Innovation: New and improved

Written by Annette Bourdeau

The world isn’t desperate for a better mousetrap. But it sure needs better hearing aids, safer lifeboat hooks and easier ways for doctors to explain what ails their patients. So thank goodness for the winners of the second annual Innovations@Work Awards. Presented by Rogers and PROFIT Magazine, the Innovations@Work program celebrates the spirit of innovation among Canada’s small business (defined here as companies with fewer than 20 employees). With great ingenuity, this year’s winners have created products that meet the real needs of physicians, marine transportation companies and the hearing impaired. What’s more, they’ve actually carried those products to market with strategies that other business owners would do well to borrow.



St. John’s, Nfld.

Revolutionary lifeboat hooks

Failure is not an option

How Mad Rock Marine launched its unique lifeboat hook against the tide of regulatory politics and startup financing.

Dean Pelley didn’t expect to—or want to—become a fixture in the world of marine safety regulation. But the president and CEO of Mad Rock Marine Solutions Inc. is now a high-profile technical advisor, thanks to his frequent presentations to international regulatory boards, such as the London-based International Maritime Organization (IMO), and a decade’s worth of research on marine evacuation systems. Yet Pelley’s efforts haven’t been for naught: his St. John’s, Nfld.-based company is under full sail, thanks to booming demand for its RocLoc: the only fail-safe or “fail-closed” on-load lifeboat release hook on the market.

Pelley has been calling for change since his days as a graduate student at Memorial University in St. John’s, where he learned how poorly lifeboats hold up in extreme weather. His subsequent research into the deadly problem was so well received that in 2002, he and colleague Jason Dawe launched Mad Rock to build a better lifeboat.

But they soon discovered an even deadlier problem: “on load” lifeboat release hooks, which are used when lowering the craft with a full load, were “fail-open”—meaning they default to an open position in the event of a deployment failure, sending boat and crew plummeting to the water. Mad Rock’s founders surmised that a “fail closed” design would save lives. After three years of R&D, eight prototypes and “a lot of sweat, tears and begging,” says Pelley, in 2005 the RocLoc received regulatory approval.

Still, the RocLoc didn’t fly off the shelves. Although the regulatory code had finally allowed for the use of fail-closed hooks, it didn’t prohibit the use of fail-open hooks, despite their shortcomings—meaning less progressive boat owners had little impetus to make the switch. “They’re looking for something they need for safety reasons,” says Pelley, Mad­­­Ro­ck’s CEO, “so they’re going to make their purchase decisions based on [mimimum] regulatory requirements.” And on price, too: Pelley says fail-open hooks are a “great deal less expensive” than the RocLoc. It’s a big-ticket item: MadRock charges US$25,000 for a fully installed release hook with all of the necessary approvals; a typical ship has two lifeboats that each require one release hook.

With that much revenue at stake, it’s no wonder Pelley has been using his research to convince the IMO to ban the use of fail-open hooks. He achieved a breakthrough in March, when a technical subcommittee of the IMO recommended making fail-closed hooks the new minimum standard. Pelley expects the change to receive final approval as early as this July or as late as mid-2010, due to the irregular ebb and flow of marine regulatory politics and bureaucracy.

Mad Rock’s political visibility has translated into a diverse roster of clients, from Vancouver-based tanker giant Teekay Shipping, to Rotterdam’s Oceanwide Safety at Sea. Klaas Kap­teijn, an Oceanwide captain, heard about Mad Rock’s reputation for producing high-quality hooks through word of mouth and gave the company a call. “What I really like about Mad Rock is that they’re building something small into something big,” he says. “Their release hook system is almost maintenance-free.” As word spreads among mariners like Kapteijn, sales follow: projected revenue for the year ending March 31, 2009 is $2.7 million, up from $40,000 in fiscal 2006.

Pelley and Dawe (who is Mad Rock’s chief technology officer) financed much of the company’s R&D phase with help from “the banks of American Express, VISA, you name it,” says Pelley, who also sold his house to free up much-needed cash. They supplemented their own contributions with about $200,000 in government grants, $150,000 in government loans and by taking advantage of a business-incubation program at the National Research Council’s Institute for Ocean Technology, located on the Memorial campus.

Even as the co-founders continue to pay their credit card debts, they’re setting up to reap even bigger rewards. The buzz about the impending regulatory changes has increased Mad Rock’s sales among safety-conscious, forward-looking companies. And, when the change takes effect, Pelley conservatively estimates that about 40,000 ships worldwide will need their hooks replaced. “If you do the math, 40,000 ships times US$50,000 a pop: that’s not a bad growth strategy,” he says. Pelley and Dawe are also thinking about branching into product innovations beyond release hooks—including the better lifeboat in which they started their entrepreneurial voyage.



Concord, Ont.

Cutting-edge hearing aid technologies

Now hear this

VitaSound Audio’s groundbreaking technology, distribution channels and price points are set to shake up the North American hearing industry.

Listen up, people: the hearing aid of the future is already here. So give a loud—or even just a quiet—round of applause to Concord, Ont.-based VitaSound Audio Inc., the company that merged two game-changing technologies into a next-generation product that was scheduled to hit store shelves in April. And not just any store shelves: you’ll find the hearing aid of the future at London Drugs and the HearAtLast boutiques that reside inside 35 of Wal-Mart’s Canadian locations.

VitaSound CEO Gora Ganguli says establishing such unconventional distribution channels has been his smartest move. “Going to existing channels becomes a daunting task because the hearing industry is so resistant to change,” he says. Alternatively, setting up its own clinics would be costly.

So, Ganguli helped HearAtLast lobby Wal-Mart executives for space inside the retail giant’s stores. He highlighted insights from his 11 years in the hearing-products industry, and successfully convinced them that there was a huge growth opportunity within the category that Wal-Mart would be wise to take advantage of.

Deals with the likes of Wal-Mart and London Drugs give VitaSound the benefits of the existing brand equity and store traffic of these retailers. “If you’re opening your own store, your biggest challenge is getting people to know you’re there,” says Ganguli. “You could potentially spend tens of millions of dollars on advertising just to get your name out. But we can piggyback on retailers’ internal marketing programs.”

And VitaSound’s products embody a lot that’s worth marketing. Unlike traditional aids that simply turn up the volume, VitaSound’s products contain groundbreaking neuro-compensation technology that maps out an individual’s auditory nerve cells, identifies which cells are dead and which are still functioning normally, and adjusts the sound accordingly. This allows for truer hearing.

But VitaSound would have a leg up on competitors even without its high-tech sound-reproduction system. Its Instant Custom Fit (ICF) technology allows it to make custom-fitted hearing-aid shells in-store in about 15 minutes using a medical-grade silicone material and an electronic module that fits all ear sizes. Traditional hearing-aid outfitters take an impression of a customer’s ear and then ship it off to be built at a factory. VitaSound’s more efficient method enables it to sell hearing aids for about $1,000 to $2,000 a pair, well below the industry norm of $3,000 to $5,000. “It brings the hearing industry to a whole new level,” says Matthew Sacco, CEO of Mississauga, Ont.-based HearAtLast. “We’re thrilled to be the launch pad.”

Although you can credit VitaSound for uniting these two innovations, you can trace their genesis to other organizations.

VitaSound’s chief technology officer, Philippe Pango, was instrumental in developing an earlier version of the neuro-compensation algorithm while a researcher at McMaster University. Ganguli licensed the technology and hired Pango, whose continuing work made the algorithm commercially viable. “Our biggest challenge was taking the formula out of a lab environment,” says Ganguli. “We didn’t know if it could be reduced into something that could function inside something as small as a hearing aid.”

The ICF also took a roundabout route to market. VitaSound was launched in 2006 by Montreal-based hearing-product manufacturer Sonomax Hearing Healthcare Inc., with Ganguli as its top executive. When Pango informed Ganguli of the licensing opportunity (they’d been colleagues at another hearing company), Ganguli leapt at the chance. In May 2008, Ganguli bought VitaSound from Sonomax, acquiring its ICF technology in the process. Financial support came from Trivaris Ltd., a Burlington, Ont.-based private-equity firm that knew of McMaster’s neuro-compensation research and saw the potential of Ganguli’s alternative distribution model.

At press time, Ganguli was finalizing a deal with a major U.S. pharmacy to distribute VitaSound products south of the border. You heard that right: products—plural. VitaSound sees itself as a hearing health-care company, and it’s applying its ICF technology to custom-fit earphones, Bluetooth headsets and earplugs that block out external sound, allowing users to turn down the volume.

As a result, Ganguli expects VitaSound to generate 2009 revenue of $1 million to $1.5 million, growing into “tens of billions” within the next few years. You heard that right, too.




Demonstration touchscreens for physicians

Prescription for growth

iMD Health’s novel touchscreen network is winning over doctors and creating a unique opportunity for manufacturers to reach all those waiting patients.

During one particularly frustrating visit to his doctor, Sandro Micieli stared blankly at the man trying desperately to explain what was wrong with his leg. “I wish I had something to show you!” said the physician as he began flipping through medical books in search of a helpful diagram.

Micieli, a certified engineering technologist, knew there had to be a better way for doctors to provide visual information to their patients. In October 2003, he launched iMD Health to find that way.

Since then, it has been a slow and steady walk to market, financed primarily by Micieli, his friends and family. More recently, a former PROFIT 100 entrepreneur climbed on board: Kevin Delano, the founder of Toronto-based Launch! Brand Marketing, which ranked among Canada’s Fastest-Growing Companies in 2005 and 2006. iMD Health’s flagship product, a 19-inch touchscreen terminal that allows doctors to zoom in on a virtual body to show patients what exactly is ailing them, look up current medical information and communicate with other doctors via a secure “privatecasting” system, is finally launching this spring.

Will it fly? Dr. Luciano Di Nardo is impressed with the product. “I’ve had very good feedback from patients, and it has aided me in terms of management and counselling,” says Di Nardo, a Woodbridge, Ont.-based general practitioner who’s among the 20 doctors who participated in a two-year pilot test of the product. “This was the smartest thing we did,” says Micieli. “The physicians worked closely with our R&D team to make sure the terminal was easy to use.”

The trial users also taught Micieli that doctors are eager for a reliable network that can connect them to each other and to breaking medical information, such as drug recalls.

So Micieli, along with software architect Van Luong, began developing a secure, proprietary iMD Health network to complement the touchscreen terminals. Integrating all the features the doctors wanted, such as the touchscreen interface, a database of medical information that could be updated in real time and a secure communications network, was iMD Health’s biggest R&D challenge. Years of effort and experimentation resulted in the privatecasting network, which includes a built-in Public Advisory Alert System that can immediately advise doctors about an emergency situation. “With SARS, doctors were called, faxed, e-mailed,” says Micieli. “We can send instant alerts.”

The network benefits iMD Health as well, allowing it to show patients a loop of informational videos and messages—provided and paid for by drug companies, consumer packaged goods manufacturers and the like—as they wait in their doctors’ examination rooms.

Sponsors can expect to pay $1,000 to $25,000 for a two-week cycle on the system, depending on message frequency, the number of terminals it runs on and the length of the message. “It’s really driven by viewership,” says Micieli. “Based on our research on other forms of promotion, we’re the most cost-effective during this current downturn.” Regardless, the sponsorship revenue will allow iMD Health to provide the terminals to physicians free of charge.

The company expects to roll out 100 units this spring, giving the iMD Health network a potential reach of one million patients annually. It plans to seed another 500 terminals before the end of this year, and more than 1,000 over the next two to three years. “I think it will be easily accepted into this segment of the market,” says Di Nardo. “Because it’s visual and easy to use, I think it has great potential for all different styles of medical practices.”

Micieli believes iMD Health’s success will rely upon its ability to add more people with creative, medical and technical backgrounds to his current staff of five—and then hang onto them. He plans to create an enjoyable work environment inspired by Google’s famous headquarters. It will feature a gaming area, a cafeteria with home-cooked meals made by his mother and whiteboard walls to doodle on. Perhaps more enticingly, Micieli plans to be generous when it comes to sharing the wealth: “We’re going to work hard and pay big.”

If everything goes as planned, there will be a lot of wealth to share. Delano predicts that within the next few years, iMD Health will be bringing in $100 million in annual revenue with a staff of just 17: “And that’s a conservative estimate.”

Just what the doctor would order for any startup.

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