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Commercialization

Canada is good at inventing, not so good at selling Add to ...

In the late ’90s, Moncton-based Micro-Optics Design Corp. had the best eyeglass manufacturing machine on the market. By 2003, it had raised $50-million in funding, including $34-million in venture capital.

That’s also the year the company went bankrupt.

Its intellectual property was picked up by a competitor in Germany. Four years later, the handful of machines the company had sold were still being used and they were still highly regarded.

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So what happened? Micro-Optics fell into the commercialization gap: unable to successfully sell a new technology product despite its strengths.

“Technology entrepreneurs excel at identifying markets for new products but typically lack the management experience to know ‘what they don’t know,’” reads a 2007 case study on Micro-Optics prepared by the Innovation, Creativity and Capital Institute at the University of Texas at Austin.

“In Micro-Optics’ case, the initial leadership team seemed reluctant to seek outside management help to cope with manufacturing problems and cash flow issues that threatened the company.”

It’s impossible to tell how much the commercialization gap costs the Canadian economy, but experts say it’s one of the main reasons this country lags other industrialized nations when it comes to innovation.

“The one thing that has always struck me is how good Canadians are at inventing things and solving problems,” says Russ Roberts, vice-president for tax and finance at the Canadian Advanced Technology Alliance (CATA), a high-tech industry association. “In terms of inputs, in terms of capacity, we’re doing pretty darn good.”

Mr. Roberts, who helped develop Revenue Canada’s scientific research and economic development tax credit program in the late ’80s, says the problem is “our ability to capitalize on our innovation inputs.” Canadian companies, he explains, are struggling to turn their innovations into sustainable businesses and keep their intellectual property in Canada.

It’s a problem with a long history. In 1989, the University of British Columbia (UBC) launched the Prototype Development Program, the first university program in Canada to help turn research into products. “It’s amazing how long we’ve been working on it and how much it’s changed,” says Angus Livingstone, who helped start it.

While these initiatives have now become commonplace, problems are emerging in other stages of product development. “We kicked the can down the road,” says Mr. Livingstone, who now has the title of innovation catalyst at UBC.

Canadians “don’t have a lot of senior management experience,” he points out. And when Canadian technology firms are bought by foreign companies, head offices move out of the country even if R&D operations stay closer to home.

Dan Herman, co-founder and executive director of the Centre for Digital Entrepreneurship and Economic Performance, an economic policy think-tank in Waterloo, Ont., says he’s seen the same thing. Companies are not struggling to access financing, he adds, instead the issue is “access to sophisticated management talent.”

That’s what happened to Marie-Eve Ducharme. As the first employee of a company that was spun out of the Université de Montréal (U de M), to develop high-tech cameras, she soon ended up managing the business. “The founder was an astrophysicist who had a great idea on paper,” she says, but “he didn’t have skills in management.”

Ms. Ducharme, whose background was also in physics, had experience as a project manager but not as a chief operations officer for a company looking to grow. She returned to school to improve her business management skills, but admits she made “a lot of bad moves.” The company lacked a solid business plan and it tried to target too many markets with too many products.

“When you go fishing, you don’t know what you’re going to catch,” as she puts it.

In 2010, Ms. Ducharme started a new company, Nuvu Cameras, to commercialize an extremely sensitive camera invented at the U de M by Olivier Daigle, her business partner. As the president of Nuvu, Ms. Ducharme says she trying to avoid the same mistakes.

One of her strategies is to focus on specific market niches. While Nuvu’s camera was initially marketed to astronomers, the company has found a bigger opportunity in medicine, where the product can be used to see things like individual cancer cells during brain surgery.

“Sensitivity is extremely important in the bio-medical field,” Ms. Ducharme says.

The two business lines are complementary, she adds. While astronomers were early adopters, medicine is a much bigger market, but the astronomy market also got her company its first customer: NASA. Having that anchor helped boost credibility, Ms. Ducharme says.

A big anchor client can be crucial for startups trying to build sales, Mr. Herman says, adding many companies fail to find one and “just disappear.” Not only are sales an important driver, having customers also helps to make new products better. “A lot of innovation comes from customer service,” UBC’s Mr. Livingstone says.

That was the strategy employed by UTComp, a Cambridge, Ont.-based company that has developed a non-destructive testing process for fibreglass and other composite materials. “It’s critical for a sustainable company,” says Geoff Clarkson, CEO and chief engineer. “If you don’t continuously pay attention to that feedback, you won’t stay in business.”

It was customer feedback that gave Mr. Clarkson the idea for his product in the first place.

He was working as an engineering consultant, doing an inspection at an oil refinery, when the customer asked him if there was a method to test the durability of fibreglass pipes the same way he tested steel. At the time, fibreglass could only be tested by taking a sample and cutting it in half, a costly and imprecise method. That conversation led Mr. Clarkson to spend the next eight years developing a technical process to fill that demand.

“Part of our success was that we already had existing customers and we were responding to a need,” says Joanne Watton, UTComp’s chief operations officer. The company, which began marketing its process a year and a half ago, is currently experiencing sales growth of about 50 per cent a year.

Due to Canada’s small market, another key to UTComp’s and to Nuvu’s early successes may be that both companies started expanding internationally right off the bat. UTComp – which has a business model that includes licensing its process to industrial inspectors, had licensees in the United States and Europe in its first year of business.

For Nuvu’s Ms. Ducharme, who has found success selling her camera in Japan, it’s a similar story. “We cannot serve only the Montreal region, it’s a niche product.”

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