BC Business
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Sometimes organizations and companies have to know when to let go of their babies in order to grow and thrive.
In creativity methodology, there’s a brutal aphorism that describes part of the creative process. “Killing your babies” is the jettisoning of those favourite phrases that were the initial impetus for innovation but no longer serve their purpose. Sometimes organizations and companies have to kill their babies in order to grow and thrive. They may begin with a passion for something, but after a while have to move in a different direction because circumstances are taking them there. Problem The Wall Street Journal reported last summer that MacDonald Dettwiler and Associates Ltd. (MDA), the $1-billion B.C. information company, was considering selling off its iconic space division to an American company. MDA has denied the rumours, but whether they prove true or not, it is clear that the company has seen the future, and it isn’t an empire built on Canadarm’s success. MDA began in 1969 as a company operating in the new world of computing. Over time it became a science and engineering outfit that created technology and data-processing systems. By 1996 it was redefining itself as an “orbital science” company known for its ability to build systems that could operate in extreme conditions such as outer space. Its biggest coup came when it built equipment for the U.S. space shuttle and space station, specifically the Canada Space Arm, or Canadarm, that enabled astronauts to work on their aircraft during more than 60 shuttle flights. Revenues tripled to $300 million from 1996 to1999, but the board of the now TSX-listed MDA and CEO Daniel Friedmann saw the writing on the wall for a company that made its living primarily from the U.S. Department of Defense, which was increasingly insistent on dealing with American companies. If it wanted to grow, it had to diversify considerably. Solution MDA, which had made its name in space, had to determine what its real business was. It realized its business was providing, analysing and packaging information about planet earth, not outer space. And on earth today, information is the new gold, especially difficult-to-obtain information that is crucial for decision-making and therefore commands a very high price. MDA began a multi-year plan to buy up, convert and integrate companies involved in land-management information, financial-services information and other information-heavy areas. It was not unlike Thomson Corp.’s transformation decades earlier from a newspaper owner to the world’s largest provider of electronic information. Today MDA bills itself as a company that provides advanced information products that capture and process data, produce information and improve the decision-making and operations of businesses and governments worldwide. Revenue has grown from $300 million in 2000 to more than $1 billion in 2007. MDA provides systems that interpret data from earth-orbiting satellites, then sells that information to governments and private companies. But it is also very strong in surveillance and intelligence, particularly at helping rapid response among civilian organizations, and it is increasingly growing in financial services, especially in conveyance, mortgage information and other real-estate-related information. A 2005 presentation to investors showed that financial services accounted for almost 50 per cent of MDA’s revenues, and that percentage has increased since. Its advanced-technology division, which primarily deals with space-based technology, fell from 50 per cent of revenues to a mere 20 per cent in 2005 and has continued its downward trend since. So despite the howls about the selling of an iconic Canadian success to the Americans, the “baby” that was MDA’s reason for being is no longer that important to the larger plan. Information doesn’t lie. Abandoning its baby, while painful, could turn out to be the smartest decision MDA ever made. Lessons
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