Photo: PhotoAlto/Eric Audras

“If you give women the support and structure to make their work lives more manageable, you will get more results out of them than a man,” Ms Arvizu argues. “It is very hard for women in Mexico to balance work and family. And culturally, few women are going to put work before family.”

Belcorp recognizes the need to encourage skilled women to join its teams—especially in emerging markets, where firms are struggling to bring in the right talent. According to the 2011 Manpower Global Talent Shortage Survey, 31% of global firms have trouble filling jobs. In India, the figure rises to 67%. It’s no coincidence that India is also the worst performer among BRIC countries in terms of female participation in the workforce, with a rate of 34%. Throughout the emerging world, women are becoming a source of much-needed talent. In Brazil, 60% of college graduates are women, in Russia 58%, and in the UAE, 66%. In India and China, where the percentage of females among graduates is 39% and 47%, respectively, the numbers are steadily growing. But why would these skilled women join smaller firms with little brand recognition and presumably lower pay?

OPEN DOORS BUT BIG MOUNTAINS

Radhika Sabharwal, 27 years old, navigates the streets of New Delhi to get to work at Wieden+Kennedy, a Portland, Oregon-based advertising agency. She used to work at JWT—a large marketing firm with 200 offices worldwide—with commensurate salary and brand recognition. But Sabharwal has found a smaller firm can mean more opportunities. “[I chose a] smaller company for personal satisfaction, to do something for myself, something which gives me more creative control,” she says.

Smaller firms have an advantage over larger ones. “It’s much easier to shift the corporate culture of a small firm than one that has 50,000 employees,” says Ripa Rashid, executive vice president at the Centre for Worklife Policy in New York, and co-author of Winning the War for Talent in Emerging Markets: Why Women are the Solution. As Arvizu points out, fast approval from senior management at Belcorp allowed her to implement changes and develop projects much more rapidly.

Of course, the shortage of women in the workforce is not due to a lack of female-friendly work culture alone. Women in emerging markets face risks outside company walls. One-third of professional women surveyed in the BRIC countries say they are concerned about safety just getting to work, according to data from the Centre for Worklife Policy. This is hardly a surprise: in Brazil, armed robbery is a common daily occurrence for both men and women; and India—the world’s third-largest economy measured at purchasing power parity (PPP) exchange rates—was recently ranked the fourth most dangerous country in the world for women, behind Afghanistan, Congo and Pakistan, according to a survey of 213 gender experts by TrustLaw, a legal news service. Companies that take steps to overcome such hurdles are more likely to attract and retain female staff. Wieden+Kennedy, for example, provides cabs to employees past 10 p.m. as well as someone to accompany them to their house.

But, according to Arvizu, while women will always contend with security issues, other problems are more to likely hinder a woman’s professional rise. For example, women living in cultures with strong patriarchal attitudes struggle to balance family and a job, especially if they need to get permission from their husbands to work. As a human resources director, Arvizu has seen the impact such cultural norms have on her female employees: “At Belcorp, there was a talented young woman in our accounts receivable departments. She had the most incredible interpersonal skills, a great communicator. One day, I asked her if she would like to work in sales, which meant more responsibility and more pay. She came back the next day, saying she could not. She had asked her husband and he had said no.”

STIRRING THE GLOBAL POT

Of course, patriarchy doesn’t stop outside the company walls. A woman’s track up the career ladder is often laden with struggles, and this may be even more obvious in larger companies. As Arvizu notes, “Most large companies in Mexico are still dominated by men; there are very few women in senior positions. And when they did achieve a senior role, it was never perceived as being based on merit. People would allege other factors, like being the boss’s secret lover. Many women often ended up leaving or not pushing further ahead in their career because they could not deal emotionally with these rumors and insults.”

This is where smaller companies may be paving the way for a workforce that further encourages women’s participation. On one hand, as smaller firms expand to other countries, they allow women to create a global business network. “The biggest advantage is not promotions, it’s the ability to shift from network to network, from London to São Paolo to Amsterdam,” Ms Sabharwal says. “Working [at Wieden+Kennedy] teaches me not to be in a little Indian cocoon, [but rather] to be global.”

The advantage is a two-way street. A smaller firm that adjusts its work culture to encourage women can take the same model when expanding to other places. Arvizu found this to be true at Belcorp: “It was really exciting because we were growing throughout the region. As we expanded, we were developing ideas and strategies on how we could restructure and reorganize the company, taking advantage of our broader reach by creating clusters,” she says.

There is no doubt that the story of smaller firms and skilled women in emerging markets will merge. Despite the barriers they have to avoid in order to be part of a company, women are gaining more technical and business skills to meet the needs of smaller companies that are moving abroad.

We follow up our World in 2050 report by arguing that the rise of emerging markets will impose new strains on energy supply. We conclude the world can grow and without excessive environmental damage – but it will need a change in human behaviour and massive collective government foresight.

Download the full report

When the founders of Vancouver-based Weatherhaven started out they were looking for a better way to protect people working in harsh climates and difficult-to-access areas. They not only succeeded but they’ve built a world-leading business with shelters protecting people in 50 countries.

Click here to read more about Weatherhaven

Trump International Hotel & Tower

Lay of the land: Pretty much everything in Chicago happens in and around the Loop, which is serviced by the city’s iconic (and efficient) elevated railway. Speaking of which, take a cue from the locals and ride the train to and from the airport (the Blue Line goes to O’Hare, the Orange to Midway) lest you end up sitting in traffic for hours. As for your home base, the undisputed jewel of Chicago hotels is the Trump International Hotel & Tower, and not just because of the luxe accommodations—it’s beloved by Chicagoans for its stunning architecture, which is saying a lot in a town that’s big on good-looking buildings.

Make your pitch: Chicago is home to its fair share of Food Network stars (Grant Achatz, Rick Bayless, Graham Elliot and Top Chef winner Stephanie Izard, to name a few), but the top celeb chef-run restaurant for business is still Charlie Trotter’s, whose out-of-this-world food is served in a room where you can actually hear yourself think. Alternatively, many a million-dollar deal has been hashed out over 26-ounce porterhouse steaks at Gibsons, a favourite of former mayor Richard M. Daley. Dark wood panelling, plush leather banquettes and bow-tied bartenders set the stage for notoriously huge portions of unadulterated USDA Gibsons’ Prime Angus beef — that’s right, they have their own USDA Prime certification.

Seal the deal: A go-to for after-work drinks, The Bar at the Peninsula Hotel is an art-nouveau-inspired gem that’s ideal for hushed conversation and top-secret negotiations. If it’s wow factor you’re after, book a table at the Signature Room. Located on the 95th floor of the John Hancock Center (the ear-popping elevator ride itself is vertigo-inducing), the dizzying 360-degree views of the Chicago skyline will surely charm any blue-blooded Chicagoan to sign on the dotted line.

What to read: Erik Larson’s The Devil in the White City transports readers to 19th-century Chicago in a nail-biting murder mystery. Larson uses fiction techniques to tell the true story of serial killer H.H. Holmes, who murdered up to 200 young women, most of them during the 1893 Chicago World’s Fair.

First person: “Chicago truly is a meritocracy. In other cities you’d need to know somebody or be related to somebody or somehow prove yourself first, but Chicagoans love a good idea, and the people here are willing to take a risk and give you a chance. So think boldly, think brashly. That’s how we got Millennium Park.”

—Lynn Osmond, president and CEO of the Chicago Architecture Foundation. The St. Catharines, Ont. native has been living in Chicago since 1996.

Holt Renfrew vice president, Bonnie Brooks Young
Photo: Kevin Van Paassen/The Globe and Mail/Canadian Press

Brooks, president and CEO since August 2008, has accomplished many things in her three-plus years on the job—by the Bay’s own accounting (and as a privately held company, there’s no other kind), sales are stronger now than they’ve been in more than a decade, up 9% in the second half of 2011—but chief among them has been rebuilding the Bay brand in her own image. Brooks is fashionable, she’s with it, she’s got the smoky radio voice that makes men weak: in short, she’s not like her fuddy-duddy predecessors George Heller or George Kosich—the men in dark suits (designer unknown) who supposedly drove the storied Hudson’s Bay Co. into the ground.

She has, as just about every industry observer will tell you, made the Bay relevant again. “Bonnie has started the process that nobody thought was possible—bringing back the magic of the department store,” says Toronto retail consultant Wendy Evans. So in late January, in a big vote of confidence, Richard Baker—the Bay’s American billionaire owner—added authority over the fusty New York City–based retailer Lord & Taylor to Brooks’s portfolio, expecting a similar turnaround there.

Like the Bay, Lord & Taylor is a retailer that has long traded on its heritage: founded in 1826, it is one of the oldest upscale chains in the U.S., and was the first to open shop on Manhattan’s Fifth Avenue. It exudes a certain Kennedyesque charm, but it is not particularly cool or modern—and that is where Brooks comes in. Baker, reached by phone in New York, is quick to point out that the 47-store chain, centred in nine northeastern states, is “making great strides,” with sales up 20% over the past two years. But, he adds: “I believe Bonnie and the team will continue to make progress and continue to innovate. Bonnie is always an agent of change.”

As we wait to see what the changes at L&T will be, a question arises: Just how much of the Great Bay Makeover has been a triumph of marketing—a discipline Brooks mastered through her years at Holts, editing Flare magazine, and reinventing stodgy Hong Kong–based retailer Lane Crawford—and how much of it consists of substantial, and sustainable, change?

Designer boutique The Room, at the Bay’s flagship stores in Toronto, Vancouver and (soon) Montreal, has certainly garnered a lot of positive press, as has Brooks’s exclusive arrangement to market the hip Topshop brand in Canada. But those measures, and the general trend to edit and upscale the Bay’s brand selection, have benefited only a fragment of the 90-store chain. David Ian Gray, a retail strategist based in Vancouver, says that there remain huge differences between the Bay’s flagships (the so-called “A” stores) and the bulk of stores in suburban malls and small towns—the “B” and “C” stores, in places like Medicine Hat, Alta., and Sydney, N.S.—which Gray says don’t have the same selection or service, and none of the magic.

Brooks’s reign at the Bay has also benefited from the stunning collapse of Sears Canada, which “is just M.I.A.,” according to consultant Maureen Atkinson of J.C. Williams Group. Parent company Sears Roebuck has treated its northern outpost as a cash cow, stripping all the profits out of Canada—“and those stores have become really sad,” she says. It is in that context that the Bay has remade itself, stealing market share in the process.

That competitive advantage won’t last long, with U.S. retailers Nordstrom and, more notably, Target setting up shop in Canada over the next couple of years. But Richard Baker says the Bay is ready—noting that 80 of its 90 stores were renovated last year. “We are as focused on the bottom 50 stores as we are the top 40 stores,” says Baker. “We’ve added back inventory, we’re improving merchandising and we’ve upgraded the facilities.”

And, of course, he’s got Bonnie Brooks. Baker insists that Brooks understands the consumer intimately, and has “the creative capacity to differentiate the business and make it exciting. She’s done it before.” And at Lord & Taylor, Baker is counting on her being able to do it again.

Photo: Pawel Kopczynski/Reuters

The Eikon platform, which cost a billion dollars and took more than two years to build, gave users access to the two companies’ combined intelligence on one desktop—hundreds of news sources, research reports and analytical and trading tools that brokers, bankers and analysts rely on to weigh investments, assess risk and conduct transactions. The word “terminal” is a misnomer today: Such news feeds used to come on their own proprietary hardware; now, the term simply refers to per-user pricing for the service. But that service is the bloodstream of the markets. Just think of the Wall Street sequel or the recent financial-crisis flick Margin Call: all those charts and numbers arrayed across multiple screens that Shia LaBeouf or Kevin Spacey gape at in horror as the markets tumble? They’re supplied—in almost real time and at hefty subscription prices—by TR, Bloomberg or one of their competitors.

While the Bloomberg name is practically synonymous with Wall Street, TR has been the industry leader. Until recently, it controlled near 40% of the market, compared with a quarter held by its American competitor. Eikon was to turn that lead into domination by revolutionizing how a data terminal looks and functions. Financial professionals are accustomed to screens that “look like airport check-in systems from 30 years ago,” as one analyst puts it. With Eikon, they can join the web age. Incorporating social media, intuitive search and smartphone apps, the system is sexy in an arena as dry and arcane as futures spreads.

For its parent, Eikon embodies the rationale for the $17-billion merger (all figures in U.S. dollars). Over the years, Thomson and Reuters had each acquired a huge hodgepodge of brands and tools, all supported by their own development and sales teams. In building Eikon, the company aimed to cut out overlaps and bring the many product lines onto one seamless platform that users could access from a single screen. “In essence, we’re simplifying the company,” Devin Wenig, head of TR’s Markets division, responsible for Eikon and other services for the financial industry, said at the time.

More than a year after the launch, Eikon isn’t changing the game so much as losing it. At year-end, only about 8,000 desktops around the world were running the system. The market data division, which accounts for more than half of TR’s revenue, eked out 1% growth in the second and third quarters, and its dwindling fortunes forced the company to take a $3-billion charge in the fourth quarter, pushing it into a steep loss. Most damningly, Bloomberg LP, founded by New York Mayor Michael Bloomberg, has been gaining ground on its arch-rival. In 2010, while the financial analytics market grew by 4.3%, Bloomberg sales jumped 10%—often at the expense of TR. Industry research firm Burton-Taylor International Consulting projects that last year, Bloomberg caught up to TR in market share, with both holding just under a third. According to Douglas B. Taylor, managing partner at Burton-Taylor, not only are new prospects choosing Bloomberg over TR, but TR clients are leaving for Bloomberg. All this is a big blow for Canada’s richest family, the Thomsons, which owns 55% of  TR’s stock through its Toronto-based holding company, Woodbridge. The Thomsons and Woodbridge president Geoff Beattie spearheaded the merger with Reuters, envisioning massive efficiencies and a broadening of both companies’ business. “Eikon has been a big deal for the company for years,” says a person close to TR. “This was Geoff Beattie’s deal.” With Eikon underperforming and TR stock ending the year down 36% from its 2011 peak, the Thomson brass are deeply unhappy. “These guys are tough: you’ve got a job to do, don’t screw it up,” says the close associate.

They made their displeasure clear over the past six months by progressively ousting almost every senior executive linked with Eikon, most of them former Reuters people. A new CEO, Jim Smith, took over last month—a 25-year Thomson lieutenant, backed by Thomson loyalists. It’s serious now: people are questioning the merger’s wisdom, Canada’s business royalty is losing money—and face—to a Yankee upstart, all while the industry faces a deep slump. Smith’s job No. 1: fix the nifty new tool that’s dragging the company down.

Thomson, Bloomberg and other purveyors of business data were Information Age companies before the term was coined—and, unlike many other publishers, they never made the mistake of giving their product away for free. In finance, where up-to-the-second data are an especially valuable commodity, Reuters led the field. While it may be best known for its news service, the company pretty much invented the market for real-time financial news and derived 90% of its revenue from it. Then, in the early 1980s, a cocky young trader named Michael Bloomberg used his severance from Salomon Bros. to hire code jockeys to build him a financial news service and trading platform for stock and bond traders—the heart of Wall Street. It was “kind of a virgin terrain, and Reuters people viewed them as a niche player,” says Taylor, who used to work for Reuters. Bloomberg built out the system’s features based on its users’ priorities, fostering customer loyalty. Perhaps most important, Bloomberg offered a proprietary instant-messaging system that made it a pioneer of social networking. “People in equity and fixed-income trading have become highly dependent on Bloomberg’s IM feature as a key tool for daily activity,” says Claudio Aspesi, an analyst with Sanford C. Bernstein in London who tracks the industry. “It’s very unsophisticated technology in many ways, but because it’s a community, it makes Bloomberg extremely sticky.” Bloomberg also created one of the first online portals, augmenting financial data with job listings, sports information, even links to Brooks Brothers.

Thirty years later, “the Bloomy” is a staple of trading floors and research desks, especially in North America. At $20,000 a year per desktop, it’s the priciest player on the market. And the system looks largely the same: orange script on a black screen, and run by typed commands right out of MS-DOS. But mastering Bloomberg shows that you’re serious about making money. “It’s perceived as the Mercedes product,” says Taylor. “If you have a Bloomberg, you have the ultimate terminal.”

Cutting into Bloomberg’s lucrative and prestigious Wall Street franchise was just one reason why Thomson and Reuters decide to wed. The two companies were a snug fit. Thomson’s strength was serving legal, accounting and other professional markets; Reuters focused heavily on broader financial services. There were few overlaps and lots of potential synergies; the two companies envisioned wringing out US$500 million in efficiencies within three years.

They also faced a common challenge in rationalizing numerous acquisitions over the preceding years. Thomson Financial was the result of some 50 deals stitched together through the 1990s after the company decided to shift away from newspapers to professional information. Reuters had also acquired various niche players, each of which had come with its own support infrastructure. The merger at first compounded the problem. TR’s invoices looked like phone books. “Something had to be done anyway,” says Aspesi. “They could justify [developing Eikon] just because of the cost benefit” in simplifying the combined product line.

Many were surprised that it was Tom Glocer, CEO of the smaller Reuters, who became chief executive when the deal closed in April 2008. But the American lawyer had proved his executive chops by putting Reuters back on track after its near-collapse around 2000. He was also tech-savvy (he can write software code), had a high industry profile, and had already started shifting the company toward the kind of open, web-based system that Eikon would become.

The idea behind Eikon was not just to consolidate TR’s financial products but to bring them into the 21st century. “The financial information industry hasn’t changed much in over a decade, which is kind of astonishing for a such a dynamic sector,” says Philip Brittan, a former Bloomberg executive that TR poached from Google six months ago to oversee Eikon. “People coming out of business school have a new way of looking at the world. People in our industry need to be hip to that new set of expectations.” Eikon looks and works like Google, Twitter and a news portal all in one.

It’s been a massive investment. A thousand clients took part in beta testing. Two thousand developers are employed in supporting it. Many early reviewers complimented the intuitive interface. But in rushing to get the system out, TR launched Eikon incomplete, failing to deliver on some key promises. Users have complained about the poor integration of historical data and real-time services. And, in an industry that lives by speed, it’s sluggish—which had been the key knock against Reuters 3000 Extra, Eikon’s most direct predecessor. An internal TR memo revealed that even employees were complaining about the system’s speed and performance.

The rollout also hit snags organizationally. The sales push was fragmented among remnants of earlier product teams. And Eikon’s uptake has been particularly disappointing among institutional investors and asset managers. They’re a more lucrative market than brokers and other sales professionals because they make a lot more money for their employers, and thus have more to spend on services. “The buy side drives so much,” says Taylor. “It has such deep pockets and is not particularly price-sensitive. Capture the buy side and the sell side will follow. And Eikon has not addressed that space well.” In fact, since Eikon’s launch, TR has been losing market share in this vital sector.

If Eikon was intended as a Bloomberg killer, TR underestimated Bloomberg’s strengths and its clients’ loyalty. The phenomenon of “software lock-in”—once you’ve mastered a tool, you’re loath to switch, even to something better—is particularly strong in finance. People fear that learning a new system will cause delays, and a mistake could cost them millions. When the TSX tried to replace the custom keyboards that came with its electronic trading system with QWERTY versions, there were fist fights on the trading floor. Dan Humphrey, head of technology at Codron Capital, a Toronto-based high-frequency trading firm, recalls trying to get a former boss at one of the big banks to adopt new tech and regularly getting rebuffed. “He’d say, ‘Why would I change something when it’s working?’” It doesn’t help that financial firms, whose budgets are being squeezed, would face retraining and integration challenges. “When you learn to make money with something, the first thing you tell [your boss] is, ‘Don’t touch my f—–g screen,’” says Doug Steiner, former CEO of ETrade Canada who now consults on technology with Bay Street firms. “The interface on Eikon is far easier. But people make money with Bloomberg.”

There’s also a deep cultural element at play. Bloomberg’s very complexity and arcane nature are key parts of its draw. Todd Toler, an interface designer at a U.S. publishing company, compares the Bloomberg screen to NASA’s old mission control. “The black background on terminal-style interfaces is an established idiom in serious ‘engineering’ cultures where real-time, data-centric analysis [has] high stakes,” he writes on his blog. “It is the look of serious people doing serious business.” Mastering Bloomberg codes and macros is like knowing the language of a secret fraternity. Its exclusivity conveys status. Bloomberg brass know well the power of the system’s iconic look. “We have to be religiously consistent,” Lex Fenwick, one of the company’s top executives, has said. “You can see a Bloomberg from a mile away.”

Halfway into 2011, the Thomsons had lost patience with Eikon’s stumbling rollout. Nine months after launch, fewer than 25,000 of the roughly 400,000 end users of TR’s financial products had moved over to Eikon, and only 3,500 new users had signed up. The company’s share price was back to the same level it had been at merger time. In late July, the Markets division underwent an overhaul, losing six top executives, including its leader, Wenig. He had been a close Glocer associate: he was the first person Glocer hired when he took the CEO job at Reuters in 2001 and, prior to the merger with Thomson, Wenig was seen as Glocer’s likely successor. Glocer took direct control of the division, promising to simplify its structure, realign the sales force and, most important, ramp up Eikon’s sales.

But there was no quick turnaround. The fall brought another anemic quarter for Markets, while TR’s other division—which largely runs Thomson’s legacy business serving legal and other professionals—powered ahead at 10%. Glocer pointed out that at a time when financial institutions are besieged by sagging profits and heightened regulatory scrutiny, they’re reluctant to switch to something new. But he didn’t put all the blame there. “I wouldn’t have fired half the team if things were going swimmingly in Markets,” he admitted in November during a conference call with analysts. He predicted that revenue growth would return…in 2013. That wasn’t soon enough for the Thomsons: a month later, Glocer followed his protege out the door.

While TR and Bloomberg dominate the US$24-billion global financial data market, there are more than a dozen other suppliers with various niche strengths. Almost all are being challenged by the financial industry slump, which is causing client firms to cut back on subscriptions and reduce the number of vendors they use. This has led to diversification efforts. Bloomberg is now making a big push for the professionals who are Thomson’s traditional turf, beefing up its Bloomberg Law service, a research tool for lawyers, to compete squarely against TR’s Westlaw service, the market leader. This month, Bloomberg launched another salvo across TR’s bow by unveiling a new tool that will let clients freely access information for which TR charges fees. The private company has said it expects its fiscal 2011 revenue to rise 11%, to $7.6 billion—a much steeper growth curve than the 2% Burton-Taylor projects for the industry. The two companies’ market-share trajectories sum up the momentum: both now have around 31%, but for Bloomberg, that’s up from 25% in 2005; TR is down from 37%.

Last summer, after the management shakeup, Glocer acknowledged his rival’s accomplishments. “Thomson Reuters is dealing with a very powerful competitor. Bloomberg—fortunately for Bloomberg and unfortunately for Thomson Reuters—has not made mistakes.”

Righting TR’s mistakes now falls to Jim Smith, who was running the thriving Professional division until September, when he took on the job of TR chief operating officer and the Professional and Markets divisions were merged under his command. Described as a pragmatic and approachable guy, Smith had been expected to succeed Glocer, but not quite so soon. A Thomson employee since 1987, he was the COO of Thomson Corp. at the time of the merger, and has long been close with both Geoff Beattie and the Thomson family. Now, observers expect him to get tough on cost cutting and product improvement.

TR plans improvements for Eikon in the first half of this year, and observers believe the product will eventually gain acceptance. What’s unclear is how long it will take, and at what cost to TR’s market position. The Thomsons have, in effect, bet the company on Eikon, and there’s no walking away from it. Says Brittan: “Eikon as the focal point for the entire company can’t be overstated: that’s our vision. It’s making real the promise of the value of the synergy.”

But behind closed doors, TR executives may be confronting a disheartening realization: that even a huge investment in state-of-the-art technology, which is in many ways superior to its main competition, may not be enough to reverse its slide and Bloomberg’s gains—“which goes to the core of how entrenched Bloomberg is,” says Aspesi. TR admitted last year, he says, that it doesn’t expect to regain the market share it’s lost any time soon. In what promises to be a very tough year in the financial markets, amid economic weakness and European instability, Thomson Reuters may have to significantly change its game plan. “The merger could not have made more sense,” sums up Taylor. “The strategy is still sound. But the tactical implementation just hasn’t worked.”

Thorsten Heins at the Blackberry
Developer Conference, February 7-8, 2012
Photo: Hartmann Studios/RIM

Subsequent media appearances carried a touch of awkwardness, too. In an interview with CNBC, Heins was a pale, unsmiling figure whose valiant attempts to answer the anchors’ questions were interrupted by audio difficulties and someone coughing and sneezing off-camera.

More worrying than his uninspiring delivery was the content of his message. In those first few days, he insisted he would not make “seismic” or “drastic” changes at the struggling company. That was clearly not what the market wanted to hear. RIM’s share price fell 12% over the two days following his appointment. In short, it was not the most elegant of leadership changes. But neither was it out of line with the company’s recent history of bungled and poorly received moves. The rough transition is now largely irrelevant; what matters is whether Heins can end the bumbling and save RIM from irrelevancy. He needs to bring order to a dysfunctional organization, rejuvenate the BlackBerry and stop the company’s dramatic market share decline in the U.S. before its troubles go global. And he has to act fast, before aggrieved investors start agitating to push him out, too.

Though his public profile has been virtually non-existent, Heins has a long history in the telecom industry. He spent 23 years at German industrial conglomerate Siemens AG before leaving for RIM. In the few short weeks since becoming CEO, he has identified what he thinks are the major issues facing the company. One is perception, a problem largely confined to the U.S. RIM simply hasn’t done a good enough job of telling consumers why they should get a BlackBerry. The other is RIM’s seeming inability to release products on time with the features people have come to expect from smartphones and tablets. Despite his initial statements rejecting major changes, he is well aware that RIM faces challenges. “Probably we need to define what seismic or drastic is,” he said in an interview with Canadian Business. All he meant in those first public statements was that he would not put the company up for sale. “I just wanted to put an end to this.” Instead, he intends to fight. Heins is by all accounts a talented and competent executive, but he has never pulled off a turnaround of this magnitude before. In fact, he was one of the last employees at Siemens to run its troubled mobile phone division before it had to be sold. Nor does he have extensive consumer experience, a demographic he has made a priority. Heins is very likely the right guy to accomplish what his predecessors and the RIM board want: staying the course, only with fewer missteps. The problem is, that might not be enough. After all, neither marketing nor better execution will make much of a difference if people don’t want what you’re selling.

Thorsten Heins is not a visionary like Lazaridis, nor does he have the swagger of Balsillie. At this point in the company’s history, those deficiencies are not a problem. Lazaridis will continue to provide the company with his insight as chair of the board’s new innovation committee. Balsillie’s bombastic style rubbed a lot of people the wrong way in recent years. Heins, in contrast, is pragmatic and detail-oriented, and not prone to outbursts. “He’s very even-keeled, and people might misread that,” says Andy Mattes, who worked with Heins at Siemens. “That doesn’t mean that he isn’t very determined.” And he’s focused. Heins enjoys various outdoor activities, especially riding his motorcycle, but, beyond that, Mattes says, “Germans don’t have a lot outside of work.”

The boyish 54-year-old, a native of Gifhorn, Germany, earned a degree in physics from the University of Hannover before joining Siemens in 1984 in its research lab for communications technologies. He gradually took on more important roles that demanded more from him than just technical knowledge. In the 1990s, Siemens sent him from Munich to Boca Raton, Fla., to build out the company’s wireless infrastructure business. Fred Fromm, his boss at the time and head of the Siemens communications unit in North America, recalls the lanky Heins (he’s roughly six feet, six inches) differed from the German executives Siemens normally sent to the U.S. He was a lot younger and possessed a strong business sense in addition to technical know-how. Despite outward appearances—the placid demeanour, the penchant for facts, data and analysis—Heins didn’t fit the stereotype of the dry German executive, says Fromm, an American. “We often had conversations here in the States about our German colleagues and their inability to think outside of the box,” he says, adding Heins took part in the criticism of his countrymen.

New wireless carriers were proliferating in the U.S. at the time, and there were two competing standards for wireless technology, known as GSM and CDMA. Siemens was a provider of GSM technology, and according to Fromm, the company got a late start in the U.S. Heins sold numerous carriers on the benefits of GSM, and also convinced his bosses back in Germany to shell out the funds to really grow the business. “In those days, that was many times the harder job than the customer,” Fromm says of securing funding from Siemens. GSM never did become the dominant technology in the U.S., but Heins established a foothold for Siemens, and his performance propelled him higher at the company when he returned to Germany in 2000.

Four years later, he was put in charge of the company’s mobile handset unit, which was in poor shape. Its phones had fallen behind the competition, and Siemens couldn’t get its products to market fast enough. Its global market share was dwindling. To make matters worse, Nokia, one of its biggest competitors, instituted a price war. Heins resisted an all-out war but did lower prices on some models, and that didn’t help the unit’s razor-thin profit margins. The division attempted to rejuvenate its portfolio with a new line of phones called the 65 series, but a defect caused some devices to emit a screeching noise at high volumes when shut down. Siemens introduced a software upgrade to fix the problem. “We remain convinced of the success of our products,” Heins said in September 2004. He was promoted to the executive board at Siemens Communications the following month, which oversaw the handset unit, among others. The mobile-phone division posted a €152-million loss that year.

Investors called for Siemens to sell the troubled division, and rumours swirled that the company was searching for a buyer. Siemens conceded that all options were on the table, but insisted a sale was a last resort. Publicly, the company was still trying to reverse its fortunes through cost-cutting, new phones and a new operating system­. In June 2005, Siemens offloaded the division to Taiwanese manufacturer BenQ. Siemens recognized a loss of €546-million on the sale. A year later, BenQ put the division into bankruptcy.

The similarities between Siemens’s mobile collapse and RIM are unnerving, but there are a few very important differences. RIM is still a profitable company, earning nearly US$20-billion in revenue in its last fiscal year. Siemens only got into the handset business as an extension of its other manufacturing activities; RIM became a success because of its expertise in wireless communication. Perhaps most important, RIM isn’t just a handset manufacturer. It builds the underlying software and operates its own network, providing it with an additional revenue stream. RIM’s structure as an integrated hardware, software and services company appealed to Heins in 2007 when he was approached by a recruiting agency to jump ship to Waterloo, and that’s why he’s rejecting calls to break up the company today. “We truly believe we are differentiated,” he says, “because I’ve seen the other side of the fence, and it isn’t greener.”

He started out as RIM’s senior vice-president of hardware engineering, and quickly distinguished himself. “What we learned over the four years of working with him was that he was a star,” Lazaridis says. Heins played an important role in the company’s international expansion, and helped establish RIM’s design centres (two in the U.S., and one in Germany), which the company uses to tailor its products to different markets. He was also integral in establishing network certification processes to allow the BlackBerry to be quickly approved by carriers around the world, an unexciting but crucial function in a company that operates in as many countries as does RIM. Heins eventually became chief operating officer for product and sales last August. He had suspected he was on a succession path, an assumption Lazaridis says was correct. “Anyone in the company would probably have come to the conclusion that he was being groomed,” he says.

The exact sequence of events in the succession plan is oddly unclear, however. “I’ve been doing this for 27 years. Jim’s been doing it for 20 years. We recognized that Thorsten was the right guy, and this was the right time,” Lazaridis says. He and Balsillie took the recommendation to the board of directors, which did its own due diligence on Heins. When the board unanimously approved Heins, the two co-CEOs asked for the opportunity to tell Heins personally. Both Lazaridis and Heins sidestepped the question of where and when this meeting took place, though Heins says he thinks it occurred in early December. Asked for Heins’s reaction, Lazaridis says, “Well, I think there was a big smile across his face. I mean, this is the opportunity of a lifetime.” Lazaridis says the succession plan was not enacted in response to shareholder pressure for change, citing instead the company’s rapid growth, financial health, and the fact that it has nearly completed a major operating system transition. “This was the perfect time,” he says. With the former co-CEOs still on the company’s board, it’s hard not to wonder just how much leeway Heins has to do as he sees fit. Lazaridis rejects this: “He’s clearly in charge.”

It was, nevertheless, a somewhat unusual leadership change. The appointment of Heins was immediate. There was no transition phase, which is typical with large corporations to allow employees, customers, investors and the media to get to know the new leader. Analysts questioned whether Heins, an insider present through most of the company’s troubles, could take the necessary steps to fix it. Mattes, his former Siemens colleague, has a different view. “Due to the fact that he’s so analytical,” Mattes says, “if he had concluded that this is a no-win scenario, he wouldn’t have taken the job.”

The challenges facing Heins are huge. RIM’s market share has shrunk to just 16% in the U.S., according to research firm comScore, whereas it used to be the only smartphone around just a few years ago. Its stranglehold on corporate customers is weakening (U.S. energy giant Halliburton, for example, is moving all of its employees to iPhones), and consumers are flocking to rival devices. But one sign that Heins might be up to the task is that he is not in denial of the fact that RIM has problems, a condition that afflicted his predecessors.

When he joined in 2007, he says, the company was still being run like a startup in some respects. Responsibilities were shared among various engineering and developer teams, and the company expanded very rapidly before a proper management structure could be put in place. Fortunately, Heins has a strong background in operations well suited to a complex company like RIM. (Siemens, after all, is obsessed with operational efficiency.) Heins has already made use of his skills, implementing a number of changes since his promotion last summer. Developers and engineers now work on small teams and focus primarily on one project at a time. He’s instituted greater accountability for managers, and introduced metrics for gauging their performance. He’ll also ensure the company continues to innovate by rotating engineers between working on projects and retraining. “Build something, then learn something new, then build something on top of that. That’s actually the creative cycle in engineering,” he says.

Greater discipline could go a long way to curing the organizational dysfunction that resulted in product delays last year, and the botched launch of the PlayBook tablet. Such improvements are crucial. RIM needs to get its new line of BlackBerry devices, which run a version of the much heralded QNX operating system, out as soon as possible. RIM still has not indicated when the BlackBerry 10 series will be released, other than to point to the “latter” part of the year.

RIM cannot afford further delay, as it’s already facing a product drought. Its BlackBerry 7 line launched last year, and the devices have not sold particularly well in the U.S. Heins is forthcoming about how RIM has lost ground in the U.S., too, saying the company didn’t react quickly enough to meet the needs of consumers as competition came to the market. Instead, the company made the decision to expand its offerings to corporations globally rather than focus intensely on the consumer closer to home. Heins contends this was the right decision, but admits the company now has to fight its way back to relevance in the U.S.

Only 20% of existing users in the U.S. have a BlackBerry 7 device. The rest own older versions. How exactly RIM convinces those users to upgrade rather than switch to another platform will, to some extent, be up to whomever Heins hires to be chief marketing officer. Unlike other mobile device companies, RIM hasn’t been overly concerned with marketing until fairly recently. For many years, it simply relied on its carrier partners to handle the bulk of the work. Its last official CMO, Keith Pardy, clashed with Lazaridis and Balsillie and eventually left the company after less than two years. The end result is that the BlackBerry is still perceived as a work device in the U.S. with no clearly defined benefits for consumers. When asked to describe what BlackBerry can sell to average consumer, Heins says it comes down to efficient communication. “To the consumer, it just has to be fluent, fun, easy-to-use,” he says.

Improving marketing and the company’s internal workings are both desperately needed changes, but some are wondering if Heins truly has a grasp of the situation facing RIM. “There isn’t room for four players in this market. There’s barely room for three players,” says Ted Schadler, a vice-president and analyst with Forrester Research. RIM is competing against much bigger companies (namely Apple and Google) that have extensive consumer marketing experience. Microsoft and Nokia, which teamed up last year, are also pushing their smartphones aggressively. “You have three major players with very deep pockets, huge advertising budgets, the ability to command huge attention in retail, in the media and among consumers, and not one of them is RIM,” Schadler says.

Competition at the low-end of the market is particularly fierce, with numerous handset manufacturers pushing cheap smartphones running Google’s Android operating system. Fighting it out in the low-end means that RIM’s margins will shrink, and it will have to sell more and more devices to maintain the same level of profitability; that’s where the Siemens mobile phone division ran into trouble. The upper end is equally challenging, with some analysts contending RIM has essentially ceded it to the iPhone. RIM has thus far tried to distinguish its products with better performance. “It remains unclear if building phones with faster hardware such as dual-core processors is the solution to reclaim the market,” writes BGC Partners analyst Colin Gillis in a recent note. “The company is on a declining trajectory and there is little reason to think this is going to change.”

And while Heins is focused on the U.S. now, the fight is really global. It may only be a matter of time before the trends seen in the U.S. play out in other countries. Heins would be foolish to be lulled into a false sense of security by, say, the 75% subscriber growth RIM saw in Europe, the Middle East and Africa over its last fiscal year. Both the iPhone and Android are gaining ground in Latin America, a traditional RIM stronghold. South Africa, which the company singled out recently as a success story, might not be so solid either.

Last year, the BlackBerry accounted for the majority of smartphone sales in that country, according to World Wide Worx, a technology research firm just outside of Johannesburg. But as contracts come up for renewal, many South Africans may turn to other devices that have since arrived in the country. RIM’s current popularity is largely due to a sweetheart deal with the carriers, who agreed to offer a low-priced plan for unlimited Internet access. Arthur Goldstuck, head of World Wide Worx, says the carriers are no longer content with the deal, having realized they can charge more. “There’s a very good chance in this coming year the networks will try to pull out of that deal, and that will be the end of BlackBerry domination,” he says.

The danger that the BlackBerry could lose its foothold globally puts more pressure on Heins to stop the decline in the U.S. before it spreads. Unfortunately, that’s not likely to happen until he gets BlackBerry 10 out the door, a product that has essentially been in the works for well over a year. The details of those smartphones are still largely a mystery. In that sense, Heins is similar to his predecessors, who repeatedly told everyone to “stay tuned” for what the company has in store. The best he can do in the meantime is slow the bleeding in the U.S. and prove to investors that RIM is no longer a dysfunctional company. Given the scope of the problems facing RIM, that’s the easy part for Heins. But as for the superb new products that will best the competition? We’re still waiting.

The report entitled, Getting on the Right Side of the Delta: A Deal-maker’s Guide to Growth Economies, found between 50% and 60% of potential deals facing external due diligence in fast-growing economies fail. By reviewing more than 200 transactions in various industries on the reasons why these transactions weren’t completed, the study (released last month), also found that when these deals collapse an average of 50% of the investment was lost.

However, outside of emerging markets the story is a very different one. According to an annual year-end statistical roundup by mergermarket, an independent London-based M&A intelligence service, global merger and acquisition activity was up 2.5% last year over 2010 (the busiest since 2008) while emerging market deal activity decreased by more than 11% for the same period.

To better manage the risks involved in growth market transactions (and for better chances of reaping the benefits such as hindering the competition or growth in a target market) PwC’s Canadian deals leader, Kristian Knibutat, says companies should start by doing comprehensive up-front planning on which emerging market is the best fit.

“For a small or medium company it’s like stepping into a candy store with a sweet tooth and not knowing where to start. It’s good to focus on one or a couple emerging markets and not look at all of them as potential markets to go into,” says Knibutat. “You need to narrow it down and focus on learning about each of them. That helps take away some of the anxiety around where you go.”

Knibutat suggests companies begin prioritizing using industry-relevant information, because there is no one-size-fits-all approach to planning. The right market, he says, is very different for an automotive supplier than it would be for a textile one.

“If you are in manufacturing, for example, where should you be five years from now? Do you have a sustainable business model where you are strong enough to sustain that business long-term or should you be thinking about reducing the cost-side of your business?” he says, adding that firms should look for markets that already have a workforce population with the level of education required for their business. “[Ask yourself] where are those clusters of excellence? It may not always be China if it’s low cost manufacturing that you should be looking at.”

Once a firm has narrowed down which markets have the appropriate population and infrastructures in place to support it, seeking exclusive arrangements with potential targets can buy time for a thorough due diligence process. Julian Brown, head of corporate finance at PwC, says because potential targets may be in markets with less structured information systems and regulatory environments investors often have to spend more time and money digging for information in emerging markets than they would in more developed countries.

“In a lot of these countries you just don’t have that historic regulative background for the company,” says Brown. “So a lot of the time due diligence is a more costly process as you need more senior people involved, more time on the ground and you need to spend a lot more time understanding the rules of the game in the country of your choice.”

Finding a reliable partner on the ground to help with the due diligence process is one way companies can help reduce these costs, however the most common reason why transactions aren’t closed in fast growing economies (according to the financial services firm), is due to differences over the valuation of a target. One reason why a valuation consensus is often hard to achieve, says Brown, is because the level of competition in growth markets can drive up the cost.

“It’s difficult for a company in Canada or another developed country that is experiencing growth in say a 2% kind of range to go into a growth economy looking at an 8%, 9%, 20% or higher range in the future,” says Knibutat. “Getting your mind wrapped around that kind of growth is often what attributes to a disconnect between the buyer and the seller in coming to terms on the price.”

Another major factor leading to dropped transactions is local government interference. Unlike in Canada where government act at arms length—investors would be wise to view it as a significant stakeholder or even a partner in some nations, including Russia and China. Understanding the type of input the government may have, say both experts, along with involving them early in the process can be critical to a deal’s success.

Knibutat says Canadian firms should also leverage their own trade representatives to help facilitate these relationships early on. “I was in India last spring and met with Ontario and federal trade reps there,” says Knibutat. “They are incredibly well connected and part of their mandate is to help Canadian companies in a number of jurisdictions. There are a number of resources available to help small and midsize business owners.”

The product, Talk-2 Me, is being used in pilot projects by 25 companies. The cost is $9.99 a month, with no contract to sign. Appropriately, he developed the idea by learning to listen to others. His button started off as something very different—a speech-recognition tool for visually impaired people to use on websites. But he didn’t seem to be getting very far with it, and finally accepted advice to change course.

True Voice, which launched in the winter of 2011, and has four employees, is aiming for a vast market of real estate agents, online classified listings services, and social media in Canada, the United States and beyond, says the 51-year-old Moffat.

What is the personal truth you’re hitting on about human beings in the Internet age?

What’s missing, when you look at social media? You can’t talk to anyone. It’s all chat. Chat has its place, but people are frustrated. Or you fill out a form, click “submit” and you wait for someone to call you back. You can say so much more in a phone call. This is a great way to engage in dialogue with the customer, and I think there’s a huge market for that now.

How did your product get its start?

I used to have another company It was developing software for Nortel Network’s SMB (small and medium business) platform, telephone systems. They were looking for someone to develop an intelligent auto attendant speech-recognition driven. We developed a product that was no longer just based on telephony. We moved it to the Web, created an interactive website, and I was focusing on people with visual problems or physical disabilities.  The government was focusing on creating accessibility and I thought it was a great opportunity . So 14 months into it, we had a product that was working, and when I talked to companies they said, “Come back in a year when you’ve got this up and running and someone else has bought it.” So I spent a month trying to get some smaller sales, but it was very complex, difficult to install.

And then?

We used to deal with MaRS in Toronto (a high-tech incubator) and there was a woman by the name of Krista Jones (an IT adviser) and she said to me: “Dougie, I don’t think you’re doing the right thing, you should do this.” I said: “No I don’t think you’re right, Krista. There’s a huge market for visually impaired and Web accessibility.” And she was right. The lesson I learned: Listen to people who are smarter than me and take advice from others. Don’t be so stubborn. Keep an open mind. Don’t be so focused that you miss other opportunities.

How did you decide which markets to penetrate?

We started going to trade shows and learning the ropes. The industries that stuck out were real estate and classified ad companies. In real estate, these guys are so open to new technologies. They’re early adopters. They’re looking for anything that can generate leads.

How big are the opportunities?

Let’s just look at the real estate market—110,000 agents and brokers in Canada. I think realistically we could capture 20% of that. Down in the U.S., there are over 800,000 agents and brokers. Those industries would be a phenomenal business without even scratching the surface of the entertainment, hotel/motel or financial industries. Say you go to a bank at RRSP time and they want to put a button on their website to encourage people to make an appointment with a financial adviser. Nobody has a button on a Facebook page that can make that rich connection with the customer. LinkedIn is another one. There are all kinds of opportunities.

How do you try to make the most of these opportunities?

Start small. It’s a matter of fine-tuning the model. Then we can go to a larger classified. We’ll move up the ladder. These larger companies will say, if it’s working for them, it should work for us, too.

How will you penetrate the U.S. market?

Create some success in Canada with companies that operate throughout North America. We have network presence down there, so technically it’s very easy for us to move to the U.S., but the mindset down there’s a little different. The culture’s a little different. I’d like to learn a little bit more about the real estate and classified industry cultures before we do that.

This interview has been edited and condensed.

Your growing company has established offices in faraway places. You now have many things to consider, not least of which is how to leverage and empower local staff while maintaining control at the corporate level. Without direct control, problems can sometimes go undetected. What’s needed is a comprehensive centralized tool that offers complete (but discrete) administration and transaction control features. HSBC Trade Services reps explain how these online channels work.

Vietnam’s large and cheap labor force
is attracting a slew of foreign companies
Photo: Patrick Syder Images

Vietnam has done well positioning itself with companies turned off by China’s rising wages and an appreciating renminbi. In recent years, it has attracted the types of industries that flocked to its larger neighbor in the 1990s: clothing manufacturers, high-tech manufacturers and auto-makers.

Labour in Vietnam—which is 35 to 45% cheaper even than in China’s second-tier cities such as Nanjing—is a big draw for these companies. Add to that a stable political environment, the government’s increasingly open attitude to foreign investment and business friendly policies, which provide generous tax breaks for businesses across a wide range of priority industries including high-tech, IT, education and healthcare.

Those advantages have turned Vietnam into a serious competitor. It has become the world’s third-largest producer of leather and footwear. Vietnamese exports of bags, hats, wallets and umbrellas rose by 35.6% in the first half of 2011 over the same period in 2010, according to CB Richard Ellis, a property service provider. Vietnam is also becoming a bustling hub of high-tech industries (Nokia and Intel made major commitments to build factories in 2011) and automobile manufacturers such as Honda, Yamaha and Hyundai.

Some foreign companies are also eyeing the long-term consumer potential of Vietnam’s growing domestic market. While Vietnam is still a poor country—GDP per head is estimated at just US$1,310 (little more than a quarter that in China)—it has a population of nearly 90 million, of which the percentage of young people under 30 stands at 60%. Vietnam shows promising growth, with GDP rising by 6% in 2011, and per head growth set to average 4% per year through to 2030, according to the Economist Intelligence Unit.

A SHALLOW LABOUR POOL

Although Vietnam’s large labour force has attracted a slew of foreign companies, many often overestimate the size of local labour pools, says Steffen Engel, a consultant with Royal Haskonning Vietnam, a consultancy firm specializing in architecture, engineering and project management that helps many foreign clients to manage their manufacturing facilities in the country. Vietnamese workers often try to avoid travelling long distances to work, Engel says, so the location of a company’s office or plant is very important.

The consideration is even more critical in light of the country’s underdeveloped infrastructure. This is particularly challenging for companies that rely on transport of goods and products—or transportation of their employees—over long distances. The situation is improving around ports and economic zones, but remains primitive inland.

But even when companies find enough local labour, they may still face a dearth of specific skill sets. “While inexpensive labour is an important reason for companies to move to Vietnam, foreign investors would be foolish to believe that they can rely on that fact alone to succeed,” says Thomas Bo Pedersen, managing director of Mascot in Vietnam, a Danish company that produces work-wear such as protective gloves, jackets and shoes. While the cost of unskilled labour is highly competitive and more than 90% of the population is literate, skills levels are generally below those of other countries in the region; Vietnam’s labour market scores slightly less well than China’s in the EIU’s Business Environment Rankings.

Pedersen has found it necessary to invest in appropriate training for both foreign and domestic staff. Few local managers have the experience or skills to execute their responsibilities right away, as might be expected in developed economies. Moreover, expats and consultants brought in from overseas to set up the business are more efficient if they receive cross-cultural training to manage and motivate a Vietnamese workforce.

Indeed, along with a skilled labor force, Pedersen credits Mascot’s fast expansion and the high profitability of its Vietnam operations to a workforce that has respect for local culture and regulations. That is particularly important when dealing with government officials and employees. According to Pedersen, what it comes down to is how local employees, officials and consumers perceive the company: “Are you a ‘nice’ investor? That is to say, are you attentive to the local culture? And are you following local laws and regulations?”

THE BUREAUCRATIC HAND

Unfortunately, even ‘nice’ investors have to accept bureaucratic inefficiency as part of the daily grind. Lengthy meetings with officials are often required to obtain permits or accurate information about necessary procedures. Investors often receive different or even contradictory information from different government departments, in part because local government departments may lack expertise or know-how in interpreting laws.

Corruption is also rife in the country and corrupt government officials often play on the impatience of foreign investors who want to move fast. Despite the temptation, Pedersen made a decision never to pay bribes. He estimates that the decision may have cost the company anywhere between six, seven or eight months in procedural delays. Instead, Pedersen recommends getting good legal advice and skilled auditors in order to help mitigate legal problems and lengthy delays.

Rising inflation is also a concern, with the consumer price index set to have risen 19% by the end of 2011. There is further uncertainty over policymakers’ determination to address the problem, given a bias towards growth promotion. The EIU forecasts inflation will decrease to 12% in 2012 and average 8% in 2013-16; the forecast is premised on the assumption that the authorities are able to anchor inflationary expectations. Even under this central forecast, rising consumer prices could contribute to labor unrest and will necessitate rapid wage rises.

THINK LONG-TERM

In spite of its drawbacks, Vietnam remains an attractive destination for companies willing to invest in building a business in the long-term. Mascot, for example, is no giant—the company has an annual turnover of about US$100m. After starting out in 2006 “with no land, no licenses and no staff”, Mascot now runs two factories and a logistics center in Vietnam, where it employs some 1700 people.

Overall, despite current macroeconomic concerns, the economic growth in Vietnam looks to remain robust at an average of 7.3% a year in 2013-16, supported by strong growth in consumption, investment and exports. Companies that have the financial backing and patience to manage both economic uncertainty and a tedious business environment may find Vietnam a competitive alternative to its huge neighbour to the north in some areas. In the near future, Vietnam may be the market investors looking to establish production facilities turn to first as they look at East Asia.

Photo: Ross Durant Photography

Rather than result in a more orderly, less risky commodities market, the opposite could occur. Dodd-Frank could lead to greater price volatility, said Susan Ervin, a partner with Davis Polk law firm and former regulator for the SEC and Commodities Futures Exchange Commission.

Ervin was an expert panelist at the recent Competition for Commodities event in New York, part of the Global Economic Outlook series presented by the Economist Intelligence Unit, Business without Borders and HSBC Bank.

“The impact is unclear,” she said. “To the extent that there is a higher cost to doing business and greater regulatory compliance burdens, that may diminish the number of major participants in market,” she explained.

Whether fewer players with more controlling stakes will bring higher or lower commodities prices is anyone’s guess. “There is disagreement about that, to say the least,” Ervin said.

Signed into law by President Barack Obama in July, 2010, the Dodd-Frank Act is an ambitious, 2,000-page bill that covers many aspects of financial markets from consumer protection, clearance and settlement, to addressing the too-big-to-fail issue. It was a response to the 2008 banking crisis and lawmakers are still writing the rules. Some are expected to be in effect this year.

For the audience of international business executives, Ervin laid out three main aspects of the bill that will have direct implications for commodities markets.

First and foremost, Dodd-Frank will create a regulated, transparent marketplace for the vast and opaque world of swaps. “The swaps market dwarfs almost every other financial market in the world and covers every type of commodity,” Ervin said.  The regulations will establish rules for swaps dealers and cover every step of a transaction from initiation through trading and clearing.

While the intention was to increase transparency and mitigate credit risks that currently exist in unregulated swap transactions, the actual effect may be to bog down the market by dramatically increasing the regulatory burden — and costs — for commodities transactions.

“To give you an idea of the scope, my law firm tried to break down every rule in terms of actionable items. We found 1,900 tasks for swap dealers to comply with the rules,” Ervin said.

A second area is speculative position limits. Already imposed on futures contracts to prevent speculators from manipulating or controlling the markets, Dodd-Frank will put speculation limits on swaps as well. One reason for this is not all swaps are able to move to regulated markets, so the limits, in theory, would diminish some of the speculation taking place in commodities.

There is already a list of 28 physical commodities that will see new speculation limits, Ervin said. “[The limits] are significant enough that there is already litigation to overturn the speculative limits rule.”

Lastly, the Volcker Rule section of the Act, to prohibit speculative proprietary trading by banks, will spill over into commodities markets. “The concern here is that banks are very key liquidity providers in commodities markets,” Ervin said. “The Volcker Rule would put very strong constraints on market-making activity by banks.”

With the 2008 financial crisis in the rear-view mirror, opposition to the sweeping and, say critics, overreaching, Dodd-Frank Act is rising.  “Dodd-Frank tries to cover so much territory, and that’s one of the problems with it,” Ervin said. “It reflects the political environment in which it was written.”

Now the question is whether Dodd-Frank can survive the current political environment and a presidential election. “If there was a total Republican slide, Dodd-Frank could be on the rocks,” Ervin said.

Céline Bak, founding partner of Analytica Advisors Inc.

To show confidence in the industry, governments should be buying locally from clean-tech suppliers thereby giving the industry references that would heighten its credibility on the world stage, Bak says. Clean-tech includes nine industries—biofuels and bio-energy, power generation, energy infrastructure and smart grid, remediation and soil treatment, transportation, recycling and recovery, energy efficiency, industrial processes and water and wastewater.

It’s a $9 billion industry with 53% of its revenues from exports, including a growing share outside the United States; it employs 44,000 people in Canada. Worldwide, it’s a $1 trillion industry—expected to grow to $3 trillion by 2020. Analytica Advisors, which has six employees, collects confidential data from more than 200 small- and medium-sized clean-tech businesses, plus qualitative information from chief executive officers on the challenges facing their companies. It also collects information from the clean-tech industry around the world.

It’s also the founder of the Canadian Clean Technology Coalition, an advocacy group. Bak, 47, has an MBA from the University of Bath, and has worked for a decade as a global management consultant.

Why did you give the Canadian clean-tech industry a B-minus?

Unless we have deployments in Canada of our world-class technologies and products from our Canadian companies it’s difficult to be as successful as you could be as an exporter.

Why is it so important for Canadian companies to get this domestic business?

It’s just like the aerospace industry. If you want to sell something, your government has to have shown the confidence to buy it. These are large, complex sales and if you’re going to be successful in an international market, whether it’s Brazil, China or the European Union, it’s very important to have robust domestic references.

You’re saying governments aren’t buying our own technology, produced here. Why?

We don’t have a tradition in Canada of what in the United States would be referred to as small-business set-asides. If you think about the procurement that occurs by the U.S. military and by the U.S government, they have had 30 years or so of defined SME procurement requirements. Pretty well all of the technological components of the iPhone can be traced back to procurement from SMEs by the public sector. We’re not suggesting the government buy things it doesn’t need or that don’t work but rather that it takes the opportunity of understanding what the industry has to offer, and that make it possible for procurement agencies, whether at the federal, provincial or municipal level, to buy at least some of what is required from SMEs.

Where are they buying it now?

They buy it from large companies, and some of them are Canadian and some of them are not. We don’t necessarily think of Canada as a source of world-class technology, if we’re sitting in a larger corporation in Canada or in the government procurement department. The Jenkins report on innovation in Canada made the point that SMEs are a significant source of innovation and economic prosperity, and that procurement attitudes should reflect that.

Are you calling for protectionism or more openness and awareness?

Openness and awareness is definitely what we’re looking for. As we negotiate, for example, with the EU, it is certainly possible for us to contemplate an SME set-aside for procurement, and that it be open and competitive for SMEs from all countries. If we can make some fairly minor changes to our attitude toward procurement of our own technology, we could light a fire under our exports.

Why are SMEs having trouble getting in the door?

A lot of our procurement processes today are based on specifying the characteristics of the technology, rather than the outcomes that we want. For example, if you think of public lighting, we have procurement processes that specify the technology that produces the light. It means that SMEs that have new technologies that would provide light at a lower cost cannot succeed.

How should SMEs open those doors?

When we think about the forestry industry, we don’t think about logging, paper, timber products, pulp and paper; we think about it as the forestry industry. There’s a whole story that explains that industry and its contribution to Canada’s economy. In newer industries like this one where companies are on average 15 years old, that story hasn’t necessarily been told. If you’re an SME who is working hard around the world, you don’t necessarily stop off in your provincial or federal capital to tell people that this could be a $60 billion industry employing 125,000 people within 10 years, where we should get 2% of the global market.

What is your policy prescription?

A renewal of our procurement policy. We also need to educate decision-makers, in the public and private spheres, about the opportunities that the Canadian clean-tech SMEs can provide our traditional industries to increase their competitiveness. Some people refer to this as the greening up of the incumbents. We also have to take the trouble to talk to the leaders of our traditional companies in the oil and gas industry, the mining industry, agriculture, the forestry sector, utilities, all across the board to make them aware of the opportunity to work with Canadian companies.

You mention on your website that Canadian clean-tech companies need to leverage the respect they have internationally. What did you mean?

We have the benefit of almost a presumption of competence. We’re known as a country that invests in R and D, where people are honest and come to business from a position of integrity. We have a great reputation out there and our SMEs have a great reputation because of their export accomplishments.

This interview has been edited and condensed.

Photo: Cargo

A few years ago, a Canadian company spent quite a lot of money on market research, web development, printing materials, travel, accommodations and PR to expand into Mexico, but they did not hire a translator. The owner’s son spent a couple of summers in Costa Rica and they all assumed his Spanish was good enough, so he was in charge of all translations. What happened? They spent quite a bit of money to have a booth at a trade show in Mexico, where most people did not approach them because nobody could understand the signs, and the website on the huge computer displays of their booth did not make any sense. Saving some money by not hiring a professional translator made a big waste of all the efforts and money spent on this plan.

So you decided to expand your business into Mexico, and perhaps the rest of Latin America. You’ve made plans, you have big expectations, and so you have developed a website, marketing materials, and perhaps even promotional videos. Your company has invested time and money getting ready for the next trade mission and you believe you are ready. Are you really?

You will be giving your card and other introduction materials to potential clients and/or partners. Is all the information they will need in Spanish? They will see your website in your card and they will visit it, but if the information there is only in English and French, chances are not all information will be readily understood.

Here is a checklist of what you need to do before heading south.

Make sure your intended message gets across; you must invest a sincere effort to have all the pertinent information in Spanish. Hire a competent, preferably certified, translator. Don’t just fall for the big translation agency—often big translation agencies in Canada are big because of their English-French area, but they lack Spanish expertise. Look for a translator with experience doing business in Mexico, just to make sure the right meaning is given to your ideas.

Keep in mind that if all goes well and you start business in Mexico, chances are you will need a translator capable of providing official translations in Mexico, so ask your translator if this is something they offer.

Hire a translator who will make themselves available shall you need to translate urgent letters or even agreements once business get rolling. 
A good translator could help you with getting materials printed in Mexico, where it can be cheaper, and you won’t have to lug all your stuff on the plane.

It’s estimated that around three billion people
globally will be migrating from rural areas
to cities in emerging markets
Photo: Win Initiative

Stormy markets overseas are dampening the global forecast for commodities over the next 12 to 24 months. That contrasts sharply with the long-range picture of unprecedented demand for raw materials to fuel the massive urbanization of emerging markets like China and India.

Add in disruptions, such as natural disasters that reverberate along global supply chains, or new technologies that are changing the way we capture and consume resources, and the old, dull days of commodities are long gone.

Indeed, volatility is the new normal, said Diane D’Erasmo, executive vice president, commercial banking for HSBC Bank, in her opening remarks at The Competition for Commodities panel discussion held in New York on Jan. 24. The event was part of the Global Economic Outlook series presented by the Economist Intelligence Unit (EIU), Business without Borders and HSBC Bank.

For the international executives in attendance, the panel presented some guideposts for the road ahead: a short-term bust, a long-term boom and a steady parade of disruptions.

THE BUST

With the euro zone teetering on the brink, and China showing signs of stress with a housing bubble and inflationary pressures, “2012 is shaping up to be a difficult year for the global economy,” said Leo Abruzzese, global forecasting director for the Economist Intelligence Unit. The EIU is predicting a 60% chance of slow, uneven growth this year for the global market, and a 40% risk of a global recession.

Panelist David McAlvany, CEO, McAlvany Financial Group, a New York wealth management and gold brokerage, was more pessimistic: “The period of 2012-2013 could be a repeat of 2008.” He said the coming financial crisis is not just a reckoning of the recent government bailouts, but of the debt-spending ways of the past couple of decades.

“We will not see the same commodity demand we saw prior to 2007-2008. We are at the end of a major credit cycle and in fact, will see demand destruction going forward,” McAlvany said.

Europe remains the biggest trouble spot, the panelists agreed. China, while slowing, is still posting growth of 8% to 9%. And while the U.S. economy is brightening, the weak job market remains a problem. “It will still take a couple of years to regain the lost jobs,” Abruzzese said.

With slower consumption globally, prices for most commodities will weaken in 2012-2013. After recording a 27% increase in its index of 14 raw materials in 2011, the EIU’s World Commodity Forecast is predicting a 10% decline in 2012, and a 4% decline in 2013.

For gold, which is not included on the EIU index, and some other “real” assets, the bad news is good news. Taking advantage of low-interest rates, investors are flocking to the safe havens. “Precious metals can do very well,” said McAlvany, who is forecasting limited downside for gold.

THE BOOM

When it comes to commodities, all eyes are on China and its voracious appetite to fuel growth. China is already world’s largest consumer of metals, chewing up about 40% to 50% of the world’s supply

And the Asian giant is only at the beginning of a mass urbanization movement as its population migrates from rural areas to the cities and a middle-class lifestyle. By 2025, according to the EIU, China will have 15 cities that will be three times the size of New York City—all needing bridges, power grids, housing, water, roads. “So ask yourself, what will happen to steel prices then?” said Abruzzese.

This massive transition is not just happening in China. Panelist Stefan Heck, a director at McKinsey & Company, and leader of the consultancy’s clean technology practice, estimates three billion people globally—in China, India, Brazil, Africa—are moving into the middle class. And the shift is happening much faster than ever before. It took about 100 years for the industrial revolution to bring tens of millions of Americans into the middle class. “China is going through the same GDP growth in 16 years,” Heck said.

That accelerated growth will be a major pull on commodities, he said. “We’re not going to run out of oil or copper, but as we go from conventional to unconventional gas sources, as we go further offshore to drill for oil, as we go to lower-grade copper and iron ore, the cost of extracting those resources is going up,” Heck said.

Price volatility will be affected in other ways. He pointed to technological advances that have brought a closer correlation between commodities that we once thought of as independent. Biofuels, for example, are directly linked to food crops. “Now, a crop failure in one region will cause a fuel spike someplace else,” Heck said.

ALTERNATIVES

As demand—and prices—for commodities soar, Heck believes the use of substitutions, such as alternative fuels, or new technologies to increase productivity, will also rise. Businesses and governments will have no choice.

Some are already thinking ahead. China and Europe, for example, have major pushes to deploy renewable energies such as solar and wind. “The first big wave of solar was 22 times more expensive than electricity in the United States,” said Heck. “Today, solar is about 20% more expensive, so we are very close to parity, and in some pockets it is already cheaper.”

In the coming competition for commodities, businesses will need a new game plan, but one that can sustain short-term swerves. “I would be building my war chest and anticipating aggressive expansion within the next 24 to 36 months,” says McAlvany. “Beyond this next period of extreme pressure, for those with well-run franchises and strong balance sheets, the world’s your oyster.”

The result: a bonanza of contracts for Fraco, which had representatives in the region and was ready to work. As well, Alumco, a Cayuga, Ont. company that manufactures aluminum façades of buildings and was very active in the region, and it had already ordered 90 platforms in the last year. “This allowed us to keep our heads above water,” says Jacques Laine, director of marketing for Fraco. He scrolls through photographs on his laptop, showing projects his company has been involved for the past ten years.

The list is impressive. NASA, the Pentagon, the National Theatre of China, Universal Studios Hollywood—all have buildings that were built or renovated with equipment made by the Quebec company, which manufactures, rents and sells hydraulic lifting platforms. Currently more than 2,000 Fraco platforms are deployed around the world.

Fraco’s equipment, Laine says, was invented by a bricklayer who simply wanted to make his job easier. Created by Jean St. Germain and patented in 1989, the device consists of a hydraulic platform with a single mast, an alternative to the bulky scaffolds traditionally used in the construction of tall buildings. It also had the advantage of allowing multiple platforms one above the other. Fraco, headed by president and CEO Armand Rainville, subsequently purchased the rights to the masted platform.

At the time, the market was limited to Quebec, where Fraco sold primarily to construction contractors. Then, little by little, the firm started to sell in the United States, and opened five stores that sell directly to contractors. Before the 2008 crisis, 75% of its sales were concentrated in the U.S.. Over time, landlords and retailers starting buying the entire product line and in turn rented the platforms out.

Fraco platforms, adjustable to any kind of building walls quickly make their way up complex projects and work at any height. The products have been used in Quebec for the Montreal’s iconic office tower, Place Ville-Marie; for repairs to Montreal’s Champlain Bridge, Trois-Rivières’  Laviolette Bridge and the troubled Turcot expressway interchange in Montreal. In Pennsylvania, Fraco platforms are currently used for a fireplace reforming of 365m high, the equivalent of a 120-storey building. In one tragic assignment a platform was deployed in West Virginia to retrieve the body of a power plant employment suspended in a cage inside a 300m smoke stack.

The first real foray for Fraco outside North America was in France, where the company now has a branch in Paris. “We are approached as much as we approach,” says Fraco’s Laine. “Proponents see our product on a site somewhere at the top of a tower and they call us. [It is] our best advertisement.”

Global sales, it could be said, are in Fraco’s DNA. In the early 1990s, Rainville worked in international aid with the central African nation of Cameroon, Elsewhere, he and with his wife and have built houses in Qatar.

CORRUPTION AND DISAPPEARANCES

In 2004, there was a flood of contracts for the 2008 Olympic Games in Beijing, so the company tried its luck in China. Its products were selected for the construction of the “Water Cube” National Aquatics Centre in Beijing. Fraco also contributed to the construction of the National Theatre of China, which remains to this day one of the most complex projects in the company’s history.

As complex as the country itself, the China adventure ended a few months after the Games. The experience was painful. “I’ve never experienced this anywhere else,” Rainville later told the business magazine Québec Inc. shortly before the closure of its branch in China. The first obstacle was obtaining permits. Then, customers who had rented Fraco platforms did not return them. The company had to go to court repeatedly. “The problem,” says Rainville, “is that we did not know where or when the machine was the following month, the [person] with whom we did business was in prison, then disappeared. Whew!”

The CEO also denounced corruption and commissions virtually unavoidable for anyone who wants to do business in the Middle Kingdom. “People in China still have three or four different business cards, some of which may be connected to the government, and they use it to argue,” Laine says. The company chose to retreat to an office in Taiwan if only to keep an eye on the Asian market.

Fraco learned from this misadventure. Exporting is a mixture of instinct and reflection, planned strategy and opportunities. Laine says that Fraco will not venture into a market without having done its homework. They will study not just the market potential but also its traditions and customs. “We had the opportunity to make a big project in Mecca, but it was impossible to enter because we are not Muslims, so we’ve created a partnership with a subsidiary in place,” he says.

The subsidiary belongs to the bin Laden Group, which does not trouble Laine. The Group has interests in over 60% of projects in Saudi Arabia, he said, including the construction of the tallest tower in the world (a height of 1,000m) in Jeddah. “The Arabian Peninsula is a must,” Laine says. They are there to build buildings so high and with unique architectures that they need our products. We aspire to these markets with confidence. “

In addition to the Qatar capital of Doha, where the 2022 World Cup will take place, a developer in the nearby United Arab Emirates approached Fraco to buy 22 platforms for the purpose of renting them out. The cash flows in the region and the price of Fraco platforms—which can cost between $40,000 and $1 million for more complex models—is not an obstacle. Fraco is also looking at opportunities in Africa, where 30 cooling towers must be repaired or replaced.

But company isn’t about to abandon North America. Although the construction market is currently moribund in the U.S., some segments offers great potential for growth. “There are more than 200 power plants in the United States, and they have aging smokestacks that need to be replaced with cleaner-operating ones. In Detroit, we are currently involved in the demolition of some of these stacks,” Laine says.

Some, he says, are drawn by the shift in global supply chains, but for the majority, the primary motivation is in the “incredible opportunity in India’s domestic market and in partnering with Indian firms to sell into third markets.”  Meanwhile, says the C-IBC’s Peter Sutherland, there’s no question of India’s economic ascendency. “The country’s youthful population, burgeoning middle class, open economy and entrepreneurial spirit ensure that it will happen.”

India’s challenges—electrical blackouts, shortages of resources, infrastructure, finance, food security and education—are actually opportunities for Canadians. We have expertise in those areas and India wants to business with us. But until now, Sutherland says, “Canadian companies have been dazzled by the prospects, but deterred by the known unknowns. Governments have done their part to smooth the way by opening doors, removing impediments and mitigating risk. The onus is now on the private sector to take the initiative,”

Happily Canada’s interest in India is bearing fruit. The following nine portraits, produced in association with the C-IBC, describe just nine of hundreds of Canadian companies operating in India, a demonstration of the vast range of endeavours, and opportunities and success.

CUBEX

When Winnipeg’s Cubex Ltd. supplied its first production drill to a Crown corporation in India in 1985, the infamous “licence raj” still presided over that nation’s economy. Notorious for its cumbersome business regulations, India had a largely closed economy where Canadian exports had a difficult time of it.

And yet, 27 years later, Cubex has remained in India, benefitting from the business-climate improvements that began in 1991. Cubex has manufacturing plants in Winnipeg, Calgary, Montreal and Thomson, Man. To date it has supplied seven drills and its business continues to grow through a global alliance partner, Sandwich Mining Cop. of Sweden.

Hemant Shah, a Cubex employee experienced in India warns that “Canadian businesses looking to India should be ready for the fact that success is not going to happen overnight. They must have patience and they have to take time.” Shah advises companies should devote one to two years developing their presence there. “A couple of trips will not cut it,” he says. “You have to be committed. The big companies like Bombardier, they were there when I first started going in 1980.”

Shah says that Canadian companies have to earn the trust of their Indian partners and he likens business relationships to dating. “I go on one, two, three dates with someone. Then on the fourth date, maybe I say, ‘Okay, we’re going to get engaged.’ So I give an engagement ring. And then after the fifth or sixth date, there’s a wedding. That’s how you can look at it.”

“On the first or second trip to your joint-venture partner or a private corporation, they’re not going to invite you into their home. On the third trip, when you’ve got into their good books, earned trust, shown your credibility, they will invite you home with the family for dinner. And that’s your first success. It’s a process, and Canadian businesses have to understand it.”

Ray Newal, co-founder of Jigsee Inc.

JIGSEE

Ray Newal was inspired to start his technology company, Jigsee Inc., after backpacking through rural India, where he noticed “the phone was much more than just a communication tool for the younger population. It was a television, it was a tool for self-expression. It was becoming a virtual ATM.”

Thus was born Jigsee, which enables video streaming for the mass market in BRIC countries by including compatibility with older model cellphones and shaky networks. Long commutes on public transit, says the 35-year-old entrepreneur, means “these people had a lot more downtime, and they’re never home and they’re never surrounded by TVs and broadband.”

India, he says, where mobile subscribers number 800 million but only a privileged few have BlackBerrys and iPhones, looked like the perfect beachhead market.  The mission according to Newal is to “democratize” access to video content.

Newal’s chief technology officer, Areef Reza, says Jigsee’s software is written in the internationally recognized Java programming language and can work on most phones with basic Java and programming support. Uniquely, it allows for consumers to stream high-quality video with the most basic, entry-level cellphones. Eventually, Newal says, Jigsee will turn a profit as it begins to leverage its platform as a digital marketing channel, enabling advertisers to connect with the mass-market in India.

Working in India, Newal says, always comes with cultural differences and provides surprises. To avoid getting lost in cross-cultural miscommunication, he hired Indian managers who had experience working with foreign companies and would be able to act as intermediaries between himself and the workforce. Jigsee currently has 25 employees based in both India and Canada.

Photo: Bloomberg via Getty Images

TARASPAN

While a lot is said about the success of large Canadian companies in the India market, Canadian SMEs are also getting in on the Indian opportunity. TaraSpan Inc. is a market-entry consultancy that helps smaller firms, particularly in technology sectors, to get in on India.

To succeed in the India market, TaraSpan’s principals say, you need to have a commitment to the market, with local presence and patience.  You need to have a willingness to adapt to the market.  What makes your product compelling in North America might not apply in India, especially at a point in India’s evolution where bottom-of-the-pyramid sales are strongest—selling stripped-down goods with low price points to reach lower income Indians.

Headquartered in Kanata, Ontario, TaraSpan opened for business in India in December 2007 with four employees.  Today it has 150 there in two divisions, performing sales and marketing, business development, software engineering and support services to some of Canada’s leading technology companies, of all sizes.

Mike Manson, CEO and co-founder, TaraSpan Inc. says that neophyte Canadian firms may be intimidated by India at first. “To adapt to the market you need to have three P’s—presence, persistence and patience,” he says. “To navigate the local environment it is imperative to have local managers who know the business customs, local regulations and a strength in human resource management.”

XMG

Ray Sharma is just starting out in India. He’s the CEO and founder of XMG Studio Inc., a mobile gaming developer in Toronto which has scored hits with such apps as Totally Amp’d and Cows vs Aliens. Now he’s been talking to a studios in India. He says that XMG’s strategy will involve partnering with local games developers, leveraging his firm’s expertise in the iOS and Android platforms in exchange for local expertise in India’s most popular smartphones.

Once he achieves a positive return on investment, Sharma says, XMG will be in a position to scale up with a more product roll-outs and a PR campaign. Local content, avidly consumed by Indians, will help extend XMG’s range of apps. “Through this bootstrap process,” he says, “we slowly build awareness of XMG. Partnering with content we can give games for free as a Trojan horse that sells music and other digital content.”

Ultimately, Sharma hopes to build games expressly for the Indian market. He plans that by mid-2013 the Indian smartphone market will have reached a mass equivalent to the one in the United States. “Combine this with brand and local-market experience,” he says, and we hope to have the right things in place so that XMG India will come a specialized unit that serves as a beachhead for Indonesia, the “’stans” and Africa.”

HATCH

For the Mississauga, Ontario engineering, business and process-consulting and construction giant, Hatch, India has been about more than securing local contracts. It has also been about fostering an important source of talent that can be used throughout its 65-office global operations.

Hatch has been in India for more than 15 years—its first office was in Guargon. By December 2011 it was employing 90 people in India. It’s active in iron and steel, iron ore, light metals and water-management sectors for both local India firms as well as multinationals doing business in India.

To develop local expertise Hatch parachutes experienced global specialists to teach them while working along side them. Local staff learn about client service, business savvy and technical matters. In turn, Indian staff support global projects, and they develop relationships with counterparts in other countries. The result, says Hatch India’s director Mick Camilleri, is a consistent level of quality in India and worldwide.

“We take a lot of pride in developing the next generation of Hatch leaders,” Camilleri says. “These are not just senior people, but staff at all levels. We invest in just as much time recruiting junior-level staff from universities as we do identifying industry leaders for senior positions.”

SUN LIFE FINANCIAL

Sun Life is no stranger to global trade. By the end of the 19^th Century the then-Montreal-based insurance company operated in seven countries or territories, including India. In the 1950s it withdrew from that country when insurance assets were nationalized. But by 1999 it returned, forming a joint venture with the locally owned Aditya Birla Group.

Aditya Group is a major Indian conglomerate with a scale that matches Sun Life’s ambitions for India. Today Birla Sun Life sells mutual funds, life insurance and wealth management services through a network of 600 branches and 150,000 sales people, including the two generations of sellers in the photo above.

Sun Life’s experience, which much larger in its scope than most Canadian firms are capable of, nevertheless relies on the same philosophy any company would adopt: capitalizing on local knowledge and deploying its global expertise. While Sun Life, now headquartered in Toronto, has considerable international insurance expertise it still relies on its local partners for an intimate understanding of the Indian consumer.

SNC-LAVALIN

Over the past decade the Montreal construction giant SNC-Lavalin has been building up its presence in India through acquisitions. The firm had been building transportation and energy infrastructure projects. In 2005 it bought RJ Associates in Mumbai, a local engineering firm, to make its presence more permanent. That was followed in 2007 with the purchase of Span Consultants in New Delhi. Today the firm has 1,200 employees in India.

The move was propitious for Canada’s largest engineering and construction company. It was at the start of a massive modernization of India’s infrastructure. Speeding economic growth has put strains on energy and transport and distorted the marketplace (top-loading washing machines outsell front loaders because  during frequent power outages top loaders can function as a manual wash tub).

The New Delhi government is planning on a five-year US$1 trillion infrastructure-building program and while politics has caused fits and starts in construction, SNC is in a good position to bid on projects. It entered the high-end engineering, procurement and construction management business in India when it secured a mandate for Numaligargh Refinery Ltd.’s crude-oil refinery.

SNC also provided engineering work on four hydroelectric generating projects that would  cumulatively produce 10,000 megawatts of power and invested in a 189-km toll road in the state of Andhra Pradesh.

Vikram Gupta, director of business development for SNC and based in Toronto, says that SNC “sees immense potential to expand its current operations through infrastructure concession investments, mergers and acquisitions and organic growth.”

Gupta says that India’s vast human talents and its democratic and legal framework are cornerstones for Indian growth. “It is extremely important to understand decision-making, cultural nuances and the somewhat bureaucratic framework, and  to be patient.”

DATAWIND

Datawind, a provider of wireless Web access products and services, recently created the world’s most inexpensive Tablet, dubbed Aakash (“Sky” in Hindi). Aakash is a $35 Wi-Fi-only product intended for Indian university students, it comes with a data pack and internet access for less than 100 rupees a month, or $2.

With 18 million Indian Internet subscribers and 120 million users, the difference between them is a matter of affordability,” says Suneet Singh Tuli, chief executive of Datawind. “That’s a gap that needs to be addressed. We have a technology that reduces the amount of data required to go on the Internet by 30 times, that’s the core of what we do. We’re able to run [the device] on low-speed networks that are available everywhere and we can afford to buy that bandwidth and sell it at a very low cost.”13

Tuli says that while India may be wryly known as a country where everything does not always work as it truly should, the opportunities it provides are endless. “Canada needs to act globally in these types of markets. Think about it, as more devices go out, providing millions with access to information, more content will be created, imagine what it can do for them.”

TOON BOOM ANIMATION

In early 2000, Toon Boom Animation Inc. began developing the Indian animation industry. Joan Vogelesang, Toon Boom’s CEO, has visited India more than 25 times in the decade that followed and worked closely with a local distributor, meeting with business people, government officials and school representatives every time. Vogelesang’s game plan was to get businesses to invest in a set up and then ramp up production of animated products.

Among the problems to overcome were to change attitudes toward the animation industry by showing its socio-economic value. Toon Boom worked with the Canadian High Commission to India as well as with Export Development Canada. It set up small schools attached to production studios until an official animation curriculum could be put to work.

It also meant revising the educational system. Once a first set-up was in place in the various existing production hubs, Toon Boom worked closely with studios to get them up and running to meet the quality, reliability and punctuality needed by the animation industry. Toon Boom facilitated introductions to North American and European studios, positioning India as the next animation destination.

“Our continued presence in the field was essential to build strong relationships,” says Vogelesang, whose Montreal-based firm won a Business without Borders HSBC International Business Award in 2011. “Our success lies between working hand-in-hand with industry and education, as well as getting government support to facilitate the birth of new businesses.”

Today the Indian animation industry represents a strong, viable sector within the subcontinent and is positioned as a player in the global animation market. More than 100 studios are now operating, hiring thousands of trained employees and constantly requiring more qualified workforce than the educational system can supply. Globally, the Indian animation industry may to grow to $2.9 billion by 2015 from $ 1.8 billion now.

Ryan Holmes | Photo: Grant Harder

Responding to the blistering growth of social media, in 2008, Ryan Holmes added social-media management to the list of services offered by his Vancouver-based Web development and marketing firm, Invoke Media Inc. He quickly found that his team needed a better tool to perform the task effectively, and put his experienced developers of content-management systems to work. In December of that year, Invoke introduced HootSuite, a social-media management system that helps businesses collaboratively execute campaigns across social networks such as Twitter, Facebook, LinkedIn and Google+ Pages from one secure, web-based dashboard.

Despite a competitive landscape and a tough economic environment, HootSuite has flourished. Spun off as a standalone company with seven staff and no revenue in January 2010, HootSuite today employs 90 and is generating sales at an annualized rate of $10 million. The firm turned its first profit in November 2010, just five months after launching a paid version of HootSuite. (Like many software startups, the company still offers a free product with limited functionality as a way of attracting fans.) Today, HootSuite is recognized as one of the world’s top social-media management systems.

Holmes is the first to admit that HootSuite’s success is due in large part to the rush to social media. “It’s the most disruptive form of communication we’ve ever seen,” he says. “There are three times more social-media accounts than there are e-mail accounts. So, there’s a lot of demand in the market.”

But where there’s demand, there’s competition. Holmes stays ahead through constant product innovation. “We’re more focused on innovating than anything else,” he says. HootSuite actively solicits feedback from its stakeholders using a variety of means, including a high-powered, third-party product called UserVoice Feedback, which gathers, funnels and prioritizes customer input.

More valuable could be Holmes’ direct involvement in product development: “I provide vision and direction, review and tweak and modify, and make sure every change is aligned with what I’m hearing, especially from our users.” It’s unusual for CEOs to be so hands-on in the innovation department, but Holmes believes it’s essential: “Founders who manage product are, in general, more successful. Facebook is one example; Apple is another.”

Being a spinoff of an established company has helped HootSuite over some startup hurdles. “We had the benefit of a revenue stream and a history with the bank,” says Holmes. The almost US$5 million in debt and equity financing raised by the firm since December 2009 has been even more helpful, funding operations and enabling some strategic acquisitions.

Still, Holmes brings the same bootstrapping mentality to HootSuite that helped him launch several previous businesses on a low budget. For instance, HootSuite staff use the free, web-based Google Apps suite instead of Microsoft Office; BaseCamp, a web-based project-management and collaboration tool; and, yes, the HootSuite software for social-media marketing.

“I’ve started a series of small businesses, and I wish this channel had been available to me when I launched them,” Holmes explains. “Every email you send has a per message cost. Every print brochure has a per-unit cost. Social media has no cost per unit—and high virality.”

Practising what its preaches appears to be paying off for HootSuite. “We have competition, but in some ways, I think we’re now leading the market,” says Holmes. “We’re no longer the underdog. Now, we’re looking in the rearview mirror.”

That’s a good place to be, but Holmes is taking his own advice to avoid resting on his laurels. “Always be hustling,” he says. “Work harder and work smarter. It’s not going to happen itself.”

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Canadian Prime Minister Stephen Harper (L) is
greeted by Chinese President Hu Jintao before
their meeting on February 9, 2012 in Beijing, China
Photo: Getty Images

While on an official visit to China this week, Prime Minister Stephen Harper and Chinese Premier Wen Jiabao negotiated a ream of trade agreements. These included everything from sharing pandas to selling Saskatoon’s uranium yellowcake to China for its nuclear energy program. As well, Canada and China signed a foreign investment and protection agreement designed to protect investments in each other’s country.

Although Canadian officials deny these are the first steps toward an all-out free trade agreement with China, the prospects are enough to send a loud message to the United States: They can do their own deals, thank-you very much.

Although two-way trade between Canada and the United States is still the world’s largest—roughly about $1 million a minute—China is becoming one of Canada’s emerging trading partners. Two-way trade is about C$58 billion a year, with $45 million coming from China and $13 billion leaving Canada for China, mostly in agricultural products.

While reluctant to say so, the U.S. administration is becoming increasingly nervous about the growing strength of China, and its new ties to countries like Canada. In sum, America fears it is being bypassed and losing the trade and economic clout it once had—something it was trying to re-establish through the Trans-Pacific Partnership (TPP).

With the collapse of the Doha Round global trade talks among 153 countries in the World Trade Organization, many countries have been actively pursing bilateral or regional trade pacts. The latest, and one of the largest, is the Trans-Pacific Partnership (TPP) among nine Asian and South American countries, including the United States. Other countries in TPP include Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

Canada, Japan and Mexico have asked to join. But Canada is reluctant to negotiate the so-called “entrance fee” the U.S. and other countries are demanding. Mostly, that involves Canada opening up its supply management system for dairy and poultry to direct import competition.

Both the U.S. and New Zealand, a major dairy producer, are demanding that Canada, as well as Japan, offer up its protected agricultural industries to foreign competition (Japan offers protection for its rice producers).

Back in Beijing, Canadian Trade Minister Ed Fast commented on the deals with China: “Our end game is to deepen our trade relationship in one of our key priority markets.”

But according to one Canadian trade official, the real driver for Canada is a worry that the U.S. will try to “keep us out of the [Trans-Pacific Partnership].”

Canada is also looking at alternative buyers for its vast oil sands reserves after the refusal by President Barack Obama to approve the 1,600-mile Keystone XL pipeline between Alberta and refineries in the U.S. Gulf Coast. The pipeline, which would run through Montana, South Dakota and Nebraska, would cost about $13 billion.

In the meantime, Canada is moving ahead with another pipeline from Alberta’s oil sands to its West Coast. Called the Northern Gateway pipeline, it would move about 525,000 barrels a day to Kitimat, British Columbia, to be shipped onto major Asian markets such as China.

“China needs our resources,” said a Canadian trade official, noting that China has already made capital investments in Alberta’s oil sands. Besides stepping up trade relations with China, Canada is also making nice with TPP members Singapore, Brunei and Malaysia. Those countries are the next stops for Trade Minister Ed Fast on his swing through Asia.

“We are on the sharp edge of a strategic sword,” said one Canadian trade official.

Canada faces a serious skills shortage
Photo: Win Initiative

Although unemployment rose in January, Canada faces a serious skills shortage. So says the Canadian Chamber of Commerce, which on February 8 unveiled a major new report on problems facing the Canadian economy. Number one on the list of “Top 10 Barriers to Competitiveness,” as the report is called, is a shortfall in skilled workers. That LNG plant at Prince Rupert and other projects badly need 163,000 construction workers in Canada right now.

Indeed, this nation also needs 130,000 more oil workers, 37,000 nurses and 10,000 skilled tradesmen and women. The president of the Chamber, Perrin Beatty, said that Canadians have to throw off a stigma that has developed around such professions. The Chamber has pledged to make a year-long effort to educate all stakeholders—businesses, labour and government—on the need to adapt the  Canadian labour force to the needs of a 21^st century economy.

“Canadians need to look at their own performance,” Beatty told an Ottawa press conference. “We’ve become complacent; we’ve been congratulating ourselves for having emerged from the recession even while other countries are growing at 3 to 4%. While we’re doing marginally better, our competitors are beating us.”

Beatty warned that Canadians risk losing their admirable advantages—land, resources, stable democracy and advanced infrastructure—to nimbler, more anxious-to-achieve nations such as Singapore. “Our prosperity is not assured,” he said. “Our customers don’t care why we’re high cost or why we’re slow. They’ll just find more competitive partners.”

The Chamber is placing the skills shortage at the top of its priority list for 2012. The network of 400 local and provincial chambers of commerce will be working with stakeholders to improve skills management. The national chamber’s report calls for employee-skills upgrading at the SME level; better integration services for immigrants; better connections between educators and business; a sharper focus on urgently needed occupations; aboriginal workforce development; job placement programs and a campaign to attract and retain foreign workers.

With heavy demand for skilled trade in western Canada, the Chamber reports, Canada needs to do a better job of training its fast-growing aboriginal population, which is concentrated in the west. As well, it must do a better job of recognizing the professional skills of immigrants and getting those people to the jobs. Beatty said that Canada could, at a stroke, fill 300,000 open jobs by getting aboriginals and new Canadians in the proper jobs.

The Chamber’s report cites nine other barriers.

Better federal labour-market policies: The report says that Canada’s federally regulated businesses must have labour policies that enable them to compete. They need policies that encourage the unemployed to re-enter the labour market. Ways to do this would include retraining but also reforming Employment Insurance so there is a common set of benefit qualifications. At present EI divides the country into 58 economic regions which can encourage workers in some jurisdictions to remain off work, hampering productivity.

An improved tax system: Although Canada is competitive in terms of its total tax rate, the Chamber’s report bemoans an overly complicated tax system which has created a compliance and administrative burden. This is a particular problem for SMEs. Overall tax compliance costs Canadian businesses $13 billion to $19.3 billion a year. The report says that marginal effective tax rates on capital investment vary by industry (the service sector faces an METR of about 25% while manufacturing faces 11% and forestry just 6%). The Chamber calls for an independent review of hundreds of exemptions and deductions, with the aim of weeding out unfair and economically inefficient rules.

Continuing internal trade barriers: Although Canada and the provinces and territories agreed to slash rules governing the free flow of goods, services and labour back in 1995, implementation has been glacial and continues to impede national prosperity. These barriers cost $14 billion a year at a time when competing nations are eliminating such rules. The Chamber says that the New West Partnership Trade Agreement between the three westernmost provinces is the model for a pan-Canadian agreement.

Improving the regulatory environment: One of Canada’s more serious challenges to global competitiveness is an inefficient government bureaucracy. The Chamber says excessively burdensome regulatory oversight causes duplication and inefficiencies but also creates higher costs and administrative workloads for business. Canadian business forks out $33 billion to comply with multiple layers of government regulation. The natural resources sector in particular needs a more efficient method of deciding on whether projects get developed. The Chamber recommends more streamlining, one-stop approaches for regulatory services.

Attracting international investment: Foreign direct investment is essential to Canada’s development, but Ottawa’s current position is highly confusing. The Harper government’s 2010 decision on a proposed takeover of Potash Corp. sent a bewildering signal to the outside world. Although amendments to the Investment Canada Act raised the threshold for Ottawa’s review of direct acquisition of Canadian businesses by foreigners, terms such as “net benefit to Canada” and “strategic asset” bewilder would-be foreign investors. The Chamber calls for full implementation of enterprise-value thresholds; providing more clarity to “net benefit” and “strategic asset” terms; and the negotiation of foreign-investment promotion and protection agreements, such as that signed by Prime Minister Stephen Harper with Beijing in February 2012.

Stimulating and commercializing R&D: The Scientific Research and Experimental Development (SR&ED) helps some qualifying Canadian corporations more effectively than others, owing to technicalities in the program. The Chamber recommends correcting the flaws in SR&D and through various measures to better protect intellectual property.

Improved use of information technology: The report complains that education enrollment in science, technology, engineering and mathematics is declining even as job opportunities in those disciplines are growing. It calls for a national “digital economy strategy,” a comprehensive program to supply digitally literate workers, and greater investment in digital technology by business. Tax policies can stimulate business investment in high tech networks on a “geographically neutral” basis.

Improving business financing: The Chamber cites Canada’s ongoing lack of venture capital to help young, promising, technically advanced companies get into the marketplace. In 2010, $1.1 billion in venture capital got invested in 354 start-ups with an average investment of $3.2 million. Yet a decade before, $5.9 billion was invested in more than 1,000 firms. The U.S. rate was more than 20 times the Canadian one with average investments of $6.9 million. The Chamber is vague on a solution other than calling for more dialogue to raise the national consciousness around the subject.

Modernizing  infrastructure: The need to refurbish or replace much of the nation’s infrastructure is well known. The Chamber would see a national infrastructure investment plan that would co-operate with other levels of government, especially municipalities, to review best practices in infrastructure financing. It would also see better training of public-sector workers so they can improve management of public-private partnerships.

To read the Canadian Chamber of Commerce’s complete document on challenges facing Canada’s competitiveness, click here.