What Growth Has Taught Me
by Will Gibson
A sense of purpose and a will to innovate guides Alberta Venture’s 2003 roster of rapid-growth firms.
When discussing the secrets of his company’s success, Shana Corporation’s co-founder and president Don Murphy invariably reverts to clichés, all related to not straying too far from his company’s tried-and-true products. “Our strategy has been to stick to doing one thing well,” says Murphy, whose company (#21) made Alberta Venture’s annual roster of Alberta’s Fastest Growing Companies for the third straight year in a row.
Murphy is not alone in advocating a “stick-to-your-knitting” approach: this year’s Fast 30 list is studded with companies that have stayed with their core competencies. In Shana’s case, that would be electronic forms, the bread and butter for the Edmonton-based company since it started in 1985. And Murphy is not alone in chanting the KISS mantra: “Since Michael Porter’s famous study on competitive advantage, there has been the notion that you have to know what you are good at and what your competitive advantage is,” observes Rolf Mirus, director for the Western Centre for Economic Research at the University of Alberta. “There is a move away from conglomerates to focused companies.”
Sounds easy, doesn’t it? Somebody forgot to tell former BCE CEO Jean Monty, whose adventures in convergence helped ensure his departure in April. His successor, Michael Sabia, wrote down the value of the telecom’s subsidiary Bell Globemedia by $545 million in September and is rumoured to be shopping the media empire, which includes the CTV network and the Globe and Mail newspaper, for a fraction of BCE’s buying price.
If Sabia needs a blueprint for focus, he need not look further than SMART Technologies Inc. The Calgary-based company, #19 on this year’s growth list, has stuck with its strength, producing electronic whiteboards, which display everything from videos to PowerPoint presentations. And SMART, which made its third straight appearance on Alberta Venture ‘s growth chart, has become a global leader in its niche market, named by the federal government as one of Canada’s top 10 exporters.
A similar story has emerged at BioWare Corp. (#2), the Edmonton-based video game developer. BioWare, which topped last year’s list, has carved out a highly profitable niche in the $20-billion gaming industry with its role-playing games, such as the Dungeons & Dragons-based Baldur’s Gate, leaving other developers to battle for joystick share in other genres such as sports or carnage.
But it is not merely enough to establish yourself as a market leader in a particular field. For example, according to Shana’s Murphy, between new competition and changing customer expectations, Shana has continued to update its flagship Informed product. “The use of e-forms is changing. Today, people are looking for capabilities beyond replacing the paper,” Murphy explains. “They want the information that’s entered on the form to be integrated into the next step of the process. It’s still e-forms but e-forms are more than replacing paper.”
And Shana has succeeded, which is why it now boasts a client list of blue-chip companies such as Boeing along with government agencies such as NASA. Developing a reputation in a particular industry allows successful businesses to quickly spread their sales outside of Alberta, Mirus notes. “What it can do is build networks across borders no matter what you do. If you are good at it, you can sell it here, there and everywhere,” he says.
That process took place for Mentor Engineering Inc. (#28), albeit somewhat as an accident, according to co-founder and CEO Gordon Howell. The Calgary-based company had developed a wireless alarm monitoring system for vehicles that it sold to the oilpatch. “In marketing that, we noticed we were getting some interest from some fleet operators,” says Howell, whose company is making its appearance on the FGC list for a second straight year.
Sensing an opportunity, Mentor pounced by redesigning its wireless platform for commercial fleets such as taxis, transit systems, tow trucks, ambulances and couriers. The Mentor systems provide everything from internal Global Positioning Systems (GPS), to credit card scanners. However, the hardware builder has avoided the temptation of developing software, choosing instead to partner with leaders in each industry. “We understand wireless networks, we understand vehicle environments, with the temperature and vibration issues, and we understand the functionality that clients are looking for,” says Howell, who started Mentor in 1988 with former AGT Mobility co-workers Stephen Hickle and Wolfgang Stichling. “If you want to compete in multiple markets, you need to redevelop all these knowledge and software packages for each industry. Within our scope of expertise, there is a huge market there. There’s lots of possibilities so it really doesn’t make any sense to dilute yourself by trying to get into other areas.”
As well as being a shining example of focus, Mentor also exemplifies another trend in Alberta’s growth-leading companies. Nurtured by Alberta’s booming oilpatch, it has diversified its customer base beyond the extraction industries, no small consideration in these times of Kyoto-induced anxieties for many Alberta companies. “Certainly, when there was a downturn in the energy industry, we didn’t notice it because we had diversified into the fleet market,” Howell says.
By leveraging its knowledge, Mirus notes that Mentor dramatically expanded its potential markets. “Knowledge is transferable and transportable. You can either train a foreigner to do it and collect some royalties to get extra return on your skills or you can do it yourself,” he says. “If you have a highly knowledge-intensive skill, it takes very little extra to apply it elsewhere and that’s where the growth end comes from.”
That was the path successfully travelled by Matrikon Inc. (#6), another perennial name on the FGC list. The Edmonton-based company – which develops software and provides professional services to industries ranging from energy and utilities to manufacturing – also quickly grew beyond the cradle of Alberta’s oilpatch, although company founder Nizar Somji viewed diversification as an almost an accident. “We could sense an industry turning down, so we would pursue other business elsewhere. Over time, it has become a habit,” explains Somji. “I started in the oil and gas business primarily because I used to work for Dow Chemical and Nova.”
That decision to diversify has reaped huge dividends for Matrikon, which derives just 19% of its revenues from Alberta. As a dividend, the decision to broaden its customer base has also helped Matrikon overcome the parochial stigma sometimes attached to Canadian firms in other parts of the world. “Because we did a lot of business outside of Canada, it gave us a reputation that we could do business elsewhere,” he says.
If Matrikon’s diversification was an accidental epiphany, then The Focus Corporation Ltd., which sits 14th on this year’s FGC list, pushed beyond Alberta’s oilpatch from bitter experience. Formed in 1977, the company helped map out the routes for pipelines and pump jacks across the northern Alberta bush for oil and gas companies. It experienced the breathless ups and sickening downs of the cyclical industry, although never as sharply as it did in February 1983, when the National Energy Program virtually shut down exploratory drilling north of the 49th parallel. “The NEP came in and within days, we had no work. It completely dried up. As a result of that, we had to lay off about half of our workforce,” recalls company co-founder John Holmlund, whose firm had 30 workers at the time. “That was the first time that we ever had to do that. As a couple of months slipped by, we actually had a meeting with our shareholders and told them we would have to shut down our business if it continued.”
By May, the oilpatch slowly began picking up again. Holmlund hired back all the workers laid off – with back pay. He also vowed to ensure the company was more protected from the boom/bust cycles of the Alberta oilpatch. Twenty years later, the Edmonton-based company still relies on the oilpatch for 60% of its annual revenues, but Holmlund’s push has seen the company add new arms in engineering and advanced technology.
These new areas have generated revenues in markets that build on the company’s roots as a surveyor. For example, the company recently developed a software package called Focus WebEnforcer, a digital database that marries statistics and graphics such as maps. The software is expected to be a hot seller in the burgeoning anti-terrorist market in the U.S. Autodesk, the fourth-largest personal computer software developer in the world, recently included WebEnforcer in a homeland security bundle that it will sell to American civic governments to organize them to respond to potential doomsdays.
If Focus has capitalized on post-9/11 jitters, other Fast 30 companies have proven worthy of Nostradamus in taking advantage of trends, be they demographic, political or even social. Right at the top is Vintacom Media Group Ltd. CEO Brad Hogg’s forecast of the boom in online personals helped crown his Edmonton-based company as this year’s Fastest Growing Company. Hogg, a computer engineer, started the company just three short years ago based on his business partner’s frustrating experience with using telephone personals. “It used to be that people were embarrassed about telling their friends that they used a dating service,” says Hogg. “Now, 35% of our new registrations come from word-of-mouth referrals. That’s people saying ‘Hey, it worked for me’ and they tell their friends.”
If Vintacom succeeded by anticipating the growing social acceptance of meeting Mr. or Ms. Right over the Internet, correctly reading the demographic tea leaves played a similar role for Pointe of View, the Calgary-based developer that finished fourth on this year’s growth list. But more than just recognizing the realities wrought by the baby boom, Pointe of View – which builds only multi-family developments – has geared its marketing towards the so-called “echo” generation, the children of the baby boomers.
“That generation has real good cash flow but very little equity,” explains Pointe of View COO Larry Kelly. “What they are doing is looking at what it costs to rent and saying ‘Gee, I can own my own place rather than rent.'”
While Pointe of View sells condos to the kids in Calgary, Edmonton and Red Deer, their parents have not been forgotten by the company, which has sold an interest in a massive new lakefront condo development in Kelowna, B.C. Aided by low interest rates, more than half of the buyers are from out of town. “What is happening is a lot of baby boomers are buying their retirement homes today and see Kelowna as a wonderful opportunity,” Kelly explains.
Those trends also extend to the business world, where outsourcing has become a new gospel for everyone from automakers to Canada’s major banks. That movement has benefited Calgary-based BOWEN – Your HR Connection, the human resources firm that finished 15th on this year’s growth chart. “It is a reflection of a competitive world. You can stay in business if you can lower your costs a little bit,” Mirus says.
In order to profit from this opportunity, however, CEO Shannon Bowen-Smed points out her human resources firm has made sizable and ongoing investments in technology. “We’ve really done a lot of work to enhance our technology so it has given us a competitive advantage in our marketplace. Our technology has really been able to optimize and create better efficiencies,” says Bowen-Smed.
Investing in new technology helps meet growing customer expectations in a competitive market, she says. “Nineteen years ago, if someone placed an order with us, it was quite acceptable to have resumï¿½s over in a couple of weeks. Now, the expectation really is that information should be in front of the client’s face within an hour,” she says.
The cost of technology and the trend for companies to focus on their core strengths has, in fact, aided people-processing agencies that now make outsourcing the top service industry in North America. “The reality is that there needs to be such an investment made in technology that organizations are looking at whether they are meant to be in the people or payroll processing business,” Bowen-Smed says. “A lot of organizations have taken a step back and said, ‘That’s not our core competency. Our core competency is doing what we do best.'”
And answering that question can be a valuable exercise. Just ask Don Murphy. Or Jean Monty.