Sarah welcomes Alec Anderson, Managing Director of Koolmill Systems, to talk about how his company is disrupting the rice milling industry – not only with its innovating rice milling machine, but with an As-a-Service go-to-market strategy.
Sarah Nicastro: Welcome to the Future of Field Service podcast. I’m your host, Sarah Nicastro. Today we are going to be hearing a very “cool” as-a-service story, which is the story of Koolmill. I’m excited to be joined by Alec Anderson, who’s the managing director of Koolmill Systems. Alec, welcome to the Future of Field Service podcast.
Alec Anderson: Thanks, Sarah. Nice to be here.
Sarah Nicastro: Good. Thanks for being here. Okay, so I’m excited to share your story with our audience, because there are a couple of really interesting aspects to it, and we were introduced by James Galloway at BDR Thermea, who was on the podcast not too, too long ago, and I’m really glad that he suggested I connect with you, and that you agreed to join me here. So before we get into the Koolmill story, tell our listeners just a bit about yourself and your background.
Alec Anderson: So yeah. How did I end up in rice milling and doing machinery as a service? That’s a good question. I started off as a marine engineer, when I left school. I was a qualified marine engineer, but that was a dying trade, so I went back to university as a mature student. During my vacation between second and third year, I went to work for a local company for summer vacation job for 12 weeks, became a final year project. I joined the company, and I bought the company, and here we are now. Rice got the hook into me there somehow.
Sarah Nicastro: Okay, yeah. So let’s explain to our audience. So tell everyone what Koolmill is, and what industry you’re in, because obviously our audience reaches across a variety of industries. So you’re definitely going to have plenty of people here that are not familiar with the rice industry.
Alec Anderson: And that’s not an unusual story. Rice is a huge global industry that feeds half the world every day, but it’s not known for it’s as a service opportunities. Koolmill is a small, family owned business based in the UK, and we’ve developed a novel disruptive technology, a paradigm shift if you like, in milling technology. And effectively, we are trying to transform a global food system, move it from a wasteful current position into a more sustainable future position. And that really depends on doing things differently, both in the physical sense, and then also in the business model sense.
Sarah Nicastro: Yeah. Okay. So we’re going to talk a little bit more about some of the competitive differentiation that Koolmill has. Before we do that though, being that our audience won’t necessarily understand of the market trends in the rice milling industry, just from very high level, explain what some of those pressures, challenges and opportunities are.
Alec Anderson: Yeah. So rice is a very conservative industry. So after 8,000 years of rice processing, we are the thumb generation in technology, and the current mechanized machines that are bound today, what introduced around about 160 years ago, and have evolved over that time, but effectively they’re all based on those early machines.
So rice has saw a number of problems. There’s enough rice to feed around about 600 million people, is lost each year from farm to fork, and that’s due to poor storage, drying and processing, and we can help address the losses in processing, and the estimated loss is around $127 billion a year, or something like that. So these are massive numbers, and we need to do much better.
Sarah Nicastro: So there’s an opportunity to improve the technology, which will reduce waste. Right? It is one big area of opportunity. And I think we’ll get into this more later, but just to sort of set the stage for folks, when it comes to the organizations that are milling rice, and where that happens, and how it happens, there’s some aspects of the industry that make it possible for huge corporations to do that, and leave a lot of people out of the realm of possibility. Right? So can you kind of explain the landscape, from that perspective?
Alec Anderson: Yeah, so the current state of the art in the industry, that’s probably around about 50,000 large millers globally, and they’re very highly capital intensive. Not necessarily digitalized, but quite automated in many instances. But to run that kind of operation, you need lots of money to buy it in the first place. You need lots of rice to keep it running, and you need a huge amount of infrastructure and power to support it.
Now, there are around one and a half million SME processors globally, if you don’t have access to those three requirements. So they’re kind of locked in to using antiquated and wasteful equipment. In fact, we were in Nigeria earlier this year, and they were running machines that were made in the 1870s, still driven by diesel. So they’re kind of locked into what they have, or if they do replace, they replace like with like, because they don’t have access to this high performance, state of the art, modern equipment, and we aim to try and change that.
Sarah Nicastro: Yeah. Okay, I did a horrible job of setting that up for you, but you did a wonderful job of explaining it. So there’s opportunity in the sense of within the industry, there’s a lot of waste.
Alec Anderson: Yes.
Sarah Nicastro: And so there’s opportunity, both in the machines and in the process, to minimize that waste, which will of course help us feed more people in the world. Right?
Then, from a competitive landscape, you have these large corporations that can afford the most modern equipment, or if even a couple of generations more modern than the 1800’s, right? But anyone that’s at the small and medium size, that is attempting to play in this space, is kind of boxed out just based on the cost of the equipment itself. And so Koolmill is disrupting the industry, both in the sense of offering a machine that meets the needs of reducing waste, and then also offering a new business model that equalizes the ability for companies to compete and to produce. Okay? Did I explain that correctly?
Alec Anderson: Yeah, you’ve got it. So basically, I think maybe a better way to explain it is these large mills are large, and you can’t scale them down and retain the level of performance. They’re just not viable.
Now, one of our unique points is that we can scale down without loss of performance. So whether we’re milling a ton an hour, or we’re milling at 100kgs an hour, we have the same performance, and that’s revolutionary in the industry. So basically I think probably three aspects to Koolmill. One is reduction in power, which is obviously very critical right now. So we’re looking at upwards of 90% reduction in power.
We’re looking at producing more food from the same input from the harvest, and increasing the value of that output, because more there’s a higher quality. So we have a quantitative improvement in quantity, and we have a qualitative improvement in the quality of the output, which is higher value, and that all builds to better revenues for these smaller producers, and also for the growers.
Sarah Nicastro: Okay. So perfect. So the machine that Koolmill has developed improves those three areas. And when you talk about quality, we’re talking about nutritional content of the ultimate output of the rice, right?
Alec Anderson: Because another aspect of Koolmill, we call it Koolmill, because we mill cold. We mill cold because we don’t waste the power, which comes out as heat in a conventional machine. There is some evidence emerging that the cold milling retains more of the micronutrients, so that then produces potentially a more nutritious food product.
Also, our bran that we produce is very clean, very pure, and doesn’t deteriorate after milling. So that enables that to be valorized into again, a human food ingredient, rather than as currently, mostly goes to food for animals, because it’s basically gone rancid. So these are all things that increase the value creation.
Sarah Nicastro: Okay. And so those are how the machine itself is a competitive differentiator. Let’s talk a bit about the decision to leverage the as a service business model, and how that is also a competitive differentiator, and a real change in the rice industry. So talk a little bit about that.
Alec Anderson: Yeah, it’s a really interesting one, this, because I guess we hadn’t heard the term Servitization before, and what we found when we did hear that term was they’d actually been doing it for many years, we just hadn’t been charging for it. So we’ve been providing the machinery, providing the engineers, providing the consumables, and that was really necessary because of the development of the machine had to be in a rice mill, because of the quantities of rice that we needed to do that.
We spent a lot of time working with large customers, trying to sell them a machine that we didn’t understand, that they didn’t actually need, because they already had the best of what was already there. And then we started to look at the smaller users who had the need, but we find there’s no point in having great technology if nobody can afford to buy it.
And we had two primary barriers. One was a perceived technology risk. We’re a small company with a novel technology, nobody knows us, nobody knows our technology, and that creates some reluctance. And also we were perceived to be a high capital cost, which none of these are true, but the perception is harder to argue than the facts. So we became involved with the Advanced Services Group at Aston, and we started to work on this pay as you mill service, or the machinery as a service business model, very similar to world wise powered by the hour, where we’ve evolved to know we guarantee hours in exchange for a fixed fee.
So that offers these small operators cost certainty. We have the technical risk. They know what it’s going to cost them, and it takes away the need for capital cost as well. So it’s an enabler, an empowerment. It empowers these small producers now to compete on pricing and quality with the large producers.
Sarah Nicastro: Yeah. Okay. So we’re going to talk a little bit more about that. Before we do, I want to talk about, you brought up to me three aspects that were key to making the as a service model work. So the first is connection to the machines. So talk a little bit about that.
Alec Anderson: Yeah. The whole service model is basically underpinned by connectivity, digitalization, and clearly if we are going to guarantee a certain number of hours per month, it’s important that we understand what’s actually happening on the machine, that we can work preemptively if things are going wrong, to mitigate any downtime, and to maximize value.
When you move to a service model, you’re really moving away from the conventional transactional sales, which is a confrontational business model. I want lots of money, you don’t want to pay me any money, and we try and meet somewhere in the middle, and you never see me again once I’ve got your money. Whereas the service model’s really based on very much a strong collaborative, long term partnership, where both parties are aligned in the outcome, either successful or not successful. Hopefully successful.
Sarah Nicastro: Well, and to your point that you mentioned earlier and just now, there’s risk sharing. Right?
Alec Anderson: Yeah.
Sarah Nicastro: So that helps you in terms of eliminating or negating that perception that’s out there. What is this new innovative thing? Could be great, might not. I’m going to just stick with what I know. Right?
So when you say, “Yeah, but listen. We’re not asking you to pay us this huge, upfront capital investment. Try it out and see if it works for you, and we’ll share that risk.” I mean, this is an area of moving to as a service that is really, I think, a huge opportunity. But it is an area that existing businesses that have a legacy, are very, very uncomfortable with. Right? Because it’s just completely different. Right?
But there’s no risk, no reward, I guess is what they say. Right? And so for you, it’s been beneficial to share in that risk, to introduce something different to help these companies find a new way of working. So, sorry. I just wanted to point out the risk part, is a part of this that for a company that’s moving to this model, there is no way around that. Right? If you’re guaranteeing an outcome, there’s no negating that risk. There’s no way to do that without accepting some risk, and that’s just part of this that we need to get past, as an industry, with companies that are going in this direction. Okay. So sorry, I interrupted.
Alec Anderson: No, but I think just picking up on the risk point, yes. The risk is there. There’s always risk. Things will go wrong. The question is how do you deal with that risk? How do you write your contracts to deal? And again, if you have this strong collaborative partnership, so say for instance if we had a customer with five or six machines, we may put seven or eight machines in, so that any time, a given number of machines is working. Nobody knows your machinery or whatever you’re making better than you do. But a lot of manufacturing right now is designed for manufacturer. How can we reduce the cost of manufacturer? How can we reduce the materials? How can we reduce everything, to make it as cheap as possible? We’re trying to do a cost plus offer.
We take the opposite view, and moved to a value creation. So if I can look at the value I can generate from a machine over its life, rather than just selling it once, can I change the way I design that machine? So design for service. Can I design it in a modular way, so that anything that fails on a machine can easily be changed? As we already touched on, digitalization, the ability to remotely monitor, capture data, to pick up at an early stage things in data that a human being wouldn’t be able to detect, and to make proactive management, rather than reactive management, which is where lots of companies are at the moment.
I think if you were in a traditional industry that’s already selling equipment, it’s probably a bigger change than it is for us, because we came in clean. We weren’t selling anything. We are a new technology, so it’s easier for us to start. But I think you have to think about the creation of value. How can you create that value? How can you capture a share of that value? And if that means redesigning the machine so that they can have a longer life with more service, and I think the world is moving away from the disposable, buy it, scrap it, get another one. If you can design machinery that has a longer life, and it can be upgraded through its life, I think there’s great value there.
Sarah Nicastro: Well, there’s great value in the sense of, like you said, you’re moving into a relationship. Or for you, you’ve created a relationship. I understand it’s different context here, because you’re not moving away from a legacy, but a lot of our audience is, which is why I’m bringing up some of these points. You can imagine having done this from fresh, how hard that is. Right?
But when you create this partnership, and you are now moving away from, “How do we do it fastest, cheapest, and make the most money up front?” to, “How do we create the most mutually beneficial working relationship for the long term?” You build the machinery different, which helps you in servicing it, and guaranteeing the outcomes, which helps your customer. But there’s also a huge environmental impact, because the additional investment that is required to create machinery that is intended to last longer is something that, in a traditional model, no one’s willing to accept the cost of. Right?
And so this allows organizations to really transform the way that their operations are affecting the environment, without forcing themselves or their customers to accept that cost. I mean, they both are, but that’s because you’re moving into a model that makes that far more feasible. So I think that’s really interesting part of the discussion too, is there’s another benefit here, which is to the environment, and moving away from that consumable mindset, moving away from just turn and burn, create cheap, sell it, we don’t care what happens after that. Right? So that’s a really interesting aspect of this, as well.
Alec Anderson: So I think our machines are designed not to be scrapped, but they’re designed to come back and be re-manufactured. So there is no end of life cost, because theoretically there should be no end of life. But it’s minimal in that re-manufacture, you want to minimize the amount of materials that have to be recycled.
I think just to pick up on your cost point, it’s really interesting, wasn’t it? Because it comes back to the focus on cost reduction, rather than value creation. If I’m going to build something at a cost, and then I’m going to put a mark up on and sell it to you, it’s an issue because the higher the cost, the more difficult it’s for you to buy. If I, on the other hand, I’m not selling you that. Then the cost of the initial machinery is less of an issue. It becomes an asset finance question now.
And where I would argue is, forget the cost of the machine. What is the value that machine’s going to create over its next 5, 10, 15 years of life? And when you look at it from that perspective, the cost of the actual, physical build is generally insignificant. So one of our machines may cost 10, 15, 20,000 pounds to make, but over its life, it’s going to make process 50, 60 million pounds worth of rice. So the cost versus the value is really the key driver, and it’s really changing that focus, because right now everybody’s focused on, “Let’s get the cost down.”
Sarah Nicastro: Yeah. No, it’s a really good point, and here’s what I want to ask you. So you know, you brought this up when we chatted the first time, which is you have to educate people in this context, customers, that productivity is not only about reducing cost, but increasing value. Right? So we’re programmed to think increased productivity means reduced cost, but in increased productivity can also mean increased value. Now, you’re not battling an internal legacy that you have to overcome with what Koolmill is doing, but you are still battling a legacy mindset, in the companies that you’re selling to. So how have you shifted that narrative?
Alec Anderson: Slowly. As I said, we work in a very, very conservative industry, and I would say our challenge right now is not a technical challenge. It’s really a culture or mindset. It’s changing the perceptions and how people think about. And if you think about it from their perspective, here’s this small company from England coming and telling us we’ve been doing it wrong for a hundred years. You know?
So it is a lot to take in, and there is another problem I think, in that your sort of intermediate management level, their power base is based on their knowledge of the existing technologies. And when you come with a new technology that’s very disruptive, it’s highly digitalized, I think there’s a fear there that the younger generation will pick up that new technology, and more quickly, and that will devalue their power base, if you like. So you have to work very constructively with these people. They could be the blockers, the saboteurs, to try and make them the hero of the story rather than the villain of the story. But it can be very challenging, and I guess if you are already got an established supplier-customer relationship, then changing that barrier, or getting through that barrier is going to be probably harder than it is for us.
Sarah Nicastro: Yeah. That’s a really good point. I mean you’re able to come in as a fresh take. Right? “Hey listen, we don’t work together, but let me tell you about this.” I’m not saying that’s not hard, but one of the biggest objections or roadblocks that I hear from organizations, that maybe recognize the potential of as a service but are struggling to understand how they could get there is, “Well, our customers aren’t going to be willing to pay for that. Our customers aren’t going to be willing to allow us to connect and implement remote service, because they pay us for hours on site. Our customers are…” you know? And it’s because they haven’t figured out how to change that dialogue, and what goes into having that conversation constructively. And it isn’t just about figuring out what goes into it.
I mean, there’s a lot of factors here. I said, “How have you handled it?” You said, “Slowly.” So there’s a lot of patience that has to be at play here, and I think it’s really interesting that you bring that up. I’ve been in this space for, I don’t know, 14-ish years, and I get asked all the time, “What’s new? What’s cutting edge? What’s the next big technology?” Right? And I think like you said, the technology is there. Okay? There is capability in technology, accessible to organizations today, far beyond what they are prepared to use. So we should not be focusing so much on AI, and what’s next, and we should be talking about the cultural, and people, and mindset shifts that are preventing companies from making use of what exists today.
So when I think about, “Where are we going over the next five to 10 years?” I’m always asked for predictions. I hate predictions, but that is where the change comes in. And the reason that we’re as media, or as thought leaders, still talking about the same concepts that we started talking about 10 years ago is because you’re talking about foundational business transformation, that takes a lot of time because there’s so many layers to it.
So I think it’s a really good point that you are not tied to that legacy, as the owner of Koolmill, and that makes your remit maybe a teeny bit easier than companies that are. But overall, we all need to understand this isn’t just a vision and a strategy that you put in place and boom, you go execute, and in six months or 12 months, you are an as a service business. This, it takes time, and we can’t allow ourselves to become discouraged, or not believe in the power of the business model, just because it’s not easy to get there. Right? So what do you think about that? That was a lot of words. I’m sorry.
Alec Anderson: No. Look, we live in a very fast world. Fail fast, move on. I don’t have a problem with that, just define fast. So for us, a hundred years is fast in rice milling, but it does take time. And also I think if you’re in a transactional sales model, where I make a product, I want my profit, I want to sell it to you, often that’s where the story ends.
What do you do with my product? How much value does my product create for you? How can I enhance that value? How can I capture my share of that value? And so one of my customers said to me, “Look, I like your machine, but the price has to be fair.” And I said, “Yes, fair to who? Fair to you, or fair to me, or fair to us both?” He said, “Well, just charge me what it’s worth.” And I said, “Well it costs you about $750,000, then borrow a machine. How many do you want?” And he wasn’t so keen then.
So you have to understand, or maybe think about things from a different perspective. If you are delivering something to a customer, what value are you creating for that customer? Do the skills and knowledge that you have, and perhaps by adapting your product, by adding extra features to that product, can that create more value for them? If you don’t understand your customer and how they use the product, and how they create value with your product, then it’s very difficult to justify a service model. But if you have that knowledge, and you have that cooperation. So I guess the key aspect, you’re just finding that initial customer to work with, who you can be very close, very transparent. We are very open with our customers. We’ll show them what it costs to make a machine.
Everybody asks me, “What’s a machine cost?” It doesn’t matter. It’s not relevant. It’s, “How much will it earn you?” is a much better question.
Sarah Nicastro: Right.
Alec Anderson: So there’s the challenge. Now again, I think going back to what we said earlier, much easier for us because we’re starting from scratch. Much more difficult where you have established practices, and if it isn’t broke, don’t fix it. That’s a saying here in the UK, and people like to just do what they’ve always done. There’s no thought required.
Sarah Nicastro: Right. For sure.
Alec Anderson: But the margins, or the additional revenue potential is significant. And again, it comes back to that capture of the value. Capturing your fair share of the value.
Sarah Nicastro: I think the point about transparency is a really good one too, because if you were having those conversations, and your answer stopped with, “It doesn’t matter what the cost of the machine is. What matters is this,” you’re not resolving that objection as successfully as if you say, “Well, I can tell you the cost of the machine doesn’t matter. What you can earn with it does, but it costs X,” because you’re not hiding anything. You’re not trying to get one over on them. Right?
And so that’s another part that I think is a big mindset shift in how this is sold though, is that value creation conversation, and the shared risk, but it’s also the honesty. Right? We’re very accustomed to these negotiations, and, “Don’t show your hand.” And this is just, it’s different. And if you can be upfront about, “Yeah, the machine only costs this and we’re charging you this, but what you can do with it is this,” and believe in that value proposition, then you know you can start a real conversation, versus trying to seem that you’re hiding something or whatever.
Alec Anderson: That’s key, but I think trust is the word there. You have to build that trust, and that, again, takes time.
Sarah Nicastro: Yeah.
Alec Anderson: And so we are lucky that we’ve been doing this a number of years now, and we’ve developed very strong relationships, both in a supplier. So we don’t have customers and suppliers, we have partners. Our supply chain and partners, and our end users. So it is really that commitment to that partnership.
And I think again, we are a small company, so it’s easier for us. Everybody’s on board with the whole concept, and that’s all they’ve ever known in the company. So if you were in a conventional existing company, with a conventional product, it’s really important that this is driven from the top down. You can’t push it from the bottom up. It’s got to be a commitment, and it’s got to be a genuine commitment, not just a dressing.
Sarah Nicastro: Yeah. For sure. So one of the things that I really, really like about your story, Alec, is when we chatted the first time, you referred to this as your ability to create a more virtuous cycle. Okay?
And so talk to us about how you see the as a service business model, and what Koolmill is doing with it, as a way to equalize competition among the really, really large rice milling companies, and the small and medium size. Tell us a little bit about what you’re doing there and the way you view that.
Alec Anderson: So in terms of the virtuous circle, there’s a number of things. So we have three pillars. There’s economic, there’s a social, and there’s an environmental. So right now, rice is one of the largest polluters in the world. It’s equivalent to aviation. About two and a half percent of all greenhouse gases, and 10% of all methane emissions come from rice.
So one of our is about valorization of these waste products. So the bran, already we talked about, can be made into a human food ingredient. Straw can be used to make power, which can power a mill, which can provide a 24/7 power to a local community, from a waste material. And the rice mill produces high value employment, which means that people can now actually buy the electric that’s now available to them, unlike solar, many grids where they don’t have a job. They can see people with light, but they don’t have money to buy that light and power.
So that’s the one aspect. In terms of the environmental aspect, obviously by not wasting rice, that avoids the waste of the resources going into growing that rice. By reducing the power demand, that’s a massive benefit. And also the bonding of the straw, the methane from the degradation of the straw.
But perhaps in terms of building the social capabilities, we call it rural industrialization, where we can use that rice mill as a focal point, as a employment generator, as a means of creating and retaining value at a local community. So rather than a rice farmer right now maybe getting 25 cents a kilo for their rice, if they could turn that into a viable mill product, they’re worth a dollar a kilo. So we could transform their livelihoods. So I think at the SDGs, we would say we address 16 out the 17. If we can put one on a submarine, we might get 17 out of 17.
So this is really a transformative technology. It can transform this global food system, and that’s really critical because by 2050, it won’t be three and a half billion people rice is feeding. It’ll be 6 billion. Asia has a lot of issues right now, in terms of land stress and water, and weather events, and contamination. So we don’t have enough rice. I think the FAO said we have to increase rice production by 70% to meet the demand by 2050. So it’s really fundamentally important that we don’t waste what we are already growing.
Sarah Nicastro: Right.
Alec Anderson: We’ve got to get the best use that we can from that. And if we can use that as an empowerment tool to give these local communities a means to create a wealth or value, and redistribute, rebalance that value chain, reduce the food miles, reduce the power per ton, these are all growers. And then also at the added valorization of using these extra waste materials to create for those adds value. That’s kind of how we see our virtuous circle.
Sarah Nicastro: Yeah, and just to dig into that a little bit, so we talked earlier, at the beginning about historically, these large rice mills can afford the latest technology, they’re doing a ton of output. Now they might not be doing it in a cost conscious way, or an environmentally conscious way, but they’re just focused on in and out, in and out production, high volume. Right? And the small and medium size rice mills have struggled, because they cannot afford that technology. They struggle to create that output, et cetera.
So by leveraging the as a service model, you’re equalizing that competition a bit. You’re making it possible for those small and medium sized businesses to invest in the latest and greatest technology, in the same way that the large companies could. And then that gives them the opportunity to improve their output, improve their value creation, without that challenge of not being able to afford that capital expenditure.
I don’t know if you’re willing to share this example, but I know you told me, when we spoke, that you have had folks ask you to buy the equipment outright, and you have not allowed that to happen. Can you talk about that, and why that is?
Alec Anderson: Rice industry is very large, but it’s also very small. So I think my feeling is we believe and are committed to our business model. The easy option for us right now would be perhaps to sell some machines to big companies, and just bank some money. But I think once we do that, we kind of shoot ourselves in the foot, and then trying to introduce the model will become significantly harder.
So it’s tough, and you have to have a persistence, and belief, belligerence maybe. But we have a unique technology. It’s patented, and so you can only get it from us, and we want to make it available to those that, perhaps the best impact is going to be with the smaller consumers. If you think about a lot, if we’re looking at Africa in particular, or even rural India, you’ve got infrastructure problems. These big mills require lots of rice. So that means you’ve got to truck that rice for miles and miles.
Now in the states, they’ve got good road systems, great trucks, it’s not a problem. In Africa, it’s a major problem. They don’t have the road infrastructure to haul that rice. So many of these large mills that have being built are not running at anything near their capacity, because they physically can’t get enough rice to them, to keep them going. Now again, if you look at the macroeconomics, Africa should be self-sufficient in rice, yet imports enormous quantities of rice to replace rice they already have, because they don’t have the physical capability to process that rice to an acceptable standard for the consumer. Therefore the consumer would rather pay a price premium to buy imported rice, rather than local rice.
So if we can increase the capability of these rural millers and bear in mind, going back to the macro, sorry to jump about, but of 750 million tons of rice that’s grown each year, maybe 40 million tons will be traded as an export commodity. So most of the rice is grown and consumed in a very tight locality. So by improving that capability, in a distributed local sense, at a high performance level, then you don’t need to be trucking that rice.
‘Cause bear in mind, if you truck that rice out to process it, you got to truck it back in to the people who grew it in the first place, so they can buy it back their own rice at an inflated price, or they have to live with the very poor quality rice that the current capability can deliver.
So that’s the sort of transformative impact we can have in those rural communities. And the large mills have a place, they have a good performance levels, but we can put those smaller mills into a position where they can actually exceed the performance capabilities of the large mills. And of course, the way energy prices are going right now, the reduction of power is significant, even for the big customers now, it’s going to become really significant.
Sarah Nicastro: Yeah. Yeah, I think there’s so many interesting aspects of the story, and I think you will see those large companies have more interest. It just maybe isn’t the first line of opportunity, but I think it will definitely come. Right?
I think your commitment to the business model though is commendable, not only because you believe strongly in it, but also the way you perceive it as an ability to democratize innovation, so that those small and medium size businesses have it, just as accessible to them as it would be to the large companies, and because you believe in and understand its impact on the environment. So it’s a really cool story, and a really commendable remit that you are committed to, focused on, being patient in seeing come to fruition. So I just think there’s a lot to learn from this, both in a lot of ways you are a really good example of the disruption that’s coming. Right?
So, people need to be aware of that and be thinking about it. Those big companies that are struggling to get away from, “If it ain’t broke, don’t fix it,” well, maybe not.
Alec Anderson: It is broke.
Sarah Nicastro: Or somebody’s going to come up with a different idea that is going to change the game. So we talked a little bit about the impact on the environment, and I just want to kind of recap there. So there’s the less power consumption of the machines themselves, less waste.
Alec Anderson: Yes.
Sarah Nicastro: We talked about building the machines for serviceability, versus upfront cost. We talked about the impact of being able to get this equipment into some of these rural communities and minimize travel, maximize the opportunity for the local workforce, et cetera. Am I missing anything, from an environmental standpoint, that we should touch on?
Alec Anderson: No. I think the environment, obviously the way the world’s going at the moment with the increase in temperature, I mean, one of the interesting stats is that for every one degree increase in overnight temperature reduces field yields by 10% for rice. So everything is a perfect storm at the moment.
There’s more demand, and there’s more problems about producing. So one of the things that we work with a partner company, they can take a husk, and they use pyrolysis to make a power or heating power. And one of the aspects of that is bio-char, and if we mix that bio-char with manure, and then reincorporate it in the ground as a natural ground improver, so it displaces chemical fertilizers. Again, with the Ukraine situation, there’s a massive price hike in chemical fertilizers right now. But one customer we were talking to in Nigeria had done a sort of build out home bio-char unit, and had some really impressive results.
So he’d increased his field yield from two and a half tons to four tons, per hectare. But more importantly, when the drought hit, his rice didn’t die because the carbon and the ground actually holds the water better. So we can mitigate carbon released by reducing the power, but you can also carbon capture that bio-char, re-enter in the ground becomes effectively a carbon capture process. So that opens up potential of carbon credits, trading credits in carbon. So these are all additional things that go into that value generation pot, and I think that’s the key.
Now, just picking up on one of your earlier points, I think we are a family business. We’re driven by our visions and value, so that gives us a lot of freedom to do things that perhaps bigger companies can’t do. But we are a for profit company. We’re not trying to save the world. Our intentions are to make a highly profitable, high growth, global business. But from a company that makes, we call it profitable purpose, we have a positive impact socially, economically, and environmentally. So why not make money from doing something good, rather than making money from something that’s destroying our environment? So that’s kind of our drivers.
Sarah Nicastro: Yeah. And it’s a great point, because I think that there’s increasing recognition that you can do both. I mean, doing good for your customers, and the world, and these local communities, and the environment does not have to mean that you sacrifice being a profitable business. It’s the same way we talked about the difference in how you sell this. It’s building partnerships, right?
Alec Anderson: Correct.
Sarah Nicastro: So it is creating mutually beneficial relationships, with an eye toward, “What’s the social impact? What’s the environmental impact?” and working to achieve that, with the partners that you have, that choose to work with you. Right? So I think that is a really good point, because I wouldn’t want someone to hear your story and think that you’re just a philanthropic organization. I mean, it has the potential to do good, and to make Koolmill money. So it’s not either/or. It’s and, both. Right? And so I think that’s a good distinction.
Alec Anderson: So we would say we are not in this driven by money. We are in this driven by our technology has impact to make, and if we do a semi-reasonable job, the money will come. But that’s the way around. So we are certainly not in the Bill Gates league, so we are not philanthropic investors. Let’s put it that way.
But I think it’s the old adage. If you give a man a fish, you feed him for a day. If you teach him to fish, he’s fed for life. So it’s really about this empowerment, and that release of that human capital that’s frustrated right now. ‘Cause if you look at Africa or India, or any of the Asian rural communities, it’s all about human capital. Agriculture is such a massive part of their GDP, but they don’t have any way of adding value, and that tends to be done sometimes out of country. So we are exporting all that value. How can we try and retain that value, and drive up that standard of living in that country? That’s our key.
Sarah Nicastro: Yeah, that makes sense. So Alec, in closing, for anyone that is looking at the as a service model, and considering its potential, whether they’re a new venture or an existing entity, any other lessons learned or words of wisdom that you would share?
Alec Anderson: Yeah. I’ve got lots of lessons. I’m not sure about the words of wisdom. I think you have to understand your end user, your customer, if you want to use that word. So you have to understand their business, and what’s the business case for them. How do you explain? If you can’t explain the business case, you’re not going to get anywhere.
And I think when we look at the potential customers that we could have worked with, it’s really important that you pick the visionary one. Some people have that visionary capability. They can see where they want to go, and some people are just trying to get through today, and we’re not really worrying about tomorrow. So I think that initial choice, and who you’re going to partner with to develop the model, because it is a development process. You can’t just get one off the shelf and say, “Well, that worked for Rolls-Royce, and we’ll just copy that in Koolmill, and then some days come along. Well, it worked in Koolmill. We can just copy that and do the same.” You can follow the principles, but you need to adapt and deploy it to suit your particular product or industry, or what have you.
Sarah Nicastro: Right.
Alec Anderson: One size certainly doesn’t fit all. But really, if you don’t understand that value you’re creating for the end user, then you’re on a loser. And if you can’t shift your mindset away from what you were doing, don’t look at the past, look at what’s possible now. Look at all the instrumentation that’s available. Can I deploy that to create value?
If you can’t create value, what’s the point? Big data. What’s the point of big data? It’s just a lot of data. Is there any gold nuggets in there, that you can pull out and monetize? Because if you can’t, then it’s just nice to have, but it’s not valuable. So these are the key aspects, I think. And be patient, and if you’re not the senior management, you need to get that senior management buy in. There has to be a fundamental commitment in the company. This is where we are going, because this will create substantial revenue beyond where we are now, and that protects the future of the company.
Sarah Nicastro: Yeah, really good. Great stuff. I love the story. I appreciate you coming and spending some time with me, and sharing it with me and with our audience, and would definitely love to stay in touch and have you back some time, to hear how it’s going.
Alec Anderson: That’d be great. Thanks for the opportunity. It’s been great chatting.
Sarah Nicastro: Absolutely. You can learn more about servitization, and the path to as a service, by visiting us at FutureOfFieldService.com. You can also find us on LinkedIn, as well as Twitter, @theFutureOfFS.
The Future of Field Service podcast is published in partnership with IFS. You can learn more at IFS.com. As always, thank you for listening.