Wisdom Exchange 2009 – Winning Strategies in Turbulent Times


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Economic conditions have shifted significantly since the last Wisdom Exchange. The program held in February 2009 aimed to give the presidents and CEOs of Ontario's most successful Small and Medium Enterprises the tools to both face these challenges and develop new opportunities.

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Wisdom Exchange 2009 – Winning Strategies in Turbulent Times

  1. 1. Inside Tough times are right for sparking innovation 4 Experts paint economic picture and forecasts 6 Wisdom Exchange REPORTER Workshop Exclusives: Lean and green 8 Managing finances 10 Securing financing 12 World markets 14 February 18 and 19, 2009 Winning Strategies in Turbulent TimesMessage from the Honourable Harinder S. TakharMinister of Small Business and Consumer ServicesThe economic world has changed initiatives, such as creating a markets (www.exportaccess.ca).tremendously since the last projected 50,000 new green jobs. The Next Generation of JobsWisdom Exchange held in You can access the proposed act Fund (NGOJF): A five year,Ottawa in February 2008. These through www.greenenergyact.ca. $1.15 billion strategy to helpare, as this year’s theme so aptly Many Ontario companies have innovative companies grow andstates, turbulent times. already found success by going create well-paying sustainable The Ministry organizes the green. The Ministry has brought jobs for today’s workforce, andWisdom Exchange to provide a together the experiences of early the next generation of Ontario’sforum where CEOs, presidents adopters in a new report called highly skilled workers (www.and business owners can meet, Think Green. This report includes ontariocanada.com/ontcan/en/share best practices and discuss highlights from a roundtable nextgen_main_en.jsp).the latest trends with each other discussion by leaders of six award be more reliable and better able Advanced Manufacturingand leading industry experts. winning Ontario firms, and profiles to accommodate renewable Investment Strategy (AMIS): The Many of you are facing tough of innovative small and medium energy, and investing in education $500-million program provideschallenges, and rethinking how enterprises that have seized green and training so that your workers repayable loans, interest free foryou do business. One business opportunities and reduced costs, have the skills and knowledge up to five years, to encouragestrategy explored at this year’s strengthened their brand, and businesses need. companies to invest in leading-Wisdom Exchange is “going generated revenue. It also provides With support from the edge technologies and processesgreen.” advice from environmental experts Ontario Government, there are (www.ontariocanada.com/ont- There are tremendous oppor- on how companies can begin their new programs and initiatives to can/en/progserv_amis_en.jsp).tunities emerging and experts green journey and reduce their help Ontario businesses grow and I would like to thank all of thebelieve that going green will firm’s carbon footprint. It can be prosper. Four examples are: speakers, presenters, workshopfuel a fundamental shift in our accessed at www.ontario.ca/sbcs Canadian Manufacturer moderators and panellists, andeconomy. “Thinking green” is (click: Leading Growth Firm Series). and Exporters (CME) SMART attendees for contributing to thevery much top-of-mind for the Our government’s highest pri- Program: Helps small and success of this year’s WisdomOntario government. In ority is to help Ontarians through medium-sized manufacturers in Exchange and for taking timeFebruary 2009, Premier Dalton this recession and build a stronger, Ontario improve their productiv- from your immediate businessMcGuinty announced the Green more competitive economy. Our ity so they can compete more pressures to look ahead.Energy Act (GEA): A Vision for five-point economic strategy will effectively in the global economy I am confident that the high-the Future. The GEA is a bold help businesses both in the short (www.cme-smart.ca). lights captured in this report;series of co-ordinated actions and long-terms. We’re building Export Market Access (EMA): as well as our Think Greendesigned to enhance economic roads, bridges and public transit A Global Expansion Program publication will provide you withactivity and reduce our climate to help move products and designed to assist small to medium ideas and practical informationimpact. If passed, it will sup- people more efficiently, investing size organizations to access and as you continue to chart aport a variety of climate-positive in a smart electricity grid that will expand their growth in new foreign successful course.
  2. 2. Wisdom Exchange Reporter | 2Company turnaround: long lead times. Project leadersCOM DEV takes it to the top need to be sure that their suppliers will be around to deliver the components. BackStrategic thinking and hard work rescue company in 2002, that was not necessarily the case for COM DEV. WordTough economic conditions. was starting to get around thatDeclining public confidence in they were in trouble.markets. Job layoffs. The top “We had just burned throughnews stories of 2009 are familiar $250 million on a failedto John Keating because they strategy chasing the wirelesswere the same headlines back in market,” Keating recalls. “WeNovember 2002, when he took had a poor reputation amongover the helm of COM DEV analysts. They thought weInternational. At that time, the didn’t know what we werecompany was at one of the lowest doing. We needed to refocuspoints in its 25-year history. and rebuild the company.” Today, COM DEV is riding It was a five-year journey.a five-year wave of success that Like many other manufacturers,has seen revenues grow from COM DEV had to deal with$88 million to $210 million, dramatic appreciations in both thethe share price quadruple and Canadian dollar and materialmarket capitalization increase costs. On top of that, two of theirby 500 per cent. best customers – Boeing and What strategies shaped that Lockheed – stepped away from theremarkable turnaround? In a commercial space marketplace. Inlively presentation that mixed addition, the Canadian govern-passion, humour and hardnosed ment reduced spending on spacebusiness insights, Keating gave an by 40 per cent. During that sameinsider’s account of the changes at time period, both the U.S. andCOM DEV on the opening night Canadian governments introducedof the Wisdom Exchange. counter-terrorism-related export “When I took over, we had controls that had a direct impactproblems,” he admits. “We were on satellite technology.running a $1-million operating Today, COM DEV technologyloss. We were deep in debt. is loaded aboard satellitesEmployees were demoralized. CEO John Keating combines a message of hope with sage advice. used by scientists to monitorWe were nearly bankrupt. But environmental changes, byif you get anything from what launched have COM DEV fluctuations. They must be telecommunications networksI say tonight, I would like you components onboard. COM reliable. Once satellites are and broadcasters, and byto hear a message of hope,” he DEV has supplied equipment launched, there are no service governments for search and rescuesaid. “Even in the most difficult to over 700 spacecraft – more calls, no repairs, no replacement and borders security missions.times, you can get through it. than any other company in the parts. All the components must COM DEV’s dramatic increasesIt’s not easy. It takes hard work. world. Founded in 1974 and be perfect. Anything less could in revenues, share price andBut you can get through it.” headquartered in Cambridge, put at risk an investment of market capitalization are only COM DEV International is Ontario, it now has about 1,200 several years work and millions the financial measurements ofa world leader in the design and employees in Canada, the U.S., of dollars. the company’s turnaround.production of space hardware. the U.K. and China, serving This demands rigorous The payoff also shows in betterBased in Cambridge, Ontario, commercial, military and engineering and design systems, products and shorter productCOM DEV manufactures civil markets. exhaustive testing and analysis, cycle times, the creation of 600components and subsystems Satellite components combine extraordinary manufacturing new jobs and an increasedfor satellites used for commu- equal parts precision and rug- precision and quality control, capacity to contribute tonications, space science and gedness. They must be tough and a spotless corporate the community.remote sensing. More than enough to withstand extremes reputation. Launching a satellite Keating outlined COM DEV’s80 per cent of all commercial of vibration, pyrotechnic shock, is a very expensive, essentially four-point strategy for a success-communications satellites ever cosmic radiation and heat one-off project with relatively ful turnaround:
  3. 3. Wisdom Exchange Reporter | 31. Get out of the wrong business points out. This is especially filter to screen any new product than trying to be more efficient. and into the right one: true in the high-tech field, where proposal. “Only if these four Lean is a whole order of“We were in a number of busi- scientific advances can inspire questions can be answered clearly magnitude greater than that.nesses, some of which had nothing new features that technicians and persuasively is a product It isn’t easy. It’s hard work. Butto do with our core competencies” like but customers don’t value. worth developing,” he says. it pays off.” COM DEV’s Leansays Keating. “We had to decide: COM DEV ran into this during • Why do customers need it? strategy includes the followingcould we be number one in this its foray into the wireless market. • Why would they buy it rather key points:niche? If not, we had to exit. It developed satellite components than make it themselves? • Demand that the organization“Even the process of defining our to support high-definition • Why would they buy it from us continuously improvecore competencies took longer microwave transmission years instead of someone else? • Provide the necessary people,than we thought,” he says, before people were ready for • Why would they buy it now? tools and support“including a number of false it. Keating is a big believer in • Remove MUDA (waste) fromstarts.” It was discovered that products developed through 4. Be Lean, coupled with the organizationCOM DEV’s core competencies “market pull” not “technology operational excellence: • Become process-orientedwere not manufacturing push.” He says not to waste “If you want to beat the • Manage risk carefullymicrowave filters and specialized precious investment dollars on competition, you really do have • Set targets and monitorelectromechanical switches. In things that people won’t buy to be better than them,” said performancethe end, COM DEV focused more and recommends a four-question Keating. “Lean is so much more Viewing the company in itson their expertise in designing larger context in terms of itsperfect components for the space contributions beyond the bottomenvironment. How did the business line, to include what it contrib-grow? They minimized the risk by utes to society, is a powerful sourcegrowing incrementally out from of commitment for employees,their customer base and focused investors and other members ofon market adjacencies: selling the community. “Fundamentally,new products to their established what we do at COM DEV iscustomers and selling established make the world a better place,”products to new customers. Keating emphasizes. “This is very, very important and something2. Understand the operational I’m really passionate about. Success leverage model: all comes down to people.”“This is absolutely key,” explains If you treat your people wellKeating. “Every new dollar of and they are proud of the workrevenue generates a dispropor- they do, then they will be happytionate increase in profitability. to come to work and thatBut, even in very difficult times, enthusiasm is transmitted to youryou’ve got to be prepared to make customers and suppliers who willinvestments.” Operationally, this be happy to do business with you.translated into a drive to increase The effect is to create a virtuousrevenues as quickly as possible cycle with mutually reinforcingwhile managing overhead costs, positive feedback loops.especially general and administrative Keatings conclusion: “If youexpenses, to keep expenses down have the right people who reallyand revenues up. The increased care about the company, who careoperating profit allowed COM about making good products,DEV to re-shape the company. who care producing things thatDuring the turn around, COM make the world a better place,DEV invested $64.2 million in then that’s what really works.capital and facilities, $18.7 million That’s the secret.”in acquisitions and improved itscash position by $33.1 million. Keynote speaker John Keating3. Sell things that people want shares strategies for COM to buy: DEV’s remarkable turnaround“It may seem obvious, but it’s at the Wisdom Exchangenot always the case,” Keating opening dinner.
  4. 4. Wisdom Exchange Reporter | 4Believe it or not – the time is rightto launch breakthrough productsThe innovation process should always be in high gear – even during economic downturnsTo paraphrase Charles Dickens, it improve their ability to create • 78 per cent feel their organization Three years ago, Gillette introducedcould be said that, for innovators, innovation-driven growth. The recognizes the need for Fusion, the first disposable razorthese are the worst of times, these firm has offices in Massachusetts, transformation with five blades. Prior to theare the best of times. Business Singapore and India. During a • 66 per cent feel their organization product launch, they invested $500media pundits everywhere will high-energy presentation, Anthony has committed itself to million in R&D and then anothertell you just how bad things are delved into some of the key lessons transformation $500 million in marketing. Withinand why they are likely going to CEOs could learn from successful “Continuous innovation is the four weeks, Fusion captured 55 perget worse. innovators. He believes that there new normal,” Anthony says. “Keep cent of all new razor sales in the But Scott Anthony thinks that are patterns, systems and strategies in mind that there are entrepre- U.S. Within two years it surpassedthese are exactly the right economic that can be used to effectively neurs in India and China who want $1 billion in sales, the fastest riseconditions innovators need to manage the innovation process. to swim in your profit pool.” to the billion-dollar sales mark inlaunch truly great, breakthrough “Innovation is not some Innovating successfully at anytime Gillette’s history.products. As proof, he points to the mysterious Zen magic,” says is a tough challenge. Anthony Cisco Systems also reaped thehugely successful companies that Anthony. “Anybody can be a cited the track record of Procter rewards of making a bold move inemerged from the last three major successful innovator if you learn & Gamble, a company Innosight uncertain times. During the Asiandownturns in the U.S. economy: how to do it.” has worked with extensively. P&G financial crisis of 1997, while mostGoogle, Best Buy, Southwest The innovation imperative grows has launched a long list of hugely of the economies in the region wereAirlines. And earlier downturns: more pressing every year. A recent successful new products – Pampers, shrinking, Cisco invested heavilyFisherPrice, Kraft, Microsoft. Innosight/Forbes magazine survey Febreze, Crest Whitestrips – P&G and expanded their presence in Anthony is President of Inno- showed that: acknowledges that in the industry, the region. Within a year, theysight, a consulting, training and • 79 per cent of organizations 80 to 85 per cent of new brands had gained Number One marketinvestment firm that works with feel the business environment and products fail. position in almost all the AsianFortune 500 companies, start-ups, has increased the need for However, the rewards of successful countries and have never lost thatnon-profits and governments to transformation innovation can be spectacular. market dominance. Juggling mindsets One of the dilemmas that innovative CEOs struggle with is that the skills most valuable in managing an established, successful business are very different from those needed to drive the innovation process. Managing a complex, ongoing business requires precision, predictability and controls. The innovation process calls for risk- taking, fluid systems and the ability to thrive within an environment characterized by uncertainty, ambiguity and diversity. Holding these two very different mindsets simultaneously is a tough juggling act. Anthony recommends setting up two distinct business units within the company: one focused on making the core business as strong as possibleScott Anthony’s message is that economic scarcity is the best time for innovators. through lean techniques and other
  5. 5. Wisdom Exchange Reporter | 5strategies; the other with a mandate better to put something out thereand resources to focus on driving and see the reaction and fix it onthe innovation process effectively the fly. ‘Perfect’ is the enemy ofand efficiently. ‘good enough.’” Nevertheless, CEOs need to Quality is a relative term,accept that it will be an ongoing Anthony emphasizes. A $100juggling act. “The core business will digital camera that plugs directlyconstantly pull at the new business into the USB port of a computerunit for attention, for resources. will not have the same quality lensIt’s as reliable as gravity,” explains as a $5,000 professional model. ButAnthony. “After all, the new it’s good enough if all the customerbusiness is risky. It gives you wants is to upload a few snapshotsheadaches. The established to Facebook – and that’s goodbusiness is what you know how enough to win market share.to do successfully.” It takes a certain level of mental Existing corporate cultures strength to drive a continualand structures can also hinder, process of launching new productsunintentionally or not, the innovation and exiting old.process. An example? Sony Scott Anthony says that innovation is not some Zen magic. Anthony recommends that,dominated the portable music to strengthen their innovationmarket through the 1980s and 90s, kits largely for recreational games. assumptions and strategies being muscles, executives shouldfirst with their Walkman and then It took visionaries like Bill Gates tested continually, and new insights deliberately seek out new ideasthe Discman, but totally lost the and Steve Jobs to sense the poten- gained. These are worked into a and information: for example,market when MP3s came along. tial of these little 8K wonders. new set of assumptions, strategies attending a conference in a totallyWhy? Anthony recalls a Sony “Successful transformative change and — as quickly as possible — different industry. Or by writingexecutive as saying about the involves re-imagining the business,” product prototypes. 10 questions that impose orthen-new music format, says Anthony. “Aim to disrupt the “It’s critically important to con- remove constraints: for instance,“I don’t really like hard disks – market. Do things differently, not stantly ask questions. In fact, the what if gas was $10 a gallon?they’re not Sony technology. As an just better. Break the rules. Change worst assumption you can make is What if gas was free? Theseengineer, they’re not interesting.” the market mindset.” that you are right,” he says. “More kinds of exercises can help Secondly, at the time MP3s were Develop a new way that helps than 90 per cent of successful new break mindsets and open upfirst entering the market, Sony had people get a necessary job done ventures start off following the new avenues of innovation.a music division that was dead-set more quickly or more easily, wrong strategy.” And given the recent gyrationsagainst supporting the development Anthony suggests, as Intuit did That’s why it’s integral to of the market, these off-the-wallof any technology - such as the with its QuickBooks software for approach innovation strategically. questions may not be allMP3 format - that could be used small business. • Ensure your core is in control. far-fetched as they might haveto pirate their music. Today, Apple QuickBooks helped small- • Gain a clear understanding of seen in calmer conditions.owns 85 per cent of the MP3 business owners who lacked your core. To respond directly to the currentmarket through it ubiquitous accounting skills to manage their • Create a clear game plan. downturn, Anthony advances aiPOD, which coincidently was businesses. As Anthony relates in • Allocate resources to achieve number of strategies including:launched in 2001 just as the tech the book, The Innovators Guide to your objectives. • focusing on a few innovationsbubble burst and a major recession Growth (Harvard Business Press), Anthony is a strong believer in that have the highest potentialrolled out across the U.S. prior to QuickBooks, the prevailing accelerating the prototype process • focusing on product features that When it first arrives on the assumption was that software for and getting your innovation into appeal to value-oriented customersscene, disruptive technology small businesses had to include the hands of customers as quickly • mitigating innovation riskusually has at least one accounting features. But small- as possible. Then watch their through partnershipscore problem. business owners didn’t care about, reactions and see how they actually Anthony is convinced that The MP3 music format didn’t nor did they understand, those use it. Often, he explains, customers these really are the best of timeshave a good business model until features. They just wanted to make can’t tell you in advance what they for innovators and that theApple started selling music at 99 sure they didn’t run out of cash. The want from a new technology until current economic scarcity willcents per track. Cell phones 20 result was that QuickBooks was the they use it. fuel a wealth of new breakthroughyears ago were the size of a brick first accounting software with no To back up this assertion, he products and services. “It turnsand needed a briefcase-sized battery accounting in it, and it became the quotes Meg Whitman, President out that deep pockets and bigpack. When personal computers market leader within a month. and CEO of eBay from its teams are actually innovationfirst came on the market, they were In Anthony’s model, innovation start-up phase of 30 employees killers,” he says. “Scarcity is ansold as mail-order, do-it-yourself is a repeating process with market in 1998 until 2008: “It’s much entrepreneur’s advantage.”
  6. 6. Wisdom Exchange Reporter | 6Featured speakers John Fursey (left) and Jayson Myers (right) discuss harsh realities of today’s economic conditions and forecasts.A picture emerges from accurate dataLatest statistics provide insight conditions in Canada. It was a are risks ahead: more financial • thin profit margins reminder of why economics is turmoil, uncertainty over China, • weakness in key markets (housing,While it sometimes seems that called “the dismal science.” The Canadian dollar appreciation and automotive, industrial equipment,executives are drowning in data, picture was not pretty. other unknowns. capital projects)finding accurate information that “What we’re witnessing is financial Even before the financial crisis • higher levels of risk andcan generate insights and guidance deflation on a global scale,” Myers erupted last fall, Myers notes, uncertainty around receivables,can be a challenge. To help fill explains. At one time, analysts Canada’s manufacturing sector was currency and pricing volatilitythat gap, two of Canada’s leading thought that if financial risk was suffering. Between 2002 and 2008, • meltdown in customer demandexecutives joined forces for a Town spread broadly, it would be exports rose 12.7 per cent in current • financing difficultiesHall presentation on what was more sustainable. Instead, what dollar terms, but this masked that Nevertheless, Myers’ data showshappening in the economy and happened was that the collapse they actually fell by 6.9 per cent in that many business leaders remainhow executives were responding of the mortgage-backed securities volume. Similarly, exports to the U.S. cautiously optimistic in theirto the unprecedented levels of undermined the foundations of in the same period increased by 0.8 outlook. While two-thirds ofglobal change. portfolios worldwide. A domino per cent in value but fell 15.8 per executives report a decline in new First up was Jayson Myers, effect started and couldn’t be cent in volume. Excluding oil and orders over the past three months,President and Chief Economist of halted. Asset values, the bedrock gas, exports to the U.S. between the same percentage expects athe Canadian Manufacturers and on which everything stands, are 2002 and 2008 fell 17.8 per cent in return to 95 per cent of normal levelsExporters (CME), who has been highly uncertain. value and 18.4 per cent in volume. (or better) within three months.recognized by the firm Watson Total manufacturing sales have And there are opportunities forWyatt as the most accurate Forecasts also suffered. Between December companies with cash and investmenteconomic forecaster in Canada. 2007 and December 2008, strengths, Myers points out. Some He was followed by John Fursey, What we have, Myers believes, is manufacturing sales nationally competitors will either fail or be ripethe Canadian Leader, Financial a global recession – centred on the dropped by 9 per cent, slightly for acquisition. New customerServices Sector, IBM Global U.S. – that will be deeper and last more in Ontario (9.4 per cent) demands will emerge, opening upBusiness Services. Fursey led the longer than the current consensus while NewBrunswick and possibilities for new product andCanadian component of IBM’s forecasts. “What we are facing is Newfoundland/Labrador suffered market development.recently completed 2008 Global new,” he says. “Past statistics are punishing declines of 30.5 and “Ontario’s advantage,” heCEO Study: The Enterprise of not a reliable basis for forecasting 31.4 per cent, respectively. says, “is in the ability tothe Future. the future.” The result is an economic customize and specialize, especially Myers quickly sketched an Financial stability is a prerequisite landscape in which challenges in niche production. Thoseoverview of the current economic for economic recovery, but there loom large: strengths fit well with these times of
  7. 7. Wisdom Exchange Reporter | 7changing customer needs • business model innovation – as an opportunity and not need for cost reductions withand demands.” their response to these changes. a threat.” the potential return on necessary Customer-driven change was “CEOs see significant change For many organizations, the investments.also the focus of the 2008 IBM and opportunity ahead,” notes impact of all these pressures is “Cost reductions can’t be done inGlobal CEO Study (ibm.com/ John Fursey. “In response, they driving greater global integration a vacuum,” Fursey cautions.enterpriseofthefuture). More than are radically changing their so they can more easily exploit “You have to look at the role that1,100 CEOs were interviewed business designs.” opportunities, capabilities, a particular business function playsface-to-face for this, the third In 2008, 85 per cent of CEOs knowledge and assets wherever in the business model, look at theedition of the examination of worldwide reported that they may reside. It is also leading customer value it creates and ask:changing attitudes in the they were expecting significant to a rethinking of business models What is the optimal way to createboardroom. It focused on change within the “More than to sharpen the focus on creating that value?”how organizations worldwide two-thirds of CEOs see this greater customer value. With the pace of global changeare addressing: as a positive opportunity to escalating in a time of tighter• new and changing customers – differentiate and are taking Achieving a balance budgets, a new perspective is changes at the end of the innovative steps in response,” needed. “It’s not about value chain explains Fursey. “Most One of the challenges CEOs face asking how can you do the same• global integration – changes Canadian CEOs see corporate in making major changes during thing at a lower cost,” he advises. within the value chain social responsibility (CSR) a downturn is balancing the “It’s about doing things differently.” External Forces Impacting the Organization Interestingly, people skills top the list in Canada by a long shot! Source: IBM Global CEO Study 2008.
  8. 8. Wisdom Exchange Reporter | 8 Workshop Exclusive Lean and GreenLean times bring a wealth ofnew green business opportunities Rob Coleman, Moderator Editorial Director, Environmental Group CLB Media Inc. Philip J.A. Ling, Panelist Partner, Vice-President, Technology Powersmiths International Corp. David Henderson, Panelist Managing Director XPV Capital CorporationThe topic was Lean and Green, but Obama signed the US $787 generated capacity will be online intended to make the provincethe workshop discussion quickly billion economic stimulus by 2009, nearly doubling since greener, stronger, and in a betterfocused on green – and for good package, which includes nearly 2008. The province has targeted position to win and compete byreason. In these lean times, the $80 billion specifically earmarked 100,000 solar-energy systems in- making it easier to bring renewablegreen market is heating up quickly. for green initiatives, including stalled in households. Investments energy projects to life, fostering aAround the table, participants were $33 billion for clean-energy in renewable energy projects which culture of conservation and attractingeager for information about new projects, $27 billion for energy- have come on-line since 2003, or new investment.opportunities and to talk about efficiency initiatives and $19 billion are currently under construction This will create a wealth of newtheir own experiences with green for green transportation. Supporters in Ontario, total $3.5 billion and business opportunities in Ontario,business practices. have hailed the bill as a landmark have created about 2,700 direct from manufacturing and installing Rob Coleman characterizes in America’s transition to a lower and indirect jobs. commercial and residential solar,today’s challenge as “how to best carbon economy. Ontario’s proposed Green wind, biomass and biogas energyalign your business with the green In the domestic market, Energy Act (GEA), introduced by generation systems to developingeconomy.” He began the session Ontario’s commitment to green Premier McGuinty in the Legisla- and marketing innovative energy-by quickly outlining two major energy over the past few years ture on February 23, 2009, would conservation technologies. Forinitiatives that are expected to has produced substantial results. establish Ontario as a leader in small and medium enterprisesstimulate a wealth of green The number of wind turbines, North America in building across all sectors, green-basedbusiness opportunities. for example, has increased from renewable energy, encouraging opportunities will enable entrepre- On the day before the confer- 10 in 2003 to 589 today. More energy conversation and creating neurs to create new productsence began, President Barack than 1,200 megawatts of wind- green jobs. If passed, the GEA is and services for a more demanding
  9. 9. Wisdom Exchange Reporter | 9world, reduce their own carbon clean water is lost duringfootprint, and provide a gateway distribution.”to new and better ways of While harsh economic realitiesdoing business in today’s are accelerating the developmenttougher markets. of new clean/green technologies, While every jurisdiction is and the billion-dollar governmentmoving forward at a different subsidies will drive the pace evenpace, the trend is worldwide faster, entrepreneurs shouldn’tand the potential is huge. “Green expect to see a repeat of the easyand clean technologies today money days of the late 1990s techare where the Internet was in boom, Henderson warns. “At that1992,” says David Henderson, time, all you needed to say wasManaging Director of XPV that you had the next ‘killer app’Capital Corporation. “Clean and people would throw millionstech is now the biggest venture- at you,” he says. “Today, first you Powersmiths International Vice-President Philip Ling (left) seatedcapital pool in the U.S.” need a great value proposition beside Paul Kerrigan, President of Alpha Poly Bag Corporation, “The greenest action of all is and a solid business case. Then discusses the importance of energy conservation.energy conservation,” explains you can access financing.”Philip Ling of Powersmiths Customer expectations can also a few hundred dollars for a simple barriers.” On the other side ofInternational. “Simply by not using be a little different in the green analysis, to a few thousand, and the coin, for some entrepreneurs,energy, you’re avoiding a whole economy, Ling has noticed. “It’s a over six figures and up for highly however, these types of frustra-stream of costs. In the U.S., where much more collaborative relation- complex products. Companies tions don’t dim the joys of takingwe do most of our business, energy ship,” Ling explains. “The whole that want to certify their green on a new challenge. “In the U.S.,security is a big issue. The way sustainability market is all about claims can contact industry- many of the projects we getthey look at it, every watt you are ‘How can you help us reduce specific bodies or a growing involved with have clearly definednot consuming means one less our carbon footprint? How can number of general certification energy-efficiency targets writtenbarrel of oil brought from overseas.” you help us reach our sustainability agencies, such as Green Seal into rock-solid contracts with While the math may be wonky, goals?’ Many see it as a continuous and the EcoLogo Program. substantial penalties if you missthe sentiment is clear: conservation process, a journey with no ‘now, Companies can also contact the targets,” one workshop par-and increased efficiency are top we are green’ endpoint.” their industry organizations or ticipant said. “As an entrepreneur,priorities and offer huge benefits It can also be a very demanding the Ontario Environment Industry it’s very exciting. You step up toto business. Today, there is market, often skeptical, data- Association to learn more about the plate and, if you deliver, youtechnology available that can driven and hard-nosed. “You the standards in their sectors and win big.”dramatically improve energy have to be absolutely scrupulous,” obtain referrals to appropriate Winning big in the greenefficiencies and generate immediate he advises. “If you position environmental marketing agencies. economy is keeping hope alive forand sizeable returns. yourself as green, you’d better Confusion over definitions is many CEOs through these tough One workshop participant be able to pass the sniff test and understandable in such a relatively economic conditions. Credit issays that he installed new, more prove your claims.” new and rapidly expanding field, tight. Orders are down. The GDPefficient motors in his Scarbor- That fuzziness about green particularly one in which the has slowed to a crawl. Cash isough, Ontario, plant at a cost of definitions, and the potential scientific foundation is growing king. Investing to tackle a new$100,000. Within a year, he had for customer backlash against and shifting constantly. As a market is a big risk.cut energy costs by $70,000 and perceived false claims, led one result, “a huge part of the work – But for those leaders willingthis has whetted his appetite for workshop participant to delib- I’d say 90 per cent of our efforts to take up the challenge, Davidmore of the same. erately downplay the legitimate – go into end-user education,” Henderson offers an encouraging “I’m looking for a payback green activities at his company. Ling says. “Terminology can be perspective.within 18 months,” he says. “If “We walked away from the ‘green’ a challenge because there is such “If you look back through businessit’s longer than that, I can’t afford word because there were too a big gap in understanding.” history, the best companies wereit and move on.” many spins to it. Is this green? The regulatory and certification born in times like these: Cisco, There are bigger-picture Not green? How green? Now, hurdles of a new market can also FedEx, Microsoft,” he says. “Yourealities at work as well. “Globally, we just avoid it all together.” be daunting, and those emerging need to be smart and tough, andas countries industrialize, the two For companies that are in the green economy are no have a good product and a goodthings they need are more energy considering adding “green” to different. The U.S. Department value proposition. But now is aand more clean water, notes their marketing repertoire, there of Energy is as bureaucratic as the time of change and that meansHenderson. “In North America, are standards, certifications and rest and the EU is no better,” one now is a time of opportunity –aging infrastructure means that measures available to sustainable workshop participant commented. especially for companies involved20 to 30 per cent of treated, claims. A company could spend “They use regulations as non-tariff in the green economy.”
  10. 10. Wisdom Exchange Reporter | 10 Workshop Exclusive Managing Finances in Challenging TimesAlternatives to traditional financingare available in the credit crunch Rick Spence, Moderator Canadian Entrepreneur Communications Andrew Wilkes, Panelist Chair, National Angel Capital Organization Jim Reddon, Panelist Principal, Intuitive Capital PartnersFinancing is a perennial challenge balance split between services supplier for more time to pay, “Venture capital is retreatingfor small- and medium-sized and management services. Several and luckily they gave it to us.” from seed and early-stagebusiness, but the nature of the participants shared some recent “The banks aren’t lending much enterprises,” he explains. “Butcurrent economic situation makes experiences that underline the these days, but they are doing angels have moved to where VCspast financial hurdles look puny. depth of the problems they face. long reviews of their existing loan were a few years ago, and thereAt a time when lenders of all “Our company is in the best portfolios,” says moderator Rick are about 100,000 angel investorsstripes are taking long looks at shape it’s ever been in,” stated one Spence. “Today we’ll explore some in Canada. Angel investors aretheir most credit-worthy customers, vice-president of a manufacturing/ non-traditional ways to finance typically involved in industrieshow can SMEs expand or even technology company. “We’ve your business.” they know, so it’s very importantretain their business? There are doubled our business in the past to seek out someone whopractical and workable alternatives two years, and it’s even picking Angel investors understands your business.”to traditional financing. The key up more in the last two months. Wilkes says that, as an angelfor SMEs is to determine the But out of the blue, our bank Angel investor Andrew Wilkes investor, he wants to bring valueright sort of investment or loan suddenly wants more than our started the discussion with a brief to any deal he’s involved in, infor their company, and approach personal guarantees; they now description of what an angel terms of his financing, expertise,the lender or investor fully armed want liens on our homes.” investor can and can’t do for a and contacts.with the relevant information. Another participant noted that small business. He emphasized “It’s really a partner you want,” About half of the workshop his bank pulled the financing for that, unlike venture capitalists, he notes. “I want to work with anparticipants were from the a crucial piece of equipment at angels only invest their own entrepreneur who makes use of mytechnology sector, with the the last minute. “We asked the money in a business. expertise. I don’t necessarily want
  11. 11. Wisdom Exchange Reporter | 11to go to your board meetings, but funding, including factors, asset- a relatively new lending tool that “It’s crucial that the borrowerI do want to go to the bank with based lenders and purchase-order is gaining in popularity. has proven, durable productsyou and help you get a loan. Right finance providers.” “Purchase-order financing is a with a high ‘put’ value,” Reddonnow, bridge loans from angels are Asset-based lending, where great niche product, and very new emphasizes. “By that, I mean thatpopular. Typically, an angel would borrowers use fixed assets to Canada,” says Reddon. “With the products have to be saleableget about 8 per cent on a bridge (machinery and equipment, a factor, the lender is financing to another customer. Since theloan, with some equity. It’s expen- inventory, accounts receivable receivables but, with purchase- lender is taking the goodssive every time you give out equity, and real estate) is becoming order financing, the lender is produced as security for the loan,but sometimes you can’t expand more popular in the current giving you money for goods that they have to have productswithout it.” credit crunch. In the past, either haven’t been made or sold that are easily sold to another Wilkes points out that Ontario’s asset-based lending was used yet. For that reason, it’s higher customer if the deal doesn’t goSMEs are facing a unique set for loans in the $2 million to risk and more expensive.” through. If you are selling customof circumstances in the current $5 million range, but is now Purchase-order financing can be goods from Germany to oneeconomy. The impact of the being used for smaller loans. especially valuable for companies specific customer in southernpreviously strong Canadian dollar Interest rates for these loans that need money to finance Ontario, we wouldn’t wantis still being felt, and early-stage are typically in the prime rate production for a quick sale. to finance you, because thereventure capital in Canada has plus 10 per-cent range. The loans “It’s usually a higher gross-margin is no ‘put’ value for us.”dropped dramatically, from $1.5 are typically used to finance producer, say 30 to 40 per cent, He says that a purchase-orderbillion in 2000 to $236 million management buyouts, expansion who can use purchase-order lender has some similarities within 2007. He noted that Ontario by acquisitions, working capital financing effectively,” he explains. an angel investor, since they willinvestors supply 40 per cent of shortfalls, rapid organic sales “For example, suppose complete due diligence on theCanada’s investment capital, but growth, and pressure from a rapidly growing company purchase order and evaluate theonly 15 per cent is invested existing lenders. has an opportunity to make a borrower’s costs on the deal.in the province. Reddon also noted an increase potential $4 million sale in 60 “It’s more of a partnership than in factoring, where borrowers get days. It makes good sense for the typical loan,” Reddon notes. Cash is king a loan based on their receivables. them to use purchase-order “But it is still based on a specific With interest costs now running financing to expand their transaction. “We don’t have to “The financial liquidity crisis between 1 % and 2 % per cent business. Something like that worry about where the companyimpacts all of us,” he says. “In per month for factoring, he can move a company from the will be in three years.”this environment, cash is king. warned workshop participants third tier to the second tier inCollect your receivables, reduce to consider the total cost of their industry.”your inventories, reduce and borrowing. Administrative charges For their part, purchase-order Rick Spence (left), CEO andrenegotiate your costs. Make can skyrocket for a company that lenders want a high rate of return Founder Steven Stein, Multi-an effort to make short-term has receivables with numerous (2 % to 3 % per cent per month) Health Systems Inc. (middle),cash sales. Focus on marketing customers. Borrowers should and a “high-touch” relationship and John Fursey, partner inspending. For example, offer carefully evaluate long-terms sales with the borrower. The borrower charge of the Financial Servicesa coupon discount instead of when using factoring. should also have experienced Sector for IBM Global Businessspending money to build your Workshop participants management, reputable and Services (right), exchange viewsbrand. On the upside, this is a were particularly interested in insurable customers, and a on innovation and educationgreat time to take market share. purchase-order financing, reliable supply chain. between workshops.If you hustle, you’ll win.” Jim Reddon offered a similarpositive view in his presentationon other alternative financingmodels, including asset-basedlending and purchase-order financing. “Banks are not in the riskbusiness,” explains Reddon,principal of Intuitive CapitalPartners. “In the current climate,we see reduced demand, reducedconsumer confidence, and areduction in the availabilityof traditional credit. But thereare many alternative forms of
  12. 12. Wisdom Exchange Reporter | 12 Workshop Exclusive Securing Financing for GrowthHow to arrange financing in today’stopsy-turvy economy Deirdre McMurdy, Moderator Business journalist, Vice President Public Policy Forum Mike Middleton, Panelist Managing Director, Q1 Capital Robert Bedard, Panelist President and CEO, BMP Group of Companies Fernando Traficante, Panelist Director, Next Generation of Jobs Fund Secretariat, Government of OntarioIn business, you need money to of the various options available advised companies to look instead explains Middleton. “Six monthssurvive, let alone to grow. That to companies looking to secure to more stable and traditional forms ago, banks were pushing clientssimple fact has not changed since financing. Middleton has spent the of financing, in particular what he away. Today they are realizing thatpeople began forming companies. past eight years focusing primarily referred to as everyone’s new best in this marketplace, there is a realWhat has changed — and keeps on meeting the financing needs of friend, the Canadian banks. opportunity, because there is reallychanging — is how hard it is for Canadian private companies, “I’ll be honest: there isn’t a lot no other capital available.”companies to get the money they particularly technology companies. of good news out there right now. Middleton was followed byneed to do business. These days, He touched on everything from Tap into the BDC [Business Robert Bedard, who in 1984it is very hard indeed. credit cards and personal lines of Development Bank of Canada], cashed $60,000 in RRSPs to start That tough reality set the context credit to venture capital, angel tap into the SR&ED [Scientific what has today grown intofor the 2009 Wisdom Exchange organizations and merchant banks. Research and Experimental a multimillion-dollar group ofworkshop on Securing Finance for He says that the current climate Development] Tax Incentive companies that includes BemproGrowth. Mike Middleton started is an extremely bad one in which Program, but in particular develop Metal Products Inc., BMP Metalsoff the session with a discussion to look for venture capital, and a relationship with your banker,” Inc., BMP Plastics Inc., BMP
  13. 13. Wisdom Exchange Reporter | 13Electronics and BMP Machining. mental benefits, demonstrate for companies of a certain size. money in place to do so. Now weBedard spoke at length about being innovation, and create or sustain Middleton repeated his warning are a global company. We’repositioned to make changes, saying jobs for Ontarians. about venture capital, saying that shipping to the EU and we’rethat growth frequently depends on The Advanced Manufacturing the days of people getting easy shipping to China, and it’s ashifting direction, either to adapt Investment Strategy (AMIS), is money to jump into the market really good feeling to see productto or take advantage of changing open to advanced manufacturing with big expensive new companies going in that direction, ratherexternal circumstances. He went innovators across all sectors.” were gone — at least for now. He than from China into this countryback to what Middleton had said Traficante explains. “Priority is pointed out that in 2001 there all the time.”about taking advantage of govern- given on projects that include were 55 venture-capital firms in As the workshop progressed,ment funding, saying that he had research and development initiatives operation, and there are only a it became clear that there wereused the SR&ED to obtain the such as: industrial R&D, design, handful today. three main points on which all thefunding necessary to develop many prototyping and engineering; “Venture capital has been presenters agreed absolutely.of his products. He also echoed new or advanced materials and decimated in Ontario,” says The first point is that innovationMiddleton’s advice about building products; advanced manufacturing Middleton, “because too many is critical. It is how companies seta good relationship with banks, processes; technology innovation; people were investing in new themselves apart, and one of theand spoke of the importance of robotics/software development; things they don’t understand. best ways of attracting the invest-reinvesting in the company you waste reduction or energy conser- Now people are moving back ment funding they need to surviveare trying to build. vation. Over a five-year period, into things they do understand, and to grow. “A lot of people get into the projects must create/retain 50 and they are taking those ideas to The second point involves thebusiness saying I’m going to be jobs or invest $10 million. the bank. There are bankers out importance of building solid rela-rich,” Bedard points out, “and Companies are encouraged to there who are entrepreneurial in tionships with banks. Bedard saysall they do is put the money they apply to either program. A nature, and they want to see these that he is constantly remindingmake right into their pockets. company cannot apply to both companies succeed.” his managers to keep in touch withMe, I put my money back into for the same project investment. Bedard returned to his point their bankers, letting them knowmy companies. That means I A company can also apply for about changing and adapting how the company is doing andalways have a good balance sheet, funding from other levels of to external circumstances, using what it plans to do. Middleton addsmaking me well-positioned to government. In particular, the his own company as an example. that the key is to find a bankersecure loans if I need them, and federal government has programs He realized at a certain point who understands your business.able to make the right moves at that could compliment NGOJF in BMP’s development that he “Finance is no different fromthe right time without wondering and AMIS funding. needed to move the company in any other business,” he notes. “It’swhere the money is going to The three presentations were a more high-tech direction and, all about relationships.”come from.” followed by a question-and-answer because he had positioned himself The third point involves being The third speaker was Fernando session during which the main to be ready for change, he was able willing and ready to make theTraficante, who looked at the ques- themes of the day were revisited. to make the move successfully. necessary changes. Bedard saystion of obtaining financing from Many of the questions centred “I have matched many changes that he had made his fortune bythe point of view of a government on how difficult it is these days to with growth,” he says, “because positioning himself to react tointerested in helping businesses do obtain grants or loans, particularly I have made sure that I have the changing circumstances. He pointsso. He spoke of the importance of out that, particularly in today’shelping companies innovate, creating climate — when the competitionwell-paying sustainable jobs in the from low cost centres is fierce andprocess, and said it is companies currency uncertainties are dire —that can do this that will have the it is more important than ever toeasiest time securing funding. remember the words written by “Innovation is often the key but Charles Darwin 150 years ago:it has to be done well, which is “It’s not the strongest nor mosthard,” he notes. “There is cash out intelligent of the species that sur-there, but no cash for big dreams vive; it is the one most adaptablewith no substance.” to change.” Traficante went into detail aboutOntario $1.15 billion Next Gen- Bad news of tough times seteration of Jobs Fund program over the context for the Securingfive years to support job creation Financing for Growth workshop,/retention in strategic areas of great but panelists Middleton, Bedardpotential for Ontario. In order for and Traficante offered viablea project to be considered, it must options and realistic advice onprovide economic and environ- how to adapt.
  14. 14. Wisdom Exchange Reporter | 14 Workshop Exclusive Selling to World MarketsExporters find customers farther afield Ian Portsmouth, Moderator Editor and Associate Publisher, PROFIT Mohan Markandaier, Panelist CEO, Pulse Voice Inc Peter Allen, Panelist President, Electrical Contacts Ltd. Brent Prior, Panelist District Sales Manager Export Development CanadaAlthough the majority of Canadian tionist rumblings south of the Poland, he admits to an affinity In addressing workshopcompanies choose the U.S. border, now is a good time to for world markets because of participants, Markandaier recom-market when they first export, rationalize diversification. his background. mended a new Ontario Chamberdue to the close proximity and Mohan Markandaier, CEO What also fuelled the decision of Commerce/Ontario governmentsimilar language and culture, it and one of the founders of Pulse to sell internationally first was the partnership grant program, Exportmakes good strategic sense to Voice Inc. – a software company company’s ability to offer cost- Market Access, to help identifydiversify into other international providing telecom solutions – effective solutions for call centres opportunities abroad. With fundingmarkets. Not only does this actually took the business global in smaller countries where little assistance that covers marketreduce dependency on a single before national because of the or no competition existed. Its first development, the company wasexport market, but it also opens challenge start-ups face in installation was in the Ukraine, able to attend a trade show inup opportunities to catapult competing with industry giants followed by others in South the U.K. and do some proactivebusiness growth far beyond what like Nortel here. Born in Sri America and the U.S., and it now marketing. The result? It opened acan be achieved within North Lanka, raised in Nigeria, educated has customers in 40 countries, satellite office there as a gateway toAmerica alone. And with protec- in Canada, and having worked in including Rogers in Canada. the European market and recently
  15. 15. Wisdom Exchange Reporter | 15signed a partnership agreement pleasantly surprised by the quick, advises Allen. “Remember national Trade and Investmentwith a telecom-solutions 30-day turnaround for approval that subtle cultural barriers (MITI) has international marketingmarket provider. and funding. can exist, with centres in 10 major markets Markandaier emphasizes that it The President of Electrical a preference to buy local, so around the world: Beijing,is helpful to use funding programs Contacts Ltd., Peter Allen – that differentiation is key.” London, Los Angeles, Mexicofor initial market research such whose Hanover-based materials There was considerable City, Munich, New Delhi, Newas attending an overseas trade engineering firm has sold in over discussion about the Canadian York, Paris, Shanghai and Tokyo.show. What about red tape that 17 countries – cautions against Trade Commissioner Service If you’re looking for advice oncan make such programs onerous? making the decision to pursue (TCS), a free resource of trade exporting, the Ministry ofHe recommends working with a market solely on the basis of commissioners across Canada Economic Development (MED),a contact inside government to availability of government and in 150 countries who are International Trade Branch andexpedite the application process. funding programs, since they familiar with the local business Investment Branch (MED),For example, he accessed helpful could be short-lived. landscape and can open doors offers market-specific seminarsguidance through a Business “Gut check yourself first for Canadian exporters. and workshops, assistance withAdvisor at one of the 12 Ministry on whether you really have International representation is research and analysis, help withof Small Business and Consumer something of value to sell in an important part of promoting export strategies and marketingServices (MSBCS), Business a new market and be sure Ontario’s global commercial plans, organization of tradeAdvisory Services Regional you can differentiate yourself activities. As part of its global missions and participation inOffices across Ontario, and was from any competitors there,” strategy, the Ministry of Inter- international exhibitions. Seven ways to penetrate new markets • Make a solid commitment. India that included one-on- about cultural protocol in agreements with foreign Develop a plan and goal – one meetings with senior new or unfamiliar markets companies. Prior also suggests whether that is seeking executives of Indian telecommu- before travelling and using the trade finance modest sales, a joint venture, nications companies. conducting business. department of your bank to an acquisition or an agent. • Tap into free resources. When • Determine your entry strategy. review lines of credit for any Then dedicate the human entering new markets, get the Making the decision to sell red flags, such as boycott clauses. and financial resources neces- lay of the land and names of directly or through a partner And be sure to mitigate payment sary for exporting. Based on qualified contacts from Ontario can depend on the type of risks through bank instruments his observations of exporters Marketing Centres and Canadian business and the target market. or insuring your receivables over many years, Brent trade commissioners. If you Because his company has niche through EDC or a private Prior, District Sales Manager engage them, there are other expertise in manufacturing insurer. He also recommends with Export Development things they can do for you as contact materials for electrical using a lawyer with an interna- Canada (EDC), says many well, says Prior. Be sure to circuit breakers, Allen prefers tional practice to ensure Canadian companies fail leverage the Canadian flag by direct sales. For Markandaier’s you do not run afoul of sales to understand the time and holding meetings with potential business, it’s important to have tax obligations in the U.S. resources required. “You are partners or customers in Canada’s a good partner on the ground which is a problem that some either committed or not,” embassies and consulates abroad in markets like India. Although workshop participants raised. he notes. “If not, you will to gain instant credibility, he speaks the language and • Conduct due diligence. Be not succeed.” recommends Peter Allen. understands the culture there, sure to check out the reputation • Participate in trade shows • Be culturally aware. In some his company faced intellectual of potential partners. You can and trade missions. These markets, such as China and property challenges and col- ask the Trade Commissioner can be valuable for iden- the Middle East, a prerequisite lection problems after opening Service and also listen carefully tifying new opportunities to doing business is to invest its office in India in 2003 and to end-users at trade shows in and making good contacts. in face time to develop began to withdraw. Now it is other countries to get insights Markandaier had his best relationships and trust and returning to the market with a on which businesses they buy experience with this when that requires patience. Allen strategic partner there. from and consider reputable. he was part of a telecom suggests checking with the • Mitigate the risks. Get a third Those are the companies to trade show and mission to Trade Commissioner Service party to review your contractual seek as partners.To contact a Business Advisor at the Ministry of Small Business and Consumer Services in your area, visitwww.ontario.ca/sbcs (click: GROW-TALK TO EXPERTS)