Setbacks provide the catalyst for a change in perspective

It’s not often that the head of one of Western Australia’s biggest private companies publicly admits to a succession of business failures, especially a man as private as Coogee Chemicals chairman Gordon Martin.

But Mr Martin believes it was those failures, including ventures into vitamins, petrol retailing and aerosols, that have had a significant impact on the direction of the company.

During a reflective address to a WA Business News Success and Leadership breakfast this week, Mr Martin said his leadership style had changed enormously over the life of Coogee Chemicals.

The self-confessed dreamer and big-picture man described himself in the early days as focused, aggressive, and at times “one-eyed to the point of being blind”.

But these days – almost 36 years after buying into the chemicals company that has amassed him and his family a $440 million fortune – Mr Martin said his measures of success had changed dramatically.

Dividing the company’s history into three separate periods, Mr Martin describes the first 10 years of Coogee Chemicals as being intensely focused on survival.

This was also the period that was the most formative in understanding some of the essential rules of business.

Mr Martin recalls sleeping in “the shed” at Coogee for 10 days, charging in with blind enthusiasm but in the end achieving nothing.

“I would have achieved more if I’d sat back and put my feet on the desk. I didn’t achieve anything,” Mr Martin told the breakfast forum.

“I was so committed to making it happen that I wasn’t planning. That lesson has been particularly valuable.”

The second phase, starting in the mid-1980s, was what he described as the “growth at any cost” period, with the measure of success defined by the company’s size and his ability to do deals.

Listing a litany of disasters, such as the AMGAS petrol retailing venture, aerosols manufacture and marketing, and the purchase of a vitamin business, Mr Martin said this was the period when the company got a sense of what it was, and wasn’t, good at.

Luckily, the company was able to get out of the woods with these ventures.

After opening 35 AMGAS outlets in the metropolitan area, it was sold to Mobil and Coogee went back into terminalling and supplying Mobil.

After buying the vitamins business from Roche, and spending $6 million over five years on development and marketing, it got its money back by selling to major supplier, Henkel.

“We thought [that] by going into an area we would somehow become confident and develop a competitive advantage,” he said.

“It was a case of not understanding our direction, and not understanding what our people were good at.

“We got the big picture very, very wrong.”

It was, however, a good learning experience, Mr Martin said.

“We were no good at retailing, we were no good at trading…and we were no good in highly competitive areas where you had no competitive advantage and you had to keep changing strategies.”

But the company did get a few things right during that time.

Its two successful joint venture projects – the sodium cyanide plant with CSBP and the two chlorine plants in Kemerton and Kwinana with Nufarm – were financed on the strength of the joint venture partners and the ability to secure long-term contracts.

The establishment of acid terminals at Kwinana, Port Hedland and Townsville were also examples of the company getting the big picture right, Mr Martin said.

He describes the third, and current, stage as the “sustainable growth phase”.

Taking the knowledge gained through past mistakes, the company now has a sense of what it is good at and where Coogee has a competitive advantage.

He said the company had developed strong skills and expertise in developing the chemical technology used in its plants, which had been built up over a long period of time, and had avoided the need to use major engineering and contracting firms.

“We’re good at finding and developing niche markets in the chemical industry.

“We get alongside some major player, and as a small player you can provide a specialised service, which gives you a competitive advantage,” he said.

Its most recent ventures include a methanol plant in Melbourne, bought from BHP Billiton in 2000, which provides 80 per cent of Australia’s methanol.

Its services operations also came online during this period with the development of chemical reagent plants at the Century Zinc mine in Queensland and at Magellan Metals’ lead carbonate deposit near Wiluna in WA.

The company also established the Brisbane Tank Terminal, and expanded the Port Hedland and Kwinana facilities. There are also expansion plans for Townsville in the wings.

At same time, Mr Martin was faced with the task of having to shut down three manufacturing plants in WA, including a copper sulphate plant.

“We confronted the brutal facts that they were never going to develop a long term sustainable business with competitive advantage,” he said.

In recent years, the company also found itself venturing into the oil and gas industry.

The demerged subsidiary, Coogee Resources, is proceeding towards the development of its Montara project in the Timor Sea. Currently under construction, the project has been hit with rising costs, with capital costs rising to $US700 million.

But despite the cost blow out, Mr Martin sees significant potential in the venture. With production on track to commence in the third quarter of 2008, the first two years should produce almost 20 million barrels.

Mr Martin said his measures of success had changed in recent times, with a greater focus on growing Coogee into a long-term sustainable enterprise.

He believes in getting and keeping the right people on board and weeding out the cynics and ‘yes men’.

Selecting the right chief executive was also important, he said.

“[A CEO] has got to have the ability to motivate, build a team and build a culture of open discussion, transparency and a culture where people can be heard,” Mr Martin said.

“They’ve also got to be a big-picture person, and someone who is prepared to confront the brutal facts.”

Mr Martin is also committed to keeping the company private.

Following the aborted initial public offer and float of Coogee Resources, launched to fund the development of the Montara project, in late 2006, Mr Martin vowed to stay away from the public market, calling its focus on short-term price performance over long-term wealth creation “destructive”.

Reflecting over the evolution of the company and his own changing leadership style, Mr Martin believes a little bit of luck has also played a part.

“Don’t let anyone tell you luck isn’t a factor in business.”