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The Changing Face of CanadianManufacturing

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DEPARTMENTS

9 PUBLISHER’S NOTEBY JON ROHR

10 BUSINESS MONITORLeadership in the New Millennium; Junior Achievement’s Success Continues; Cambridge Tourism Awards

33 WATERCOOLER

MOVER & SHAKER

12 THE CHANGING FACE OFCANADIAN MANUFACTURINGBY JON ROHRAn exclusive Exchange magazine interviewwith Perrin Beatty

FEATURE

38 MAKING A DIFFERENCE / BY SUE RICHARDSBetter Leaders through Education and Idea Exchange“Peers who are jazzed about their work and their lives.”

COLUMNS

19 THE FAMILY BUSINESS DOCTORBY DR. JOHN FASTThe Success of FAMILY, INC.

22 MANUFACTURING METHODSBY DOUG CATERTaking Advantage of Capacity Gains,At a Profit

24 GOOD GOVERNANCEBY JOHN DINNERThe Board’s Role in Stategy Development

27 PUBLIC MARKETSBY JIM KOPPERSONDealing with Reality

29 TAXWISEBY TERRY WICHMANWhat’s Wrong with Our Income TaxSystem?

30 ON ASSIGNMENTBY PAUL KNOWLESAccommodations: Adding It All Up

SERVING BUSINESS IN WATERLOO REGION AND GUELPH

P.O. Box 41030, Waterloo ON N2K 3K0 • Tel: (519) 886-2831 • Fax: (519) 886-6409email: editor@exchangemagazine.com

ExchangeCONTENTS

Volume 21, Number 4 MARCH/APRIL 2004

On the cover: Perrin Beatty, President and CEO of the CanadianManufacturers & Exporters

Publisher/Editor: Jon Rohr

Associate Editor: Paul Knowles

Feature Writers: Sue Richards, Jon Rohr

Advertising Sales: Brian LyonTMR (519) 886-1946

Creative Director: Diane Johnson

Art Direction: Laurie Martin

Circulation/Office Administration: Leanne Rohr

EXCHANGE magazine is a regional business publication pub-lished by Exchange Business Communication Inc. President,Jon Rohr. Eight issues per year are distributed to each companyin Kitchener, Waterloo, Cambridge, Guelph, and Fergus asdetermined by Canada Post Business Postal Walks.Subscriptions are available for $29.90. Send cheque or moneyorder to Exchange, P.O. Box 41030, Waterloo, ON N2K 3K0.Attn: Circulation Department. Back issues are available for $8per copy. Phone: (519) 886-9953. Fax: (519) 886-6409. ISSN0824-457X Copyright, 2004. No part of this magazine may bereproduced without written permission from the publisher.

Exchange

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Capacity and Productivity Lead to ProsperityMeetings of minds on innovation

BY JON ROHR

Converting raw materials into products — the manufac-turing of goods and services — is the mechanism thatbuilds economies. With a healthy manufacturing sector,

financial success undoubtedly ensues. Profit provides theresources that drive innovation. Application of an innovationallows for increased productivity. The more productive youbecome, the more competitive you are, and the more difficultit becomes to remove your job/companyfrom the economy.

Throughout all of our communities wehave many examples that prove innova-tion is as much an element of success asis an adequate supply of raw materials.Simply, innovation supplies the nutrientsthat drive our economy.

Anyone can deliver milk; it’s whenothers do it competitively that you areforced to adapt or perish. You get a cart,then a truck, then a bigger truck. You increase your capacityby hiring another truck and training the driver to reach a sim-ilar level of productivity. And so on and so on. In a nutshell,you innovate, and that leads to your future prosperity. Any-body can do it, if they now how. And there lies the crux of thematter.

I’m not familiar with any educational program that willteach you a cut-out version of how to apply innovation inyour traditional manufacturing operation. It’s a challengingprocess.

I am familiar with the growing need for manufacturers tostart thinking about how they can achieve productivity gains.I’m also becoming more familiar with the growing number oforganizations claiming they can help. I think the best idea

I’ve heard involves the establishment of peer groups. Thisconcept is already well established among the manufactur-ers of software technology, leading to the development ofCommunitech and other peer groups.

I am also aware of the Young Entrepreneurs Organization(YEO) and Young Presidents Organization (YPO). Both areorganizations whose members say the most stimulating part

of the program occurs in the peer-to-peerdiscussions. You can read about our localYPO in this issue (page 39).

There are also national organizationsthat lobby governments and assist manu-facturers. The Canadian Manufacturersand Exporting group is a well establishedorganization led by the man featured inthis month’s cover story — Perrin Beatty,from Fergus, Ontario.

The value of all of these groups comeswith the gathering of people with similar job descriptions,discussing best practices, new applications, organizing planttours and subsequently “stealing” innovative ideas. And it’sall OK. By sharing common objectives, improved productivi-ty and capacity keeps you in the game. If not — quit, sell outand get out of the game altogether. Let someone who hasthe passion to develop your company lead it. If at all possiblekeep controlling interests local.

Innovation. More today than ever before, that’s thelifeblood of our economy.

PUBLISHER’S NOTE

JON ROHR IS

EDITOR AND PUBLISHER

OF EXCHANGE

MAGAZINE FOR

BUSINESS

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BUSINESS MONITOR

in-school programs to more than10,500 students in the Region duringthe 2003-2004 school year.

JA’s “Student Venture andCompany Program” gives high schoolstudents a hands-on opportunity toexperience operating a business.“Project Business” provides grade 7and 8 students with an introduction toCanadian business and our economic

Thanks to the tremendous sup-port from their many volunteersand the funding they receivefrom corporations, service clubsand individuals in WaterlooRegion, Junior Achievement hascontinued to expand its studentreach and to add new programs.Plans are underway to providethe business education and stay-

During an interactive luncheon ses-sion with the Kitchener-Waterloo

Software Quality Association, I led anexercise with an artificially imposedtime limit. This exercise, primarilyaimed at managers/leaders andintended to demonstrate groupdynamics, communication, and infor-mation sharing, also helps to identifycommon project management andproblem solving pitfalls.

During the exercise it became clearto the group that our methods for deal-ing with the pressures of time and thesharing of information are the keyingredients for successful projects,successful teams, and successful lead-ership styles. Half the attendees partic-ipated and half watched the dynamics;it didn’t take people long to observethat this exercise accurately reflectedtheir current working environments.

At some point in the exercise,observers and/or participants begin toanalyze the situation, asking, “What isthe meaning of this exercise?” Theyquestion why they are doing it, butthey still continue and they don’t slowdown long enough to chew the prob-lem in bite size pieces. Instead, theyattempt to eat the problem whole andget it done.

The participants felt time con-straints worked against them; theyweren’t able to effectively organizeunder the constant reminder of time.Therefore, how could they possiblechew the problem in bite size pieces,and really digest what they were tak-ing in? Sound familiar? Is this aneveryday occurrence at your place ofwork — you question the meaning ofwhat you are doing, but still gothrough the motions of doing it. Per-haps you, too, find it difficult to organ-ize and execute given the structureand the pressures of time constraintsand deadlines.

When we are thrown into newworking groups and continue to oper-ate under the pressures of time, we areforced to eat, learn and work on therun. At some point one has to stop toask, “What are we digesting?” Theanswer, in part, is in the followingreminders for all leaders who find theyare racing against the clock and sel-dom pausing to ask, “What is themeaning of this exercise, or this meet-ing, or this project?”

Do’s1. Participate. Share the information

and ideas you have — don’t wait tobe asked because you may never be.

2. Delegate. Share the workload —take bite size pieces.

3. Appreciate. Respect each individ-ual’s contributions, needs, and moti-vators, although they will likely bedifferent from yours.

4. Concentrate on people and process,instead of on the entire problem andthe pressures of time.

Don’ts5. Don’t dictate a process, a how-to, or

an outcome.6. Don’t exaggerate your failures,

issues or successes — don’t make itbigger or smaller than it is.

7. Don’t overrate your power as aleader.

8. Don’t underestimate yourself, oryour team — either ability or poten-tial.

-BY LINDA GREGORIO, PRESIDENT OF PRESENTS OF MIND

LEADERSHIP IN THE NEW MILLENNIUM

“Why are wedoing this?”

Right photo, 2003 Monthly winners: L to r back row - Romy Ahuja,Best Western Cambridge Hotel, Christina Bradley, Wings ofParadise, Ryan Da Silva, Stars Men’s Shop, Vatche Soghomonian,Galaxy Cinemas, Maya Chakravarti, African Lion Safari.Front row - Linda Elder, Kwik Kopy, Linda Outwater, Holiday InnKitchener, Mary Schmalz, Forever Young Day Spa Centre, SigiRingwald, Rushes Restaurant, Waterloo Inn, Janice Primeau, RegisSalon, Gowri Ragu, Holiday Inn Cambridge. Absent are KathyMartz and Tammy Lawton from Grand Accents

JUNIOR ACHIEVEMENT’S SUCCESS CONTINUES

Junior Achievement’s “Business of the Year” award was presented to VernonErb of the Erb Group, by Waterloo Regional Chair Ken Seiling, left, and LeeKors, District Vice-President, CIBC Kitchener (Award sponsor).

Romy Ahuja, Director of Sales at the BestWestern Cambridge Hotel, was awarded the2003 Hospitality Hero Grand Prize atCambridge Tourisms 2nd Annual Gala eventheld January 22, 2004. The awards recognizeindividual achievement in providing outstand-ing customer service and hospitality to visitorsto Cambridge & the surrounding area. Twelverecognitions are awarded monthly with theGrand prize winner chosen from the 12 win-ners. As the Grand Prize Winner, Romy waspresented with a custom-designed award,engraved with his name and an all expensepaid trip for two to Quebec City.

MARCH/APRIL 2004 l exchangemagazine.com l 11

BUSINESS MONITOR

CAMBRIDGETOURISM AWARDS

system and “The Economics ofStaying in School” provides grade 7and 8 students with an understand-ing of the personal and economiccosts of dropping out of school.The recently introduced “BusinessBasics” program gives grade 5 and6 students the opportunity to learnabout the role of small business intheir community, while “Banks inAction” allows grade 9 and 10 stu-dents to learn the fundamentals ofborrowing and lending money, aswell as the impact of interest rateson banks and customers.

A key feature of all JuniorAchievement programs is theinvolvement of volunteers from thelocal business community, whoshare their expertise and experi-ence with the students while guid-ing them through the programmaterials.

The demand for JA programscontinues to escalate each year,providing JA with the challenge offinding more funding and morevolunteers to meet the demand. Toget involved, contact JuniorAchievement at 576-6610 or by e-mail at jawatrgn@golden.net.

LOGISENSE CORPORATIONLogisense Corporation is a Cambridge-basedprovider of optimization and administration soft-ware for companies managing internet-basednetworks. Optimization software, also known astraffic management software, helps companiesimprove the speed, efficiency, reliability and cost of their internet infrastructure. Recently, one of theworld’s largest clothing retailers purchased and implemented Logisense’s traffic management solutionto facilitate downloading of bandwidth-hungry employee training to their internet connected stores. Byimplementing Logisense’s solution, the retailer avoided a multi-million dollar upgrade of their internetnetwork.

Administration software enables companies to deploy internet access and services like e-mail, andto bill or allocate the costs of internet usage to individual customers, users or departments on the net-work. Logisense’s flagship EngageIP billing software is used by service providers providing internetaccess, wireless services including wi-fi and voice-over-internet services.

Through its optimization and administration software, Logisense also provides value-added servic-es like filtering for objectionable content, managing of peer to peer activities like music downloadingand blocking software for nuisance spam.

Logisense started life as MGL, an internet service provider serving southwestern Ontario. Unableto source quality software for managing their business, the founders of MGL developed their ownsolutions for tracking, billing and providing services. Ultimately, the service provider business was soldin order to focus on the business of supplying other service providers.

Today, the company has 15 employees. Approximately 500 diverse customers have purchasedLogisense products including AOL Roadrunner, HMV Japan, Siemens, Reuters and the City of Norfolk,Va. Over 70% of those customers are in the US. Sales are growing at a rate exceeding 50% annually.

A key factor in Logisense’s rapid growth rate is the explosion and rapid evolution of internet-pro-vided services. Wireless services like wi-fi and voice services over the internet which have been indevelopment for years are now achieving critical mass as commercial ventures. Customers who imple-ment Logisense solutions see opportunities to reduce and reclaim costs more effectively and to takeadvantage of revenue opportunities by providing additional services.

Contact Logisense at 519-249-0508 or visit www.logisense.com.

e m e r g i n g t e c h n o l o g i e s

What do you get when you mix the “storming” capabilities ofthe H1 Hummer and the sublime characteristics of a luxurytown car? You get the H2 Hummer, now available in Water-loo. The visually civilized and stalwart H2 serves a not-so-defined and equally charismatic individual. It’s no surprisethat few can resist the powerful emotional appeal whichplaces driver behind wheel. Physically similar to the H1,which we saw a lot of in “real life” Desert Storm, the H2 is avehicle that looks good around a school teacher, lawyer ormechanic of any sex. The unyielding off road capacity is bet-tered only by the H2’s “everything within reach”uptown inte-rior. With ample room for the family, in-laws and out-laws theH2 in a head turner like no other.

The H2 is here!The H2 is here!

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HUMMER with George Michaels, CHYM FM, winner of the

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12 l exchangemagazine.com l MARCH/APRIL 2004

The ChanFace of

CanadiMANUFABY JON ROHR

“Sixty years ago, two brothers, Georgeand Mathew Beatty by name, opened asmall farm implement factory in Fergus,Ontario. At this early period the whole ofthe settled portion of Canada was dottedwith such village industries. The firm theyfounded has just celebrated its diamondjubilee. It’s still in Fergus. It is now aninternational organization. It has expertoutlets in Great Britain and New Zealand.It sells its wares in almost every countryin the world. But it continues to functionlargely along the lines laid down by thefounders. In short Beatty Bros. is still avillage industry, but it is one that hasgrown to vast proportions.”

The above excerpt is from a frontpage article in the Financial Post of July14, 1934. Written by Gordon L. Smith, itran under the lengthy headline: “BeattyBrothers of Fergus, Celebrates SixtiethAnniversary — Founded by Two Brothersand is Now Run by Two Brothers.” BeattyBros. was founded 1874.

AN EXCLUSIVE EXCHANGE

MAGAZINE INTERVIEW WITH

PERRIN BEATTY

Call for NominationsBETTER BUSINESS BUREAU OF MID-WESTERN ONTARIO

COMPANY NAME: __________________________________

ADDRESS: ____________________________________________

CITY: __________________ POSTAL CODE: ______________

TELEPHONE: ________________ FAX: __________________

PRODUCT OR SERVICE OFFERED: ______________________

______________________________________________________

THIS NOMINATION SUBMITTED BY:

NAME: ______________________________

COMPANY: __________________________

TELEPHONE: ________________________

FAX: ________________________________

Recognizing a business for its commitment to maintaining a culturewhich consistently sets exceptionally high standards of behaviour inbuyer and seller relationships, illuminates the importance of corporateconscience and responsibility in fulfilling a company’s obligation to themarketplace to do what is right and fair, demonstrates to the businesscommunity that adhering to Better Business Bureau ethical standardsis the hallmark of successful, competitive companies.

ELIGIBILITY

All for profit businesses that have been actively in business for not less than fiveyears in the Bureau’s service area of Mid-Western Ontario. Not-for-profit charitable organizations are not eligible for this award. Both member and non-member companies of the Better Business Bureau can be nominated.

AWARD CRITERIA

An independent selection committee from the academic and general com-munity will evaluate candidates for the Better Business Bureau IntegrityAward.• High ethical standards of behaviour toward customers, users, shareholders,

employees and the communities in which they do business.• A history of ethical practices in the marketplace, including acknowledgement

by peers.• Marketing, advertising, communications and sales practices that reflect a

true representation of what is being offered in the marketplace.• Communicate and train employees in carrying out ethical principles.• Have been actively in business for the past five years in the Better Business

Bureau of Mid-Western Ontario’s geographic area.• Show no evidence of failure to meet financial obligations.

Completed nomination forms must be received by Friday March 26, 2004 at:

THE BETTER BUSINESS BUREAU354 Charles St, E.Kitchener, Ontario N2G 4L5

TELEPHONE: 519-579-3084FAX: 519-570-0072 or submit online atwww.bbbmwo.ca

2004

Business

IntegrityAWARDS

MARCH/APRIL 2004 l exchangemagazine.com l 13

ging

anACTURING

MOVER & SHAKER

14 l exchangemagazine.com l MARCH/APRIL 2004

What’s interesting to note today,says Perrin Beatty, is that theissues of the time are the

same issues manufacturers are goingthrough now. Beatty is President andCEO of the Canadian Manufacturers &Exporters. He’s in charge of the leadingCanadian business network, one with aheritage dating back to 1871.

This is an organization with a lot ofhistory, and a lot of clout. In 1902, oneof the current organization’s predeces-sors, CMA, was given Dominion Char-ter (Act of Parliament) to carry on busi-ness. CME maintains this Charter and isthe only association in Canada with thepowers that this grants, including thepower to hold official hearings (Domin-ion Charter, May 15, 1902).

Perrin Beatty is the great, great grand-son of the founder of Beatty Bros. Hisposition is influential. His pedigreeincludes independent family ties to boththe Canadian Manufacturers Association(Est. 1871) and the Canadian ExportersAssociation (Est. 1943). It seems fittingthat he now leads the merged CME thathis family helped build.

Beatty terms his position an “hon-our,” and he can cite historical familyconnections with each organization.

He also has connections, period —Beatty served as a Member of Parlia-ment (PC) for more than two decades;he was elected a year after graduationfrom the University of Western Ontario.Before he left politics, Beatty had servedas a Cabinet Minister in seven portfo-lios, including National Revenue, Solici-tor General, National Defence, Health

and Welfare, Communications, and Sec-retary of State for External Affairs.

And although he was involved inpolitics for more years than his agemight suggest is possible, manufactur-ing is in his genes, and he understandsit from the ground up. He knows thebasics, the dollars and ‘sense’ of manu-facturing.

Exchange Magazine publisher JonRohr conducted an interview with Per-

rin Beatty, made possible with the helpof the Cambridge Chamber of Com-merce. The interview addresses thenew concerns of the CME and of manu-facturers and exporters. It has beenedited for space and clarity.

Exchange: What are the challenges fac-ing Canadian Manufacturers today?

Perrin Beatty: There are a number ofthem. In the short term, manufacturershave been hit by the change in thevalue of the dollar (CDN), which hasdramatically appreciated over thecourse of 2003, and has effected ourexport competitiveness. The issue isn’t,that there is an optimal exchange ratethe dollar should be pegged at; rather,it’s that we’ve seen this dramaticincrease in a relatively short period oftime when people were locked intocontracts. It wasn ’t related to animprovement in productivity.

Now, the issue of skills is an issue nomatter where you go. In Canada wehave a skills problem on its way tobecoming a crisis. The shortage ofskilled workers is a real challenge interms of ensuring we can train, recruitand hold skilled workers.

The whole area of government regu-lation and taxation is an issue becausebusiness is very international today,

and it’s important that Canada’s envi-ronment is competitive with the best ofthe world. It’s not good enough for usto be in the middle of the pack or elseyou’re at a competitive disadvantage.

Another concern is the moving ofmanufacturing jobs off-shore to China,and to other Asian countries as a resultof their ability to produce high qualitygoods at a cost well below ours, becauseof labour cost and the economies ofscale. Challenging questions for for

Canadian manufacturers include:What is our strategic position?Where does our company fit in?What products should we be produc-

ing that we can produce competitivelyand which someone in a very low wagecountry can’t come along and under-price us on?

What other advantages can we add?Can we add value in service, in upgrad-ing of quality? Is it in customization, asopposed to doing a mass production,

MARCH/APRIL 2004 l exchangemagazine.com l 15

MOVER & SHAKER

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“The Key for manufacturers is to setannual improvement goals in the areasof quality, delivery and cost/productivi-ty, and the financial results will follow.”– GEORGE LOENIGSAECKER, PRESIDENT, LEAN

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where there is a competitive edgewhere a Canadian company can effectleadership?

And so all of these are issues thatmanufacturers are struggling with today.And you’re seeing the face of manufac-turing changing at a pace that is totallyunprecedented in human history.

Exchange: Are manufacturers reinvest-ing in themselves or are they giving upand letting their systems fall into aperiod of history where they’re notgoing to be needed, not going to fit in?

Beatty: We survey our members eachyear and we ask them, “What are yourinvestment intentions?” We’re expect-ing in 2004 to see increased invest-ment in new plant, new capital, toensure they’ll be more competitive.This particularly will be the case as thevalue of the dollar goes up. Whenyou’ve got a very cheap dollar it’sexpensive to buy imported equipment,and it’s often cheaper to hire morepeople do the job than it is to havemore efficient equipment. As the valueof the value of your dollar goes up, therelative cost of buying equipment

MARCH/APRIL 2004 l exchangemagazine.com l 17

comes down, and you need to reinvestin order to improve the productivity perworker, by having new equipment. Onaverage, the age of equipment in Cana-dian companies is older than counter-part American factories. We need to domore to close that gap and improveproductivity. We need to improve avail-ability of skills, we need to upgradeskills of people in manufacturing today,we need to have a regulatory tax envi-ronment that encourages reinvestmentand improvement of equipment. One ofthe key areas that an organization likeCME can be involved in, is in promot-ing “Lean Manufacturing”.

You take a look at Toyota, which hasbeen a pioneer in the world in terms of“Lean Manufacturing”, where theyfocus on constant improvement. Theyare always looking at ways do thingsbetter for lower cost. What you find is a

dramatic improvement in terms of qual-ity and cost production. It importantthat manufacturers look into each ofthose areas to improve their position.

Exchange: Let’s get back to the dollar.There are people who are forecastingthat by 2004 or 2005 our dollar will beat par with the US dollar. How wouldthat impact manufacturers?

Beatty: I think we have to anticipatethat the dollar is going to continue toappreciate; whether it will be as rapidor as much as it’s been so far this year[2003] is impossible to say.

Exchange: Will the US dollar continueto weaken while ours remains thesame, relative to the rest of the world?

Beatty: Our dollar tends to float up ordown with the American currency,

but then it appreciates relative to theUS dollar. One of the real issues thatNorth American manufacturers haveis with the fact that the Chinese cur-rency is pegged to the US dollar at anunnaturally low rate. I think all of uswould support a floating currency,whether from Canada or from China.And what’s important is that it shouldtrack your productivity in your coun-try. I f you see the productivityimprove substantially, then you’ll seethe strength of your currency grow.And it doesn’t undermine your com-petitiveness.

Where you ’ve got a problem iswhere your currency appreciates rap-idly without an equal increase in yourproductivity; suddenly, you’re losingyour competitive edge in the exportmarkets. And that’s the challengeright now. If a Canadian manufacturersigned a contract for $1 million US atthe beginning of [2003], it’s worth lessthan $800,000 now [at time of writ-ing]. When you loose 20% off the top,that includes your entire margin and alot more. It’s fast-changing and chal-lenging, but it’s something where themost progressive manufacturers arelooking for ways of constantly rein-venting the business, redefining howthey do it.

We’ll probably see the pace of manu-facturing accelerate in the comingyears. It’s unrecognizable compared towhat I knew when my family was inbusiness, and will probably be unrecog-nizable compared to now in just a fewmore years.

MOVER & SHAKER

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