Even before he took over as president and CEO of the Business Development Bank of Canada in August 2015, Michael Denham was a leading voice on the issues facing Canadian companies today.
Denham served as Accenture’s senior managing partner in this country from 2007 to 2011. He wrote on, and advocated for, issues ranging from labour shortages to global expansion. Now, he leads a team of 2,000 people who provide financing, consulting and venture capital to entrepreneurs across Canada. A crown corporation, the BDC earned close to $500 million in net income last year.
In this exclusive interview with Canadian Business Editor-in-Chief James Cowan, Denham explains what Canada’s entrepreneurs need to thrive in the global economy today—and how he plans to help.
You joined the Business Development Bank of Canada in August, after a long career working in the private sector: you were an executive at Bombardier, and were president of Accenture and AquaTerra. What appealed to you about the BDC job?
Frankly, what attracted me to the BDC was its importance in Canada. The BDC is the only financial institution that focuses on entrepreneurs, and small- and medium-size companies. I view these as the backbone of our economy. When I first joined the corporation, I attended the PROFIT 500 event, which was a room full of very, very successful entrepreneurs. And one of the guys there put his arm around me when I arrived and took a selfie. Not because he knew me, but because the BDC had backed him five or six years ago, and now he’s the CEO of this incredibly successful, rapidly growing company.
Your predecessor at the BDC, Jean-RenÃ© Halde, led the organization for a decade with a strong track record. When you took over, was your goal to maintain continuity with his tenure, or did you want to create your own mandate?
You’re right. Jean-RenÃ© was a very successful leader, so my leadership role is to maintain the momentum I inherited. But there are a number of things I’d like to really accelerate over my tenure.
The first is making it as easy as possible for entrepreneurs to work with us. We’re going to be accelerating our deployment of technology to make a first-rate online banking platform, and we plan to add 20-odd business centres across the country. The second thing we’re going to do is increase support for entrepreneurs and small businesses as they expand internationally.
In the past, you’ve been vocal about the need for Canadian businesses to expand overseas. What practical strategies do those businesses need to succeed on the international stage?
The first thing you need to do is get the house in order. When you’re entering a new market, [customers are] not just waiting for you to get there. There’s going to be some other company—be it domestic or foreign—there already. You’ve got to out-compete them to win market share. So you need to be very good at what you do.
Then you need to focus and pick your markets. And from there—and this is something we help our clients with—you want to speak with Export Development Canada, which can help connect with the right resources.
Do you think Canadian companies avoid international expansion because they think it’s too complex? Or are they just scared?
I actually met with one of our clients last week in Toronto. He runs a company that packages non-prescription pharmaceuticals. He said, “With the low Canadian dollar, there are lots of opportunities for me in India, in the U.S. and in Asia. But frankly, it’s just too hard, and I don’t know how to go about doing it.” I think that represents the attitude of a lot of our successful clients. And what we can do for them is simplify the task of connecting to export markets.
Are there particular countries or regions that companies should be considering right now? It seems like there are trends. China was popular, and then South America¦
Right. My personal view is the U.S. does still represent the best place for most entrepreneurs to start, given the choppier growth rates in places like China, Brazil and South Africa right now. It’s always better to be diversified, but for a client that’s just now contemplating whether to start exporting, I would recommend the U.S.
The BDC has been vocal about the importance of high-impact firms—companies that are growing quickly and have shown a real ambition to succeed. Canada has far fewer of those companies than the U.S. Is it possible to convince entrepreneurs that they need to become more ambitious?
Our client base has a number of segments. One comprises folks who are growing, who are successful, who have a high ambition and a real mindset of wanting to conquer the world. The second segment includes entrepreneurs who are successful but are, frankly, quite content where they are. In the middle are clients who are doing well but aren’t focused on conquering the world because they just see that challenge as too risky. Our role is to help that middle group to see through the impediments and define a plan of attack. Once that plan is clear, they gain confidence, and an underlying attitude of wanting to succeed and conquer the world kicks in.
You’ve stepped into fairly high-profile roles on a number of occasions. Do you have an approach to getting acclimatized to a new job?
Every job at every company has a specific challenge. When I joined the BDC in August, we were performing very well. So there was no turnaround challenge, no burning problem that had to get fixed. I knew my challenge would be to walk in, understand the clients and the momentum, and find a way to build on the strengths while identifying two or three new challenges. I did that through lots of meetings.
I’m a listener and I learn through listening, so I talked to many clients. And then I spent some time thinking about our aspiration to help Canadian entrepreneurs become the most competitive in the world. I had to think about the various ways we can do that. I used what I came up with to set an agenda.
The BDC is a large organization with offices across the country. How do you ensure your vision is actually embraced and implemented by the people who deal with your clients on a day-to-day basis?
I’ve learned over the years that when you’re leading larger companies, you need to have a focus. There are only so many things an organization can do at once. My role as CEO is to constantly reinforce that focus. So in discussions with our clients and in the field, I need to make sure I am consistently talking about those things that really matter to the BDC.
But how do you make the leap from talking about a focus to getting people to enact it?
As a leader, you need to tap into people’s sense of purpose. That’s particularly relevant for us at the BDC; people choose to work here because of the importance of what we do. Having a purpose-driven organization really helps to accelerate change- and to make that change be embraced—provided you can connect that purpose with what you want to do as a leader.
In November the BDC announced it would offer $500 million in additional financing to support smaller companies hurt by low oil prices. Do you think these current tough times offer some lessons that could help Canadian firms get stronger in the future?
We recently did some research that found nearly 40% of small- and medium-size businesses in Alberta were companies that each depended largely on a single client. Not a single sector—a single client. Diversifying to multiple clients, locations or industries correlates to higher levels of sustainable performance.
In your conversations with clients, are there particular themes that keep getting mentioned? Do you notice any trends in their thinking?
We’re not seeing a particularly good picture with respect to the investment intentions of our clients. Relatively few of them plan to invest significant amounts of money in their businesses right now. Today, the vast majority lack the confidence to do that. It’s not that people have a sense of panic; it’s more that they are taking a wait-and-see attitude toward the economic environment before they decide to invest. And that’s something we’re trying to change.
The BDC also has a large venture capital business. Are there particular sectors that seem to be thriving right now?
We’ve seen a lot of activity around clean tech: companies like General Fusion. It’s working on commercial-scale nuclear fusion; it was on the cover of Time. It faces lots of challenges along the way. It’s a Canadian company that could fundamentally change our world if it succeeds. And as I travel, I’m having more and more conversations with companies that are focused on clean tech. Certainly, the recent climate change summit in Paris led to much more conversation on the topic.
Over the years, you’ve been a vocal advocate for getting Canadians to address various business challenges, including the need to go global and the skills gap affecting the labour force. What have you found is the most effective way to convince people—either business leaders or policy-makers—to pay attention to these issues?
First, you need to be consistent. You need to keep talking to folks about the same thing for a while, because attention spans are short. Second, there needs to be some substance and substantiation to your point. And then the third thing I think is important is to attract others to your cause. If you can serve as a rallying point for others, you can get some real critical mass.
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