Harnessing our innovation potential is not an either-or equation
By Patrick Thera.
Want to foster a high-tech community in the heart of Prairies? Why not ask a Prairie company that has been successful in advanced technologies long before the rise of personal computing, the internet, and smartphones?
SED Systems has been a pioneer in this field since the mid-1960s. Originally spun out of the University of Saskatchewan Department of Physics, SED has been involved in upper atmospheric studies, the development of space instruments, satellite imagery, search and rescue missions, mobile satellite communications, digital satellite radios, and deep space exploration, among its many other accomplishments.
The success of SED has always been its ability to keep its customers happy and adapt to changing market conditions. For more than 50 years, SED has been solving tough engineering challenges, working side-by-side with the who’s who of the communications industry, and doing so all within the City of Saskatoon, and in the Province of Saskatchewan.
SED formed its manufacturing capability out of the need to reliably build the products it had designed. We quickly realized, however, that we could sell our excess capacity to do contract manufacturing for other companies in both the commercial and defence markets. This evolved to SED as it is today, with a staff pool of 300 professionals, including more than 130 highly qualified engineers and technical staff, alongside a sophisticated manufacturing department, which includes a state-of-the-art surface-mount electronics manufacturing line.
In short, we turn our customers’ ideas into reality. Sometimes, that means manufacturing an end-product to meet their needs; other times, it materializes as a collaboration to bring their product concept to life.
A major source of disruption for SED today is that we find ourselves thrown into the middle of a tech start-up bubble being aggressively cultivated by policymakers. This is not the first tech bubble SED has seen, and it certainly won’t be the last. A few years ago, oil, gas, and mining ruled the day, and you could expect very little government support for technology developments that were not geared toward these industries. Times change, though, and so do the capricious priorities of government.
Saskatchewan was not the first Canadian region to jump on the most recent tech bandwagon, as many other jurisdictions across Canada have piled on to what they believe to be the big ‘out’ from the sinking commodities sector. I counted at least 10 other regions coast-to-coast, all claiming stake to the label of the next ‘Silicon Valley.’
This makes for a very attractive climate for tech start-ups. But, if past is prologue, we know the reality is maybe 10 per cent of these start-ups will actually make it to profitability. Until then, they subsist off the funding they receive from private venture and government subsidies.
Don’t get me wrong: A start-up struggling toward profitability is a noble cause, and one that I support. SED is very proud to have played a small role in the success of several start-up ventures in recent years that have grown to prosperity. That said, the recent efforts of many lean more toward a pursuit of extremely high valuations, and a big sale or IPO. This pays early investors and principals handsomely, yet leaves others (including taxpayers) holding a larger bag of debt. Eventually, the bubble bursts and we face another drought period of large layoffs and bankruptcies.
How do these start-ups attract this kind of money? Key and foremost is the idea. Obviously, the idea holds merit or it would not attract much interest in the first place. Second, pitch it with a young entrepreneur in their mid-20s or 30s. Third, develop a ‘game-changing’ philosophy toward doing business, marketing, or the management of staff, that seems necessary to go along with bringing such an audacious idea to market.
This is the new hook in the current bubble.
The adoption of outlandish philosophies — whose effectiveness could never be proven, but that sound progressive — are attractive to both the venture capital investor (who only needs to hit a home run one out of every 10 times at the plate) and their target hiring group.
Candy walls, band rooms, nap rooms, no fixed office plans, beer dispensers, inbound marketing, leapfrogging, and recruitment disguised as kitschy-sounding social events are but a few of the less creative concepts being bandied about. These are all great when your end-goal does not include being a profitable, sustainable company. After working more than three decades in the tech industry, I believe there is no substitute for running an efficient operation and for hard work. I also believe that amazing innovation, entrepreneurialism, and profitability can be obtained without a candy wall.
The other fundamental hurdle to creating a tech hub is the availability of local technical talent.
Saskatchewan has produced some of the very best technology expertise in the world. Even giants like Google recruit out of our post-secondary institutions. The problem is that there are not enough of these talented individuals to go around.
The number of graduates from our university computer science programs is remarkably low — so low, in fact, the start-ups that are flooding into our province are fighting amongst themselves to attract the talent they need to fit their operations. So, now we are in a situation where we are rolling out the red carpet to create a start-up community without a resource pool capable of sustaining it.
Most certainly, there are programs that could be adopted to attract more people into technical vocations as opposed to the trades. It’s still only a couple of years ago when policymakers were touting ‘the trades are the only way to go.’ Regardless, programs to increase local technical pools take time, probably more time than any of these start-ups have had to wait before. Instead, they look to a local source of highly trained, skilled resources — existing, longstanding tech companies.
So, why don’t we jump on the start-up bandwagon? As a part of the Calian Group of Companies, a publicly-traded entity, SED feels a great responsibility to return value to its shareholders. SED does this through two basic means: Our continuous consecutive profitable quarters allow us to return a dividend to our shareholders, and we have an agenda that focuses on sustainable growth. We make critical investments in core technology and products that will help us increase our competitiveness and our presence in the marketplace long-term.
That’s not a very exciting raison d’être if you believe the boasts of the current wave of tech ventures. Nevertheless, this philosophy has kept us in business, providing successful, reliable careers in Saskatchewan since before the first man walked on the moon.
Recently, our investments have allowed us to achieve double-digit growth in our products business. This is where we feel we can help spawn real, sustainable growth in our local high-tech community.
I believe the true win for Prairie tech companies is through collaboration. SED has a breadth of capability, including the knowledge and equipment to help with product engineering, prototyping, functional and environmental testing, and full-up production. We seek to collaborate with businesses that have access to markets and ideas for products that we can help design, develop, or manufacture. Where the right business case exists, governments should help nurture these collaborations.
The opportunities are endless, from product design to big data applications. With some joint investment, I believe that, working together, we can harness our true innovative potential, and create the real win-win for tech in the province and beyond.
It’s about raising our collective global presence, and building an industry that can withstand any bubble.
Patrick Thera is the president of SED Systems — a global trailblazer in the development and integration of complex satellite, communications, and aerospace technologies.