A series looking at the unique challenges facing Canada's midmarket companies and how they innovate, stay competitive and grow. In this piece: Innovation doesn't just mean R&D. Sometimes it means selling something else when your inventory gets swept away.
A devastating natural disaster on the other side of the world forced a Winnipeg-based automotive sales and service company to get creative when faced with customers who wanted products that weren't coming.
Which is when The Dilawri Group got into high gear.
The privately-held company has long prided itself on its ability to adapt to the changing needs of the local market and its sometimes-fickle consumer base. Over its 30-year history, it has grown from a modest mom-and-pop shop founded by Ashok Dilawri to a small chain of businesses with more than 400 employees and revenues that topped $240-million last year, according to the company.
In 2011 a deadly earthquake and resulting tsunami in Japan suddenly choked off a vital supply of new vehicles, parts and pieces coming into North America. Dilawri's managers found themselves having to return deposits paid by customers on vehicles that never arrived, while sales slumped at its dealership display lots that sat half vacant around the city.
"It was a very difficult time for us," said Glen Daman, company president. "You can't sell off an empty shelf."
Many a mid-sized business has sunk under less pressure.
Small to mid-sized companies are regularly touted as the backbone of the Canadian economy. The Conference Board of Canada estimates more than 100,000 new businesses, with up to 500 employees each, are created every year. In all, they employ about 5.1 million people and produce 30 per cent of gross domestic product.
But businesses of this size also fail at a staggeringly high rate. Up to half go out of business within the first five years, often due to weak management capacity, insufficient access to private investment capital or a limited ability to grow, according to conference board research.
That Dilawri didn't collapse has much to do with its long-standing business philosophy, whereby employees from the top down are encouraged to embrace "innovation" in its broadest sense; that is, taking a good idea and transforming it into money or market share.
Faced with a "do or die" situation, managers at Dilawri sought to do both. They dug deep into the company's extensive database to strengthen customer retention through various incentives and events, while drumming up new business in other departments that were unaffected by the tsunami, including two collision-repair centres, an automotive-detailing shop and an after-market accessories store.
To cushion the financial blow out on the sales floors, staff spent no time lamenting what they couldn't offer. Rather, they worked to attract patrons to what was available – from new vehicles from manufacturers not affected by the tsunami to a rapidly expanded used-car inventory.
"It caused our sales people to be better," Mr. Daman said. "We did a better job of finding out the wants and needs of a customer – that maybe a smaller SUV was not what would really suit their needs, and maybe it was a larger SUV or possibly a sedan that we did have in inventory."
All the while, managers held fast to the notion the company could ride out the storm while continuing to deliver the boutique-quality customer-service levels that won Dilawri its loyalty in the first place. For instance, the company has red phones installed throughout its locations that directly connect dissatisfied customers with Mr. Daman's personal mobile. He said he endeavours to speak with every customer on any topic related to the business within two hours of the initial call.
Bruce Good, executive director of the Centre for Business Innovation with the Conference Board, said more businesses could learn from Dilawri's example.
Mr. Good said too many small and mid-sized companies misunderstand innovation, falsely equating it with research and development. Research, he said, is the ability to turn money into knowledge. Conversely, innovation is about transforming knowledge into money.
The strongest companies have a culture of innovation that is strategically managed across the entire spectrum of operations, from sales to human resources, with metrics in place to effectively measure the value.
Many smaller companies understand the supply chain, and can efficiently track inventories and costs, Mr. Good said. However, when it comes to measuring innovation within the firm, up to 40 per cent of firms have no measurement tools in place whatsoever.
Three years after its most challenging year, The Dilawri Group has seen a steady rise in business, with sales up an estimated 23 per cent last year over 2012 and a projected increase of at least 23 per cent again this year, according to Mr. Daman.
The lessons drawn from that challenging year are still fresh in the minds of those who captained it through the economic mire. The company recently launched its own non-prime financing branch to customers seeking car loans, and has plans to move into the insurance sector.
Mr. Dilawri, who continues to oversee the company as its sole owner and chief executive, said the company's success has always been strategically planned, with every expansion paid for through its own profits and with the desire to have a "better, more secure financial base."
"We bite off only as much as we can chew," he said.
THE DILAWRI GROUP
Founder/owner: Ashok Dilawri
Location: Winnipeg, Manitoba
Number of locations: 10
Number of employees: more than 400
Number of businesses: 12 businesses, including seven dealerships, two auto-collision centres, an auto-detailing shop, aftermarket accessories store and non-prime financing centre.
Primary source of business: sales and service of new and pre-owned vehicles
2013 total revenue: $240-million
Two-year revenue growth (from 2012 to 2014): (projected) sales growth of 46 per cent
Source: Dilawri Group