Drone Applications in the Energy Industry

In December of 2017, Ms. Georgina Ford, Assistant Editor at ITP Media Group interviewed Mr. Bill Wimberley, Chief Revenue Officer at CAPE Productions, Redwood City, California for an article to run in Arabian Oil & Gas. The article discussion centered on unmanned aerial vehicles (aka Drone) applications in the Oil & Gas Industry in the Middle East. Following is the transcript of that interview. 

Georgina Ford: Why are unmanned surveillance vehicles of such importance in the oil and gas industry?

Bill Wimberley: First of all, drones can provide an aerial perspective that is only otherwise achievable with a helicopter at a tiny fraction of what a helicopter costs to fly and maintain.  Some of the applications for this aerial perspective are listed below.

Georgina Ford: In the Middle East, the conditions are pretty harsh in many areas with extreme heat etc., are there any precautions/special features a O&G company should look for in UAVs? 

Bill Wimberley: Heat, dust, sand…..and rain are definitely not ideal for drone flight, however, various manufacturers have recently built drones that are as resilient as possible under these conditions.  As demand for drones for these conditions increases, so will the technology to protect them even further.  Only recently has drone aircraft technology advanced beyond the line-of-sight technology required to actually fly the drone, e.g. the drone’s controller unit.  Most commercial drones today utilize an iPad, or similar Android device, to control drone flight in proximity (generally less than 5km) to the drone itself.  At CAPE we discovered that these “pads” are actually more susceptible to harsh conditions, particularly heat, than the drones themselves.  This initially presented a difficult problem in extreme heat conditions.  There are currently a few companies addressing this issue with a cooling device that straps on to the back of the pad to greatly reduce the effects of heat.  Again, as demand increases, solutions to challenges like heat, battery life, payload, etc. will emerge in greater and greater numbers.  These solutions are coming at a very rapid pace.

Georgina Ford: What are the uses for unmanned surveillance vehicles in the O&G sector?

Bill Wimberley: I have direct experience with the following applications:

1)      Investor acquisition.  I have successfully used aerial photos and video to enhance the presentation of O&G projects for prospective investors. 

2)      Surveillance, perspective and documentation of a well site, or sites, for investor acquisition.  In addition to encouraging geology, geophysics and financial return prospects, remotely located investors want to see the physical well site, where it is in relation to other sites, what the surrounding terrain looks like, etc.  Aerial photos and video can provide a valuable perspective for investors.

3)      Project progress reporting & documentation.  It is said that “a picture is worth 1,000 words.”  Using periodic photos and/or video provides invaluable information for investors, and provides a perspective that enhances reports, charts and graphs that generally flow out of an O&G project.

Bill Wimberley: In addition to these benefits, an effective drone deployment strategy can provide:

1)      An excellent tool for early detection of environmental problems.  A company here in the USA uses drones for early detection and documentation of environmental impacts for the chemical industry.  Drones can carry a wide variety of sensors and cameras for this purpose.

2)      A quick detection tool for operational efficiency and human safety. Drones can be used for activities such as flare stack, topside, under deck, and splash zone inspections. They can be used on any part of the well platform where inspections typically require rope access or scaffolding, and the risky involvement of humans. 

3)      Conducting real-time safety inspections of equipment greatly reduces the need for equipment shut-down.  With appropriate sensors, drones can detect hazardous materials such as escaping methane, sulphur, etc. before they become life or project threatening issues.

4)      Close-up equipment inspection & documentation.  Utilizing high definition zoom equipped cameras, drones can inspect and detect imminent equipment failures, upstream and downstream, before they fail in places that are very difficult for a human to examine.

5)      Security and rapid response.  In areas of the World where security is a challenge, drones are being used very effectively to monitor assets and provide quick response to security events.  Smaller drones, flying at altitude, can be nearly silent in their surveillance of perimeter fencing and detection of movement.  Furthermore, when events are detected by terrestrial sensors, drones can often be dispatched quicker than humans and provide valuable video feed to security command centers.  Modern commercial drones can carry high-powered zoom cameras, infrared, thermal-imaging, etc.

Georgina Ford: What are the benefits of an unmanned vehicle, as compared with "boots on the ground?"

Bill Wimberley: My experience confirms that these work best together, in tandem, where each compliments the capabilities of the other.  Drones can be a highly effective tool in the toolbox of O&G field professionals.  Drones may someday have sophisticated enough artificial intelligence that they can conduct some tasks completely independent of human intervention, but there is currently no replacement for the expertise of experienced O&G professionals today.  I see drones extending and enhancing the work of field personnel.  I also see drones providing a safety factor that will greatly reduce accidents.  This is always a good thing.

Georgina Ford: What kind of cost-savings could be expected from using UAVs?

Bill Wimberley: his is virtually impossible for me to quantify broadly.  ROI and cost savings will depend on the specific application of the drone(s) for an O&G company.  I can say from experience and with confidence that ROI and cost savings are relatively easy to quantify for many O&G applications.  One reason for my confidence is the relatively low cost of drone applications compared to alternatives. 

Georgina Ford: Do oil and gas companies still need to get permissions/government approvals in the region (UAE specifically) to use UAVs?

Bill Wimberley: I am not personally an expert on UAE laws regarding drone usage.  This question is best answered by local authorities.  In many parts of the World, however, drones have initially been considered more of a threat than a help.  This is very unfortunate, and is short-sighted, in my opinion.  As ROI and cost-savings become increasingly documented and more widely publicized, this perception will undoubtedly change. 

Georgina Ford: What kind of lifecycle does a UAV have and what are the upkeep concerns/costs like when compared with hiring a person?

Bill Wimberley: As stated earlier, drones and human work most effectively and powerfully when they work together.  Drones can be, and should be, excellent tools for O&G professionals.  Modern commercial UAV’s, from most leading manufacturers, are very resilient and can operate for 1,000’s of hours with proper maintenance and repair….like any other piece of industrial equipment.  Commercial drones are highly cost-effective, costing as little as 10,000 USD with standard equipment.  Adding sensors and specialized cameras increases these costs significantly, but depending on the application, the alternative is often many multiples of the cost of drone operations.  Keep in mind that drone deployment requires human operators and pilots.  This is a cost that has to be considered in the economics of a drone deployment strategy.

Georgina Ford: What are the safety/security concerns associated with using UAVs in the oil and gas industry?

Bill Wimberley: With proper maintenance and piloting, drones are quite safe.  However, with anything aerially deployed, accidents can happen.  Drones must be flown responsibly, by qualified personal and follow local flying rules.  Drones and civilian/commercial/military aircraft don’t mix well.  This is why most countries require a significant separation between drone flights and other aircraft.

Georgina Ford: Is there anything else you would like to add?

Bill Wimberley: As a management consultant and serial entrepreneur, I am interested and engaged in the effective deployment of drone, and other technology, solutions for several different business applications in multiple and diverse industries.  Recently, I represented a drone SaaS company at the ASIS Security Conference in Bahrain where I discussed the application of drone technology to the private security industry with numerous global companies.  I was fascinated to hear how concerned the Middle East countries are about security and its direct impact on economic development and regional prosperity.

LinkedIn: http://www.LinkedIn.com/in/WilliamSWimberley

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Georgina Ford | Assistant Editor | ITP Media Group

Direct: +971 4 444 3000 
PO Box 500024, ITP Building #14, Dubai Media City, Dubai, U.A.E. 
Switchboard: +971 4 444 3000 
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Oil & Gas Crowdfunding Platform Crudefunders Completes First Reg CF Offer

Investment crowdfunding is not just for startups. While originally anticipated as a vehicle to fund the next cool startup, crowdfunding is being utilized to finance a growing variety of businesses – large and small – and industries. So why not Oil & Gas?

Crudefunders has been operating in the great state of Texas under the Texas Intrastate crowdfunding exemption until just recently.   Now using Reg CF, Crudefunders may claim the first completed investment opportunity under the new exemption raising $251,000 online. The funded project, Aquinas-TL Smith #25, LLC, is for the participation in the drilling, testing, and completion of a single well in Texas.  The estimated ROI has been pegged at 29.9% with a payback in under 24 months. For closet wildcatters – this may be for you.

Investing in Oil & Gas can be a tricky business – just like any other commodity the price of oil can shift dramatically.  Today was one of those days when OPEC met and the price of crude jumped dramatically with energy ETFs rallying to 16 month highs.

Crowdfund Insider recently spoke with Bill Wimberley, Chief Operating Officer of Crudefunders. Wimberley has been working in the oil and gas industry for about 13 years including clients like Mobil Oil, American Petrofina, Exxon, Atlantic Richfield, ConocoPhillips, Shell Oil and more.  Wimberley shared his insight into Crudefunders and how oil & gas projects are ideal for crowdfunding.

Crowdfund Insider: Who came up with the concept for launching an Oil & Gas crowdfunding platform?

Bill Wimberley: Allan Fine (co-founder) originally came up with the idea for Crowdfunding Oil & Gas development projects in 2013.  He presented the concept to David Taylor (co-founder) and together they launched Crudefunders in 2014.  I joined the Board of Advisors shortly thereafter, and assumed the role of Chief Operating Officer in early 2015.  We soon realized that, because of the uniqueness of the underlying asset, Oil & Gas development projects are poised to be the ideal investment vehicle for equity crowdfunding.

Crowdfund Insider: Do you have outside investors or are you Bootstrapping?

Bill Wimberley: We were fortunate to raise enough capital from friends and family to build the initial platform (aka portal) to comply with Texas Intrastate Crowdfunding Regulations and then to bootstrap the period throughout our operation under the Texas Intrastate.   In June of this year, to coincide with the official SEC release of Title III, Regulation Crowdfunding, we completely retooled our portal to comply with both Reg CF and Reg D and to integrate with a national Broker Dealer, an escrow service provider, and a payee provider.  Now that retooling is complete, we are raising additional capital to expand outside the state of Texas for a national footprint.

Crowdfund Insider: How are you sourcing deals? Where are most of the investments located? US only?

Bill Wimberley: We initially began operating under the Texas Intrastate with a request for proposal to all licensed Texas operators in good standing with the governing body for Oil & Gas in Texas, The Texas Railroad Commission.  As a byproduct of this, and of some initial goodwill, we received prospects from all over the world.  

All of our projects so far have been within Texas but moving forward, we will consider any project that makes good economic sense to our investors.  This does preclude us from participating in areas and formations where higher operating costs prohibit a viable offering.

Crowdfund Insider: How are you marketing your offers to investors? What types of returns are you generating? What about exits?

Bill Wimberley: We market our offers via Crudefunders.com and provide our 6,000 registered investors regular updates to check for new projects.  With the extensive use of SEO and Social Media, we are rapidly growing our investor database.  Crudefunders is currently active on opt-in eMail, Facebook, Twitter, Google+ and LinkedIn.

In terms of returns generated, each project is unique and carries its own return scenarios that must be analyzed and substantiated. 

Our first Reg CF project (recently closed out) posted an estimated 29.9 ROI by the Project Sponsor, but there is no “typical” project in Oil & Gas.  Every project is evaluated on its merits, including risk, exposure, and likely ROI.

Oil & Gas is a unique asset class for several reasons:  The production of an Oil or Gas well naturally declines over time and a properly-designed project should produce a significant proportion of its total dividends within the first few months and then slowly taper off until the well becomes sub-economic.  This production “decline curve”, and associated revenues, is calculated based on available history, nearby production, geology, projected reserves and the current and projected price of Oil.  We like to showcase projects that provide a quick return of principal with a healthy trailing dividend stream.  By this very nature, a properly designed project should have a significantly higher Internal Rate of Return (IRR) than other asset types.  We stress the importance of IRR in project analysis to encourage investors to maximize their chance of success by participating in multiple projects over a period of time.   This concept can work particularly well if an investor receives his initial investment back every few months and then reinvests into another project as part of an overall investment program.  It is important to understand, however, that in an Oil & Gas project, the initial investment is extinguished until principal payback and the exit is the dividend stream itself.

Crowdfund Insider: Which securities exemptions are you using? Reg D (506c/b) Reg CF, Reg A+?

Bill Wimberley: We currently offer Reg CF and Reg D 506(b) securities.  A typical Oil & Gas project carries with it unique characteristics inherent to the stage of the project.  Significant tax deductions exist that are unique only to Oil & Gas and are characteristic to the stage of the well project.  In addition, different stages carry with it varying degrees of risk. Because of this, we approach this unique opportunity by separating offering types for accredited investors into 506(b) and non-accredited investors into Reg CF.  At this time we do not plan to offer Reg A+ because it specifically excludes energy projects.

Crowdfund Insider: Why is Oil & Gas a good investment when the price of crude is so low?

Bill Wimberley: Investing in a project when the price of Oil is low, presents a better opportunity to the investor.  From an industry perspective, expenses in the Oil patch are significantly lower at $50/barrel that when prices are $100/barrel Oil.  Things like lease costs, rig time and drilling expenses are down as much as 50%.

We provide and educate our investors to consider the breakeven Oil price of a project.  This is a calculation of the minimum price Oil would need to sustain over the entire duration of the project in order to simply return the investor’s initial investment.  If the breakeven Oil price is $25, then any price over that $25, the investor should make money.

If prices continue their increase, this would likely reflect in multiples for the return scenarios because the monthly well-operating expenses should remain the same while revenue will necessarily increase.  A $10/barrel increase in price is potentially an additional “X” return to the venture.  This point in time is very similar to the Real Estate crash in 2009.  It was the right time to buy and hold if you had liquidity.

As another point, when Oil prices are low and traditional capital is scarce, investors have a greater opportunity to participate in better quality projects that would traditionally be only available to financial institutions.

Crowdfund Insider: How are you driving revenue for Crudefunders?

Bill Wimberley: We drive revenue to Crudefunders in the form of a nominal success fee for raising the capital to cover origination expenses.  We prefer to align our interests with that of our investors by taking an interest (aka working interest) in the project and participating alongside them.  This incentive is what helps create a strong desire for success and extra care in the due diligence process.

Crowdfund Insider: What about crowdfunding other energy verticals?

Bill Wimberley: Our intent is to stay VERY focused in the O&G vertical.  We have been presented multiple verticals from renewable energy, sustainability, hospitality, and energy service companies, but have declined them all so we can keep a focus on our business model……at least for the foreseeable future.

Crowdfund Insider: How has site performance been to date?

Bill Wimberley: We have been very fortunate to have funded 4 projects to date.  We have raised more capital than any of the Equity Crowdfunding Company under the Texas Intrastate exemption and we were the first Oil & Gas Company in the USA to fund a project under Regulation Crowdfunding (Title III).  We have a very large investor database that grows everyday which makes this possible along with a great team that vets our projects that have been listed.  We see a bright future and hope to be able to list a new project every month for the short term and grow to listing a new project weekly by mid-2017!

This article appeared initially in Crowdfund Insider online magazine, December 1, 2016:

Oil & Gas Crowdfunding Platform Crudefunders Completes First Reg CF Offer

Crowdfunding Provides New Sources of Capital for Oil & Gas

Introduction

In the business world, significant news does not always appear in headlines yet makes a profound impact. The oil and gas industry embodies a prime example. Even though extraordinary technological advancements have occurred in E&P and operating efficiency over the last few years, another key development has actually flown under the radar. Simultaneous with the technology explosion is the global revolution in the financial industry enabled also by technology and aptly named Financial Technology or FINTECH.

Comprised of several different components including mobile payments, money transfers, consumer loans, asset management and capital acquisition, one component of the FINTECH revolution is particularly advantageous to the oil and gas industry: access to capital.  As a matter of fact, recent changes by the U.S. Securities and Exchange Commission (SEC) in May of 2016 created an entirely new addition to the capital stack This action opened the door to new sources of capital directly applicable to independents/small operators in the oil and gas industry never before available.  The phenomenon, equity-based crowdfunding, represents one of the biggest changes in SEC regulations in more than eighty years and the oil and gas industry is just now waking up to the possibilities for new growth capital.

How the game is played

On October 30, 2015 the SEC passed new rules, along with amendments to existing rules, which were destined to have a profound impact on the future of the U.S. capital markets.  These rules had previously been under consideration and deliberation by Congress for 4+ years under “Title III of the JOBS Act” also known as Regulation Crowdfunding.  That is the operative term for oil and gas executives – Regulation Crowdfunding. These new rules and amendments were intended to permit companies to offer and sell securities through crowdfunding to a much wider definition of investors than previously possible.

The basic idea behind crowdfunding is to raise money through relatively small contributions from a large number of people, combining the best of micro-finance and crowdsourcing.  These new Regulation Crowdfunding rules had two primary purposes: 1) to assist in the capitalization of start-up and emerging growth companies (thereby creating jobs and stimulating the economy), and 2) to provide investment opportunities, with appropriate protections, for a new class of unaccredited investors (aka "crowd"). These rules officially took effect on May 16, 2016 for technology companies via Web-based portals which had met all of the SEC criteria for offering investments under these rules.

Because equity-based crowdfunding is breaking new ground in the U.S. and the oil and gas industry, industry independents may understandably have apprehensions. Statistics abroad are considerably more reassuring. While equity-based crowdfunding is relatively new in the United States, it was a $34B global business in 2015, ($17.2B in the USA alone), and was projected by many analysts to surpass venture capital by the end of 2016.  It is also projected to grow by as much as 20% per annum worldwide over the next few years. Bluntly speaking, equity-based crowdfunding is a major development that, for no valid reason, has gone relatively unnoticed by most of the U.S. population and the oil and gas industry.

Ironically, Regulation Crowdfunding was not originally imagined by its primary author and sponsor, Congressman Patrick McHenry of North Carolina, a member of the House Financial Services Committee,

as an effective financial tool for the oil and gas industry.  Rather, his stated purpose was “to foster relationships between investors and entrepreneurs”, specifically “to permit crowdfunding issuances that offer an equity stake (securities) to investors.”  This includes any industry where capital is required and jobs can be created.

How Regulation Crowdfunding benefits operators

Of all the industries where equity-crowdfunding is being introduced, the oil and gas industry (specifically the E&P sector) is uniquely and perhaps even ideally suited.  The caveat is that operators need to separate their thinking about consumer crowdfunding, typically to cover individual emergencies, from equity crowdfunding with its multiple features and benefits. For the independent oil and gas company, Regulation Crowdfunding provides:

• Access to new, never before available, capital from a new investor class - the “crowd.”  This “crowd” is largely composed of unaccredited investors, however, the numbers of them are huge.

• Relatively low cost of capital compared to other options.

• Maximum flexibility in project planning with a combination of capital sources that includes the “crowd” with other capital sources.

• Perpetual funding from the “crowd” for entire oil and gas field development where success begets success and crowd participation momentum builds with achievement of expected results.

• National and (with SEC and AML banking compliance) international exposure to operator’s projects and development programs.

• “Crowd” investor communication and management as one aggregated group through Web-based portals.

An unprecedented investor opportunity

At the same time, benefits are not exclusively limited to operators since the individual investors, which constitute the “crowd”, become part of an investment opportunity, which was previously beyond their reach. By virtue of SEC actions, for the new “crowd” investor, Regulation Crowdfunding through approved portals provides:

• An opportunity to invest directly in oil and gas projects, not merely public stock in oil and gas companies.

• An opportunity to invest in different levels of risk vs. reward and estimated ROI profiles:

  • De-risked completion only projects where the investor gets a “free look” at the electric logs (and perhaps tests) prior to investing.

  • Low risk recompletion projects where production improvements are attainable from zones previously identified with open hole logs, cased hole logs and/or offset production.

  • Low to medium risk projects in proven fields with identified resources, extensive geology and infill wells in known formations.

  • Higher risk exploration where geology and reserves are less well known, yet early indications are for excellent potential and high returns.

• Assuming project success...recurring revenues from working interest ownership for years in the future.

• Generally higher returns on investment than other investment classes previously available to the “crowd.”

• The opportunity to participate in an industry that has historically been closed to the general public.

Challenges & outlook

Of course, the brave new world of Regulation Crowdfunding is not without its challenges.  In the original bipartisan bill (Title III of the JOBS Act) several restrictions were introduced to limit risk and exposure for unaccredited investors. Some of these also reduced the intended purpose of the original bill.  As a result, Congressman McHenry acted swiftly and decisively by introducing H.R.4855 (aka Fix Crowdfunding Act) in mid-2016 to “fix” the original limitations and thereby increase the effectiveness of Regulation Crowdfunding for both small business and the “crowd” investor.  H.R.4855 passed the House side of the 114th Congress (2015/2016) by a vote of 394 to 4 in favor.  It was sent to the Senate on July 6th of 2016 where it currently awaits action.  This will likely be taken up and passed by the 115th Congress in 2017.

Despite the initial challenges in Regulation Crowdfunding, the future for both the industry and its application for oil and gas is very promising. This optimism is not a surprise, given so many upsides in terms of the benefits to operators and investors, which are providing the valuable capital often unavailable to many small project sponsors, producers and operators before.

The Innovative Synergy of Crowdfunding & Energy

On October 30, 2015 the Securities and Exchange Commission (SEC) passed new rules, and amendments to existing rules, that have already had a profound impact on the future of the U.S. capital market. These rules have been under consideration and deliberation for 4+ years under the name Title III of the JOBS Act (aka Regulation Crowdfunding). They permit companies to offer and sell securities through equity-crowdfunding to a much wider definition of investors than ever before. These new rules have two primary purposes, 1) to assist in the capitalization of start-up and emerging growth companies (thereby creating jobs), and 2) to provide investment opportunities, with appropriate protections, for a new class of investors (aka "the crowd"). These new rules officially took effect on May 16. 2016 for companies who had met all of the SEC criteria for offering investments under these rules.

Crowdfunding is already a $34B global business (2015) and is projected, by analysts, to surpass venture capital in 2016. It is also projected to grow dramatically worldwide in the coming years(1). This is a really big deal that has gone relatively unnoticed by most of the U.S. population, but this changed dramatically on May 16th of this year.

While most agree that funding companies through the "crowd" is an exciting new frontier for the capital markets, many (if not most) warn of the perceived risks associated with this type of investment. However, the statistics and associated risks cited are usually those attributed to start-up companies where 50%-90% (depending on the industry) fail within the first few years. The reasons for failure vary from incompetence to lack of experience.

"My formula for success is rise early, work hard, and strike oil." -J. Paul Getty

Of all the industries where equity-crowdfunding is being introduced, one industry appears to be ideally suited....Energy, and specifically the Oil & Gas production segment of Energy. This is true for several reasons:

• Oil & Gas is a well understood investment class that has been around for a very long time. It is a tangible commodity that is vital to the global economy.
• Investors can participate directly in the success of a single well or multiple wells depending on deal configuration.
• Oil & Gas projects can be configured in a variety of ways with a variety of risk profiles from existing production to exploratory. ROI is correspondingly various.
• The risk of Oil & Gas projects can be, and often is, hedged against with existing production, thereby greatly mitigating risk.
• Oil & Gas projects, like any investment, have risk, but less than most start-up companies.
• Oil & Gas projects can provide monthly cash flow, depending on production, reserves and the price of oil, and wells can produce for many years.
• New techniques and advanced technologies are being developed and deployed at a feverish pace to increase production, reduce costs, and decrease the risk of Oil & Gas.

I know what you're thinking....."but what about the current low oil prices?" Excellent question, and easily addressed in an earlier article on this subject entitled "Who in their Right Mind Invests in Oil at these low Prices?"

As stated earlier, May 16th, 2016 was an important and exciting financial date that has been a long time coming. The new SEC rules are "the biggest change to securities laws in over 80 years." Crudefunders was recently selected as one of only a handful of companies picked to represent equity-crowdfunding portals on Capital Hill before Congressional leaders, and Crudefunders was the only such company for the Oil & Gas industry.

For more information, check out Crudefunders at www.Crudefunders.com.

Bill Wimberley, Founder & Sr. Managing Partner - Visioneering Associates - Dallas, Texas, USA.

(1) Crowdfunding Industry Statistics

The Imperative of Perpetual Vision

"Visioneering is a clear mental picture of what could be, fueled by the conviction that it should be.” -Andy Stanley

So often organizations jump into strategy and tactics before planning and the results are chaos, confusion or disaster...or all three.  But even those organizations that understand this oftentimes begin planning before they have developed "a clear mental picture of what could be."  This clear mental picture of what could be is best pursued through a process of "possibility discovery"... or as Stanley calls it, "Visioneering."

As human beings we quite naturally develop strong paradigms of thinking and action over time.  This process begins at birth and everyone has a paradigm.  A Paradigm is "a fundamental unquestioned set of assumptions that determines our worldview." These assumptions (aka biases) are formed by our past experiences (good and bad), our environment, socioeconomic influences and many other factors. Paradigms act as filters.  We quite literally see the world through our paradigm filters. These filters can severely limit our ability to see beyond what we know and what we believe to be true.  People in leadership positions are no more or no less susceptible to these paradigms, however, in their role as leaders, they have a far greater responsibility to be aware of and understand the effect of what is commonly referred to as "paradigm blindness." Following are some notable examples of (at least initial) paradigm blindness:  

“I think there’s a world market for about five computers.” —Thomas Watson, Chairman of IBM, 1943.  

“There is no reason for any individual to have a computer in their home.” —Ken Olson, President of Digital Equipment Corporation, 1977.

"Who the hell wants to hear actors talk?” —Harry Warner, Warner Brothers
Pictures, 1927.  

“There is no likelihood that man can ever tap the power of the atom.” —Robert Milliken, Nobel Prize winner in physics, 1920.  

There are literally hundreds of other examples of paradigm blindness that can be found by a Google search, but the bottom line is this...our paradigms stand in the way of us seeing the possibilities in front of us...if we let them.

Organizations cannot reach their full potential if leaders don't recognize this effect and take steps to insure that their vision is expanded as widely as possible and every effort is made to pursue the discovery of possibilities and limit predetermined limitations!  This is not a one time activity (aka static Vision Statement), but rather the development of a purposeful and perpetual "visioneering" discipline.  In today's world, organizations that don't have this discipline, no matter the industry, are doomed to stall, or fail. 

For this kind of corporate discipline to develop, first and foremost, it must start at the top.  Leaders must discover their unique paradigm, how this paradigm interacts with other decision-makers and how it impacts productivity (or lack thereof) across the organization. Leaders must learn how to broaden their thinking and expand their vision.  However, it is virtually impossible for leaders to "see" their own paradigm and how this effects their decisions and their intention toward others without going through a formal process of discovery. There are tools and techniques specifically designed to aid in this discovery process.

Case in point #1 - I was hired by a Board of Directors several years ago to turn around (aka rescue) a failing software start-up company where they collectively had a great deal of money invested. The young founders were bright, talented and hard-working. Their technology was sound and their business plan was adequate. However, for a variety of reasons they had lost their way and were floundering to identify their vision and mission. Revenues were falling fast. After a few facilitated discovery sessions, a sequestered weekend away (no cell phones) and some strategy changes, the company was back on track and was acquired for considerable money a few months later. In one of the discovery sessions I found a half-baked software product that, with a few tweaks and enhancements, was very valuable to a specific industry at the time. Ironically, that software had been put on the shelf by the CEO 6 months earlier and considered unimportant.

Case in point #2 - I have had the privilege of working with prospective entrepreneurs and small business (SME) owners in Morocco, Afghanistan, Libya & China, along with Native Americans here in the States. In all but a few rare cases a pattern has emerged in persistent, generational poverty caused by a lack of economic prosperity.  This pattern is a combination of deep seated paradigm blindness entrenched in history and the corresponding lack of ability to imagine and grasp possibilities. Until these paradigms are discovered and addressed, progress simply cannot be made. you have to look no further than our well documented nation building failures in Afghanistan for proof.  I can go on and on about this.

Perpetual vision (aka visioneering) is a learned, not an innate, skill. It is, however, one of the most valuable skills an organization's leader can have. No matter the industry or the business, the discipline of perpetual vision is imperative for sustained success.  As previously stated, there are tools and techniques to examine these, evaluate their impact, and leverage them to the advantage of an individual and an organization.

Five Keys to Tribal Business Development Success

Tribal economic development is more crucial than ever for Indian Country’s self-determination, self-reliance and sustainability.  Pressures on Gaming revenues due to competition, changing compacts and State and Federal regulations, are increasing.  A changing Federal Administration in 2017 suggests, at minimum, an uncertain future in federal dollars and programs.  As a result of these factors, and many others, Indian Country must increasingly become economically creative, innovative, self-sufficient…and decisive.

I have been “beating this drum” for almost five years now as (formerly) Chief Business & Economic Development Officer for a large Oklahoma Tribe; at national and regional NCAIED RES events, at various Federal and State Forums and Conferences in D.C., and one-on-one with Tribal leaders across the country.  My work on the economic strategies and business models for three different Tribal Promise Zones over the last four years, including the assembly of over 100 private and public, domestic and international, partners for multiple Tribes, has further validated both the opportunities in business development and the risks of inaction.  I am increasingly optimistic about the future ahead for Indian Country, but at the same time, I see many missed opportunities right now.  The penalty for missed opportunity is, best case, delayed progress and, worst case, Tribal economic decline.  This is a tragedy that must be averted.

The “engine” behind economic development and job growth is business…new, accelerated, expanded, optimized and leveraged business.  Tribes must simultaneously take advantage of, and fully exploit, as many of the following business “eco-systems” as possible.  These include goods and services where…

1. Customers and businesses are both on reservation – this is where Tribal members have businesses that are desired and needed by other members (e.g. c-store, car wash, dry cleaner, restaurant, Farm-to-Table, etc.). Wherever possible, Tribal entrepreneurs and small business owners must be encouraged, inspired, developed and supported.  Tribes must strive to meet their own business needs with their own business people wherever possible!
2. Customers passing through the reservation on their way to somewhere else interact with reservation businesses – this is where members’ goods and services are offered to highway passers-by in such a compelling way that buyers make an impulsive stop, or better yet, plan their stop ahead of time. Business examples are travel plazas, truck stops, small scale gaming, restaurants, fast-food, various retail, etc.
3. Customers make advance plans to come to the reservation (aka Tourism) and enjoy the offerings of reservation businesses – this is where Tribal goods and services have a compelling draw and (hopefully) a reputation for customer service, operational excellence, value, variety, etc., and where length of engagement (aka stay) is increasingly extended. Examples are gaming, sports and recreation, competitions, cultural events, genealogy research, historical pilgrimages, various retail, etc.  This eco-system is one of the most powerful, because it also feeds the previous two eco-systems!
4. Customers are off-reservation (nearby towns or cities) yet are provided goods and services by reservation businesses – this is where market research and testing determines what others want and need to buy and these are provided by reservation businesses. Examples are franchise retail, manufacturing and distribution, agri-business products, consumer products, homemade goods, arts and crafts, etc.  Here also, Tribal entrepreneurs and small business owners must be encouraged, inspired, developed and supported. 
5. Customers are national or international and are offered goods and services by reservation businesses via eCommerce and social media – this strategy leverages technology to dramatically extend the “reach” of Tribal businesses and make irrelevant the limitation of business location. The opportunities here include phone-bank customer service and support, tech support, call center, outbound marketing, order fulfillment, travel agency, computer programming, distance learning and training, online gaming (if legalized), etc.

Each of the above eco-systems has its own unique opportunities and challenges, but each should be carefully examined and a strategic plan developed to address the associated possibilities of each.  A few of the Tribes I have worked with are well on their way to building out all five of these eco-systems, however, these Tribes are the exception.  Many other Tribes ignore one or more of these…..to their detriment.

One final word about access to capital, resources, expertise, training, etc. to implement these eco-systems…DON’T LET THESE PERCEIVED BARRIERS DISCOURAGE OR DISSUADE YOU!  There are more financial and human resources available to help than you may currently realize.  The next step is to get a vision for all business possibilities, evaluate every business opportunity, develop a business plan and take action!  Failing to plan is planning to fail!  This too is a tragedy.

Tribal Economic Development Elements

(Posting to LinkedIn Tribal Economic Development Group)

Please allow me to introduce myself.  I am new to this Tribal Economic Development Group and I have enjoyed reading each of the comments and perspectives on this subject posted by others. I am a business strategist and serial entrepreneur with 9 companies under my belt (1 NASDAQ IPO) and a successful business consultancy spanning 4 different countries. Following are some of my own thoughts on this important topic:

1- Gaming - is an awesome profit generator that should be leveraged to the max, but it WILL decline at some rate TBD over the next 10-15 yrs. Gaming should therefore be considered "a bridge to diversification and sustainability." The length of the "bridge" depends on many factors. Don't be surprised like Atlantic City!  Now is the time for tribes to plan and act on business diversification.

2- Planning - each tribe is different so strategic economic planning is absolutely critical path. "If you fail to plan you plan to fail." Every tribe can benefit significantly from an outside perspective here. Tribal insiders oftentimes have limited and/or politically impacted viewpoints.  Not bad, but simply a fact.

3- Leadership - developing transformational leaders must be a high priority for every tribe. There is simply no substitute for "transformational" leadership. Most traditional leadership training is ineffective. “Only three things happen naturally in organizations: friction, confusion & under-performance.  Everything else requires leadership.” -Peter Drucker.  Nations, tribes, governments and companies rise and fall on leadership.

4- Entrepreneurship - every tribe should have a formal business development plan that includes small business incubation and acceleration.  I am a member of the NBIA(.org) and there are plenty of resources available. You simply cannot ignore the stimulation of organic business growth inside the tribe.

5- Operational Effectiveness - to be fully effective, business & economic development must be separated from tribal government. They are simply totally different “engines” for the tribe. I know of a billion dollar tribe that is stifled completely by the unyielding mix of these two together, so their tribe is only realizing a tiny fraction of their awesome potential.

6- Economic Development - means effectively exploiting your (many) tribal advantages and meeting your tribal people where they are. I know of a tribe whose annual revenue is $850K/year, but their people are living in abject poverty.

7- Possibilities - following are some things I believe every tribe should carefully consider and evaluate:

a- The leverage to the max of ALL natural resources.  Obvious, but often overlooked with respect to possibilities.

b- Agri-business (Farm-to-Table/Product)(full value chain)(greenhouses, aqua/hydroponics, etc.).  There are also great opportunities in Agri-Tourism. Tribes must leverage their agrarian roots in some form with modern technology and all available other advantages.

c- Genuine, culturally sensitive and relevant tourism. Why do I know that this is likely underdeveloped? The largest and most influential tourism consultancy in the country, perhaps the world, had never worked with a Tribal Nation before I hired them for a project a year ago.

d- Highway Retail (Travel Plazas, Truck Stops, C-Stores). Yes, there are a lot of tribes that own and run these however, are they producing 12-18% EBITDA? This is possible under the right conditions & structure. I am aware of a tribe with a C-Store generating $12M+ revenue annually and losing $200K in the same time period.  This is a tragedy and easily fixed.

e- Artrepreneurship.  Tribal artists in every discipline should be increasingly successful as entrepreneurs and there are sophisticated ways to help them be so. I work with a company in Dallas that literally built an entire art community with local artists using technology and advanced retail strategies. One single location has 7,000 pieces of art from 140 different artists.

f- Federal “Promise Zone”-The US Government has a brand new program (USDA administered) to provide unprecedented economic development dollars to tribal nations (and other under-served areas) and the 2nd round RFP comes out in August of this year.  The Choctaw Nation is currently the only Tribal Nation in the country with this designation.

I can go on and on about leveraging EB5, FTZs, NMTCs, CDFI, IEC, IIP, SBA Loans, Crowd-Funding, etc., but in the interest of brevity, I will stop here.  Bottom line...tribal nations have lots of opportunity and I am very bullish on their (your) futures.