Canadian companies: Know your competitors before going global

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The first in an eight-part series of solutions to address the challenges facing Canada's foreign trade. This week's challenge: Understanding how the world has changed.

Adapting to a world in which supply chains are global, business is integrated as never before, communications technology is cheap and competition is everywhere, puts a premium on thinking internationally.

McGill University business professor William Polushin uses an Olympics metaphor: a personal or Canadian best might not be good enough. "It starts with world-class products and services," he says.

The intensely integrated global economy is a world of opportunity - and risk. Succeeding means knowing who the competition is, what your value proposition is and how to leverage technology in the creation and marketing of your product or service. It means knowing more about the history, politics and social behaviour of distant regions than you ever imagined possible. It means searching out sources of information, contacts and assistance. It means a willingness to adapt to local conditions, to fail and try again. It means developing staying power. That is what thinking internationally requires.

"You really have to understand who your competition is," says Prof. Polushin, the founding director of the international competitiveness program at the Desautels Faculty of Management, and president of AMAXIS Inc., an international business-development services firm. "If you want to supply Bombardier, SNC-Lavalin, Rio Tinto, make sure that what you have to offer is not just as good as the guy across the street in Longeuil but good enough to go head to head with guys from the United States, from Europe, from Asia."

International business is built on relationships - but only to a point, says Bruce Linton, chief executive officer and president of Clearford Industries Inc., a small company based in Kanata, Ont., that has created a wastewater collective and treatment system that also produces green energy. The system is designed for regions, typically near the equator, where water is scarce. The costs to build and run the system are low. The company sells to China, India and Colombia.

"The idea of building relationships is nice, but we knew we had something that would work for China's water problem. I've got a lot of good buddies to go to banquets with in China but they wouldn't buy anything from us if it wasn't good value and proven."

A generation ago, the emerging economies were focused on wealth creation, he says. Today, there's an equal concern with creating sustainable infrastructure. "Many of those places don't want high technology and high operating costs. What they want is a long-term support cycle."

Making use of low-cost technology is vital. His company has barely a dozen employees and yet is able to succeed in what he calls its "unusual business model": essentially, outsourcing computer and design work from emerging economies to Canada, instead of the other way around. The company works with international or local construction companies to build its wastewater treatment structures. Nearly all the material that goes into these structures is produced abroad. The brainpower is Canadian.

"When I'm having lunch at a restaurant in China, they have more people working in the restaurant usually than we have in our company," he says.

That's not something he boasts about while abroad. "We don't regularly promote that this company is based in Kanata with a dozen staff. You really have to be careful not to diminish the perceived quality by aggressively disclosing that you have 12 people."

New types of opportunities exist in emerging economies for companies that are involved globally and have their eyes open, says Sarah Kutulakos, executive director and chief operating officer of the Canada China Business Council.

To think internationally may require companies to take a second look at what they offer. It may be possible to leverage technology and know-how that Canadian companies take for granted. For example, "A huge amount of activity that's going on right now with China is in the service area," says Ms. Kutulakos. "It's not nuts and bolts products. It's investment, it's services. A lot of what China needs, and other countries, too, is processes and sophistication. Companies that might be making widgets actually have these, but they haven't sold them before."

The companies that thrive, she says, "get their heads around the fact that participating in today's global value chain is not just sourcing and selling. It's thinking about what a market needs and how you can supply it. Bringing a product to market and doing it efficiently - that's actually something monetizable. A lot of companies may have a product that isn't interesting to a country like China but the expertise in bringing it to market efficiently is something they might need."

China still suffers from a technology gap with Canada and other Western economies, according to a study from the Institute for Competitiveness and Prosperity, an Ontario government agency.

"The companies that are very successful are able to take advantage of that gap and sell their products or services in helping China to bridge that gap. Because China is going to get there no matter what. The more a Canadian company can figure out how to insert itself into that process the more opportunities they have in the short term. And then of course the more accumulated experience they have."

Refusing to participate in those opportunities may be costly, she says. Those companies most at risk in today's churn of technologies and competition are the ones that insist, "'I'm going to do it the old way, the way I want to.' They're the ones who get left behind. They're the ones that hurt the most when things evolve."

The companies that succeed are those that look at it as a 10-year opportunity, knowing that in a decade they may have helped create a competitor. "Don't be afraid to cannibalize yourself because somebody else would have taken him to that point anyway," says Ms. Kutulakos.

Success requires the willingness to put in the time to learn how to adapt to local conditions. "You have to understand the political, historical and economic environment driving these different countries," says Prof. Polushin. "You can't just go on a trade mission, and it's the first time you've ever been there, and suddenly you're an expert in the market."

While success in Canada is usually a precondition for success abroad, businesses discover that what helped them succeed at home doesn't necessarily work abroad. "Even big companies often try to standardize their approach, which would be nice if you could do it. That's not the way it works."

Prof. Polushin suggests that Canadian companies try to operate their business outside of their home market, though still within Canada, before going abroad. "I'm from Alberta and I live in Quebec. It's a different language, a different legal system, different cultural norms. Before you start thinking about Mexico or China, why don't you just test the market in your own backyard?"

Next week's focus: Dealing with cultural differences