Wisdom Exchange 2007 Report


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In June 2007, CEOs and presidents of Ontario's high performance firms gathered at the Wisdom Exchange to expand their business network, share best practices, benchmark growth strategies and gain advice and insights critical to success.

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Wisdom Exchange 2007 Report

  1. 1. Highlights from the forum for CEOsEvent Report and presidents of Ontario’s high performance firms WISDOM EXCHANGE 2007 Strategies for Growth 13TH WISDOM EXCHANGE CONFERENCE The Estates of Sunnybrook, Toronto, Ontario June 2007
  2. 2. On June 5, 2007, CEOs of Ontario’s high performance, innovative growth firms met at the 13th Wisdom Exchange forum to network and explore Strategies for Growth. We hope this report provides an overview of the insights shared by CEOs, topic experts and workshop presenters at the event.Wisdom Exchange 2007 TABLE OF CONTENTS In this report Going global: opportunities abound for Ontario growth firms 2 Transformational leadership: look to the bard for inspiration 4 Competitive success: it starts at the top 6 Innovative marketing: Web 2.0 technologies 8 Organizational excellence: the seven keys to making your organization great 10 Lean culture: techniques for business growth 12 Financing growth: some capital ideas 14 Defining success: learning from the best practices of Ontario’s high performance firms 16 1
  3. 3. For many of Ontario’s high performance firms, global Going global: expansion and staying on top of constantly changing markets can be a challenge.Wisdom Exchange 2007 WORKING LUNCH opportunities In his opening remarks to CEOs and presidents of leading growth firms at June’s Wisdom Exchange, the Honourable Harinder Takhar shared his observations abound for on India’s rapid growth and ensuing opportunities for Ontario’s small and medium enterprises (SMEs). Ontario growth “I was born in India and have returned every year or two since the mid-1970’s. During Ontario’s business mission to India earlier this year, I saw things that firms reinforced for me that India has changed more in the past five years than in the previous 25 years,” said the Minister. India’s economy averaged 7% annual The Honourable Harinder S. Takhar, growth for the past 10 years and grew another 9.2% MINISTER OF SMALL BUSINESS in 2006. Home to one-sixth of the world’s population, AND ENTREPRENEURSHIP India has an estimated 350 million middle-class consumers who want the same products and services that are popular in Europe and North America. In recent years, the country has also accelerated its engagement in global trade by opening its domestic markets and increasing its investments overseas. “Ontario companies have an advantage that makes us very competitive,” the Minister explained: In every Ontario community we have people from China, India, and Pakistan who know these countries as well as Canada. This helps us undertake partnerships around the world and we should build on this diversity. In addition, business people will find a communications infrastructure in India supported by a democracy where the legal system is based on English common law, English being the most important language for commercial enterprise and national and political communications. Recognizing India as one of the world’s fast-growing emerging markets, Minister Takhar accompanied Premier Dalton McGuinty and more than 100 business delegates on a trade and investment mission 2
  4. 4. “ It takes more than just thinking globally for us to remain competitive in this changing environment. “to India and Pakistan in January 2007. With two-waytrade expanding at a rapid pace, Ontario’s missionwas designed to build on this enormous potential.Canada’s 2005 exports to India surged 25% over2004, and India became Canada’s 14th largestexport market in 2006. As a major contributor toCanada’s increase in export growth, Ontario goodsexports to India have more than doubled in the pastthree years. Looking ahead, bilateral trade betweenCanada and India is targeted at US $20 billion in On how to build relationships with foreign buyers,goods and services within the next five years. It is also Minister Takhar advised, “If you get to know theexpected that India will spend between $150 and people and culture, work with your contacts in new$330 billion over the next 5-10 years on infrastructure markets, and build win-win partnerships, thealone and will not have the internal capacity to do it dividends coming out of these countries can bewithout help. “This will open up new opportunities for great.” The Ministry’s Ontario Director for the MiddleIndian and Ontario companies to work together in East agreed, offering his hands-on description of thecritical areas,” said the Minister. export process: “You visit your target market, and you meet people. Then you come back and meetThe Minister also cited examples of major Indian the same people again, plus new people. Whenfirms such as ICICI Bank, Ranbaxy Pharmaceuticals, you come back the third time, you meet the oldSatyam Computer Services, and the Aditya Birla people and some new people. On your fourthGroup that have invested millions to start or expand trip you can ask the first people that you met fortheir businesses in Ontario. “The Chairman of Infosys, an order.”India’s largest software company, told me that Ontariois the right place for them to invest,” he said. Thanking the audience of growth-firm leaders for their contributions to the Ontario economy, Minister TakharThe India-Pakistan trade mission is part of the said, “You are the innovators who create newgovernment’s embrace of globalization and products and services, high-value jobs, andaggressive action to attract more investments and partnerships around the world.” To help Ontario firmscreate more avenues of distribution across the globe enter into some of the world’s hottest markets, thefor Ontario’s world-class products. “It takes more than province has established 10 International Marketingjust thinking globally for us to remain competitive in Centres, in New Delhi, New York, London, Losthis changing environment,” said the Minister. “We Angeles, Munich, Paris, Mexico City, Beijing, Tokyo,must go global and show the world what Ontario and Shanghai. These centres, located in Canadianhas to offer.” A strong example of this was when consulates, are there to assist Ontario firms to makePremier McGuinty presented the politicians and local contacts, participate in trade shows, andbusiness leaders he met on the mission with a explore the opportunities of new markets.BlackBerry. The Premier made sure everyone knewthat the world’s most popular personal communication For more information on programs and services todevice comes from the Ontario-based company support Ontario businesses at any stage along theirResearch In Motion, as proof of Ontario’s leadership continuum of growth, visit the Ministry’s new andin the global economy. improved, one-stop website at www.sbe.gov.on.ca. 3
  5. 5. When Jim Fisher, Vice-Dean of MBA Programs and Transformational Executive Education at the University of Toronto’s Joseph L. Rotman School of Management, searched for an example of outstanding leadership leadership: to discuss at this year’s Wisdom Exchange, he reached back more than 400 years and brought to life Shakespeare’s Henry V – only it was a veryWisdom Exchange 2007 PLENARY look to the bard different Shakespeare than the CEOs in the audience had studied in high school. for inspiration Leadership has fascinated Fisher throughout his career. Over the last 30 years, he has worked closely with some of Canada’s top corporate and Jim Fisher, political leaders, including Pierre Trudeau and Galen VICE-DEAN, MBA PROGRAMS Weston among many, many more. AND EXECUTIVE EDUCATION, JOSEPH L. ROTMAN SCHOOL Why should Shakespeare be of any interest to the OF MANAGEMENT, CEOs of some of Ontario’s fastest-growing firms? UNIVERSITY OF TORONTO As Fisher explained, half of all today’s English- language live theatre productions are of Shakespeare’s plays, which were all written around 1600. “In other words,” Fisher said, “Shakespeare still has 50 per cent market share after 400 years without introducing any new products.” And why is the Bard so successful? “Shakespeare’s enduring appeal lies in his tremendous insights into people’s inner motivations,” Fisher said. “Shakespeare asks why people do the things they do. And why other people let them.” “He understood that you are not a leader when you just take a courageous stand, or when you state the great vision, or when you have great charisma. You are a leader when people are following you in a direction where they would not otherwise go,” said Fisher. 4
  6. 6. “ You are a leader when people are following you in a direction where they would not otherwise go. “Take the character of Henry V as a case in point.The year is 1415. King Henry V of England hasinvaded France. In late fall, after months ofwarfare, his army of approximately 6,000 troopsbegins the long march back to Calais, France,so they can be home for Christmas. They aretired, sick, injured, wet and hungry. On October25, at Agincourt, they come face-to-face with25,000 fresh, well-rested and well-fed Frenchtroops. On the morning of the battle, Henry has “Henry gave his troops a plan and a vision,”one chance to rally his troops and turn near- said Fisher. “All my experience tells me thatcertain defeat into an English victory. leaders have to have both. Bringing the two together gives power to both of them.”History books don’t record exactly what Henrysaid that morning, but whatever he said worked In Fisher’s leadership paradigm, motivating theextraordinarily well. The battle of Agincourt has organization is just as important as setting targetsbeen immortalized as one of the greatest English and direction, creating organizational structuresvictories of all time. and monitoring results.Shakespeare, that master of inner motivations, Motivating employees inspires them to makecrafted for Henry a speech that galvanized a commitment to go beyond the minimum andthe English troops. He did it by appealing empowers them to help the company achieve itsto their honour; he appealed to their sense objectives. It is about articulating and bringing toof fellowship; he promised them fame and life the values that are consistent with the visionimmortality, depending on whether they lived and give meaning to the work. It is aboutor died. connecting emotions with the job at hand.”The focus was on values – not money, not “Treat your employees like volunteers and theyauthority – because values are what motivate will go the extra mile for you,” said Fisher. “Leadpeople,” said Fisher. “That’s as true today as it with your heart, as well as your head. Create awas 400 years ago.” vision. Have a plan. Energize your people.” In Fisher’s view, that is the essence of leadershipHenry also had a revolutionary battle plan, Fisher whether your battle is for market share or for thepointed out. He chose a wide muddy field as English throne.his battleground. The French troops, as theycharged across the field in their heavy armour, It worked for Henry V. In fact, it made himgot bogged down and became easy targets for a hero whose fame has lasted more thanthe English bowmen. 500 years. 5
  7. 7. Wisdom Exchange 2007 KEYNOTE PRESENTATION The success of high performance firms can be Competitive grounded in some down-to-earth attitudes. That’s what CEOs discovered at the 2007 Wisdom Exchange when Art Church, President, CEO and Partner of success: Mancor Industries Inc. in Oakville, Ontario, began describing his company’s successful approach to gaining and maintaining competitive advantages in it starts at the top North America’s hard-hit manufacturing sector. Church is a down-to-earth guy, even if he does have Art Church, an MBA in finance from McMaster University and PRESIDENT, CEO a bachelor of applied science in mechanical AND PARTNER, engineering (P.Eng.) from the University of Waterloo. MANCOR INDUSTRIES INC. Over the past 10 years, Mancor, a precision manufacturer of metal components and sub-assemblies to original equipment manufacturers (OEMs) in the mid-volume transportation-equipment industry, has seen growth in their employee numbers, plant locations and sales. Major clients include John Deere, Freightliner, Caterpillar and Volvo. “Basically, we’re hole drillers,” Church said. “We learned that if we drill the holes in the right place, people pay us more.” His description of Mancor’s approach to business was down to earth and his opinions on major issues were equally up-front. The company’s operating philosophy is based on three principles: • Decentralized plants are run by stand-alone management teams with full profit-and-loss responsibility. “We get far better results,” said Church. “Customer relations are better, as is the rate of technology innovation.” • Head office develops systems infrastructure and facilitates best-in-class performance. “Responsibility for the company’s success lies with the CEO,” Church stated firmly. “The reasons for success have to do with having good employees, good systems and equipment, good suppliers, good customers and good fortune, but the responsibility rests with the boss.” 6
  8. 8. “ If an idea is good, people can usually just explain it. If it’s not so good, they usually say, ‘We should do it for strategic reasons. “• Continuous improvement is embedded deeply and firmly into the corporate culture. “It means we’re never satisfied, that we’re always looking for a better way,” he said. “It also means we’re not afraid to make mistakes.”The search for innovations, improvements and new ideasis never-ending. Every quarterly management meeting, forexample, includes a visit to a customer or other businessin the city where the meeting is being held. “You can Church’s focused, down-to-earth approacheven learn from a well-run restaurant or dry cleaner,” characterizes his views on two major issues facingsaid Church. “But don’t do something just because Canadian manufacturers today.Toyota does it. Do it because you understand the logic • The high Canadian dollar:and the wisdom and can see how to apply it successfully “Stop complaining,” Church told the businessto your own business. Make the idea your own.” leaders in the audience. “The Canadian problem is not a high dollar but wage and service costsIn addition to ideas, good plans are absolutely that are too high. We need to reduce manpoweressential. Church’s observation is that many ‘get stuck’ expenses with automation. Wage rates areat the plan and repeatly re-do it; to make the plan a complex problem to solve. We may needwork, you must work through the cycle and continually some help with that.”improve it. At Mancor, new ideas have to pass two • Competition from China:critical tests. The One Page Test means they must be “China is almost impossible to beat so we’veable to be described on a single sheet of paper. The adopted the ‘bear in the woods’ solution,” saidBar Test means they have to be simple enough to be Church. “Everyone knows you can’t outrun a beardescribed and understood in a crowded, noisy bar. in the woods. But I don’t need to run faster than the“If an idea is good, people can usually just explain it,” bear, I only need to run faster than you.”said Church. “If it’s not so good, they usually say, ‘Weshould do it for strategic reasons.’” Despite the competitive threats posed by China and other emerging nations, the high Canadian dollarChurch is a big believer in the 80/20 approach, which and other pressing issues, Mancor is growing. Partsays that 80 per cent of the value is usually generated by of the spirit driving that growth, is his firm belief in20 per cent of the activity. It is a rule he applies in many the importance of focusing on the customer andareas of the business, including training. “Training plans combining good business with a little fun. “Have fun”with high value result in people acquiring skills that help is embedded right in the company vision, along withthe business improve,” he said. “We develop most of our being “Best-in-Class”, “Profitably Growing Mancor”training programs ourselves. First we identify the 20 per and “Being Safe.”cent of the concepts or skills that will generate the 80 percent value to Mancor, then management teaches the As Church explained, “If people like to come to workprogram. We have learned that shorter is better: the and people like to do business with us, we thinktarget time for most training is two hours.” that’s cool.” 7
  9. 9. 1. 2. During the past 15 years, the Internet, e-mail and Innovative the World Wide Web have revolutionized the business world, yet many experts believe the real transformation has just begun. marketing:Wisdom Exchange 2007 WORKSHOP As the Internet transforms from an information source to an interactive site for collaboration, new Web 2.0 opportunities are emerging for businesses of all sizes. New Web-based technologies such as blogs, wikis, social networks and a remarkable technologies new breed of collaborative software suites hold the promise of changing even more dramatically how businesses operate. Yet these second-generation 1. Dr. Cindy M. Gordon, Internet capabilities, collectively known as Web FOUNDER AND CEO, 2.0, also raise a number of questions voiced by HELIX COMMERCE CEOs at the innovative marketing workshop. INTERNATIONAL INC. How can SMEs benefit from opportunities arising 2. Ron McKenzie, from new technologies? What precisely is CEO, OCTOPZ changing? How can these advances in technology help companies reach customers? What business models offer the best chances for success? What are the implications of not being Web 2.0 ready? How can businesses prepare? Who has time for all this? These are questions that Dr. Cindy Gordon, Founder and CEO of Helix Commerce International Inc., has come to grips with on behalf of early- stage growth companies and industry leaders such as Amdocs, Astra Zeneca, Bell Canada, CIBC, Microsoft and Rogers. “Where Web 1.0 emphasized connectivity and information retrieval, Web 2.0 stresses social interaction,” explained Gordon. “Collaboration, in the form of a marriage of social networking and new media technologies, is the strongest force shaping business practices today. It is now mission critical for businesses to create organizational structures that 8
  10. 10. “ The next generation of workers will be seeking a sense of ownership of their work and will expect to have a level of input in every segment of the company. “make collaboration the cornerstone of highperformance workplaces. Collaboration,globalization and diverse teams will characterizehow and what work is done.” This Open Sourcemovement, as it has been called, promotes easycollaboration and improvisation.One of the most remarkable aspects of theseleading-edge technologies is that users can muchmore easily change and re-shape the tools to meet “What this means is that you can work withtheir evolving needs. One of the easiest, simplest colleagues anywhere in the world, any time,and least expensive ways for a company to begin together or individually, without ever leavingWeb 2.0 applications is through a CEO blog. your office,” said McKenzie. “The result isA blog (short for “web log”) is like an informal, improved decision making and acceleratedonline diary or newspaper column. A blog can speed-to-market, which can create a hugebe written daily or even more often by the CEO competitive advantage in todays fast-pacedand posted on the company’s intranet where business environment.”everyone can read it. Anyone can comment,add information, ask a question or respond “So-called smokestack industries – financialto a comment or question. It becomes an open, services and world-leading brands – areongoing conversation in which people across the adopting these technologies because they addcompany can participate equally. Blogs also allow value,” added Gordon. “They link people so theythe sharing of direction, can be tracked, and can open doors both within and on behalf ofare searchable. your company.”“One of the side benefits of blogs is that they have a For CEOs looking to grow their companies,strong appeal for the next generation of workers,” Web 2.0 applications can provide a set ofsaid Gordon. “The next generation of workers will be powerful tools with far-reaching potential. Theirseeking a sense of ownership of their work and will flexibility and ease of use add to their appeal,expect to have a level of input in every segment of especially for executives whose 24/7 schedulethe company.” is already fully booked.Ron McKenzie, CEO of Octopz, provided workshop On the issue of online security, it should beparticipants with a real-time demonstration of the kind managed and monitored like any asset inof technology available to companies that embrace your company. The recommendation is to startthe collaborative potential of Web 2.0. From the inside your company with social networking toworkshop floor via the Internet, he contacted a see the results before launching external tool kits.colleague at another office. They could see each In Gordon’s expert opinion, there is absolutely noother on the screen and they could discuss and make question that, when it comes to Web 2.0, “thechanges to a document in real time. benefits far outweigh the risks.” 9
  11. 11. A curious thing happened with the shift to Organizational knowledge workers and team-focused environments. Companies realized that how people felt about their work and how co-workers related to each other had excellence: a direct, bottom-line impact. Emotions in theWisdom Exchange 2007 WORKSHOP workplace could no longer be ignored. The challenge was what to do about them. the seven keys The concept of emotional intelligence, defined as the ability to understand and manage the emotions to making your of oneself, of others and of groups, began to gain traction among people who were trying to build high performance organizations. Some people, organization Steven Stein, CEO of Multi-Health Systems, among them, came to believe that great organizations thrive by winning the hearts and minds of their great people. “It was a tough sell for about 10 years,” said Stein, a leading expert on psychological assessment and emotional intelligence. Dr. Steven Stein, CEO, MULTI-HEALTH SYSTEMS Multi-Health recently completed a study involving more than 2,000 employees from a variety of organizations in several countries. One of the core questions was “what makes a workplace great?” In Stein’s analysis of the survey results, three core elements emerged: • The fit between a specific individual and a particular job: “There are a lot of square pegs trying to fit into round holes,” said Stein. • The importance of good relationships in the workplace: “The most productive people are the ones who have a best friend or friends at work.” • Having a sense of purpose and feeling that what your company does is important. Organizations can boost their performance dramatically by improving one or more of those elements. The U.S. Air Force, for example, came to Multi- Health with a serious employee issue. It was under10
  12. 12. “ Connecting people with the right jobs, connecting co-workers together, and connecting all of them “ to a sense of purpose is the path to building a great workplace.pressure to increase recruitment. One of its biggestchallenges was that the turnover rate amongrecruiters was very high – about 50 per centretention rate after one year. Multi-Health studiedthe emotional intelligence of high-performingrecruiters. They found that the Air Force’s best andhappiest recruiters had, among other attributes,high levels of empathy. The Air Force startedscreening potential new recruiters for empathy andother key attributes linked to emotional intelligence. fewer hours than their colleagues and thatThe retention rate is now 92 per cent, generating people who put in long hours – workaholics –$2.7 million annually in savings because the Air can be less productive than you would think.Force no longer has to find, train and replace so Again, match people to the workload.many recruiters. 4. Build strong teams with shared purpose and“Connecting people with the right jobs, connecting visible goals: Recognizing and celebratingco-workers together, and connecting all of them to measurable achievements helps to validatea sense of purpose is the path to building a great relationships and a sense of purpose.workplace,” Stein told delegates at the WisdomExchange. “What we want our employees to feel 5. Make sure managers can manage: Ensureis TGIM – Thank God it’s Monday.” managers have the right skills. Employee surveys show that only about 50 per cent of managersThe links between emotional intelligence and and supervisors are seen to be dealingsuccess can be adapted and applied to effectively with underperforming team members.organizations, resulting in higher performing teamsand workplaces. Stein has identified seven keys to 6. Treat people with respect and leverage theircreating a more emotionally intelligent unique talents: Studies have shown a linkorganization: between lack of respect for diversity and anger in the workplace.1. Hire capable people who love their work: Match people to the job and show them how 7. Be proactively responsive by doing the right they can be part of something larger than things to win the hearts and minds of your the organization. people: Stay in touch with the issues that are important to your employees. Pub nights, bagel2. Compensate people fairly: Since “fairness” is a breakfasts and town halls can all help to identify perceived value, paying people more money is staff issues – and solutions. not always the answer. Sometimes job flexibility or training opportunities are valued more highly These insights are explored further in Stein’s latest than a raise. book, Make Your Workplace Great: The 7 Keys to an Emotionally Intelligent Organization, along with3. Dont overwork (or underwork) people: Studies strategies that organizations can adapt to take their have shown that high performers often work performance to the next level. 11
  13. 13. Companies searching for ways to sharpen their Lean culture: competitive edge are looking closely at lean manufacturing techniques, and for good reason. Pioneered by Toyota, then spreading to aerospace techniques for and other industries, lean processes have beenWisdom Exchange 2007 WORKSHOP credited with helping some companies gain huge efficiencies. Reductions of 50 per cent or more business growth in such areas as manufacturing lead times, inventory and overhead costs and improved quality and productivity have been reported. Scott Smith, PRESIDENT, Improvements of that magnitude have caught the HIGH PERFORMANCE SOLUTIONS INC. attention of business leaders everywhere, including Wisdom Exchange delegates who participated in the Strategies for a Lean Culture workshop. One company was eager to adapt lean strategies but lacked a coherent plan. Another company was moving to a new plant and wanted to set it up as a lean facility. A third firm wanted to learn how to sustain its lean approach after initial successes. Scott Smith, President of High Performance Solutions Inc., brought 20 years’ experience in lean implementation, continuous improvement and supply chain management to help workshop participants understand what “lean” really means and how they could start or expand their lean approaches to manufacturing. One of the myths that many people (especially nervous employees) believe about lean production is that it is just another euphemism for cutbacks. Nothing could be further from the truth. “Lean is about growth, not about reducing head count,” said Smith. “Lean is about eliminating waste. If employees come to believe it’s about head-count reduction, the lean program is dead.” The main drivers of ‘Lean’ are people (to foster lean thinking), processes (to eliminate waste), technology (to provide tools that support people and processes, and the end-result (customer success).12
  14. 14. “ More than 95 per cent of opportunities for cutting waste are found in production activities that don’t directly add value from the customer’s perspective such “ as downtime, too much inventory, overproduction and product defects.First and foremost, the lean approach is holistic.“It’s a whole enterprise tool that encompasses acompany’s entire business, from preparing thequote to collecting the cash,” said Smith. “It shapesboth the manufacturing value stream [things thatdirectly add value] and the customer value stream[what the customer is willing to pay for].”Secondly, because the lean approach involves theentire company, responsibility for implementing it is Finally, energizing the lean culture is an unwaveringshared throughout the organization. Everyone has commitment to continuous improvement. Smitha responsibility to spot where waste is occurring. suggested that companies focus on four improvementEveryone has a responsibility to identify objectives in their order of importance:opportunities for improvement. • Increased safety, which removes waste, avoids injury costs and fosters employee“More than 95 per cent of opportunities for cutting commitment to lean processes. Increased safetywaste are found in production activities that don’t leads to . . .directly add value from the customer’s perspective • Increased through put, by reducing downtime.such as downtime, too much inventory, Slowing down to get the job done rightoverproduction and product defects,” said Smith. increases safety and also leads to . . . • Increased product quality. Higher product qualityThis company-wide sharing of responsibility leads to . . .and hands-on involvement needs to be • Lower costs, by reducing the need for rework tochampioned, supported, rewarded and sustained correct flaws.by management. It requires learning newskills. It involves significant investments of time Adopting lean manufacturing approaches is not aand money. quick fix. “Changing to a lean culture can be challenging and can’t be accomplished overnight,”For many firms, adopting lean techniques means a said Smith. “Your company should plan ondramatic change in corporate culture. “Company devoting three to 10 years to the effort.”culture plays a key role in moving toward lean,”Smith said. Creating and sustaining a successful In fact, the job of creating a lean production systemlean culture requires company commitment in five is never complete. The most advanced leankey areas: practitioners (such as Toyota) continue to seek• Vision: Without vision, there will be confusion. improvements, even after many years of• Skills: Without skills, there will be employee implementing lean. anxiety.• Incentives: Without incentives, change will be On the other hand, the benefits continue to grow. at best gradual. Lean techniques helped Toyota become one of the• Resources: Without adequate resources, there world’s largest and most profitable companies. And will be frustration. that is a pretty solid endorsement of the power of• A plan: Without a plan, there will be false starts. thinking lean. 13
  15. 15. 2. 1. 3. “There’s more money and more sources of money Financing growth: available to Ontario businesses than ever before,” said moderator Rick Spence in setting the tone for the Financing Growth workshop, a crash course some capital in how to identify the right type of capital forWisdom Exchange 2007 WORKSHOP growing businesses. ideas Spence offered a few recent statistics to show why capital is more abundant than many entrepreneurs think: 1. Moderator: Rick Spence, • According to the Canadian Venture Capital SMALL-BUSINESS CONSULTANT and Private Equity Association, private capital 2. Dennis Ensing, Director, invested $5.1 billion in 36 disclosed buyout WISE MENTOR CAPITAL transactions in the first quarter of 2007, nearly 3. Ryan Kovac, Vice-President, half of the total amount invested in all of 2006. MMV FINANCIAL INC. • Venture-capital investment in the first quarter of 2007 totaled $598 million, a 61% increase over the first quarter of 2006. The growth in dollars invested was even stronger in Ontario, where $302 million was invested in 42 companies. • The Toronto Stock Exchange’s Venture Exchange facilitated $590 million in business financing in 2006, more than double the 2005 total. The new PROFIT 100 list of Canada’s Fastest- Growing Companies shows today’s top growth companies tap many kinds of financing. According to the June 2007 issue of PROFIT magazine, many PROFIT 100 companies use the following sources of financing: • Banks (76%) • Leasing (60%) • Friends or relatives (35%) • Public stock issues (28%) • Private investors (25%) • Venture capital (23%) • Foreign banks (17%) • Angel investors (16%) • Asset-based lending (9%) • Employees (8%) • Supplier (6%) • Commercial paper (4%) • Bond issues (2%)14
  16. 16. “ When pitching investors, enterpreneurs should focus on three key areas in the business plan: management, the market opportunity and your product or business. “Another theme from this year’s Profit 100 list wasexplored: many growth firms advocate conservativefinancing. These companies try hard to minimizeexpenses and boost cash flow, so they are lessdependent on outside financing. Some companieskeep business plans and financial plans up-to-dateand meet regularly with bankers, venture capitalistsand other financial sources in order to understandwhat capital is available to them should they everdecide to use it. These penalties could be as severe as forcedIn the workshop discussion, detailed questions sale of the company or replacement of theabout financial alternatives were answered by management team.Ryan Kovac, a former venture capitalist who now • How long should your business plan be? “supplies “venture debt” as vice-president of MMV As a marketing document,” said Ensing,Financial Inc., and Dennis Ensing, an experienced “20 pages should be enough. In fact, he saidCFO who now helps other companies raise money it is your one- or two-page executive summaryas director of finance with Wise Mentor Capital. that will (or won’t) earn you a meeting with potential investors.Here are some of their key observations: • “When pitching investors, entrepreneurs• Web 2.0, health care and “clean tech” should focus on three key areas in the (environmental technologies) are currently business plan: management, the market considered “hot” by investors. opportunity and what’s unique about your• In discussing the cost of capital, Ensing plotted a product or business,” Kovac advised. chart of financial alternatives based on • To identify investors most likely to be receptive anticipated annual rates of return and the risks and interested in your business, Ensing advised: investors are willing to assume. He said angel “Do your research. Use a rifle, not a shotgun, to investors (private individuals making high-risk, find investors,” added Ensing. Don’t go to an IT early-stage venture investments) usually target venture-capital firm if you’ve got a biotech deal.” 50% to 60%, venture capitalists expect about • Kovac offered more details on venture debt, a 40%, while private equity about 25%. Expect to growing form of financing that is secured against pay 18% to 19% for venture debt (subordinated a company’s assets and intellectual property. debt for growth companies). The banks look for Mainly targeted to growth firms in technology 5% to 6% a year. and life sciences, venture debt includes an• There is another price to be paid for equity, equity kicker, but no financial covenants, says Ensing noted: “The higher you go on this Kovac. “We just want you to pay us back curve, the more intervention is sought by your every month.” financial partners.” • “Going public ideally should be an event• Ensing emphasized that business owners should of liquidity [i.e., cashing out of a company], focus more on the terms of a deal (and the not a financing event,” said Ensing. “Because shareholder’s agreement) than the cost of of the cost and complexity, going public financing. Conditions could include penalties for is the option of last resort; however, it can failure to achieve a “liquidity event” within a generate financing where other options have designated time period or for poor performance. been exhausted.” 15
  17. 17. Defining Success: learning from the best practices of Ontario’s high performance firms The Ministry of Small Business and than 12 ‘best practice’ business activities.Wisdom Exchange 2007 MINISTRY PUBLICATION Entrepreneurship released a new report at Respondents also provided insights into focus the Wisdom Exchange on June 5, 2007. areas such as the nature of innovation, challenges for the future and important Defining Success: Learning from the Best business lessons learned. Practices of Ontario’s High Performance Firms provides an overview of the importance Notably, of the four best practices that of Ontario’s small and medium enterprises more than two-thirds of the CEOs rated as (SMEs) that employ 2.8 million people in most important, three were people-focused. Ontario and generate $120 billion in annual Having empowered employees with the economic activity. right skills and winning their commitment to growth were seen as key reasons for The report then focuses on high performance their success. SMEs as major contributors to Ontario’s economic vitality. High performance SMEs, have: The other top-ranked factor was the • Sales growth of at least 50 per cent in importance of developing and implementing three of the past five years; product- or service-innovation strategies. • Between 10 and 500 employees; and Many of the respondents said that • A global head office in Ontario. government programs had helped them conduct research and develop innovative To determine what critical business products and services. approaches led to high performance and growth of Ontario firms in today’s global To read more about the success factors of marketplace, Defining Success measures high performance firms in the Defining best practices used by leading SMEs to Success report, and to access Wisdom successfully grow their businesses. For this Exchange program updates, all of the study, Deloitte interviewed 130 business publications in the Leading Growth Firm owners, presidents, CEOs and other senior Series, the Ontario Business Program Guide, leaders in a variety of sectors across the and more, visit the Ministry’s new and province and identified the impact of more improved website at www.sbe.gov.on.ca.16
  18. 18. Contact: Ministry of Small Business and Entrepreneurship Business Advisory Services Branch Partnership and Business Development 56 Wellesley Street West, 4th Floor Toronto, Ontario, M7A 2E7 www.sbe.gov.on.caPrinted in Ontario, Canada on recycled paper © Queen’s Printer for Ontario, 2007