Innovation

If you can't beat 'em, then change the rules

Written by Eleanor Beaton

Atlantic Winner: Mad Rock Marine Solutions Inc.
Location: St. John’s, Nfld.
What it does: Manufactures lifeboat release hooks
President, CEO and CTO: Dean Pelley

Dean Pelley was a grad student researching international offshore safety when he ferreted out the problem that his company’s technology would ultimately solve. It’s estimated that in the past 18 years, 600 people have died in more than 1,000 lifeboat accidents, mostly due to a failure in the release-hook system.  In many such accidents, the release hooks that are used to release the lifeboat or to pull it to safety will open as the lifeboat is being raised back on board, dropping occupants as many as 80 feet into the water.

“I knew that if we could create a solution to that problem, it would be a huge innovation in the industry and we could sell our product around the world,” says Pelley, who co-founded St. John’s, Nfld.-based Mad Rock Marine Solutions Inc. and is the firm’s president, CEO and CTO.

However, international seafaring regulations delayed commercial rollout of Mad Rock’s fail-safe RocLoc systems to international markets by four years—which shows that even life-saving products can get lost at (exporting) sea. But by pressing for regulatory change and taking advantage of government resources, Pelley has built a business that generated revenue of $3.7 million in the year ending March 31, 2010—84% of it from exports—within three years of its first sale.

Pelley’s early research suggested there would be ample demand for products that improve lifeboat performance and, especially among cruise lines, help meet insurer safety requirements. He quickly realized that export markets would be invaluable. “Canada’s shipping industry is just too small to support the kind of company we envisioned,” says Pelley.

But Pelley’s innovation held the key both to his firm’s growth and its potential demise. RocLoc has to be retrofitted to existing lifeboats, which are governed by original equipment manufacturer (OEM) regulations. Under laws set out by the International Maritime Organization (IMO), Mad Rock wasn’t an OEM, and therefore wasn’t permitted to make adjustments to lifeboats. Meanwhile, the lifeboat manufacturers, who argued that the root cause of hook failures was inadequate training and maintenance on the part of shipping lines, weren’t interested in buying the RocLoc.

To remain afloat, Mad Rock would have to create a mechanism for its merchant shipping and cruise-line customers to buy the firm’s products. “I knew I could only do that by getting involved in the regulatory process at the highest level,” says Pelley. So, beginning in 2004, Pelley used a grad-school connection to secure a spot as a Canadian delegate to the IMO, which he began lobbying for regulatory change. And because IMO regulations are standard-setting but not legally binding for its member states, Pelley worked with individual countries to alter their laws so that domestic companies could buy and install RocLoc.

Setting up an in-house regulatory affairs department has been crucial to Mad Rock’s success, says Brian Veitch, an engineering professor at St. John’s-based Memorial University, who has watched the firm since its inception. “By effecting the regulatory changes,” says Veitch, “they’ve put themselves in a position to respond to a significant industry need.”

Mad Rock sold its first order to a Norwegian firm in 2006 and hasn’t looked back. Last year, U.S. customers accounted for 63% of Mad Rock’s foreign revenue, while clients in Singapore acccounted for 15%.

Pelley says breaking into export markets would not have been possible without following a strict regimen of plane-hopping and help from the Canadian government. From the outset, Pelley enlisted trade commissioners at Canadian consulates to identify potential customers and set up sales meetings. On one of Pelley’s first sales trips to Norway, a local trade commissioner found dozens of prospective buyers, set up 10 meetings and even chauffered Pelley to them. Without the support of trade commissioners, Pelley says, few of his early sales meetings would have occurred. “They gave us the credibility,” he says. “The fact that a trade commissioner was setting up the meeting assured foreign clients that we weren’t some fly-by-night operation.”

Mad Rock also tapped government services later in the sales process, in the form of insurance from Export Development Canada (EDC). In late 2007, shortly after signing a contract to provide $300,000 worth of release hooks to a major cruise line, Pelley applied for accounts-receivable insurance from the EDC. He used this as collateral to secure a manufacturing loan from the Newfoundland government, which provided financing to ramp up production. “That sale was instrumental in helping us become a market leader among cruise-ship customers,” says Pelley. “Without that insurance, we couldn’t have secured the funding to make it happen.”

Originally appeared on PROFITguide.com
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