COVER

SUCCESS IN HARD TIMES

SOME CANADIANS ARE SHOWING THAT IT IS POSSIBLE TO THRIVE IN THE INCREASINGLY COMPETITIVE GLOBAL MARKET

ROSS LAVER August 12 1991
COVER

SUCCESS IN HARD TIMES

SOME CANADIANS ARE SHOWING THAT IT IS POSSIBLE TO THRIVE IN THE INCREASINGLY COMPETITIVE GLOBAL MARKET

ROSS LAVER August 12 1991

SUCCESS IN HARD TIMES

COVER

SOME CANADIANS ARE SHOWING THAT IT IS POSSIBLE TO THRIVE IN THE INCREASINGLY COMPETITIVE GLOBAL MARKET

Like many successful executives, Gerald Thorp began with a vision. In 1987, after 10 years in Alberta’s oil exploration business, Thorp says that he became convinced that there was an untapped market for a high-speed gas analyser that could “sniff” out oil and gas deposits. Gas analysers had been in use for decades, but the existing machines weighed 150 lb. and took at least seven minutes to analyse a sample. After discussing his proposal with scientists in the United States and the Netherlands, and with financial support from the National Research Council in Ottawa, Thorp and several associates designed a three-pound sniffer that uses leading-edge microchip technology to perform the same function in less than a minute. The company they set up, Calgary-based MicroTech Well Logging and Wellsite Consulting Ltd., began marketing the devices three months ago and already has contracts with 12 energy firms. Thorp and his associates are among thousands of unsung entrepreneurs, researchers and managers whose achievements are helping to make Canada more competitive.

MicroTech is currently negotiating joint-venture agreements to market its product in the United States and Europe. “To start a company, you have to be willing to work long hours and live from hand to mouth,” says Thorp, 37, MicroTech’s president. “But I knew that if we stuck with it, we were capable of creating a product that would compete internationally.” At a time when the country’s economy is easing back from the bruising effects of a yearlong recession, successes like Thorp’s provide evidence that many Canadians still possess the knowledge and the resources to succeed in the increasingly crowded global market. Indeed, in its short history, MicroTech has displayed many of the key traits that economists and business leaders say are needed to ensure that Canadian business thrives in the 1990s: having identified a potential market, the company scoured the world for the best available technology and then applied it to create a specialized product that will win customers at home as well as abroad.

Innovate: Still, the hundreds of Canadian companies that are competing effectively around the world—including such widely acknowledged success stories as Northern Telecom Ltd. of Mississauga, Ont., and Bombardier Inc. of Montreal, makers of the Canadair commuter jet— are surrounded by thousands more that have fallen behind in the race to innovate, or were never serious contenders in the first place. For too long, analysts say, Canada’s prosperity has been based mostly on its abundant but diminishing natural resources and the availability of cheap energy. Moreover, many of the country’s resource-based industries could not function without imported machinery. As Bank of Nova Scotia chairman Cedric Ritchie noted recently: “Canada probably cuts down more trees than any country in the world, but we import chainsaws.”

The country’s manufacturing sector is clearly facing even larger problems. According to Statistics Canada, 267,000 manufacturing jobs have disappeared across the country since January,

1989 Canada-U.S. Free Trade Agreement, the Bank of Canada’s policy of maintaining high interest rates to battle inflation and the 20 per cent appreciation of the Canadian dollar against its U.S. counterpart since 1986. But another factor has undoubtedly played a role as well: as Statistics Canada reported last week, productivity in Canadian manufacturing—essentially, output per worker—fell sharply between 1986 and 1989. In the United States, the destination for two-thirds of Canada’s exports, manufacturing productivity increased during the same period.

Over the past two years, an army of academics, consultants and business groups has tried to determine the reasons behind Canada’s poor productivity growth. Some experts charge that Canadian workers demand excessively high wages from their employers and expect too many services from government. That dependence on government support, they say, leads to higher taxes that discourage new investment and reduce the incentive to work. Another view, less commonly expressed, is contained in a 1989 study on competitiveness by the World Economic Forum, a Swiss-based academic consortium. The Canadian business leaders who took part in the study concluded that, in general, managers in Canada have a mediocre sense of drive and entrepreneurship compared with their counterparts in other industrialized countries. “There is no such a thing as a bad work force,” says Sonja Bata, director of Toronto-based Bata Ltd. “It is a question of bad leadership or bad management.”

Pressure: The results of Canada’s weakened competitiveness are clear: unemployment has reached 10.5 per cent, the highest rate among the world’s seven leading industrialized countries. Many companies have abandoned their domestic operations and moved to the United States, just as Canadian consumers, in steadily increasing numbers, are crossing the border to do their shopping.

Under pressure to respond to those problems, federal government leaders say that they will launch a concerted campaign to improve Canada’s competitiveness—although Trade Minister Michael Wilson has not provided any of the specific policies that his government intends to pursue (page 34). But members of all three major federal parties agree, in general terms at least, on the need to improve education and workplace retraining programs, stimulate spending on research and development and provide a stable source of funding for new business ventures with export potential.

But most Canadian businesses cannot afford to wait for the results, which may take years to have an effect. In fact, many analysts express doubt that Ottawa’s response will make much of a difference. Says Judith Maxwell, chairman of the Ottawa-based Economic Council of Canada: “It’s not a question of governments being able to push levers and affect productivity growth. The solution is going to happen on the plant floor.”

Challenge: Increasingly, Canadian business appears to be responding to the challenge. To show how some companies have successfully improved their competitive position, in the following pages Maclean ’s profiles six enterprises, ranging from a forest-products company to a designer of sophisticated computer software (page 28). The lessons they have learned are by no means universally understood in the business community. But their experiences indicate that Canadians—with will and determination—can still thrive in the global marketplace.

ROSS LAVER