Letting small business shine

At a time when small businesses are being asked to share more risk to compete in global supply chains, it was perhaps appropriate that the Aerospace Industries Association of Canada (AIAC) took a chance last fall by electing a small business owner as its chairperson.

It wasn’t because of any glaring weaknesses in his resume. John Maris, a test pilot, is president of Montreal-based Marinvent Corporation, a research and development test and evaluation company, and teaches at a local university while working towards his PhD. Rather, the sector has tended to lean on the expertise of its original equipment manufacturers (OEMs) and first tier companies for its strategic direction.

“That was a gutsy move to make,” Maris said of his nomination. “They did step out on a limb. [But] it brought some perspective that they hadn’t had before. It also showed that they were resolute in supporting the small business cause.”

Maris is a firm believer that, “if you can find mechanisms to let [small businesses] shine, they absolutely will. But you have to find those mechanisms.”

Small companies of 250 people or less make up 93 per cent of the aerospace sector but contribute just 19 per cent of the workforce, seven per cent of R&D, eight per cent of sales, and four per cent of exports, according to 2014 statistics. To Maris, those figures represent opportunity for growth.

“I would argue that growth in Canada can only come from small and medium business enterprises,” he said, suggesting that with larger firms facing slim margins in global markets, even modest increases in those categories could pay large dividends for SMEs.

“If you can turn a 10-person company into 100, or 100 people into 500, now you are talking something pretty serious. In fact, if you can get every element in the supply chain that wants to, to move up one rung, the consequences for the economy and our industry would be enormous.”

During his tenure at the helm of AIAC, Maris has championed the development of a consortium model that would encourage small businesses focused on similar niche areas of the aerospace sector to band together to provide OEMs and Tier 1s with a seamless single point of contact for that capability. When tied with academic research and the right support structures from government programs, a consortium could offer a formidable resource to larger firms.

The idea isn’t new. Small companies have long been wrestling with the tautology that, “if you are not big enough, you can’t get the programs that will make you big enough to get those programs,” Maris observed. But faced with globalization of the supply chain, consolidation among suppliers, and greater demand to mitigate risk, many are recognizing that working together might be more effective than battling separately.

“The premise is that it is better to get 20 per cent of quite a lot than 100 per cent of nothing, which is what happens if you go your own way but don’t win any contracts,” he said.

As a first step, AIAC this summer published a draft of a best practices guide for consortia. It does not recommend any particular model of consortium, but instead lays out possible options and key considerations–everything from membership, to governance, intellectual property, insurance, and dispute resolution.

The 20-page document draws from the experiences of various consortia around the world, including the Consortium for Aerospace Research and Innovation in Canada (CARIC), NASA’s small business innovation research (SBIR) program, and the recently announced CertCenterCanada, an independent consortium for flight test and certification.

“The guide is there to show you roughly what the choices are and, hopefully, what the consequences of those choices might be,” Maris explained. He’s now asking industry to treat it as a “straw man” and help refine it. “Then it becomes a living document.”

The consortium strategy is part of a larger vision Maris has for small business growth. Once the guide is finalized, he’d like to see it form the basis for a quality standard, much like ISO 9000 or AS9100. Companies that comply with the guide would gain credit with a range of government programs, such as when applying for a Business Development Bank of Canada (BDC) loan or completing an application for the Strategic Aerospace and Defence Initiative (SADI), Industrial Research Assistance Program (IRAP) or Build-in-Canada Innovation Program (BCIP). It could also serve as a multiplier for small companies contributing to an OEM’s Industrial and Technological Benefits proposal.

“This becomes a control document,” he said. “If people check all the boxes as determined by some process that has yet to be defined, then I want to have government buy-in that you are a desirable entity and eligible for very specific and tangible benefits.”

In fact, Maris hopes a broader effort to coalesce around consortia might contribute to a more holistic Canadian industrial aerospace policy. At present, programs such as SADI, IRAP, BCIP and technology demonstrations all reside in different federal departments and do not always knit together in a coherent way.

As a hypothetical example, he noted current efforts to develop an ecological plane. While small companies might be making headway on their own projects, it is unlikely they would be well coordinated toward that larger objective.

“I could be doing an IRAP on whether blue paint is better than red paint for airplanes. Someone else might have a SADI application to see if covering a plane with feathers will work better. We all do our own thing and a) each one of those projects stands on its own; b) they are not keyed into any national objectives; and c) there is no natural feed from one to the others.”

Maris suggested linking the various government programs together as part of a “niche-based policy” that leverages the notion of key industrial capabilities laid out in Tom Jenkins’ 2013 report on improving defence procurement.

“Imagine if these programs handed off from one to another if you were in one of the niche sectors,” he said.

For example, a company completing IRAP funding might automatically pre-qualify for a SADI contribution, which might in turn ensure automatic eligibility to BCIP or participation in a technology demonstration project.

“If there is a targeted policy, and you now linked all of these programs together, look how advantageous this could be for Canada,” he said. “Right now all these programs offer money left, right and centre, but there is no one steering the [overall] ship.”

Though his term as AIAC chairman comes to an end this week, Maris will continue to push the consortium model and a more comprehensive industrial policy for small businesses. To maintain the momentum of the past year, AIAC has asked him to remain as the formal liaison with government on the initiative, a task he was pleased to accept.