The Case of the Wise, Elusive Aussie

Ted suspected the low transfer price wasn’t a bargain.

Ted’s Problem

Ted is CEO-North America Div., of specialty-corp. His counterpart in Italy wants Ted to develop a US market for xbcp powder delivered from the Italian plant.

The CEO-Italy Div. offers an attractive transfer price for the power. Ted knows his predecessor tried, five years ago to test the power in the US wood preservatives market. The test was a flop.

Potential customers said that specialty-corp’s xbcp powder met their examination guides. But, in use it was not as effective as powders sold by other suppliers.

Ted knows his counterpart in Italy tends to push his views at the corporate level. Before treading this levels’ minefield, Ted needs to understand xbcp’s market

Ted’s Solution

Ted was familiar with my customer research work . He contracted me for a project to understand the wood preservatives market. And, use of the powder in the preparation of wood preservatives.

Understanding the Wood Preservatives Market and xbcp’s Role: Executive Summary

Background

Wood preservatives is largest US market for xbcp. It is the test market where xbcp failed five years earlier.

My first task was to build a list of 240 knowledgable individuals in the wood preservatives market. Then for statistical significance, I followed the Rule of 30 method and called people on the list. Each respondent heard that the client had invented a low-cost process for producing high purity xbcp.

Conversations with 30 respondents elicited little interest in replacing their suppler of xbcp.

  • Many potential suppliers, worldwide
    • Respondents choose those who provide a product with consistent properties.
  • Capacity to produce xbcp exceeds demand.
    • Major suppliers have integrated backward. They’ve built internal capacity to produce xbcp with consistent properties.
    • Main driver for over-capacity … environmental regulations

Over-capacity driven by environmental regulations on drinking water containing soluble copper

  • Copper is a key component in the production of xbcp.
  • Copper-containing waste streams provide low cost sources of copper for producing xbcp.
  • Some examples:
    • Waste stream from etching printed circuit boards
    • Waste stream from copper ore treatment

Respondents don’t know why xbcp has inconsistent properties.

  • Near the end of the project, a respondent said an engineer, who he knew, might know the puzzle’s answer.
    • He knew the engineer’s name but not his present location.

After tracking the engineer to Australia, this is what he told me.

“A copper ore mining company down here hired me 2 years ago. My job was to integrate backwards and recycle the waste stream into copper compounds.

You can do this in two ways:

  1. Heating the copper waste in air. It is a route to xbcp powder, yet, results in sintering. Sintering results in decreased activity when producing wood preservative.
  2. Adding alkali to the waste stream produces a xbcp powder with high surface area. It is ideal for producing wood preservatives. It is the route we practice.
         Technical Director — Adelaide Chemical Company Ltd

Outcome

  • The specialty-corp plant in Italy produces a sintered powder.
  • Specialty-corp’s competitors use the low temperature way to make the high surface area power
    • Their starting material cost is very low. Waste producing companies pay them for taking the waste away.

Ted shared the results of the project with his counterpart in Italy.

They agreed that, in light of the comments of the wise Aussie

    • To abandon the attempt to develop a market in the US