Welcome to the Emerging Excellence Podcast.

A real pleasure to have you with us.

And today's guest is a real special one, a real specialist when it comes to all things heavy industries.

He's raised hundreds of millions of dollars, delivered billions of dollars of benefit when it comes to breakthroughs and new solutions to industry, and made a profound difference when it comes to implementing AI and robotics into companies, turning it from just purely ideas into genuine value.

So, first of all, welcome Dr. Nathan Kercher.

Great to have you here.

Thank you, Michael.

Thank you.

Hi, everyone.

So, my man, tell me, in terms of this sector, you've spent basically your whole career innovating in a sector which isn't known for innovation?

Yeah.

What are some of the biggest challenges you've seen in the boardroom and perhaps across industry, which have maybe.

I think you could look at it two ways.

Stifled progress or really enabled progress.

How would you think about that?

I think it's actually a pretty good question.

It's a little bit hard.

Not to be a bit rude, but I'm not meaning to be.

So with that caveat, there's this reality that this sector has lots of opportunity in front of it, there's lots of ground to regain, so lots of inefficiency slips, lots of problems.

But at the same time, there's been this growing gap between the vision, the strategy, the people who set the course at the destination, or we can call them the executives of the board, whatever you like, and then the people on the front line who actually do the doing, do the work.

The appetite is there, though.

So both, both of those groups of people want a shared great outcome.

I want a similar outcome.

They've just got different ideas of how to get there.

And there's this bit of this gap in between, of not quite understanding what each other does, not quite being able to communicate effectively, effectively with each other, which is surmountable, which is a very positive thing.

Yeah.

And so what's the gap?

Is it that they like, they just have different priorities, or is it that they.

Their life experience is different?

What do you think it is?

So let's say I'm not a psychologist.

I can tell you what my guess is, it feels like a malalignment between KPIs to be really, really short.

So it might be the incentives, the ideas, the focus, the history, the, you know, where you went to school, what you learned, the levers you can pull personally in the business.

For one group's not quite the same as the other.

That manifests itself into many different ways.

And for for instance, and I'll be very stereotypical.

Maybe the CFOs interested in increasing the top line, maybe the operations managers increased interest in increasing the productivity of the guy driving the bulldozer.

They may connect to be the same thing, but there's a gap there.

They don't understand it.

When one says, I'm doing the other one, it doesn't immediately strike in their mind of, oh, we're trying to achieve the same thing.

If they're not trying to achieve that same thing, that also goes unnoticed.

Okay.

It's interesting because we met writing this, right.

The book we've just completed and what that highlighted to me.

Every senior executive I spoke to pretty much said the same thing.

They had a huge appetite for things like AI, robotics, new technology.

There was a variance in terms of getting either the workforce to engage with it and I don't know, is that a knowledge issue as well?

Like, do they just.

Because I don't know, from a personal perspective, it feels like there's a huge, like knowledge gap.

Like AI is coming at the wazoo at the moment.

It's like, where do I start?

And so maybe the easy answer is don't start at all and just kind of hide.

Yeah.

So I think that's, that's a great, that's a great maybe finger to put on the pulse, so to speak.

So there's a few things in there for a start.

The kind of maybe more ethos, vibe, expectations, hopes, dreams, desires, vision of maybe the executives that you've just kind of mentioned is just hard to translate into tangible terms in words I understand for the day to day work of this other function.

Now, there's nothing nefarious about that.

That's just the kind of way it is.

They're speaking slightly different languages on the other side that you've got, you know, I'm being a bit stereotypical.

You've got this expert in, let's say building bridges, who's being told AI might be a great way to do something that they don't even understand, makes any sense in the business because they didn't go to as a business school.

So they're standing at the bottom of what they think is Mount Everest, thinking, okay, well, I don't know what AI is.

I don't know what a bottom line is.

I don't know what an EBIT is.

Yeah.

Or why it matters.

I don't know why it matters.

Where do I start?

What do I do?

And at Friday they're going to say, how's the bridge going?

So it just becomes maybe too hard, too unknown, too many hurdles in front of them.

How do you get up Mount Everest, do that to that battle?

I'm not even really sure that's what you want.

Did the voice come from over there?

Am I supposed to be going there?

Are we on the same page?

All this confusion just manifests itself in a way of, well, I don't really know what to do.

I can't move anyway, in confidence.

I'm used to a hundred bridges out of a hundred need to stand up or there's a problem.

So I'll do nothing.

Yeah, totally get it.

Well, it makes sense, right?

I think it's like with anything, if you've.

There's a big leap between that, let's say commercial acumen or that commercial understanding that or largely a lot of operational roles.

So let's take it on a positive bent because I think it's super important to stay focused on that.

What is the other like?

Are there any other things that you're seeing from a like which are really working?

So you've got that perhaps it sounds like if they can get alignment between the board and the operational team, that's very beneficial.

What else makes a big difference?

So I'm going to wheel you back half a step.

So getting alignment is great, but it's not step one.

Step one is just accepting that you don't have to be aligned.

Right.

So it's perfectly okay for, let's say the ops manager, the guy building the bridge, to not get what the CFO does, to not understand what a bit is, to not understand how aligns.

Right.

That's okay.

So they don't need alignment, they just need the trust.

They just need to believe.

Okay, you do your job.

I, I do my job.

Together we win as a company.

So that's maybe step one, if they can get alignment.

Happy days.

Even better.

Yep.

The situation quite often is because I don't, you know, me as an operations guy, say I don't understand what you're even talking about, let alone how to get alignment, that I just go, well, that can't be done, therefore I'll do nothing.

So we're.

I think you've inadvertently given the example why there's so much inertia and innovation in these heavy industries.

Because the assumption is I have to understand you to be able to help you.

So you're saying people get stuck on that?

Is that what you're saying?

So is that what you're saying?

Yes, people get stuck on it.

But I chuck in the word Needlessly.

So they needlessly get stuck on it and maybe it's too nice, maybe it's too empathetic, maybe it's too considerate, maybe it's some sense of burden or some sense of ownership or some fear of the unknown.

Maybe it's all of those things, maybe it's none of those things.

Again, not a psychologist, but yes.

Into some kind of purgatory where I'm not quite sure what you went, what you meant.

I'm afraid of taking risks, I'm afraid of getting things wrong.

There's too many repercussions for that.

So in ambiguity, I will just err on the side of not moving.

Yeah.

Not doing something.

Yeah.

The conundrum is that the board, of course, they need their junior workforce.

And arguably the best ideas, or perhaps the biggest pain points are being experienced at the coalface.

Yes.

Building the bridge.

As an example, when you're working with these companies who seem to have really figured this out, how are they actually harnessing or evaluating the real issues that their workforce are experiencing?

Yes.

That's the interesting thing.

Right.

Trust and understanding are not the same thing.

So the person on the front line.

Yes, I agree with you, does know the issues, does see the fires, maybe they're even on fire themselves.

But the board doesn't need to understand them.

It doesn't need to know what the fire is.

It's a bit like when you get your car serviced.

You don't need to know what they're going to do.

You might not even ask them what they're going to do.

You just trust it's going to be in your best interest if they've done it.

What we don't typically see is that acceptance that one doesn't need to understand the other.

They just need to align on the same outcome and have trust that each other will get there.

In the cases where it does work well, that trust has been built and one disbelieves that the other will get them there or be there when they get there, or help them on the way or et cetera, et cetera.

Okay.

And so that trust, though, is tricky.

Right.

Especially if the board execs don't really, let's say, know what the outcome's gonna look like.

Like you talked about the car and you've talked about it.

I think you share it in the interview where, you know, when you take the car into a garage, you don't ask the mechanics how exactly they're going to do things.

Yeah, right.

It's a little different because cars are known into the.

And they've probably serviced a car before.

This is different, right?

It's exactly different.

So in the.

In the case of the car, yes, you know exactly what to expect.

So you can kind of get a vibe along the way that they're heading the right way, or if not, when they get there, you know what to see, you know, if they've got there or not.

When you're doing something truly innovative, you don't even know where you're going.

So you don't know if you're there yet.

You don't know if we're headed in the right direction.

You don't have to head in the wrong direction.

They say it's great.

You don't know if it's great.

It makes it very difficult to try and report and monitor things in the traditional way, because are we making good progress?

I don't know where we're going, so maybe we are.

Yeah.

So, yes, it's completely different.

But again, that's where the trust is in.

So if we reframe from maybe.

Are you doing this the way you normally do it?

Am I measuring it the way I normally measure things?

Am I understanding things the way I normally understand things?

The whole different process of monitoring and watching and guiding through innovation, maybe, like in a program we're talking about, maybe going through and trying to understand what are logical steps, what's a good process to take, and understanding when things are going well and understanding when things need to change or pivot or stop.

If we reframe, let's say, in this case, the executive's perspective from the way business has always been done, to this way of working, then yes, you can go from value capture of trying to optimize the current system, kind of optimize what you're doing, to value creation, which is, in other words, stumbling into the dark and hoping you bump into a pot of gold.

Well, talking about gold, because I think it's a good.

Is a good term.

You've got arguably one of the most extensive backgrounds in this space of anyone in the country, if not on the planet.

Thank you.

Well, it's not me saying that, like, if you just look at your background, you've been a guest lecturer at Stanford, you've done your old tenure there, get recently regularly pulled over to Silicon Valley to contribute.

You are a partner in a construction tech venture fund.

Like, if anyone knows this space, you.

You pretty much know it.

With that mind or kind of that background, that top of mind, what are some of the gold mines that people have Stumbled into or the pot of gold that they've actually.

When they're going through that stumbling process, what have they come across?

Let me start by pouring cold water all over that.

So CVS are the highlights of a lot of activities.

So I have failed many, many more times and done many more silly things than I've ever done good things.

What I have done that I'm most proud of is learned a way to try new things, to try and do better, Better things, different things.

And when it.

When they inevitably fail for it not to matter so much or cost so much.

Yeah.

Right.

What that has done has changed the roi.

Right.

So.

So is it like reducing the capex part?

Yes.

So instead of trying to spend $10 million for, hopefully something comes off and I get the 10 million back to change it to now I only have to spend $100,000.

And if something pays off getting $10 million back, the first one gets the.

Oh, wow, thanks.

Gee, we dodged a bullet there.

The second one, I get a parade, a trophy.

Yeah.

At the end of a CV run, I got some nice bullet points to put on.

And thank you for pointing them out.

Yeah.

During the process, yes.

It was learning how to stumble into the dark looking for this pot of gold or hopes there without causing any damage and without hurting myself on the way.

So the best strategy is to learn how to explore safely and to believe that there's a good outcome in the future or there's hope to be had.

Yes.

Something I like to say, the emerging to the emerging leaders, the people coming through.

Is CV something you end up with.

Unfortunately, you hear from people like me, who's got one, and then you think, I can never compete with that.

You will.

You'll do much better.

Just do it.

Yeah.

Okay.

Well, let's get to the actual outcomes because I think that's.

Let's talk to the highlights because I feel like that's often what people are searching for and they kind of need that proof point to justify that 100 grand spend or whatever it might look like.

What are some of the.

What is a typical ROI in this space?

Let's say if there is one for someone in construction.

Oh, it's.

It's just ridiculous.

So I think the best way to say this is probably through case studies, because if I give you a number, it just sounds ludicrous.

Okay.

But it's quite often that something's been done and there's a radically new way to do it.

So let me give you an example.

So I'm thinking about this project.

I Worked on it was putting bricks into a prefab brick facade.

So nice and boring.

Let's just say for simplicity.

It was a ten step process.

Everything was, you know, pretty regular tuned.

Happy days.

No problem here, no fire here, nothing to see here.

No one got told about, nothing got shown.

I wasn't there to look at it.

I was there for some other reason.

Saw it and just thought, okay, if you change step one slightly by, in that case, using a vision system to determine where a brick was and a robot to pick the brick up off a pallet and just put it on the line, then step six, seven, eight, nine weren't needed anymore.

Those steps were involved forklifts and QA and rework and angle grinders and cost a lot of money.

Yeah.

So just the simple step of having a little bit of automation at the front, which effectively did two parts of nothing to the value chain or to the time it took to go through scale to oblivion.

So there that, you know, I say $100,000 to get the robot and the vision system running save something like 200 million a year.

Wow.

Because those later steps just weren't needed.

Wow.

Just flowed through.

Didn't need the forklifts, didn't need the forklift drivers, didn't need the storage yards, didn't need the QA people, didn't need the angle guys.

Didn't need the rework.

Could make a thousand units instead of 100 units because didn't, you know the failure.

I dropped through the root floor because there were no bad units paid.

Everything was usable.

So that scaled because the sheer volume of that single line alone was 180,000 bricks a day.

Wow.

So and the time saving per brick was what, a couple of seconds?

A couple of seconds like this?

Completely negligible.

It's.

You would take more time trying to remember which pockets you put your hanky in.

If you had a running os, then you would save for that.

But the real saving came not from that couple of seconds, just from if one brick out of 100 had an issue.

Yeah.

When you're doing 180,000 bricks, the.

That's a lot of issues.

Yeah, that's a lot of.

If that's spread over different panels, that's a lot of panels.

If those issues went away, so do those issues.

So does that rework, so do those problems.

So the real saving there was.

Yeah, opaque.

It's interesting, like I feel like in this sector, and this kind of speaks to the project we're collaborating on, is that, you know, we've seen examples on the Diary of a CEO podcast where he talks about how he said to his team, I'm going to pause on all hiring and any new hires have to be proven that that job can't be done by an AI robot or AI agent.

Yeah.

And in like 60 days he realized that it saved him something like he offered a $20,000 bonus to the team or individual who came up with the, with it.

And it saved him like I a couple of million bucks in 60 days.

And I think I hear these examples.

It's like, wow, the opportunity in this sector, infrastructure construction is just like it, it's, it's, as you said, it's almost unimaginable to get that.

Like, it seems ridiculous in terms of the efficiency gain.

It is.

Again, I'm a little bit headline spooked.

So that's an awesome headline.

And probably, yes, it's very believable.

I think if we reel it back to something very simple and go from bottom up, it becomes Mount Everest just disappears.

So if you think about it in terms like this, so if you had a worker doing whatever it is they do, there's going to be some tippity tap involved, some paper pushing involved, some ordering, procurement, telephones, whatever.

So sprinkle some AI, robotics, automation, process automation on there and it becomes very believable.

You might save someone an hour of their week just from automatic filing, automatic something or other.

Very believable.

You scale it up to an average person getting 100k a year.

You've just saved 3k a year, maybe made that person feel better.

How many people do you have working your organization?

1 10, 100?

1,000?

10,000.

All of a sudden that 3,000 a year gets a lot of zeros put behind it.

If we wheel that way back to maybe the technical level, you've done nothing.

You've worked out a new way to schedule a meeting and you've saved people a little bit of time.

Nothing.

You scale it up to CFO level and that's $100 million saving a year.

Yes.

To do what you're saying, completely automate away new highs.

That's an awesome ambition.

But we don't need to start there.

We can start with, we have the luxury of scale.

We don't need to save 100% of anything.

We can save 1% of a lot of things and end up much, much better off.

It's a very different mindset.

Right.

In terms of thinking that I see a lot in this space that if you can't do something perfectly, then it's not worth doing.

I think that that's probably my little cheeky giggle moment with so many companies I interact with.

So I could give you a specific case, but I don't need to.

I have gone into so many rooms of so many different construction companies and spoke to so many senior execs and the story's basically gone.

I, I get it.

You build 100 bridges.

If one falls over, that's a problem.

You're doing something like this, you try a hundred things and one works, that's a win.

You just don't worry about the other 99.

And that's really the case hit.

So the game's completely flipped.

Whether it shows promise, whether it outcomes in something, that's a reason to triage it, that's a reason to park it, that's a reason to look later and support the winner.

Sure, if we have, you know, kiss a lot of frogs to get the prince, whatever that saying is, then fine, that works.

In the world of emerging tech introducing change, you say that simple bridge thing to so many execs in this field and the size in the room are audible.

They're like, ah.

That's why we're stuck in innovation purgatory.

We expect everything to be perfect.

But the very definition of not knowing what we do, of course we can't work out if it's going to work.

Let's switch to the program in terms of what we're building and why you think it fills a gap and what it enables for people, which you think is going to make a big difference in this space.

Yes.

Okay, so we have so many amazing consultants.

So, you know, McKinsey, BCG, they all kind of spring to mind who are very, I would say top down.

So, you know, ideas are incredible, strategy is spectacular.

Yeah, sure, they've got lots of it that's coming there.

But there's this gap that we talked about where this idea strategy has this gap between operational layer and execution is literally everything.

Execution is everything.

So we had this, okay, I don't know, board level strategy, let's do something.

That would be great.

And operational reality of.

But how would you actually do something?

How does that happen?

How does that translate?

So the program in my mind closes these two main gaps.

How do you translate this malalignment of objectives, outcomes, or how do you frame it in such a way that an operational kind of mindset or bottom up mindset has a target that they can comprehend, so has some idea of what.

They'Re doing and they're bought into, Right?

Yes, absolutely, definitely.

Have to be bought into.

Because if you really want to do something, it costs a lot less effort.

Yeah.

At the same time it's the unknown unknowns.

So you know, I'll be, I'll be dramatic.

There's no possible way you can do X.

Sure there is.

What about tool A, tool B, tool C?

Or if you think in a very simple turn it's impossible to get a nail, spike of steel to go through a bit of wood, else not use a hammer.

It's quite literally that simple.

You pick someone who's done, you know, computer science at a fancy uni and, and they know hammers that we don't know.

Yeah.

It's really that simple.

You just go, there's the piece of wood, there's a nail.

I don't know what to do.

They go, here's a hammer.

We just call this one AI.

It's been overhyped.

That's a bit scary, a bit off putting.

We struggle as bottom up folk trying to see something tangible.

We hear the strategy, the vision and we think things like that's nice, that's great.

Can't tangibly connect it to anything.

We're missing this gap of what tools do we need, what tools are available, what tools can we use and translate that to an outcome place.

Yeah.

And I think that's the key piece.

Right.

It's that ability to bridge, its ability to bring accountability.

The actual holding the hand part, the building that, having a group of people going through that journey together, I think that's the real value of this space because I think there's so much.

There is a huge level of variance in the sector but there's also a whole bunch of doing a lot of the same thing.

And I think the opportunity, what I see in this is that the chance to learn from others is almost as valuable than what you might even get out of it by doing it individually.

Absolutely.

Even if you do this and you are completely garbage at it, seeing a friend over there or knowing someone over here and they did that in their company.

Absolutely.

Definitely.

I feel like that's the.

So the power of normalization cannot be overstated.

So if you think about something, it can be very, very difficult.

If you try and do something and you fail, it is very, very difficult.

If you see someone else do it next to you, all of a sudden it's achievable.

The world is littered with examples, littered with them.

So no one can run 100 meters in less than 10 seconds.

It's impossible someone did it.

Oh, I'll do It too.

No one can do a triple backflip.

I'll do it.

No one can backflip a motorbike off a jump.

Someone did it.

I'll do it.

Yeah, just throwing in context, throw an AI.

It's like, oh, let's take the family to Hawaii.

Oh, someone invented a plane.

Oh, let's get on that.

So everything's impossible unless the guy next to you happened to just do it.

And then all of a sudden, I should do it too.

And you're 100% right.

You don't have to be the one that did it.

Just knowing it can be done is often enough to unlock this value.

Yeah.

And also just having talked to them for, for like, maybe like, you've got to know them in this, you know, it's gonna be like 60 days.

We're not talking about doing super deep work.

The idea is very much to.

As we see it, it's like that.

It's kind of bridging, as it were, some of those kind of key gaps and turning those huge mountains into.

Oh, no, that looks like a more of achievable hill walk rather than, you know, it's not absolutely different.

Ice climbing or something like that.

So I'll do my favorite, my favorite example and sorry for going in circles, but, you know, if you give the, let's say the executive level, the board level, a few of these keywords, a few of these things, they maybe take one step closer because now they've got some idea of some operational thing.

If you give these operational folk a bit more idea of a keyword, a strategy, maybe a vision, they come one step closer as well.

Maybe that gap's bridgeable.

Now maybe if they take another step, another step, they're touching hands.

So all of a sudden, now their misalignment has gone away.

Now they can meet in the middle.

Now they can share values.

Then if you provide them with an operational tool, the say, the executive folk can speak with the example.

They can say, okay, well, this company deployed to a whole company.

But you see what I did and I don't know how to work a computer.

And I got up to work and, well, that's very rude to me.

Sorry, I. I don't know how to develop it.

Yeah.

But I managed.

You could do this in an afternoon, so surely you're the expert in it.

You can do a lot better.

But that example is a different mindset.

So I'll go radically into stereotype mode.

So everything's impossible to engineer until someone else has done it, in which case you should stop talking and I'll do a better job at it.

Thank you.

And it's as simple as that.

You talk to an executive and you're like, I just don't get what you're doing.

You see example and you go, thanks, please sit over there while I do it properly.

I think the other piece there, which we haven't touched on, is actually bringing the vendors in who are, you know, as you talked about, coming from these fancy universities, they've got deep expertise in these in technologies.

But what they are actually really lacking is the other part, which is the on the ground, real understanding about industry.

And I think that's where this has the real power to kind of bridge a bunch of that.

I think it does have the power and I think the situation now is absolutely tragic.

So we have these group of people who are amazing at making, let's call them widgets, and a group of people who need the widgets.

And then we've created this interface that we often call commercial, where we get the people who can make the widgets, trying to sell the interface, sell the widget to the people who need the widgets, and barriers go up.

So every time they enter the room, we think, oh, God, he's trying to sell me something.

No, no, thanks.

So the automatic response comes from, no, not interested.

I'm fatigued with people trying to sell me things.

Please go away.

But the reality is they could probably use the widget.

We sprinkle on top of that brow area because we're so afraid of people trying to jam sales down our throat, we start to hide things.

So if the widget makers could see behind the hoarding, they could do a better job.

Oh, they can't come though, because if they're behind the hoarding, they might try and sell us something.

We don't want that.

So, yes, it's created unintentionally, I'd say silos or barriers where the emerging tech or the tech suppliers can't get to the problem.

They don't have the information.

The information can't go back.

The solution can't go back.

This program dissolves that.

So it's really more empirical of, okay, leave everyone, leave their sales guys behind, please bring your tech guys.

Tell us fundamentally what your tech does and might help.

And the people who might want to use your tech go, that's cool.

But a little to the left would be even better than the tech guys go, okay, well, yeah, let's do that.

Yeah.

So the intention there is to completely circumnavigate that barrier to actually result into this connection between the widget needers and the widget makers.

And I think without spruiking our own hauling too much, I think there isn't, there's never been a better time for this in terms of like there's 40,000 people just in Queensland alone who are needed in terms of the labor shortage.

The opportunity of this like productivity is not going through the roof, it's in fact it's tanking.

Right.

And so I think this is a real, it's going to be super interesting to see how this plays out as a, like a hotbed for ideas.

But what's your take?

Well, I definitely agree with you, but I'm compelled by law to argue with you.

So I think we need to dive deeper into skill shortage because the reality is if we, we take away the grand average, maybe there's different skills needed.

So a very, very simple thing, a chippy is not, not a sparky.

So maybe we need an x number of 1 and y number of the other.

They can't do each other's job, so some kind of tool that can democratize that so they can kind of do anything, maybe lower the skill level.

So you know, the generalist can now be the semi specialist in those two fields.

Maybe that makes the available skills more widely applicable to skills footage.

Yes.

The other thing is I think some of these tools can actually make the people who currently have the jobs more productive.

So instead of needing to hire so many new roles, we actually find out because these people can do more, we need less new.

So there's that aspect which will radically change what's needed, what's available.

But I think that all circles back to there needs to be a radical change in mindset of what's the new possible can be.

And yes, I got to the S bit.

This hype cycle we've been going up of AI can change the world is now going down to the trough of disillusionment of okay, but what does it actually do?

How can we actually use it, which in this speak is the perfect time to actually start transitioning from or could do anything to.

Here's some examples of it actually having done something.

Yeah, so yes, awesome.

Great place to leave it.

Nathan, thank you so much for joining us.

No worries.

It was good chat as always.