Asset-intensive Industries Need to Undergo a Transformation in Perspective
Copperleaf Technologies is a fast-growing company that has been developing innovative approaches to making asset investment decisions since 2000. The company has developed a unique decision analytics software solution for Asset Investment Planning and Management (AIPM) called C55 that has been adopted by some of the largest, most well-respected organizations in the world. C55 helps these organizations decide where and when to invest in their businesses to optimize performance and manage risk in their critical infrastructure. In 2016, Copperleaf was named the 17th Fastest-Growing Software Company in Canada and the Emerging Tech Company of the Year in BC.
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TheFutureEconomy.ca: What is your overall assessment of Canada’s tech sector?
Judi Hess: I think the tech sector really matters in the Canadian economy, and we are starting to see it become a major contributor in BC. People used to think of Canada as solely a resource-based economy, but we are now starting to make a dent in the tech sector and I think it’s really important that we do. It matters to our growth, it matters in terms of innovation in Canada, and both our provincial and federal governments are beginning to support it. So I think we are in the early stages of a very meaningful tech sector in Canada.
You are suggesting that the Canadian tech sector is still quite small. What are some of the challenges for the sector to grow, grow fast, grow efficiently and go global?
I think what really matters is talent. We have to continue to cultivate more talent in Canada, and it’s also very important that we attract talent to Canada. My personal feeling is if we can attract and grow talent at the required levels to feed this industry, I believe capital will follow. There are definitely some capital-financing issues for the tech sector but I am already seeing a lot more companies interested in investing in Canadian tech companies than I have seen before.
“If we can attract talent to Canada and grow talent at the required levels to feed [the tech] industry, I believe capital will follow.”
Another thing that is relevant today is the fact that trade agreements matter. Given the size of our domestic market, Canada needs to have trading partners and trade agreements because only selling our technology within Canada is not going to cut it for the tech industry. We really need those trade agreements, they need to be robust, and we need to be able to export our technology all around the world to make the Canadian tech sector strong.
Resource sectors such as forestry, oil and gas, mining and agriculture are very important to Canada’s economy. What strategic role does asset management play for these industries?
All organizations operating in these sectors have strategic goals they are trying to meet by making strategic investments. What they decide to invest in is critical to the success of these companies now and into the future.
When we look at asset management, we are focused on helping organizations make ‘value-based decisions’, as we call them at Copperleaf; value-based investments that deliver not just the financial bottom line but also ‘the new bottom line’, which is even more than the triple bottom line. This encompasses anything that the organization believes delivers value. This approach has to be flexible, it has to focus the whole organization on generating and creating value, and it really has to be all encompassing, especially in asset-intensive organizations. This, in my opinion, is very critical.
“I am already seeing a lot more companies interested in investing in Canadian tech companies than I have seen before.”
For example, when we work with asset-intensive organizations, we look at the value of risk mitigation. Of course, we also look at both hard and soft financial metrics. Given new trends in the workforce, we also look at employee engagement as a critical component to make sure that the organization can be successful going forward. In this respect we look at what investments can make the company more attractive to the new workforce that is coming up. So you really need to look at a much more all-encompassing, holistic approach to the bottom line if you want to make investments that are going to deliver on your strategic goals, and that is what we focus on with the companies we work with.
What impact are global trends such as climate change, globalization and digitization having on risk and risk management?
I cannot understate the impacts of climate change on our client base and the decisions they are making today. We work with organizations in electricity generation, transmission and distribution, oil and gas, and water, and all of these firms are facing environmental impacts to their business. For example, distributed energy resources (DER) are changing the way electric utilities think—and changing the way they are investing. If you talk to cities, they are dealing with rising sea levels and are looking into planning for that now. So climate change is without a doubt changing the way these companies are investing; businesses need to bring the impacts of climate change into the equation when they consider their investments and how they are going to meet their strategic goals going forward. In addition, there are a lot of stresses on infrastructure, and in many cases this infrastructure is reaching its end of life and needs replacement or more investment.
“How to make [asset management related] investments is critical for the success of [Canadian resource] companies now and into the future.”
When we look at digitization, our clients have a lot more information available today than ever before to help them make decisions, so they need to bring this information into the decision-making process. Our mission is to help these companies use their data to make better, more informed decisions.
With regards to globalization, I think we can benefit from what other countries and other sectors are doing. If we have a much more open information-sharing platform and are able to share best practices among other countries and industries, we can all benefit.
How would you characterize the Canadian approach to asset management compared to other countries in the world?
Canada is a leader in terms of asset management, although not necessarily the leader. I think the Canadian climate has an impact on this; as a northern country we have to plan, it is in our DNA. The UK and Australia are also leaders in asset management but Canada is definitely helping to lead this charge. I think that is why you see technology companies like ours springing up in Canada – because there exists a ready market for asset management solutions and ours is a country where planning, building and maintaining our infrastructure is critical in terms of economic growth. So being able to make decisions based on the evidence and the data available, and looking at the longevity of our infrastructure is very important too.
The risk of stranded assets is particularly critical in the oil and gas industry, how can this be mitigated in tomorrow’s world?
I definitely think it is a problem and companies need to future proof themselves. They need to think ahead and understand the new bottom line in order to plan and get ahead of it.
There are many ways companies are repurposing stranded assets or looking at new innovations connected to them. Investments can transform or augment the use of these assets, which can change the impact they are having on the environment and in other areas. I think innovation can play a big part in this. It certainly is not the first time in history that this challenge has arisen; we have seen stranded assets due to changes in policy, the environment or global issues coming to bear on companies. Being agile is really critical. In the tech industry, we have to be agile because things are changing all the time. Some of the industries that face the potential of stranded assets are older, maybe a bit more risk averse and they have big, heavy assets that they need to deal with. But planning and future proofing is the way to meet these challenges and that is what we see our most advanced clients doing.
“I cannot understate the impacts of climate change on our client base and the decisions that they are making today.”
How does Copperleaf’s C55 solution helps your clients plan and future proof their company?
Copperleaf is a software company and we help businesses make better decisions when investing in their organizations, their people and their infrastructure. Something that is unique about Copperleaf is our enterprise approach to problems; when working with companies we do not limit ourselves to point solutions, but instead we focus on the organization as a whole.
Our solution applies a value-based approach that addresses the ‘new bottom line’ because the only way to make very good trade-off decisions is to have a comprehensive approach to understanding, calculating and using data to determine what delivers value to a corporation. We are usually working in an environment with limited resources; companies do not have an unlimited pool of people or funding, no matter who they are. So it is critical to make the best of use of those resources today and in the longer term.
Another thing that is unique about Copperleaf is our value framework, which is very robust and flexible. The Copperleaf Value Framework allows our clients to understand how to compare very different types of investments so that they can make informed trade-off decisions. They might want to invest in training new employees, replacing obsolete technology or physical assets, or even generating more financial impacts. We create value models in terms of financial impacts, risk mitigation, safety and environmental considerations, regulatory requirements and people issues. We have even created libraries of value models that we share with our clients so they can accelerate their ability to take on a more holistic approach to valuing and assessing their investments and using data in the most effective and optimal way.
“Ours is a country where planning, building and maintaining our infrastructure is critical in terms of economic growth.”
In addition, we also offer multi-constrained optimization. A company might have certain resource constraints that they need to understand. Examples include minimums or maximums of available talent, capital or operating expense allocation. This makes planning very challenging and this is what we help companies do. We make it very easy for them to perform sensitivity analysis between different plans and understand what the best trade-offs are.
Our solution is very comprehensive and gives companies transparency and a window into understanding C-level decision-making in a way they seldom had in the past.
How do you see improvements in AI and big data augmenting your software’s capabilities?
We are already making use of data companies have in the decision process. This will only expand in the future and being able to use artificial intelligence in this area will continue to augment our system’s flexible approach. Obviously, increased computing speeds help. The ability to easily add virtual machines and access increased computing power, whether it is quantum computing or not, and to be able to employ artificial intelligence technologies and machine learning will all augment our solutions in the future.
With advances in machine learning where do you draw the line between your system supporting a human and influencing or deciding for a human?
I think machines should influence humans. Humans have a lot of unconscious bias. In fact, research continues to demonstrate what frail decision makers we are. We are very emotional and we are not intuitive statisticians. Fortunately, we now have the tools and the mathematics and the data at our fingertips that can help us make better decisions. But it is still very difficult. Say a company is going to spend $100 million to $1.5 billion a year; what is the best way to spend it? It is a problem a machine can help a human with. I don’t believe we’re at a point where machines should be making all of the decisions but I do believe humans should get support from machines so that they can have better data to help them make those decisions, and I think humans need to verify that those decisions make sense.
What is your vision for the future of asset intensive industries?
I think asset-intensive industries need to change; they need to undergo a transformation in perspective, and it is very important that they do so because the types of companies and organizations that support infrastructure are propelling the GDP of the countries they are residing in. Investments in infrastructure benefit our economy and strengthen our ability to compete in the world. So it is very important.
Today, these industries are very conservative; they are very risk averse and, in general, they are slower moving. This could stem from the fact that their decisions carry much weight and make big impacts on the countries they operate in. But I think they need to transition to become more agile. Some are already on their way and more of them are going to have to follow. It is a shift that is occurring but that must pick up pace.
These industries are also seeing the old guard retiring and a younger generation of people starting to become attracted to these areas. It is a new world and asset-intensive industries need to transform, be more agile, open and receptive to new technologies and new ideas, and move more rapidly to those ideas where the risk of transitioning is appropriately assessed. The leaders in this space are already moving but compared to how a high tech company has to move to stay on top of what is happening, these companies need to up their game and transform rapidly otherwise they will be left behind. Even though it is surprising to think that an infrastructure company that has been delivering infrastructure for decades might be left behind in the new world order, it is something they are contemplating.