Halifax’s John Risley has built some of the most successful marine-products businesses in the world, including Clearwater Seafoods Inc. and Ocean Nutrition Canada, the global leader in the Omega-3 fatty acid supplements. He recently helped found the 4Front Atlantic Conferences to spur more entrepreneurship in Atlantic Canada.
He spoke to The Globe and Mail about how Canada can grow more globally competitive firms, and why foreign takeovers of mid-sized firms can be good for Canada’s economy.
Your businesses operate in markets around the world. Do Canadian business people lack a global outlook?
Yes. There are exceptions, but Canadians in general, and Atlantic Canadians in particular, don’t tend to look at things globally. That’s a huge problem in the current marketplace.
Why do we have this blindness?
There are a number of reasons. First, Canada does not have global trading relationships. It has a relationship with the United States. The second driving factor, for Atlantic Canada in particular, is that the public sector plays a larger role in the economy here. We don’t have the same private sector component in the economy that we have elsewhere.
Do we need more trade deals with other countries?
The federal government, with some frustration, has been trying to get Canadian exporters and businesses to look beyond that traditional north-south relationship. But I am reluctant to lay the problem at the government’s doorstep. We want less public sector dependency, not more.
What can be done to broaden our outlook then?
What we really need is for entrepreneurs to recognize, from the outset, that they’ve got two choices in starting a business. One is to be a small service-oriented, owner-operator business serving a small market somewhere in Canada. There’s no problem with that. I am not saying that you shouldn’t be a chiropractor or start a hairdressing salon or a local gym. But if you want to build a business beyond that, you have to think up front about what your prospects are for that business being globally competitive. Canadians, and Atlantic Canadians especially, are not good at that. We don’t think in those terms and we need to. Our entrepreneurs need to understand the choice they are making. Am I globally competitive? If I am not today, can I get there? Is there a niche here that can be globally competitive? Because they will not grow beyond the owner-operator level absent the ability to become globally competitive.
Is that how you approached the creation of ONC, which has become the world’s leading maker of Omega-3 fatty acids?
Yes. We followed the model of our Clearwater experience, which was built by paying no attention to the Canadian market. Our total focus was international, and we brought that same focus to ONC. We didn’t approach the venture with a view of, ‘How can we do more business in Toronto?’ We didn’t give a damn about Toronto. We gave a damn about where the opportunities were around the world, in markets we knew something about. At the time we sold ONC earlier this year it had about 400 employees in Canada and 150 in the United States and Peru, and our markets were one-third in North America, one-third in Europe and one-third in Asia.
But ONC is not the only example. We’ve had two very successful software start-ups in New Brunswick. One [Spielo] was recently sold to IBM. Another [Radian6] was sold to Salesforce.com. And the financial returns were spectacular. We had some entrepreneurs who saw an opportunity, rolled up their sleeves, chased it, and did extremely well.
Is it cause for concern that these successful mid-sized companies are being purchased by foreign firms?
If the purchase is motivated by a foreign buyer’s desire to pick up the Canadian company’s assets and transplant them outside of Canada, that’s a great shame. But if the business is globally competitive from its Canadian base, then it’s got to be because the local people have made it that way. And if that’s the case, I can promise you that the international buyer will not move the business, because in moving the business they will lose the company’s global competitiveness.
Is that the case with ONC?
Yes. We saw a huge opportunity with ONC but we were worried about our ability to scale quickly, provide global distribution, and engage global food companies at the level they needed to be engaged at. We did not have that capacity. We feared losing our dominant position in the marketplace. The purchaser, DSM, is a large Dutch firm that does business with those companies, is the world leader in the nutritional space and has global distribution. DSM is absolutely committed to retaining everything that makes ONC globally competitive: our research focus, manufacturing facilities, and the whole team we’ve got here in Canada. So the Canadian company is going to grow – albeit under international ownership – faster than it otherwise would have.
Is it the case with Spielo and Radian6?
There have been no layoffs, the work being done in New Brunswick is not being transplanted, and in fact my understanding is that those companies continue to hire. You can’t be part of a global economy, which is what we must aspire to be, and at the same time say we want to put up walls and retain ownership of all these exciting new companies.
You are a serial entrepreneur. What’s your next project?
We have a couple of start-ups right now, but they are very embryonic at the moment so I’m not going to divulge the details. It’s true, though, that building a business is like building a house. If you build a house, the minute you finish it, you think to yourself, ‘I wish I could build it all over again, because I learned so much from the process and I could build a much better house now.’ The more you go through this process the more you learn. We have started three fairly substantial businesses now and while there have been ups and downs they have all been financially successful and it whets your appetite to keep doing it.
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