If you are a successful Canadian defence company, the odds are, you are successful in other sectors (ie. infrastructure, aerospace, or automotive) and/or you are exporting. We were thrilled to work with Michael and his team at Avascent earlier this year on an industrial analytics study that surveyed the Canadian defence market.
The study found that over two-thirds of Canadian businesses in the defence sector generated less than 25% of their business from defence. It is extremely rare (and I would argue, an unwise business strategy) to focus solely on the Canadian market. My financial auditor refers to it as “business concentration risk”. Risks tend to serve as bright red flags to stakeholders that could limit growth and progress; whereas driving exports is a way to achieve continued growth, establish diversified, longer term revenue sources and improve our trade balance. In short, this is how you really stimulate an economy.
While it seems pretty obvious, it still can’t be ignored – exports bring tremendous benefits to both a Canadian business and the Canadian economy. They create substantial growth at the company level which, in turn, leads to increased investments in technology, innovation and expansion. These investments can deliver strong and sustainable growth to the Canadian industrial base over the long term, especially when a Canadian business is given a “Global Product Mandate” from a large foreign corporation.
I believe that for part or most of these reasons, the Canadian Government is now emphasising the importance of government contractors to drive exports for Canadian industry. Under the new value proposition requirements, for instance, bidders’ will not only be assessed based on the price and technical capability of their product, but also on the economic benefit that will be delivered to Canada as a result of the contract, with exports having played a significant role in recent RFPs. This requirement presents a clear opportunity to build up Canada’s intellectual property and technologies.
Many Canadian companies do not know where to start when considering exporting their products and services globally. However, various resources exist in Canada that companies can consult. You should consider working with the Canadian Commercial Corporation (CCC), which is a Crown Corporation that I am a Board member of, that was established to advance international trade between Canadian industry and government markets. Additionally, OMX specializes in connecting suppliers with government contractors for the purpose of fulfilling offset obligations. Often, Canadian companies can be included in these contractors’ global supply chains as a result of their work in Canada.
Partnering with local firms
Further, if your company is exporting globally, you will likely encounter industrial participation and offset policies similar to the ITB policy in Canada. This means you will have to partner with local firms and ensure that you meet all of the requirements set out by that local government. OMX has recently expanded its platform to accommodate connecting, managing, tracking and reporting on industrial participation in any country. This will help any companies (especially SMEs) prepare bids to other governments and manage their obligations effectively.
Another asset to Canadian companies looking to export is the Global Offset and Countertrade Association (G.O.C.A), which promotes international trade by facilitating a better understanding of countertrade and offsets. Specifically, I would advise interested companies to come to G.O.C.A. this October in Montreal to learn how their peers are leveraging and meeting offset requirements around the world. The conference is so rarely in Canada, and I have been personally involved on the organizing committee, so I can say it is going to be a great one!
As usual for this column, I went around to some Canadian companies in the defence sector to get a better idea of the impacts that exports can have on Canadian industry first hand. First, I visited Nexeya Canada, which designs, manufactures and tests electronic products for mission critical environments. Located in Toronto, Nexeya exports 90% of its products and sells globally to OEMs and tier 1s, as well as subcontractors and operators. Due to their niche products, Nexeya has found delivering the required product demonstrations to foreign companies to be a challenge.
I also visited SMEs from across Canada. I spoke with Jocelyn Williams, Vice President at Automatic Coatings, about her experiences exporting: “Automatic Coatings has developed and patented corrosion and coating solutions that increase lifecycle and reduce maintenance costs which we’ve exported for the past 17 years, particularly to other Governments and are looking at expanding our global reach. Expanding exports provides more jobs for our Ontario employees and showcases our innovation globally.” Automatic Coatings is recognized globally as having the most technologically advanced powder and liquid coating facilities in North America.
Weatherhaven, a Vancouver-based deployable military shelter company, is another Canadian SME success story that most people know quite well. The company had success developing container solutions for DND and has since exported this product to more than 20 countries around the world, contributing to the company’s growth and the development of new global solutions.
Ray Castelli, CEO of Weatherhaven, explained that they are satisfying three markets – the Canadian government market, the international export market, and an ‘internal export’ market that satisfies international demand through the obligations created by Canada’s Industrial and Regional Benefits (IRB) and Industrial and Technological Benefits (ITB) policies. The company has partnered with DEW Engineering for the $130 million Medium Sized Vehicle Shelter (MSVS) program.
I also spoke with Andrew Lutes, Managing Director at Twenty20 Insight. Andrew commented on Twenty20’s experience selling abroad that, “The main advantage is that you have access to additional markets. This is key to maintain revenues, especially when your domestic market is flat. The challenges are getting timely access to information on opportunities. Currently, we U.S.e local agents which are effective, but significantly lowers your profit margin.” Twenty20 is an Ottawa-based company with over 15 years of experience providing the highest quality smart soldier solutions for military, law enforcement, and security officers.
Clearpath Robotics in another Canadian SME with an interesting export story. Clearpath provides unmanned vehicle solutions for research and development and exports to over 40 countries around the world. The company has a second division, OTTO motors, which recently launched in April of 2016 and provides industrial self-driving vehicles for material transport.
Meghan Hennessey, Marketing Communications Manager at Clearpath, described some of the advantages and challenges of exporting as a Canadian SME: “Right now, the advantage is the Canadian Dollar, particularly since many of our suppliers are Canadian. As for the challenge: exporting highly advanced pieces of robotic technology can be a daunting task at times and the logistics team at Clearpath leverages their past experiences, and accentuates that knowledge with continuous improvement initiatives and training. Considerations such as international customs regulations, free trade agreements, and ever-increasing restrictions on shipping lithium-based batteries have caused an abundance of documentation and worry within the Clearpath export team, but the challenges have been accepted and overcome time after time.”
Now is the time for Canadian industry to innovate and explore ways to enhance their competitiveness to shine abroad. Michael and I wish everyone in Canada the best of luck and are hopeful we continue to have success selling abroad.
Nicole Verkindt is founder and president of OMX. She is a board member of the Canadian Commercial Corporation and was recently appointed to the board of the Peter Munk School of Global Affairs. She is also the technology editor of Vanguard Magazine
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