Market Gap Investments
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  • July10th

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    The International Integrated Reporting Council (IIRC) see http://www.theiirc.org are calling for commentary on a recently released consultation draft paper on Integrated Reporting by the 15th July 2013 – not much time left, but there is still time to comment.
    There are many interesting innovations in the draft paper, and one that I find interesting and valuable is around the business model.
    At the heart of an organization is its chosen business model. Current business model reporting is inconsistent, both in terms of uptake and scope. Uptake appears to be influenced by the presence of regional legislation, corporate governance codes and listing requirements. Scoping inconsistencies are linked to mixed interpretations of what, exactly, constitutes a business model.
    This Background Paper for explores and reconciles divergent approaches in business model reporting with the aim of reaching a common, widely-accepted definition of the business model for use in Integrated Reporting (). Specific implications for the development of the International Framework are as summarized below.
    A distinction is made between business model disclosures and other information such as:
    • external factors or context
    • capitals
    • governance
    • strategy and resource allocation
    • opportunities and risks
    • performance
    • future outlook

    This framework provides a very interesting perspective on how an organisation creates value through its use of various capitals, and in addition to considering outputs (loosely what an organisation is developing and selling) it also includes outcomes (positive and negative impacts of the business process).
    Have a look at the framework and comment by 15th July.
    More importantly, review your business in terms of the described business model and think about how this might affect you.
    The Business Model

  • September9th

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    On Friday, 7 September 2012, I talked to a group of leaders touring from Pakistan, the topic ““Defining business success and the relevance of the environment on business”

    The group was touring Australia through an AusAid Australian Leadership Award scholarship (http://www.ausaid.gov.au/scholar/pages/ala.aspx).

    There were 20 people in the group, and the intention was to visit a number of successful enterprises and get an understanding of how SME’s are approaching dealing with the environment in Australia.

    The group stated in Queensland, visited Melbourne and will be in Sydney next week, before returning to Pakistan where they will share what they have learned with SME’s in Pakistan.

    Of the 20 people in the audience some 4 were academic, and the remainder were advisers from the Small and Medium Enterprises Development Authority (SMEDA) of Pakistan (www.smeda.org.pk).

    Coincidentally, SMEDA is very similar to Enterprise Connect (http://www.enterpriseconnect.gov.au/Pages/Home.aspx), a great initiative designed to help good Australian businesses improve their performance.

    I have been engaged as a Business Adviser Clean Technology Innovation Centre through Ai Group as part of the Enterprise Connect initiative, so as a group we had a number of interesting observations about the similarities and differences in SME’s in Pakistan and Australia.

    A copy of my presentation is attached. Defining business success and the relevance of

    There were a couple of great things the visitors really enjoyed about their stay in Melbourne.
    They were able to visit the following three innovative and environmentally conscious businesses:

    Cookers: http://www.cookers.com.au/store/index.asp where Peter FitzGerald showed them around the site and explained how it has been developed to be environmentally focused.

    Close the Loop http://www.closetheloop.com.au where Steve Morris explained his business model of “no waste”, a strategic objective of making someone else’s refuse the raw product for your production process.

    Ferguson Plarre Bakehouses http://www.fergusonplarre.com.au where Ralph Plarre explained how he has designed the business with the environment in mind. Ralph was also the enthusiastic guest speaker at the dinner for the ALA’s on Thursday evening.

    Some of the similarities defining success in SME’s while addressing the environment included:
    • Strategic intent
    • Focus
    • Commercial imperative – though accepting that sometimes the environmental path is more expensive, it is profitable in the long run and benefits us all

  • July23rd

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    I recently reviewed my accounting software, and thought it time to upgrade both my process and software.

     As I started looking around, I became aware that the best solution for me existed in the “cloud”.

     I have heard of cloud computing, however my experience has been relatively limited. I explored the options around application service provider (ASP) some time ago, and found the value proposition unattractive. The ASP value proposition has been developed significantly, and the current wave of Software as a Service (SaaS) providers have established a great business model that is cost effective and a great value proposition.

     In relation to the accounting package, I pay a monthly fee, the software is maintained off site and is always current, the data is backed up and secure, the solution is good and the price is over 60% lower than traditional software.

    The solution has been available for several years, however there now seems to be a really strong trend to these types of services and the solution seems new.

    I raise this, because I am noticing that the majority of businesses are still waiting for some form of lead from government to start taking action to manage carbon. Innovators are still leading the herd in managing carbon and creating a new business model, yet they comprise about 10% of all businesses and I suspect many of these leaders will develop a significant advantage over time.

     It is interesting to note that one of the leaders in “cloud computing” Salesforce.com – the current new thing – started the business model in 1999.

  • June10th

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     – how are we assessing investment proposals?

     Recently I was advised that a proposal to install solar generation to replace existing power just didn’t stack up economically, and the question posed was how will renewable energies ever replace current technologies for power generation when they aren’t economical?

    My initial response was that the business model we are using to assess these proposals needs to be questioned. The two alternatives were assessed as if the outcomes were considered identical (i.e. a certain number of kilowatt hours of power generated for a certain cost).

     However the outcomes aren’t the same.

     Power acquired from the existing technology and purchased from an electricity retailer was being assessed at the current cost, with no accounting for the carbon effect of the generation.

     The solar generation was assessed at the cost of panels, installation, etc., a recognition that it was likely some power would still be acquired from a retailer, and yet there was no assessment of the cost of carbon in the equation.

     The way some businesses are making this decision now is that they are choosing the solar option because they feel it is the “right” option from an environmental point of view, there may be the opportunity to generate renewable credits either in a formal or informal market, and there may be a further range of positive impacts created from looking at innovative alternate sources of energy. These intangible benefits are then assessed as offering sufficient benefit to outweigh the economic cost.

    The point is that if there was some form of emissions trading scheme (ETS) in place, these intangible benefits could be assessed as an “offsetting” renewable benefit, and matched with the carbon cost of traditional methods, and potentially the economic argument would start to match the environmental argument.

    I have previously said that innovative businesses I have met with are acting and investing ahead of legislation, and while this is true, the majority of businesses won’t act unless there is some economic advantage or compliance regime where they are obliged to consider the cost of carbon in their investment decisions.

     In December 2009 there was significant momentum in place in Australia as businesses were preparing for the introduction of an ETS.

    It seems that lack of political will has stalled this momentum significantly, and many businesses are now waiting for a signal from government (of whatever persuasion that may now be) before acting.

     We shouldn’t forget that NGER is in place, and there is already a form of carbon reporting happening.

     I understand that there is still bipartisan support to reduce carbon emissions by 5% of 2000 emissions by 2020.

     It is generally accepted that the only way to achieve this agreed target is to have a pricing mechanism for the cost of carbon (and arguably the most effective mechanism is some form of ETS).

     The current level of delay will make the cost of achieving the target in a delayed timeframe much higher than if we began taking action today.

     I suspect the innovators and the early adopters will be in a much better position both environmentally and economically in the next three years.

     What do you think?

     Thanks to those who attended the presentation in Melbourne yesterday. The copy of the presentation is here:

     Web version Climate_Project CPA – Centering on Excellence Melbourne 9 June 2010

     The code for the software offer is “CPA Melbourne”. Talk soon.