It’s a little-known fact that most corrosion sensors used in Germany, the US and South Korea contain the label “Made in England”. The reason is a coincidence of deep technology knowledge at Imperial College, an evangelical MD called Peter Collins, and an unfortunate tragedy at BP’s Texas City refinery. We had the chance to have a rich discussion with Peter Collins, where he shares what he learnt in building up Permasense, the corrosion senor company based in Crawley in the UK.
First a quick summary of what happened. In 2005 there was a major accident at BP’s Texas City refinery. A large vapour cloud explosion tragically killed 15 people and equipment corrosion was identified as one of the causes. BP immediately swung into action to find a technology to continuously monitor equipment corrosion – something that was done manually and infrequently at the time. Through corporate connections, BP got to meet Professor Peter Cawley, an expert in non-destructive testing at Imperial College. Very soon patents for a continuous corrosion sensor were filed and in 2007 a collaboration agreement between BP and Imperial College was in place for development of a corrosion monitoring device. This in turn led to a commercialisation agreement the following year. In 2009, Peter joined the newly incorporated company, Permasense, and they received their first commercial order for devices from BP, which Peter helped to hand build. In 2010 Permasense received a multi million-pound order from BP, and from 2011 to 2013 he worked tirelessly to build a second wave of customers. In 2014 /15 Peter built a global sales team, and the last piece of the puzzle, a service business. In 2016 Permasense was sold to US engineering company, Emerson.
So what did Peter learn from his seven year rollercoaster ride and what advice does he have for people working in, or engaging with technology start-up’s?
Technology – customer translator
Like most successful start-up, Permasense was born with a clear idea of the problem it was aiming to solve and the capability to create a solution. Peter says a start-up needs a translator between the technology and the customer, something he is brilliant at. In his view there are two key aspects: economic value and user specifications.
Economic value – numbers are vital but not enough
Economic value is the benefits that Permasense was going to deliver to its customers. These are “seen” by relatively senior people in the customer organisation, in Permasense’s case, the refinery senior management. When Permasense started they believed the key customer benefit was the operational cost saving of moving from manual corrosion measurements using a hand-held device to automatic measurement from an in-situ device. Through long hours of discussion with potential customers, Peter discovered the economic value was much, much greater.
The Permasense device could allow oil and gas plants to run much harder – for example it could allow a refinery to increase the amount of cheaper, sour crude used, potential doubling refinery gross margins. Similar examples were found in gas production and cracking operations. Peter also discovered that money alone does not talk. You have to make benefits meaningful on a human level to get attention. Peter’s message to refinery managers that: currently you are running the plant with such a cautious but high cost operating approach that “in 20 years you will have a pristine plant, but it will have been mothballed for 10 years” hit home in a way that $’s alone could not.
Deep collaboration with end users
Although the economic value owner decides whether to buy, it is not going to happen unless the Users are happy. The collaboration with BP not only gave Permasense a site to test its prototype, but just as importantly mandated a high level of engagement between BP Users and the technologist. There were weekly discussions about the device and how it was used, to guide development.
They learnt a huge amount about what made a good device from an “on the ground” point of view. For example: of course the device had to measure wall thickness with enough frequency and accuracy to measure corrosion rate with high confidence, but what was the best way to clamp it to the equipment? What temperature and vibration did it have to withstand? How to retrieve the data (wireless or cable)? If the Users were not happy with Permasense’s answers no one was going to test or buy the device.
Build a full solution
One of the keys to unlocking the potential of Permasense was building a full solution. At first the company was providing data to its customers on corrosion rate – “actionable insights” in the current jargon. But things got really interesting for customers (and Permasense) when they did a deal with a corrosion inhibitor company which provided an integrated, closed loop solution – so when corrosion rate went up, corrosion inhibitor injection increased, keeping wall thickness loss to within pre-determined limits.
Work with the most demanding customers
“B2B selling is all about references” says Peter. Which is why Peter strongly believes that a start-up should work with the most demanding customers, in Permasense’s case, refineries in the US and Germany. Those precious, initial, sweat-blood references must be with customers that the rest of the industry respects, otherwise the effort is largely wasted.
Furthermore, working with these demanding customers means navigating their often bewildering internal organisation, requiring nimble footwork. For example: a corporate innovation team can be really useful to provide a gateway to the business units who have a pressing need and a good sized budget, on the other hand they can also keep you in demonstration hell for far too long. Peter is a great believer in sales training to help start-up’s to navigate these tricky waters.
For technology adopters and acquirors
In addition to providing some important insights for start-up’s, Peter also has some wise words for technology adopters and acquirors.
For technology adopters – focus on the value a start-up creates for you
In Peter’s experience, technology adopters (development partners / early customers) often get emotionally engaged with trying to make sure they don’t lose out on the equity upside of the start-up through royalties etc. In reality the chances of working with the next Google are so small as to not to worry about (there were 10,000 software development start-ups in the UK alone in 2017).
Instead technology adopters should focus on unlocking the value that a start-up can create for them. In the case of Permasense, using their solution on a world scale refinery for three months generated more value than the price paid for the company when it exited.
Practically this means:
- Being open to share problems – as one company’s problems is another’s opportunity – and be prepared to get into the detail so that robust user specs can be developed
- Provide incentives for operational staff to trial and adopt new technology (whereas at present the reverse is often true)
- At senior levels, recognise that in today’s environment one of the key factors in maintaining competitive advantage is your willingness to adopt new technology
As a point for any major corporate spending significant sums on technology development to consider, Peter is clearly proud of Permasense’s effectiveness. He says that a major engineering corporate spent ten times the amount they did on development and failed to produce a viable product.
For acquirors – don’t be arrogant!
It’s very tempting for an acquiror of a tech start-up to believe that the way they do things is the “right” way, and the reason they made the acquisition was only for the technology. Imposing corporate policies (such as stock holdings or remuneration) and failing to retain people can rapidly lead to value erosion.
Peter suggests a softy-softly approach to integration, with a laser-like focus on how to leverage the technology and business model of a start-up.