Canadian companies want collaboration without the sharing of risks and rewards. This will impact innovation, warns GE Canada President and CEO Elyse Allan.
Bob Lipic’s passport is well-worn. The founder, president and CEO of Sudbury, Ontario-based Mining Technologies International Inc. (MTI), a Canadian manufacturing success story, has visited more than 50 countries since he launched the company in 1986. These days, he typically spends 30 weeks each year supporting his clients, scouting out the next potential markets and looking for strategic opportunities.
Lipic’s efforts have led MTI to become Canada’s largest manufacturer and supplier of advanced mining equipment―for example, think hydraulic drills, utility vehicles, raise bore drilling tools, continuous mining systems. In fact, at a time when Canadian manufacturing has lost ground to less-expensive imports, MTI enjoys sales in the multi-millions, employs 400 people in facilities in Sudbury and North Bay, Ontario and exports two-thirds of what it manufactures through sales offices and distributors in the US, Mexico, Ecuador, Peru, Bolivia, Chile, Russia, Kazakhstan, Australia, and throughout South East Asia .
Growth in the mining sector comes with its share of challenges. On the supply side, MTI faces tight margins, challenging shipping logistics, surcharges, a strong Canadian dollar, fluctuating foreign currencies and fluctuating commodity prices. At the same time, as longtime employees prepare to retire, MTI will be competing with cash flush resource-based companies for skilled talent.
Perhaps the biggest challenge comes from meeting the ever-changing requirements of client needs and demands. A little history: In the 1980s most big mining companies had their own research departments developing equipment to help improve productivity and lower costs. Starting in the early 1990s, they got out of the equipment innovation business opening the door for new players and upping the ante. “Clients are always pushing the capabilities and limits of equipment,” says Lipic. “They want robust solutions, more functionality.”
MTI has set itself apart in the marketplace by creating a culture focused on delivering just that. Continuous improvement and innovation are at the heart of its approach to business—and that involves listening to its own people on the shop floor to identify the most efficient ways to operate and listening to clients and customizing solutions to meet their specific challenges. “Our clients are looking for units that can be automated and that can do more than one task. That is an ongoing evolution of improvement. We have a strong engineering department that works closely with clients and we rely on that group to provide us all the necessary background and direction for the shop floor.”
Clients also want guarantees of performance. For that reason MTI has made prototyping an integral part of its innovation process and has built a testing facility to demonstrate new mining equipment. Other companies have since approached MTI to use the facility as a development area for their products.
That kind of collaboration with customers and associate manufacturers has also manifested in the form of a partnership to share costs in areas that do not represent a competitive threat. For example, MTI recently worked with a competitor based in Montreal to market products collectively. “Both companies prospered from that relationship,” says Lipic. “It’s one of the advantages private companies have over public companies. We are more nimble and can take innovative approaches like this because we have fewer stakeholders to appease.”
On the flip side, larger public companies have an ability to raise funds that private companies do not. Banks and government programs could do a better job of helping private companies innovate and grow, says Lipic. “We need more support to develop export markets. Canadian banks are interested in supporting growth here at home but not necessarily internationally focused.”
He also says government programs could do a better job of helping companies boost productivity and innovate. Lipic points specifically to the federal Scientific Research & Experimental Development (SR&ED) tax incentive program designed to encourage research and development investment and the Northern Ontario FedNor programs as examples of programs that could do more for manufacturers. “From an accounting point of view, anything you get in return on the SR&ED program is taxable. If I look at FedNor programs [also designed to promote innovation], by the time we get to the stage in development where we know a client is interested in the project and we apply for the funding, we’ve already disqualified ourselves because we’ve gone beyond theoretical projection, design and concept but we needed to get to that point in order to make the case to the client.”
As a result, MTI continues to rely on its people, internal processes and close relationships with clients to drive further innovation and productivity. Increasingly those clients are overseas. It’s no secret that mining is booming around the world and MTI is using its reputation for designing and making high performance, high quality innovative products to gain further market share in emerging markets in Eastern Europe and China, markets looking for quality products from the West and the expertise Canadian manufacturers bring.
Lipic is also looking at a few strategic acquisitions that will give MTI more capacity closer to its customers and allow the company to take advantage of lower manufacturing costs. “The right acquisition will allow you to penetrate new markets and broaden your product offering. If you were to design and build and steal market, it would be years in the making to achieve success. Acquisitions allow us to do several things at once.”