAT) is warning small business operators about the activities of unregistered BAS agents. AAT’s public warning follows a letterwriting campaign by the association to federal government ministers, alerting them to the prevalence of unregistered agents and urging them to provide additional resources to the Tax Practitioners Board in the May budget to allow it to increase its investigation and compliance activities against unregistered agents. The Tax Practitioners Board has warned that businesses using an unregistered agent are not
protected under the safe harbour provisions of the Taxation Administration Act if the agent is negligent. In addition, unregistered agents may not have the qualifications or experience required of a registered agent and may not have professional indemnity insurance cover. Only registered agents are permitted to display the Tax Practitioner Board’s Registered Agent logo.
HEY, BIG SPENDER Around one third of 2000 Australians surveyed for Slater and Gordon family lawyers admitted they had spent more than $500, knowing their partner would disapprove of their purchase. Most (28 per cent) said they had done this once or twice, while six per cent said it was a regular occurrence. The survey found men (38 per cent) were more likely than woman (28 per cent) to make a secret purchase.
SEEKING AWARDS Rad Bookkeeping, Mornington, and the Dandenong Pavilion restaurant have entered this year’s Victorian Telstra Business Awards. The bookkeeping company run by Debbie Demooy (Micro Business Regional category) started 14 years ago at her dining room table and has now two full time, two part time and two casual staff servicing over 130 clients. Dandenong Pavilion co-founder Steven Metter (Medium Business category) says they have turned an ageing and outdated restaurant into a modern architecturally designed venue. He says it’s important to keep up with customer expectations. The Pavilion has its own Facebook page and is on Instagram. If either business wins its state category it goes to the national finals.
House prices higher Melbourne’s housing market in 2015 is set to record growth similar to 2014 levels, according to the Domain Group’s forecast in its Autumn State of the Market Report. Dr Andrew Wilson, senior economist at Domain Group, said Melbourne’s auction market “is clearly tracking ahead of the results recorded towards the end of 2014 and the recent interest rate cut will continue to fuel confidence”. “This year, strongest results for prices growth have been during the autumn season before the market moderates through winter and spring,” Wilson said. Melbourne’s median house price is forecast to increase by between three and five per cent over 2015. “Melbourne’s mid and upper prices ranges, together with the prestige market, were the best performers in 2014 and they are expected to again prove resilient through 2015.
Flag on smoking bans City of Greater Dandenong is taking its first steps toward smoking bans in strip shopping centres and outdoor dining areas. The council has asked officers to report on the pros and cons of a ban as well as information about bans introduced by other councils like Frankston which disallows smoking in the CDB malls. Cr Matthew Kirwan said Victorian councils are generally lagging behind their interstate counterparts, especially the ACT where smoking has been banned in outdoor eating and dining areas since 2009.
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further revealed that appearance matters most for start-ups and small businesses, with 73 per cent respondents favouring a smart, well maintained office. Other observations include the willingness to commute, with proximity to transport links being critical to 57% of start-ups and small businesses, set against the global average of 49%. Top 10 characteristics for the ideal work location for small businesses include: 1 Reliable and fast IT services. 2 Looks smart, well maintained and well equipped. 3 Guarantees safety for my belongings. 4 Reliable, professional front desk management. 5 Close to transport links. 6 Car parking. 7 Close to other businesses in my sector (such as Financial district, media district). 8 Close to shops and restaurants. 9 Close to home. 10 Has a prestigious address. CEO of Australia and New Zealand, Paul Migliorini, wasn’t surprised such heavy emphasis was placed on fast IT services.
May 2015 | Frankston / Mornington Peninsula / Dandenong | BusinessTimes | 7
NETWORKING GALLERY
1. Peninsula Business Networking met at The Heritage, Balnarring, on 14 April. Guest speaker was Danielle Storey, of The Cartridge Family. Pictured are Karen Lewis, of Tothemetal Floral Designs, with photographer Daryl Gordon, of The Biz Photography. 2. Aaron Hunter, business development officer for Mornington Peninsula Shire Council, with Sav Neri, of Fifo Capital. 3. Sandra Watt, of Bay Fish ‘n’ Trips, with Paul Roberts, solicitor with Mornington Legal. 4. Brian Davenport, of Rye Rotary, with networking guru and guest speaker Danielle Storey, Barry Kirkpatrick, director of Mt Martha Community Enterprises, and Mark Kay, director of Leading Electrical. 5. Spicy Web Design hosted a Google Partner seminar for business owners at its Frankston offices on 14 April. Pictured are Michelle Roberts and Fiona Barrrett, of bvc financial solutions. 6. Tania Lee, of QA-Z, at the Google seminar. 7. Frankston Flyers BNI group met at Frankston International Motel on 16 April. Pictured are Rosie Fritsch, of Opti Plumbing, Peter White, BNI director of Melbourne Southeast, and Luky Wilson, of Cruise Managers. 8. BNI ‘flyers’ Guiselain Jodun, of 1st Class Accounts, Scott Tepper, of Tepper’s Group, and Nadia Hughes, of Smart Business Solutions.
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9. Liam Stains. of Sports Injury Clinic, and Janine Sissons, of Art by Design. 10. 3RPPFM community radio’s Taking Care of Business show held an outside broadcast at Telstra Mornington on Friday, 17 April. Pictured are TCB host Jacki Mitchell, Telstra Mornington owner Peter Bennett-Hullen, Jessica Humphreys, of Social Concepts, Toby Travanner, of The Learning Company, and Telstra area general manager (southeast Melbourne) Vicky Allen. 11. Frankston Business Network’s (FBN) April meeting was hosted by Statewide Autistic Services at its Seaford offices on 21 April. Pictured from left are Trevor Burt, of NEM Business Performance, Bev Unitt, of Beyond Success Coaching, and Brady Hancock, of ReBrands and Podmania, Seaford, 12. James Tucker, NAB business banking executive (Dandneong), Katie Billing and Wayde King (director), of Carr Barnett Accountants, Frankston. 13. Jonathan Patchell (left) and Luke Simmons (right), of Vertical Matters, with Max Coulthard, of Monash University. 14. Russell Decker, of Treloar Australia, with Chris Maber, of IT business You Choose. 15. Frankston Business Network committee members (from left) Jonathan Reichwald, business development coordinator, Frankston City Council, former mayor Christine Richards, president Peter Patterson, Dereen Wallace, of MBA Accountancy, Mornington, Tim Jerram, South East Water’s manager of Construction, Monitoring and Asset information, Kath Ferry, CEO of Statewide Autistic Services, and Taso Tounis, of Budget One, Mentone.
Listen online - rppfm.com.au, via the app or 98.7fm
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May 2015 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 9
NETWORKING
Referrals are all around us We are all, each and every day, standing in the middle of referrals. They are all around us – we just aren’t paying enough attention to them. Dr lvan Misner*
Networking specialist
born child was born. I used to be able to sleep through anything – and I mean virtually anything. There was once an automobile accident in front of my home. Police and ambulance sirens, neighbours, and multitudes of people were outside my front door. I’m told the noise was deafening. I don’t know because – I slept through it all. I discovered it the next morning when I walked out my front door only to find police tape across the walkway. Like I said, I could sleep through almost anything. A few years later, I was about to welcome my first child into the world and I was 2890
Part of our brain has something called a reticular activating system” or RAS. Your RAS is like a filter between your conscious and your subconscious mind. It is capable of taking instructions from your conscious mind and passing them on to your subconscious mind. For example, have you ever been in a busy airport with announcements coming over the loudspeaker, noise from all the hustle and bustle, people talking all around you but then your name or your flight number is announced and all of a sudden you think, “wait, that was my name”. That’s your RAS at work. Your subconscious screens out things you determine that aren’t important and it alerts you about things you think are important. I never fully believed this until my first
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worried, really worried. What if she woke up at night crying and I didn’t hear her? That would be terrible. I went to bed the first night really concerned about that. Around 2am I sat straight-up in bed and realised that my daughter was whimpering (not even crying loudly). I immediately nudged my wife and said, “Honey, I think the baby’s awake” (I know, women everywhere hate me now, sorry) but forgetting about the lousy husband issue – think about the power of the RAS. It’s incredible. I could sleep through an automobile accident outside my front door but I woke up with the slight cries of a baby. Our reticular activating system is amazingly powerful. Our RAS has that same power as it relates to referrals. We are all standing in the middle of referrals every day. They are all around us. We simply need to put our RAS to work in order to hear them. For that to happen, we need to start by listening for the “language of referrals”. Whenever anyone says to you, “I can’t,
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I need, I want, or I don’t know,” whatever they say next is most likely a referral for someone. These phrases (along with many others) indicate that the person talking is in need of something. That something they need is a possible referral that you can give. If you train your RAS to open its filter and recognise those phrases you will almost immediately increase the amount of referrals that you can give to your referral partners. Giving referrals is one of the best ways to start “getting” referrals. Giving referrals begins with opening your mind or reticular activating system to hearing all the referrals that are all around us each and every day. When you begin to do that, a whole new world of doing business opens up to you.
CITY’S MOVERS AND SHAKERS
*Dr Ivan Misner is a New York Times bestselling author. He is founder and chairman of Business Networking International (BNI), the world’s largest networking organisation. Dr Misner is also senior partner for the Referral Institute, an international referral training company. Email: misner@BNI.com
Dandenong has shown off of its skills in making products that roll, with a display at the Civic Square. Trains, trams, buses, recreational vehicles, caravans, trucks, defence vehicles and off road camper trailers were wheeled or driven into the square to gain publicity and emphasise the city’s manufacturing capabilities. Greater Dandenong mayor Cr Sean O’Reilly said the
display would “let people know that manufacturing in Dandenong and in south eastern Melbourne is very much alive and well”. The display on Friday 17 April was followed by Nissan Australia announcing it would keep its casting and parts manufacturing plant at Dandenong South beyond 2020. The plant will supply parts to 38 models internationally, including the Nissan Leaf electric car.
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GPC Asia Pacific (Repco and Automotive Specialist Group) will build new offices at Rowville. The new building – scheduled to be completed in time for the 95th anniversary of the 1922 founding of Repco - will be GPC Asia Pacific’s group and Repco Australia’s support offices. GPC Asia Pacific recorded revenues of more than $1.23 billion for the year ending 31 December 2014 on the back of a 7.7% sales growth. “GPC Asia Pacific is pleased to partner with Australand for the construction of our new group support office. This is a really exciting step for GPC Asia Pacific that will enable us to pursue our goals,” GPC managing director John Moller said. “The investment marks another significant step for GPC Asia Pacific, following an investment of in excess of $165 million in new inventory and the addition of 44 stores to our portfolio since April 2013; and our committing to deliver a new 21,900 square metre distribution centre in Brisbane in 2015.”
Employers are passing costs on to the seven out of 10 Australians who maintain a home office, according to research from global workplace provider, Regus. The survey that polled 1194 business decision makers and professionals in Australia, found that 83% of respondents say that employers are not covering all their employees’ costs. Nearly half (48%) of respondents said that setting up a fully functioning home office costs more than 20% of their annual salary, putting the average home office at $240 a month (this takes into account the cost of equipment, forgoing the use of a room, energy bills, cleaning and maintenance). Despite the costs, 55% of those surveyed have a fully equipped professional workspace in their home and 41% think most companies that encourage their employees to work from home are simply trying to transfer the cost of having workspace onto the employee. “Employers are finding efficiency and cost savings from following an agile approach to where their employees work,” CEO Regus Australia and New Zealand Paul Migliorini said.
The full potential of the cloud is not being realised by SMEs because of cost and slow internet speed. The MYOB survey of more than 1000 SMEs found that 46% are using cloud computing, up 9% in the past six months. However, 24% of them are dissatisfied with the speed of their internet connection and 23% are unhappy with the cost. The survey also showed more SMEs to be online but social media use has declined. Facebook (18%) and LinkedIn (17%) are the most popular social media channels for SMEs, with retail and hospitality businesses the most frequent users of Facebook and professional services and property businesses the biggest users of LinkedIn. Blogging and Twitter are yet to gain a firm foothold with SMEs. The total proportion of SMEs using social media dropped five points, with 26% of businesses surveyed using social media, compared to 31% in August 2014. Businesses say the main benefits of having a website as generating sales leads (41%), and providing a more professional brand image (39%)
May 2015 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 11
COVER STORY: KEN JUNGWIRTH
THE MENTOR WORDS AND PICTURE: KEITH PLATT
KEN JUNGWIRTH IS AS WILLING TO TALK ABOUT SPORT AS HE IS ABOUT BUSINESS. BOTH REMAIN A BIG PART IN HIS LIFE. WHILE HE’S RETIRED FROM ACTIVE COMPETITION, THE SMELL OF LINIMENT OR THE SIGHT OF A BUSINESS PLAN STILL EXCITES HIS SENSES. A career comprising managerial positions and two successful business start-ups provided Ken Jungwirth with the skills to mentor fledgling entrepreneurs, particularly in the area of small business. His connections have been forged as much through sport as business. After a stint with AFL clubs Melbourne and Carlton, Jungwirth played VFA (VFL) for Prahran and Frankston. His 13 goals in a game at Frankston Oval in 1972 was a club record for over 15 years. He played competitive cricket into his 40s and retains sporting ties through Melbourne-based The Roaring 40s Club (President in 2014), a business and social club, as well as chairing the coterie group of his home footy club, Murrumbeena. Closer to home he has been a committee member of the Proudly Frankston Campaign and also served as a regional Commissioner for AFL Victoria, South East Region. Having been on both sides of the employment fence – as an employee and an employer – Jungwirth is well suited to his latest role as a business mentor. It’s not a full time job, he stresses, but one he’s taken to with relish since selling his own company and “retiring”. His first decade of work was spent with a company that supplied scientific products to laboratories, including universities. Jungwirth’s first employer, Laboratory Supply Pty Ltd was a good business in that many of its products (pipettes, test tubes, jars) were single use only and regularly needed replacing. “I had successfully handled some management roles but after 10 years I had a burning desire to work for myself,” Jungwirth says. He was 27 at the time and, in 1975, “saw an opportunity to enter the laboratory glassware
market” and established Jenglas Products with his wife Jennifer. “I called on laboratory personnel and took orders for customised glass apparatus and repairs. I was a dogsbody running a one-man operation for five years.” Jungwirth said every university in that era had its own glassblowers on staff who were allowed to do some freelance work. “They were a pretty essential part of our operation in the early days and helped establish the business until I was able to source new products from local and overseas suppliers”. In 1980 Jenglas was bought by HLS Scientific, which appointed Jungwirth state manager and then national manager. Five years and a bit on and HLS itself became a “takeover target”, being acquired by Crown Scientific, a subsidiary of Corning USA. Jungwirth, not wanting to relocate his family to Sydney, established Proscience Pty Ltd, once again supplying scientific equipment. Jungwirth’s second foray into his own business (Proscience) saw him again making contact with known suppliers who readily agreed to support the new venture. He took a one and a half page business plan to the bank, secured a significant overdraft facility and “headhunted” a top salesman with the offer of salary, profit share “and maybe a share of the business”. The business plan included stated: “The name Proscience is synonymous with professional scientific service. The basic philosophy of the company is that the customer is the most important person in our business and all activities will be directed at providing optimum customer service”. This philosophy guided the direction of the company from day one. “We knew the market and we took off like a rocket. There were a few hairy moments but, by and large, things went well,” Jungwirth says. “I said I wanted to retire at 55, knew I wouldn’t, but wanted to be in a position to do so financially.” By 2000 Proscience’s annual turnover was approaching $10 million, the 15-member staff included a good management team and he had a succession plan in place. His planned retirement (he would remain chairman) took a back seat when the three anointed key executives “all said no thanks” to becoming directors. “It was a little bit of a shock but at the same time I knew we had to expand into New South Wales and beyond, to become national if we were to maintain our momentum.
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Opening doors: Mentor Ken Jungwirth helps owners of small enterprises to improve their business skills.
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“Then, out of the blue, I had a call from a representative of the subsidiary of a Danish medical instrument company looking to expand and diversify into scientific supplies. “I met the managing director, arrived at a tentative agreement, and they bought us lock, stock and barrel.” The sale happened shortly after Proscience had built premises in Keysborough (which were then leased out to the purchaser) and was “perfectly timed because we only had one month of the GST to tackle”. During his time as head of Proscience Jungwirth encouraged staff with offers of profit sharing and bonuses if targets were met. “Surprises” for the staff for special achievements included a Harley Davidson ride to a restaurant and the hiring of a carriage on a party train. “We kept a close eye on our competitors, analysed what they were doing and estimated we were twice as productive per head.” After the sale and after complying with its terms by staying on for 18 months, Jungwirth decided “I was not ready to retire and, with all my experience, decided I should be able to help young people grow their businesses”. K J Enterprise Solutions was formed with his daughter Louise, who held a Batchelor of Business, offering a mentoring and consulting service to SMEs “across a broad spectrum of industries”. Jungwirth has now achieved his “retirement” and scaled back his mentoring to a small number of selected businesses, one of which now operates out of the United Kingdom. Asked about his own mistakes in running a business, he has no hesitation in going back to the beginning: “The first time around I was very raw and unprepared. I knew what I wanted to do and believed in myself but it was a slow start.” Another brake on business has been an inclination to “take people on face value”. “I could have been more reserved, guarded and less trusting. But I’m comfortable, that’s my personality and I don’t think over the journey that anything has cost me significantly.” He said one of the most important lessons learned when running the business was managing the debt collection. “It is all very well to make sales but the transaction is not completed until the cash is in the bank.” “When the due diligence was done before the sale [of Proscience] it showed we had only accrued $10,000 in bad debts from a turnover of around $50 million.” That accumulated knowledge has seen Jungwirth praised by clients he has mentored. He says steps followed with each new client start with a faceto-face meeting “and an involved discussion about what they do and where they are good at. I gauge the personality of the person to see whether I think I can help them”. Once taken on as a client, he will do a SWOT (strengths, 14 weaknesses, opportunities and threats) analysis and, May 2015 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 13
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COVER STORY: KEN JUNGWIRTH
over a series of monthly meetings, encourage them to document a business plan. “People shy away, but a business plan doesn’t need to be complicated. My first business plan was less than two pages. “If you don’t know where the goal posts are how can you kick a goal?” Setting budgets and targets and regularly
reviewing a company’s performance against budget are also high on Jungwirth’s list. While confident of his personal skills, Jungwirth has no hesitation in recommending other experts in their fields, such as accountants, solicitors and web designers. “I derive pleasure from putting the right people together. My prime objectives in mentoring are to provide a sounding board
for the business owner and to assist them to work on the business and not just in the business. The business owner is the prime income generator so it is important that they devote most of their time to income generating activities. It really gives me a buzz to see small business operators enjoying well deserved results for their efforts.”
Irrigator takes on mentor to improve skills Ken Jungwirth mentors David Lacy, owner of Mornington Irrigation. The connection comes from Jungwirth being a family friend, but the arrangement is strictly business. Originally, the mentoring began with two meetings a month, with Jungwirth assessing all sides of Mornington business’s operations. The firm is Lacy’s first venture into owning and running a business and Lacy says his meetings with Jungwirth have dropped to once a month “as my experience has got better along with my ability to read P and Ls [profit and loss sheets], set budgets and run the business day to day”. Jungwirth’s advice included recommending contacts that would be beneficial to Mornington Irrigation. Lacy says Jungwirth was also a help to his brother Paul who, along with his “life and business partner” Kristina Karlsson, started the now-international kikki.K fashion stationery stores. In the 13 years since launching kikki.K Paul Lacy and Karlsson have opened 62 stores and gone online with their “Swedish” brand of stationery, recently adding accessories like bags and home wares. Jungwirth plays down his part in the kikki.K story, but does acknowledge providing Paul Lacy with help when recommending him as an ideal candidate for a marketing job at leading surf brand Rip Curl. “Geoff Slade [Geoff Slade & Associates] called and said Rip Curl was looking for a marketing man and the person Geoff described to me [as best suited to the job] was Paul Lacy.” That leg up illustrates the worth of networking.
If I’ve ever needed to make a decision and bounce it off someone, he (Jungwirth) has been great. DAVID LACY Mornington Irrigation
Jungwirth says he and Paul Lacy then “seemed to bump into each a lot at airports”. “At one time he called me about a business plan, which I thought was a bit ambitious.” David Lacy says the plan being proposed by his brother Paul was for kikki.K, now operating in five countries with a staff of 400 and a multi-million dollar annual turnover. David Lacy, a bricklayer, moved to Queensland and was hired by retail irrigation suppliers Aquafield McCracken at Beerwah, in the Sunshine Coast hinterland. “It was all retail although I occasionally did installations, mainly bore pumps,” Lacy recalls. On his return to Victoria he was appointed manager of Peninsula Irrigation, Seaford. After seven years he thought “I can do that” and, in August 2009, opened a shop in Mornington. That initial business was started with a partner who Lacy subsequently bought out: “We had different approaches, it was an
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amicable split.” Opening in the middle of the global financial crisis came with its own set of challenges, but Lacy was able to generate annual growth of 15-20%. These days Mornington Irrigation has four employees and three subcontractors “who in the past two to three years have been working full time for us”. “I knew Ken Jungwirth from the word go – my brother Paul recommended him and gifted me 12 months’ of his services.” “After that, I could afford to pay him through my own business. I’m still mentored by him today. “We have minutes and it’s run like a proper meeting with Ken analysing my figures and budgets, how I’m going with them and monitoring my day to day finances. “He doesn’t need to know about irrigation, just general business principles.” Lacy said he can call Jungwirth anytime to discuss things. “If I’ve ever needed to make a decision and bounce it off someone, he has been great. “I can sell, but have never before had to run a business and I’m always looking to get better.” The scope of Mornington Irrigation’s market ranges from domestic to agriculture, industry, commercial and schools. Lacy says landscapers appreciate that he runs a one-stop shop, providing drains, pits, pumps (and repairs), lighting, turf, seeds, fertiliser. “Gardening stakes are probably the only thing we don’t have.” • The state government’s Business Victoria website offers a small business mentoring program that includes some free 45-minute sessions. www, business.vic.gov.au/businessmentoring-program
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CONTRIBUTIONS
FINANCING GROWTH WHEN BANKS SAY ‘NO’ A long-standing and well-managed air conditioning duct manufacturer going through a strong growth period needed more materials to meet demand. The owner contacted his bank, but unfortunately it could not meet his needs: the bank considered the business to be fully funded. Fortunately, through a colleague who knew of Fifo Capital, the owner was able to finance some of his sales invoices. Fifo Capital’s Sav Neri said his company bought the invoices, advanced 80% of their value and the manufacturer was able to solve his cash flow issue. The business is now meeting all its customers’ orders, Neri said.
KEEPING YOUR CUSTOMERS SATISFIED
PROTECT YOURSELF AGAINST HACKING It’s easier than you think for someone Jessica Humphreys* to steal your passwords and access Social media consultant your online accounts. It can be as simple as having a weak password, using the same password on multiple websites, clicking on a suspicious link in an email, or perhaps using an unsecured network. Even some of the largest worldwide companies experience forms of online hacking every day, especially over the past few years – including Dropbox, eBay, Adobe and Sony Pictures. This is where two-step authentication comes in. Two-step authentication is an additional procedure put in place to enhance the security of your online services. A number of large online services are already using this approach – in fact you may already be unknowingly using this procedure. The first step is your basic login method – to enter your username and password. The second step provides an additional level of authentication to access your online account. This may be in the form of entering a code that is sent to you via SMS or from a voice call. Will two-step authentication protect you against hacking? Although using two-step authentication does not necessarily mean you are completely secure against hacking, it definitely adds an extra level of protection to your online accounts and reduces the risk of being targeted from an online attack. The extra time needed for two-step authentication is a minor inconvenience to ensure that you have a higher level of security. It’s better to be proactive and take precautions when it comes to online security, than leave yourself open to have your personal accounts and information stolen from you. *Jessica Humphreys operates Social Concepts, a social media consulting business. Send questions to Jessica@socialconceptsconsulting.com
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If customers are kept waiting more than 15 minutes it might be a good idea to offer them a cup of coffee. This tip to avoid customer anger and frustration comes from TrueLocal group manager Ruth Trewhella, who lists five things that most annoy customers: 1 The long wait. If running behind schedule, tell customers how long their wait will be and apologise for the wait. Delays longer than 15 minutes are too long, and this is where you may need to offer customers something in return for waiting, such as refreshments or a VIP service. 2 The unexpected bill. There’s little that irks customers more than a final bill that doesn’t match the initial quote, for example GST tacked onto an invoice that wasn’t originally included in the quote. Quote accurately and seek customer permission for additional costs. 3 The call centre merry-go-round. Going through multiple automated voicemail prompts and offshore call centre are among the worst experiences for a customer. Consider offering additional online chat or email services. 4. Don’t make customers the apprentice’s guinea pig. If an apprentice needs to work on a job to gain experience, seek customer permission and be there to supervise. 5. Rude service. Rudeness is the main reason some customers won’t return. If you feel yourself getting emotionally involved or are feeling stressed prior to chatting with a customer, ask a colleague to replace you, or – in extreme cases – reschedule with the customer. Trewhella says an analysis of customer service ratings show “firstclass service” is most likely to be found in Berwick or Richmond.
Other suburbs in the top 10 were Pakenham, Frankston, South Yarra, St Kilda, Dandenong, Cheltenham, Geelong and Werribee. Business directory and review platform TrueLocal based its list on the number of five-star ratings given by customers to small local businesses outside of CBD areas over the past 12 months.
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BLENDED FAMILIES AND SMSF PITFALLS By CHRIS HILL* Most people mistakenly think that when they die their will controls all of their assets, including their super. Wills prepared for most blended families attempt to divide all the assets between the spouse and children from an earlier relationship. However, a recent case of Munro shows how things can go terribly wrong. Mr Munro, who was a solicitor, intended his super held in their SMSF to be paid to his estate where his will divided everything between his second wife and children from an earlier relationship. He completed a Binding Death Benefit Nomination form stating that his super should be paid to the “trustee of deceased estate:- 100%”. Mrs Munro took control of the SMSF on her husband’s death and attempted to pay Mr Munro’s super to herself instead of his estate where it was to be divided with her step-children. In the end the court agreed with the wife. Despite being reviewed by Mr Munro’s accountant and financial adviser the court took the view that the words used were not sufficiently clear when considered with the wording of the trust deed and the superannuation law. There are other cases like Munro which apply a very “black letter” view to interpreting death benefit nominations. If they are not carefully prepared in accordance with the trust deed, they will be invalid and whomever takes control of the super on death (usually the spouse) often can pay it to themselves. Call a specialist if you are unsure about whether you have an effective death benefit nomination, .
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BY JACQUELINE CONQUEST* There is a common misconception that when it comes to settling financial matters in family law a 50/50 rules applies to the division of assets. While in some cases assets are divided equally, the court does not use this as a starting point. The range of outcomes depends on a number of matters including the following:What each party’s assets and liabilities were at the time they commenced living together; 1 How long the couple stayed together. 2 Whether there were gifts or inheritances from either side of the family. 3 The earning capacity and income of each party. 4 What arrangements are in place for the on-going care of any children. In family law, while general principles of law are applied, each case is different and the outcome turns on its own particular facts. This means that there is no black and white result. The outcome of any particular case sits within a range of what is considered to be acceptable. A family lawyer can advise you of the legal principles and assist you in your decision-making process in relation to your settlement.
May 2015 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 17
HEALTH
The empathy defect “So are you going to boycott Bali holidays?” I asked two friends at dinner, in the shadow of the Bali Nine executions. I knew what their answer would be — they are regulars on the winter pilgrimage to the balmy, inexpensive “paradise” destination — but I put the question anyway. “No way - what for?” was the gist of their reply. “Chan and Sukumaran knew the law. They knew the consequences. I have no sympathy for drug traffickers.” Etcetera. Their views matched an infamous Morgan Poll survey in January this year showing that more Australians than not believed anyone convicted of drug trafficking in other countries and sentenced to death should be executed. For the record, I saw last month’s executions as political murders. Two men died for the sake of a “leader’s” reputation. It’s been happening since time immemorial and it is immoral. That aside, however, my friends’ views on society and the law include a “zero tolerance” approach to illicit drugs, not only to traffickers but to users, especially those who turn to crime to maintain their addictions. Plenty of conservative Australians are in the zero tolerance camp on drugs — lock ’em up, no second chances, no exceptions, everyone understands the rules and the consequences of breaking them. That is, until it becomes personal. Until someone close develops a drug addiction and runs into trouble with the law. Maybe it’s your child, or a nephew, or a friend — someone you know. Then it’s different. Suddenly we can see the human dimension, and have a new-found empathy for the miscreant. Then a “zero tolerance” treatment seems no longer fair or just. The better we know the person, and their story, the more likely we are to feel for them, to be able to imagine ourselves in their predicament and, of course, to feel the impact on their family and friends. Empathy for others is directly proportional to their distance from us. When a loved one is ailing, we are first to their bedside, maintaining all-night vigils, doing anything we can to help, feeling their pain. But when an earthquake strikes a
Michael Ellis*
Chinese Herbalist
We have lost something that religions, in common with the great philosophies of the East, have always provided. faraway place and causes the deaths of thousands of people who look and sound quite different to us, we are far less empathetic than when one Australian — a person we can readily identify with — is caught up in a tragic event. We know which item will lead the popular news services. As a society, Australians have an empathy deficit, despite the way we prefer to see ourselves. Sociologists might explain this in terms of our geographic isolation, but also the way our societies have lost their sense of community, how in our physical and emotional isolation, our depression, we’ve become selfish and uncaring. Even our institutions contribute to this. One need only consider our treatment of asylum seekers for proof. We can be cruel if we dehumanise them — call them “illegals” or “boat people. The government
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doesn’t want us to hear their stories, in fact, because the more human they seem, the more sympathy they get. Look at how the government cuts foreign aid because it knows it will get minimal political grief for doing so. Until this year when the deadline of the Bali Nine killings became imminent, the reaction in Australia to anything published about Sukumaran and Chan was mostly indifference. As their executions approached and media coverage intensified, however, the groundswell of protest grew in direct proportion to how much we came to know about the two men. The more human, the more familiar — the more “us” — they became, the more we empathised. A similar phenomenon has occurred over the years around Anzac Day. The way the Anzac stories are told emphasises the youth and naivety of those who enlisted to fight. One TV station had the compelling idea of comparing some AFL footballers who died at Gallipoli to current day players, identifying and interviewing players of similar age and background, such as Carlton’s Tom Bell. Why was this compelling? Because it allowed us to feel what it really must be like to have a son, or nephew, or friend, sent unwittingly to a violent political death. The more the media brought to life the Anzac fallen, the more the public empathised, the greater the turnout at shrines for dawn services, and the more deeply moving people found these occasions. I’m the last one to be advocating for outdated religious ideas, but unquestionably while focusing on our individual material existences, we have lost something that religions, in common with the great philosophies of the East, have always provided. That is a unifying ideology — the idea that we are all one, that the separation of individuals is an illusion. Out of this understanding comes empathy. Such as do unto others. So how about me, my friends asked. Would I be packing the suitcase and surfboard for Indonesia this year? I hear there are some great waves in New Zealand. *Michael Ellis is a registered Chinese herbalist in Mt Eliza. Visit www.mtelizaherbal.com
MARKETS
An investor’s dilemma The pending slump in profits at Adelaide’s Hills Industries has a symbolic ring to it. Management seems to have guided the market to a 45% fall in profits this year as sales have declined and the $A impacted profits. This is not due to any backward looking attitude by the company. It has been a long time since the Hills Hoist has been a major profit item. By the 1960s it had branched out to other steel products like TV antenna, steel products, home security and then communication devices like beepers for hospitals. As South Australia became an ever less favourable place to manufacture goods, it began to import security cameras and more complex IT products for resale. In this sense Hills traces the path of an economy that has reached the end of its economic model first as protected manufacturer and resource exporter and now as resource exporter, domestic services and importer of finished goods. Local manufacturing has shrivelled to a drip, services are top heavy as banks dominate the economy and the big resource exports, iron ore and coal, are fading. Now that China’s leaders are talking of the “greenisation” of China it has far less need for steel having built more houses and freeways than it can use for the next 25 years. The Vice Premier, Zhan Gaoli, couldn’t have made it clearer when he opened the China Development Forum in late March saying that China’s growth model is no longer sustainable. High growth is over. “We have paid the price”. If our largest customer is calling it quits on smoke belching sintering plants and ageing steel mills, what comes next for us? An economy in which we ring each other a lot on ever discounted mobile phone plans has something going for it but not much, especially as the support staff for this industry is largely in the Philippines and India. However, as investors, our role is not to delve into questions of political economy but to make the best of the hand we are dealt. One way is to erase the disadvantage of distance and high costs with IP by manufacturing offshore via contract manufacturers. These new breed of process specialists like Taiwan’s Foxconn assemble high value products like Apple’s iPhone. In the case of our own Redflow, a company with IP over a “flow” battery technology
Richard Campbell* Stock Analyst
Plain export of IP is the other approach. There is always the danger of it being copied, but it depends on the situation. Melbourne’s CleanTeq is working with a research institute ultimately controlled by China’s water resources ministry, which has an enormous problem on its hands: 50% of China’s rivers and streams are polluted with some stretches actually dangerous to touch. CleanTeq’s method of pulling out heavy metals, oil, nitrates and other nasties will be deployed across China at first in small
River pollution in China.
that suits off and on renewables, it will manufacture via a plant in Mexico just across the border from El Paso, Texas. Mexican wages are now cheaper than China’s and this location is ideal to service the southern US sunbelt states installing solar panels at a rate of 2.5 rooftops a second. Another approach is to set up a manufacturing base in China and make your own products. Vmoto is growing rapidly now that it is established in Nanjing with capacity to make 300,000 e-scooters a year for both the local market and for export. The numbers are growing rapidly as battery costs fall and because the cost per kilometre is minimal. This is propelling interest from national postal services. There are a lot of them globally. China’s perpetual toxic haze that threatens the lives of tens of millions means that zero emission transport will be favoured and as its oil resources are falling, sun, nuclear, hydro and wind can provide non-polluting power.
installations, but potentially across most of China’s once beautiful, but now factory and effluent-plagued landscape. Ridley Corporation also may have high IP leverage from a CSIRO developed fish feed technology that promotes remarkable growth in farmed prawns at a time when ground up “by-catch” is all but exhausted as fishing fleets trawl the oceans. (China is even planning to harvest krill) Ridley’s licences cover Australia, Thailand, Indonesia, Malaysia and the Philippines – a very large footprint. The Chinese licence holder is already in production, which says something about Australia’s lack of urgency, but when your product makes prawns grow 40% larger and stronger, you appreciate the value of good science and good IP. * Richard Campbell is Executive Director of Peninsula Capital Management, Tel. 9642 0545. rcampbell@peninsulacapital.com.au
May 2015| Frankston / Mornington Peninsula / Dandenong BusinessTimes | 19
PROFITS FOR CHARITY
Bullfrog’s Bali extravaganza
Simon Kennedy shows off his Mornington business , a tribute to his late wife Marinna.
STORY AND PHOTOS BY KEITH PLATT A visit to the shop being run by Simon Kennedy in the light industrial area of Mornington can be both entertaining and overwhelming. The “factory” is packed with furniture of one sort or another. Imported pieces are jammed in against others Kennedy may have bought on eBay. Artworks adorn the walls and small pieces such as lamps and vases have been placed on the various tables and other flat areas throughout the showroom. Silver mounted jewellery from Mornington Sea Glass has its own display case. Furniture is imported and artworks come from friends, including one of his daughters. Visual clues to Kennedy himself seem blatant: he wears a cap topped with a plastic dolphin and, when posing for a
photo, seems to adopt the visage of the amphibian to which his business owes its name, Bullfrog’s Bali. He says his nickname came from his grandfather “who said I squatted like a bullfrog”. Next to his feet to the side of his crowded counter is a microphone and amplifier. Another clue. Kennedy says he uses it to spruik his wares while customers are squeezing themselves around the shop, or he’ll rattle off a couple of jokes. “I tell them to start talking to one another, get to know each other.” Kennedy also uses the microphone to describe items in the shop, particularly those with a history, such as the petrified roots of teak trees unearthed from centuries-old plantations in West Irian Jaya. “Nature can’t repeat itself,” he says. “That’s why the glass vases are blown to
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follow the curvature of the roots. “The Europeans couldn’t get enough of teak and the Dutch cleared the land [in Borneo and parts of Indonesia] in the early 1600s, leaving the roots in the ground. I’ve got people digging them up in Borneo and [the Indonesian island] Flores.” Kennedy is having a silver waterfall made to “spill out” from under one of the glass vases neatly sitting on one of the centuries’ old roots. Other furniture pieces have been made from timber “rescued” from boats washed ashore near Aceh, the northernmost province in Sumatra, by the 2004 tsunami. The province’s capital Bandeh Aceh was the closest city to the undersea earthquake, which triggered the devastating tsunami. But assessing the man by his appearance would be misleading, although the
interview with BusinessTimes follows a similar idiosyncratic trajectory to the layout of his showroom (which he likens to Aladdin’s Cave). Despite his self-deprecating manner, Kennedy has an underlying earnestness and a tale to tell. His is a story of years spent as a soldier, running a shelter for homeless men, a carer and now, with his decision to establish a business in memory of his late wife Marinna, a trader. Kennedy says the composure with which Marinna accepted her fate and coped with pain was “unique, inspirational and incredible”. “I decided to set up a shop and donate profits to two key areas – the Royal District Nursing Service, the Dolphin Research Institute (DRI) – as well as Save the Children, Uncle Bob’s and a fund that helps young ex-servicemen.” He says the past two years have enabled him to hand over more than $70,000 to these causes. Kennedy is speaking in his office, a room off the main showroom that is equipped with a table and chairs as well as sale items. Dolphins had been Marinna’s favourite mammals and her ashes were dropped into the sea off Mornington, close to a pod that has been monitored for years by the DRI. Kennedy says he met Marinna in 2006 after he was asked by her solicitor to visit her home in Gorokan, New South Wales, “to see if she was being ripped off” by her carers. “I met Marinna as her possible carer. It turned to romance and we were married 26 August 2009.” Before meeting Marinna – whose name he says means Maiden of the Ocean Kennedy had cared for a former Army
Simon Kennedy decided two years ago to donate the profits of his business, Bullfrog’s Bali, to charities, including the Dolphin Research Institute. He says that so far the causes he supports have received more than $70,000. buddy who eventually was admitted to a nursing home with dementia. Marinna had been incapacitated as a result of a car accident 23 years previously. At 21, and a passenger in a car that collided with a truck in the Blue Mountains, she was the solve survivor. Kennedy met her when she was 44 and by the time she died “she had outlived her life expectancy by 29 years”. “She fought a battle nine out of 10 people would have given up.” Kennedy’s life before Marinna started in Malaysia where his Army career father was stationed as part of the 3rd Australian Infantry. The family moved back to Australia, settling in Frankston. After attending Monash University, but failing to finish his studies, Kennedy “travelled Australia” until deciding to join the Army in 1979. A decade later he returned to civilian life and worked in the spare parts department for Panasonic at Artarmon, Sydney. After the death of his beloved Marinna
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and the end of being a 24-hour carer, Kennedy wanted to “do something unique, appealing, attractive”. With the help of his “resourceful brother” Nick, he set about establishing contacts in Indonesia. Suppliers came from Bali to meet him and he’d been in Borneo while in the Army. Last month saw the arrival of his 10th container of furniture and other objects from Indonesia, including the second glass-topped coffee table from sections of the hull of a dug out canoe. In July a new free trade agreement will see a reduction in his import costs. Although he has travelled to Indonesia, Kennedy says “with the internet there’s no need to go back”. In fact he had his “first holiday for as long as I can remember” at Easter, in a cabin on the banks of an inland weir. Sounds remote, but not for an international trader who specialises in the petrified remains of ancient teak trees … who knows his way around the internet.
May 2015 | Frankston / Mornington Peninsula / Dandenong BusinessTimes | 21
MANAGEMENT
Lessons from an epitaph Alcoa Point Henry smelter and rolling mill are dead at only 52 years of age, after supporting more than 400 families in Geelong and many more people across its support industries like power, maintenance and transport. So what can we learn from this that can be applied to businesses today? Firstly, the initial problems started the day that the American engineers sat down in the 1950s to draw up some concept plans for this new facility “down under”. They made various choices for design and equipment based on their experience but they struggled to adapt their North American experience to this new country on the other side of the world. They chose to construct buildings that could carry six feet of snow for an environment that had never seen snow. They selected a combination of new and second-hand equipment that collectively imposed substantial limitations on future growth and performance. They did their best, but their decisions introduced operational complexities and costs that became a heavy burden to carry over the years. There is no doubt that the maximum scope to influence an operation’s future performance occurs during this early design stage and the hardest process occurs when the designers don’t have experience in the specific physical and social environment where the facility will operate. The smelter was better configured than the rolling mill and, in its early operating years, performed well enough to justify expansion in the late 1970s. At this stage, it was still believed that Point Henry was basically a domestic supplier with little capacity left over to supply export products into Asia. In retrospect, earlier recognition of the opportunity to become a major regional supplier could have opened the door to larger capacity growth that may have helped embed a lower unit cost structure. Perhaps the deficiency here was a clear understanding of the potential for regional growth, particularly in Japan and Asia. If this had been clear, additional equipment for casting a range of product shapes could have set up the smelter for longer-term success. The rolling mill as a domestic supplier struggled with small order sizes, a wide range of specifications and a market that was reluctant to pay prices for what were
Hamish Petrie*
Business consultant
basically boutique products. The operations tried to be all things to all people for the first couple of decades and, during this period, rarely made a profit and certainly never provided a reasonable return to its owners. In the early 1980s, the rolling mill was very much under the hammer with significant operational technical issues on the hot mill that were manifested in high costs and long, uncertain lead times. Alcoa’s executive leadership were very critical of the operation and were quite prepared to close the mill immediately. Fortunately, under great pressure, the operating teams made some breakthroughs and performance improved. A stringent marketing and operations review resulted in a major simplification of the product range to focus on the growing demand for aluminium cans in both Australia and Asia. These two factors combined to save the Point Henry rolling mill from closure. Within a few years, however, Comalco’s mill in Yennora in NSW could not weather the storm of strong competition and Alcoa’s marketing efforts, and they decided to sell or close Yennora. Alcoa took the opportunity to buy the Yennora mill and connect the two rolling mills more closely with the growing regional demand for cansheet. The major difficulty was that the global cansheet market was moving to tighter and more complex specifications that neither of the Australian mills could achieve. For example, global can makers wanted a sheet width much wider that either of these mills’ capability and the cost to widen these mills was prohibitive, because of the original design decisions made decades beforehand. Unfortunately, there were enough international competitors who could produce wide sheet to satisfy the regional demand and hence the rolling mills’ days were numbered.
22 | BusinessTimes Frankston / Mornington Peninsula / Dandenong | May 2015
Throughout this time, Alcoa’s leaders worked hard to optimise their performance by using the best available management ideas. They followed Japan’s revolution on quality, they sought involvement from all of their people, they worked with their union leadership, and they developed novel technology to reduce variability in their products. These efforts kept the mill working from the mid-1980s until last year when they finally succumbed. In retrospect, great efforts from a wide range of people helped to delay the inevitable when the macro variables like exchange rates and power prices combined to bring the end. It is interesting to note that many of the people who had responsibility to manage Point Henry have gone on to much bigger and more responsible roles based on their experience here. You will find them in executive meetings and boardrooms around Australia and in the major financial centres of the world – including London and New York. There is an old adage that “tomorrow’s power comes to those that solve today’s problems” and this is certainly true here. The personal experience of leading an operation through adverse times is a great experience that equips people for bigger future roles. While there is always some sorry at the closure of an industrial facility, it should be tempered by the knowledge that, without the creative efforts of many people, it could have had a much shorter life. Action Planning Questions: 1 When structuring design teams, do you have strong representation from people with knowledge about the local physical and social environments? 2 Do you have a method to identify and prioritise future constraints during the process to design a new product or facility? 3 Have you sought opportunities to buy out a competitor thereby improving your strategic market position? 4 Do you look for job opportunities where there are major strategic business issues and difficulties? They will provide the best learning opportunities. *Hamish Petrie had a 37-year corporate career including 25 with Alcoa Inc. His latest position was VP People and Communications for the Global Alcoa Corporation based in New York. He can be contacted at hamish@nitroworld.net or on 0404345103. © Hamish Petrie 2014
SLEEPING DUCK HEADS TO UK Australian start up Sleeping Duck, an online retailer of low cost mattresses, continues to spread its wings with a UK launch last month. After recording more than $1 million in sales in the first 10 months the company, Sleeping Duck, has set its sights internationally with their first-of-its-kind customisable mattress – The Titan. The mattress, engineered with a combination of pocket springs, memory foam and natural latex, allows customers to vary the firmness and feel. Sleeping Duck was created by Noble Park pair, Winston Wijeyeratne and
Selvam Sinnappan, who met at ANZ’s graduate program following completion of their engineering degrees. Frustrated by the inefficiencies of big business, the two men decided to leave the comfort of full time work and identified a gap in the mattress industry. “The mattress industry was in desperate need of innovation, particularly in the customer service department,” Mr Sinnappan said. “Our own experiences in major brick and mortar stores were terrible and stories of people being pressured by pushy salespeople into spending thousands of dollars on mattresses, only to be disappointed when they took them home and
slept on them for a few nights were all too common,” he said. Sinnappan said Sleeping Duck’s success lies in their simple, yet effective business model. “We decided to change the way people buy their mattresses. Instead of offering a large range of similar products, we only offer one affordable, customisable mattress that we designed using our backgrounds in engineering, and combine that with the best customer experience. We let our customers sleep on a mattress for a full 60 nights – if they don’t like it in that time, they can return the mattress for a full refund. For more information, visit www. sleepingduck.com.au
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