We need more dragon slayers
By Bryan McCrea & Evan Willoughby.
What do a smooth-talking commerce student and an eager engineer have in common? Shipping containers, dragons, and an all-too-aggressive aversion to the word no.
Our story starts in 2010 at the University of Saskatchewan — the birthplace of some of the province’s most innovative and thriving manufacturing firms: SED Systems, Vecima Networks, and International Road Dynamics, just to name a few. It was there we first crossed paths and began a journey that would take us to the airwaves on national television, to Canada’s most powerful boardrooms, and, in recent years, all the way up to the northern tip of Alaska.
The two of us became serendipitous allies during the fourth-year Wilson Centre for Entrepreneurial Excellence i3 Idea Challenge. Our big idea (okay, Evan’s): To turn shipping containers into housing for students.
Truth be told, we soon realized it wasn’t a very good idea as far as business competitions go. Students don’t have money. We didn’t have money for land. It didn’t make a lot of sense. So, we took a step back and asked ourselves what the benefit would be of building anything out of shipping containers. Well, they’re stackable, transportable, and highly durable — perfect for mining as well as oil and gas companies working on remote, industrial sites.
That was it. Lightning in a bottle. Before long, we had earned our first $30,000 — two times that if you count the in-kind marketing, legal, and accounting support that came along with the top prize for the business plan competition — and built our inaugural prototype. A chance encounter with serial investor W. Brett Wilson a few months later, and there we were: Two Prairie boys pulling a flat deck trailer through downtown Toronto to our taping of CBC’s hit show, Dragons’ Den.
Long story short, we made our pitch and had our first investor, the same W. Brett Wilson we had met only weeks prior. Now that we had a billionaire’s money, we thought we should probably get serious, and 3twenty Modular was born.
Our first contract was to build a Northern Saskatchewan camp for Claude Resources (now Silver Standard Resources), a gold mining operation, in January 2011. We had no idea how we were actually going to design and build the units, and, in turn, we lost our shirt. But it was the cost of entering the market. The good news was they were so impressed with the high quality and quick turnaround, the company ordered another million dollars of product in our first calendar year. We’d need more space.
Soon thereafter, we started working out of a 3,000-square-foot farmyard quonset, and then a vacant 10,000-square-foot auction mart. We weren’t flashy by any means.
The evolution of the business was not limited to our physical infrastructure. How we responded to the market evolved as well.
Up until 2012, we had always sold things. Then, one day, our phone rang from Fort McMurray. A company needed to rent 10 units (which we didn’t have on-hand, by the way) and ship them within the next two weeks. All of a sudden, we were in the rental business.
In 2013, for the first time, we responded to a public tender to build a 180-bed workforce housing camp for the Department of National Defense. Fifty-nine days later, we were trucking 36 modular units to Cold Lake at a price tag of $2.8 million.
That federal contract showed we could do big projects for big clients. It also meant, however, additional capacity was necessary — which, under normal circumstances, would have been fine. But it was also about the same time capital expenditures in the resource sector were starting to slow down.
We have no illusions that we could’ve easily been an overnight boom and bust, if it were not for one critical decision to start diversifying into non-traditional revenue streams.
Our biggest win was actually building portable school classrooms. Today, non-container-based work accounts for two-thirds of our sales, and we recently moved into a brand new facility of our own in Saskatoon’s north end.
Why are we telling this story? We’re telling this story because we are in no way special, despite what our mothers may say.
Unless you come from money these days — which we didn’t — it is incredibly hard to make a go of it as an entrepreneur. We are among the lucky few who came out the other side. There are lessons we’ve learned and observations we’ve made along the way, though, we think are worth highlighting:
As kids, we all filled out those career aptitude tests. Some of us were supposed to be lawyers, others firefighters. None of us were supposed to be entrepreneurs.
I’m sure many of us remember our friends from school whose parents did own their own businesses. We couldn’t relate, nor did we know what it took to get there. Few of us cared, either. Why? Because they still looked like our parents.
Kids need to hear from entrepreneurs that look like their brother or sister rather than their parent or grandparent. And schools need to present entrepreneurship to young people as a viable first-choice career option, not as a footnote or afterthought.
When we launched 3twenty, everyone told us to focus, focus, focus. That was good advice, sort of, yet it limited our growth. We should’ve diversified earlier.
Let’s be clear: There is nothing wrong with focus; but if it dominates your business mantra, it can come at the expense of innovation. New companies need to embrace agility and get used to saying the word yes — even if it means not knowing how at that exact moment.
We always say entrepreneurism is part of our culture, and not, in any part, by design. We’ve been innovative out of necessity. Having the ability to do so requires hiring excellent people that trust each other non-conditionally. In reality, that was our biggest mistake: Not hiring good enough people sooner. Just because your aim is to be one of the most cost-competitive players in the market does not mean you need to be the cheapest employer.
The role of government
Innovation is like an egg. It’s not government’s job to lay the egg, or raise the chick; it does, however, have a role in protecting the egg and giving the chick a chance at maturing.
The core principle governments must recognize is the interconnectedness of the Canadian economy. That’s amplified perhaps even more in the west, where
so many businesses like ours — from accounting firms to catering companies — rely on a prosperous resource development sector, which depends on pipelines and market access. Politics cannot get in the way of progress.
We also must shift how we publicly support business investment, especially for start-ups. We need more incubators focused on industrial technology, not just advanced technology; we need to reward aggressive investment in young companies; and we need to incentivize programs that work.
Take, for instance, the (to be polite) overly cumbersome Scientific Research & Experimental Development (SR&ED) Tax Credit. Unannounced revisions to SR&ED meant small companies like ours had invested significant time in an already bureaucratic process, only to find out the rules had changed. In our experience, the program has evolved to suit multinationals with R&D departments — not small, growing enterprises where innovation and research is less structured.
The National Research Council – Industrial Research Assistance Program, on the other hand, is an excellent example of a model that works. It’s responsive, it isn’t administratively heavy, and it has accelerated our own R&D spend and product development.
Staying true to principle
Call them cowboy ethics. When someone like W. Brett Wilson shakes hands, his intent is to do the deal. We’ve embraced those same values, and expect our staff, suppliers, and customers to do the same. It’s one of the most important pieces of our brand and identity.
In the end, there is nothing easy about the business of manufacturing. We are constantly changing our definition of success to ensure we’re successful. We have no secret ingredient or special approach — we simply try to outwork our competition, each and every day. For small manufacturers, there is no substitute.
Bryan McCrea and Evan Willoughby are the co-founders of 3twenty Modular in Saskatoon — winner of the 2014 Saskatchewan Manufacturer of the Year award.