Guest Blogger: Dale Austin, Principal, Tessellate Inc It’s no secret that there are a number of challenges facing Canada’s energy sector.  We are all aware of the issues around market access and pipelines – namely that it is difficult if not impossible to build one, particularly one associated with the oil sands. There are also a number of other factors driving energy companies to take another look at how they do business.  These include: Changing consumer demand. The need for performance improvements in order to lower production costs and meet shareholder demands for higher returns. Increased regulatory uncertainty and costs of compliance. Access to financial, equity and risk management markets. Long-term waste handling risks. Competition for talented employees. Ability to earn and maintain public support in response to growing local, regional and global concerns. For the energy sector to overcome these challenges, companies must strengthen their innovation efforts as part of an integrated process for solving complex problems. Innovation is often viewed, incorrectly, as a unique process.  It is seen as a line item, such as research and development, or a single transaction in a chain leading to some new technology or product. In fact, innovation has many faces: Innovations that are technological and social. Innovations that are either incremental or breakthrough. Innovations in strategy, products and services and support systems. Process innovations (changing the way work is undertaken). Innovations in culture (changing the organizational structure and operating principles, including changing attitudes and behaviours). Energy companies are well aware of the challenges they are facing and, for the most part, their initial approach to innovation is to look internally to their own dedicated R&D arms for solutions.  Alternatively, they turn to a few large service providers where long-standing business relationships are in place. This inward...

  September is energy month here on the Abacus Insider.  Over the next few weeks I’ll be posting selected articles looking at some of the important energy-related issues faced by small and medium sized businesses operating across Ontario, and how different approaches to these issues can be integrated into company strategy. To kick things off, today I’m going to briefly discuss incentives available through the Ontario Power Authority’s ‘Save on Energy’ program and how businesses can use these incentives in conjunction with internal strategy to maximize success. Energy can be a major overhead cost, especially in the manufacturing sector, but with many efficiency programs requiring upgraded equipment or new infrastructure, such upfront capital costs can be a hurdle to efficiency for many businesses. From a customer’s perspective, the way a business or supplier deals with its energy costs can also have a major impact on the price of goods and services.  To set prices, companies usually assign their overhead costs to the products they sell in order to ensure they aren’t unknowingly missing out on potential revenue.  Depending how this is done (correctly, accurately, or not) and the type of industry, there could be substantial variation in price levels, and therefore distorted price signals to both the buyer and seller. In order to be as competitive as they can be, small and medium sized businesses must not only work to control their energy costs, but also be as accurate as possible in attributing those costs to production. So what can business owners do about energy? The OPA’s Save on Energy program provides a list of incentives to businesses across most industries for saving across a range of areas, from equipment upgrades through tax abatement.  Having a look at what’s available to your industry is...

Although the technology sector has been following a boom and bust trajectory over the past twenty five years or so, it’s really within the last decade that social media and e-commerce have reached a level near-universal acceptance where becoming an online millionaire (or billionaire) is no longer only left to the select few like Bill Gates, Steve Jobs, Steve Wozniak, and Michael Dell. Start-ups, many conceptualized and run by Millennials, have been rising up, sometimes seemingly out of nowhere, with such household names as Facebook, Scribd, Shopify, and even Google.  The apparent influx of tech start-ups and the cash they attract and generate has, in part, led many to see Millennials an entrepreneurial generation.  But are we really?  Is entrepreneurship really something to be studied and planned for? A recent article in the Financial Post, “How tech’s young millionaires spend their money” discusses some of the rosiest success stories of Millennial technology entrepreneurs.  It insinuates that all one must do to strike it rich online is live on a frugal budget and maybe find some seed capital. In many ways, entrepreneurs can be compared to Olympic athletes.  Like elite athletes, successful entrepreneurs have just a little something extra; whether that’s drive, dedication, creativity, intelligence or something else.  There may be many very strong skiers across Canada, but only a select few make the cut to compete on the World Cup circuit, and even fewer get to fly to the Olympics.  Regardless of their aspirations, those who don’t make the cut were just missing that ethereal ‘something extra’.   Entrepreneurship is risky (that’s the point), so be aware and informed Entrepreneurs who build successful companies are the athletes who make it to the Olympics, but the failure rate is daunting.  How many children who buckle...

A recent article published in the Financial Post on July 22, suggests that Millennials are saving at a much younger age than other generations.  While the article correctly identifies that Millennials face financial pressures not experienced by other generations, including higher tuition costs, student debts, fewer jobs, and higher housing prices; unfortunately it includes a few problems in assessing the financial position of the generation. The first important issue to address is that of the research study referenced in the article.  A poll is cited to provide insight into the attitudes and behaviours of Millennials and Boomers when it comes to saving and investing.  However, the poll only included a sample of 150 Millennial respondents, and no further methodological data is provided (was it conducted online, by telephone, etcetera).  Such a small sample size can introduce dangerously large margins of error into the data, making it extremely difficult to reach meaningful conclusions.  In survey research, it is almost never a good idea to draw conclusions on a sample population of less than 500. A more troubling portion of the article emerges through a series of quotes from a vice-president at TD Wealth Private Investment Advice.  According to the interviewee, “if someone invested $100 per week, in 10 years she’d have $65,551, assuming a 6% rate of return – she could have a down payment for a home”.  Although this is a classic example of compound interest given by financial planners, such a savings scenario is simply unrealistic for many people, not just Millennials. Although there’s no one ‘right’ answer on how much to invest or save, many investment resources will suggest a starting point of 10% of your pay – this of course depends on whether the source is using a net pay (after...

There is no shortage of articles and lists around the internet aimed at helping Canadian Millennials (those born between 1980 and 2000) better manage their money.  So what makes this one different?  The other lists don’t understand how we Millennials shop, save, and even interact with the world.  Others make broad statements or generalizations that may even be out of reach for Millennials; for example, it doesn’t help to tell a 21 year old university student to invest and have a savings plan before they understand the fundamentals of such things – especially if their hourly wage is $12. So, this list will be a bit different – it will act to inform as well as to advise, and hopefully help to de-mystify money, savings, and spending.  Maybe even tell you where it’s OK to spend a little.  Also, at the end of the article, I’ve linked a basic budget template with a basic debt repayment calculator for students. Get a Student Bank Account If you’re a student, and you don’t already have one, get a student account.  Most banks and credit unions offer special low-or no- fee checking accounts for students.  You might be able to save $10 or more per month, but more importantly you’ll be able to track your spending through your online banking.  The ability to track spending will be a big help in the ‘budgeting’ section later in this article. Student accounts can also offer nearly unlimited debit transactions per month.  Paying with plastic can help avoid ATM fees and provide you with a traceable record of every purchase you make – again helping with your budgeting process. Saving and Investing The classic example shown to young people in terms of the importance of saving is the idea of...

Chances are you’ve heard someone you know question probability in a game setting; maybe without even knowing it.  Whether the throw of a single die, in a game of pure odds like flipping a coin or roulette, or even a game of multiple dice like Risk or Dungeons and Dragons, someone has claimed a certain outcome ‘must’ be coming next, or that some other outcome was ‘unfair’. The basic principles of probability can be relatively simple to understand, but the applications to competitive games or scenarios where outcomes matter can be difficult – not because we can’t understand them, but because we often have a vested interest in the outcome.  In this brief article, I’m going to talk a bit about what underpins probability in games, and then give a few examples of these theories in practice – and hopefully answer some questions at the same time.   Independence A core principle of probability theory in general and how it applies to games in particular, is that of ‘independence’.  In basic terms, independence exists when one event in a set does not hold any effect over the outcome of the other events.  For example, if you were to roll one die twice, the first roll has no influence over the outcome of the second roll, and is therefore independent. However, assume that you are a contestant with a chance of winning one of three prizes: prize 1, 2 and 3; each contestant in the room has a raffle ticket which could be matched to a prize.  Also assume that each prize is assigned as the winner is called, and the ticket discarded after the draw.  Even if tickets are pulled randomly, if the winning ticket for prize 2 is pulled and the winning ticket...

Recently, the Harvard Business Review published an article by entrepreneurship guru Steve Blank titled “Why the Lean Start up Changes Everything”.  Blank discusses the concept of the ‘lean start-up’ (see “Three Principles of the Lean Start-Up Method”), and how the notion of a traditional business plan is out of step with the modern start-up. While Blank’s article does an excellent job of providing an overview of the lean start-up method to new entrepreneurs, it glosses over several fundamental questions any start-up would be wise to answer.  A key statement made early in the article claims that the standard business plan is dead, and that projected financial statements and a long planning process are only slightly better than worthless for lean start-ups. By not relying on a traditional business plan, Blank argues, start-ups are better positioned to pivot following failure and move to a more successful position.  But what about the costs and risks of failure?  Are we to just assume those away as a possible conclusion of any business strategy?   Start-Ups and Failure It is accepted that new start-ups face an imposing failure rate (placed at roughly 75% by a recent Wall Street Journal article, available here).  If this is true, then an overall risk of failure is the single largest threat facing a new business.  While this conclusion is not exactly a revelation, it underscores the risk inherent in the business of entrepreneurship.  So, what can entrepreneurs do to minimize their risk of failure?  Have a plan – sit down and think of some of the things that could possibly cause your business to fail.  What can you do about each of those critical threats?  Some will be entirely out of your control, but by at least having a plan on paper...

As some of our readers might know, most members of the Abacus Data team are avid cyclists.  Our interest goes beyond the thrill we get riding a bike but with the sport and even the history and culture that surrounds the bike. A few days ago, a blogger on the Economist wrote a really interesting piece on the growing trend of using cycling as a way to network for business and professional success. The blog notes, “Traditionally, business associates would get to know each other over a round of golf. But road cycling is fast catching up as the preferred way of networking for the modern professional. A growing number of corporate-sponsored charity bike rides and city cycle clubs are providing an ideal opportunity to talk shop with like-minded colleagues and clients while discussing different bike frames and tricky headwinds. Many believe cycling is better than golf for building lasting working relationships, or landing a new job, because it is less competitive.” Unlike golf, cycling is less competitive, more team oriented, and it’s not difficult to get involved.  Also, as someone who played a lot of golf as a teen I know that there’s less chance of embarrassing myself and less pressure to hit that perfect shot. While on a bike, I’ve never thrown my water bottle in frustration or sworn to never ride again.  I can’t say the same thing about golf. I recently joined the Ottawa Bicycle Club and hope to get out to their group rides a few times a week.  There really is nothing like riding in a big group, feeling safe in the company of others and being pushed to rider harder for the benefit of the peloton. For hardcore road cyclists, there is also a bond between those who share...

Few Canadians think there will be NHL hockey played this year. Disappointed NHL fans are more likely to side with players in dispute; half say they are less likely to attend a future NHL game. Download the detailed tables After talks between players and the NHL broke down on Friday, a new survey conducted by Abacus Data finds that six in ten Canadians believe that hockey will not be played in the NHL this year while 76% of NHL fans think the season will be lost entirely.  Most NHL fans are disappointed with the lockout while a significant majority say they are angry and sad about the league’s lockout of players. Few Canadians believe that NHL hockey will be played this year. NHL fans are disappointed and angry at the situation and that frustration could lead to them staying home when play resumes. Attention to the NHL lockout Overall, over one in three Canadians (38%) said they are following the NHL lockout very closely or somewhat closely.  However, among those who self-identify as NHL fans, 87% said they are following the lockout closely. Most don’t think hockey will be played this year. When asked whether they thought NHL hockey will be played this year, a majority of Canadians (62%) said no while only 9% believed hockey would be played. Three quarters of NHL fans were pessimistic about hockey’s return while only 9% had hope that hockey would be played this season. Very few fans in Canada have any hope that hockey will be played this season,” said Coletto.  “Across the country, fans and non-fans alike think it is unlikely that they will be able to watch any NHL hockey. Lockout could hurt ticket sales When asked whether they would be more or less likely...

Successful managers are constantly looking for better tools to assist in decision making, yet even the strongest leaders can find it difficult to resist the hunch.  Whether it is because of previous successes or simply a ‘feel’ that has developed over a long career, managers and decision makers often rely on gut and intuition to make serious decisions.  However, there often too many stakeholders or variables involved to base major strategic decisions simply on feeling. When used in conjunction with an effective management strategy, modern research techniques are able to quickly provide targeted and detailed intelligence and support for business decisions.  This article will explore how recent management theory can be combined with cutting-edge research techniques to give managers confidence in their decisions and provide for optimal outcomes. As new tools and techniques of business are constantly emerging, it is critical that the management teams in all organizations, including small and medium sized businesses (SMEs), stay abreast of new approaches.  One of the more valuable new ideas to emerge is that of Evidence Based Management (EbM), described by Stanford University’s Robert Sutton as: “…a simple idea.  It just means finding the best evidence that you can, facing those facts, and acting on those facts.  Yet surprisingly few leaders and organizations actually do it – and those that do trump the competition”. A recent set of guidelines published by CMA Canada and authored by Bernard Marr outlined how businesses may adopt elements of EbM  to their advantage by providing a detailed description of its application as well as a simple flow chart to follow. According to CMA Canada, a survey of 371 companies found that 65% of top performers said they had significant decision making support or real time analytical capabilities, versus 23% of low...

Last week, the Financial Times ran an article discussing the recent leaking of JP Morgan’s “doomsday scenario”.  While the bank’s Chief Investment Officer was engaging the trades which led to the recent $2-billion loss, another division of the bank was developing a scenario that would play out the results of a $50-billion trading loss.  In short, the bank would likely experience a run and collapse. In its tone, the article appears to present the existence of such a doomsday plan as a curiosity; as though surprised that such planning would take place.  Such a scenario should not be treated as an anomaly, or even as something to be concerned about.  Simply put, it is smart risk management. As Robert Kaplan and Anette Mikes suggest in the June 2012 issue of The Harvard Business Review, risk management can be broken down into three distinct categories: preventable risks, strategy risks, and external risks. Preventable Risks arise from within the company and are controlled through careful development of mission, vision, values and strategic goals; along with carefully implemented internal controls and audit infrastructure. Strategy Risks are those risks explicitly linked to the strategic choices and planning of an organization.  They are not necessary a negative, but rather are inherent to the business – for example, the strategic risk of a bank which decides to lend money is the chance that the loans may not be repaid. External Risks are completely outside the control of an organization, typically arising from major political, natural, or economic events.  As companies cannot prevent or control these risks, management must be able to identify and plan for their eventuality. But what do these mean for risk management, for JP Morgan’s case, and more importantly, for your business?  Most organizations are able to...

Today, I’m speaking at the Credit Union Central Canada Government Relations Conference about the public opinion landscape as it relates to politics, the mood of the country, and financial services in Canada. My presentation will focus somewhat on the Occupy Protests happening all over the country.  Over two weeks ago, we released some public opinion data that we conducted with the Corporate and Community Social Responsibility Conference which  found that while a majority of Canadians support many of the messages the protests are making, only 41% have a favourable impression of the protests and only 15% believe they will have a positive impact on politics in Canada. In other words, most Canadians like the message, just not the messenger and most believe that governments will not respond because special interests have too much control over public policy. Despite this worrisome level of cynicism and apathy, the protests have had significant consequences for the financial services industry in the United States.  On November 5th, Occupy protesters in a number of cities organized Bank Transfer Day where they urged consumers to withdraw all their assets from private banks and transfer them to credit unions or other co-operatives. Since September when the Bank of America introduced a flat-$5 fee to its customers, credit unions in the United States have seen a 50% increase in new account sign-ups or 650,000 new members. There hasn’t been any news coverage of a similar trend in Canada, but our research finds that there is potential.  Over six in ten Canadians (64%) either strongly or somewhat agreed that Canadian financial institutions have been reckless and greedy.  Many Canadians don’t have a favourable impression of banks, despite the fact that no Canadian bank failed nor required government bailouts and most Canadians use one of the five Chartered...