What does it take to crack the global business market? Learn from the leader of an ASX Top 50 company, who took Aussie company Incitec Pivot Ltd. worldwide.
During his time as CEO, James Fazzino transformed Incitec Pivot from a fertiliser co-operative operating in four Australian states with an enterprise value of $400 million, to a global diversified industrial chemicals company, operating in 13 countries and with an enterprise value of $8 billion. He shares how he grew a global business with innovative systems and sophisticated strategy.
I loved business from a very early age. I can remember when I played with LEGO with my brother, I chose to own the mechanics shop or corner store – the business – while John was the policeman or fire chief. As a kid I loved numbers, which was why economics and accounting, the language and framework for business, was an obvious choice for my university degree.
Business creates an opportunity to make a global difference. At Incitec Pivot we put food on the table for millions of people through the fertiliser business. And through the explosives business, we lifted millions out of poverty by mining the raw materials to support the urbanisation and industrialisation of China.
For Incitec Pivot’s people, we created a business system that ensured they worked safely and were empowered to continuously improve every aspect of the company. As we grew the business and took it global, we created significant opportunities for career advancement and distinctively changed the paradigm for women, who now play leading roles in Incitec Pivot’s management and operations.
On a personal level, you don’t get many opportunities to create long-term value. I was fortunate to build two world-scale chemical plants in my tenure – one in Australia and the other in the US, each costing around $1 billion and having a life of 50 years.
To take an Australian business and make it global, it’s all about being able to leverage a distinctive core competence in a new geography. Importantly, the competence needs to be transferrable. This is where many Australian companies fail, as Australian industry is highly concentrated – what appears to be compelling returns driven by competence is often compelling returns driven by industry structure.
Of course, leveraging core competencies provides the strategic case for taking a company global. The difference between average and outstanding returns is all about execution.
I’m currently writing a case study on this topic, because it’s exactly what we did at Incitec Pivot. Initially, we leveraged our core competence in nitrogen chemical manufacturing into the global acquisition of our explosives business, Dyno Nobel; and subsequently, we broadened the business into diversified industrial chemicals, via our Louisiana ammonia plant investment in the US.
The best piece of advice a business mentor gave me is ‘to do only what only you can do’. It came from Malcolm Broomhead, who now chairs Orica and sits on the BHP Board. Living this mantra allows you to focus on your role and the distinctive value that you create, and empowers your team to do the same.
It was a key concept underpinning Incitec Pivot’s business system, where our mantra was to ensure problems were solved at the lowest tier possible in the organisation. Employees at this level are the true value creators in any company as they’re closest to the customer. We called this ‘tier one’ and, interestingly, 70 per cent of $0.5 billion in productivity savings originated from this tier.
In a business, if you don’t fail occasionally, then you’re not pushing hard enough. Failure is an important element of innovation and learning. The Plan-Do-Check-Act cycle underpins continuous improvement and failure is a key part of the innovation process.
It’s also important to remember that today’s problems increasingly don’t have technical solutions – where there is a right or wrong answer – but require adaptive solutions where the answer is unclear or where there are many answers. Accordingly, experimentation that often involves failure is a key part of problem solving in business today. The caveat is that you need to fail fast so that business viability isn’t put at risk.
And just as it’s important to do a root cause analysis on things that didn’t work to ensure enterprise learning, it’s equally important to do a root cause analysis on the things that did work. If you don’t understand what drove success, there’s no basis for sustainability.
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