Interview with the President

David Noël: Welcome to the Manitoba Business Podcast, featuring interviews with business leaders and entrepreneurs based in this great province. I’m David Noël.

The subject of today's interview leads another great example of an incredibly successful Manitoba business that most of us have never heard of. For 50 years, they have been the world's largest supplier of controlled environment chambers for agricultural research and production, with over 100 employees spread across 5 continents. As usual, our conversation is all about trying to understand how they got there, and where they're going.

Without further ado, here is Steve Kroft:

[to Steve] Steve, it's great to meet you. Thanks so much for coming on the show.

Steve: Thank you very much for having me.

David: Could we start by just having you tell us a little bit about who you are and what your company does?

Steve: Sure. My name is Steve Kroft and I'm the president, the CEO of Conviron. Conviron is the leading designer and supplier of plant growth chambers and rooms in the world. We are based in Winnipeg. Our equipment is used by universities, government research institutions, such as Ag Canada, USDA, and their equivalents around the world. Then all the world's leading biotech companies, ag-biotech companies. So think of Monsantos and pioneers of the world.

Our equipment whether it's small, reach-in size chambers or larger rooms mimic environmental conditions, temperature, light, humidity, CO2. So our equipment is really used for research, although there are some production applications as well.

David: So you manufacture basically spaces in which you can control whatever environment variables are important for plant growth? Is that right?

Steve: That's right, or some other applications as well, such as entomology or perhaps chemical storage but really 95% of what we do is for plant growth in particular.

David: What's the history of the business? How long has it been around?

Steve: The company was founded in February of 1964 and has been owned by my family since April of 1964. My father, at the age of 26, convinced his father, who was in the grain business, to lend a couple of guys who wanted to form a company and in fact had formed a company about 60 days earlier, convinced my grandfather and his partners at the time to lend them $35,000 to start a company and the rest, as they say, is history.

David: The first question that comes to mind is what happened to those guys who were with the original company?

Steve: Well they stayed with the company for a period of time and then as can happen in a lot of startups, the founders get very involved in the technology, but aren't necessarily the right people to run a business per se. So they were around for a while and then they moved on, fairly soon after, to do other things.

We started to build a company, I wasn't around at the time. I was not yet born, but started to bring on other designers. The company was an exporter really almost from the beginning, because my father, Richard Kroft, had met a lot of people, I guess in two different contexts. One, my grandfather being in the grain business, they were always entertaining traders from around the world, and sitting at their dining room table in their home my dad got to meet a lot of people from around the world and became very interested in the global marketplace. Shortly after the founding of Conviron, we moved to Ottawa. I was about six months old.

He became the executive assistant to Mitchell Sharp in the Liberal government and he was the Minister of External Affairs. For a few years before we moved back to Winnipeg, he was traveling all over the world, to places like China and South America, that a lot of Canadian businesses were not really present. When we moved back in late 1969 and he got more involved in the business, he tapped on many of those same contacts and we started building the business internationally.

I would say that we're a fairly sophisticated exporter, given that we've got product in over 90 countries. We've now got offices on four continents. So exporting is a big part of what we do.

David: No kidding, very cool. Just to clarify, during those years where your dad was working as the assistant to Mitchell Sharp, was he also involved in the day-to-day of Conviron?

Steve: That's a good question. He was not involved in the day-to-day management. I joined the company 19 years ago and I have been sort of a hands-on manager of the business. He had a different role, although at various times he was more involved than others, but initially I'd say it was more of a passive investment for the family.

He started to get more involved in the late '70s and '80s but there was a general manager here at all times, and in fact a president. He didn't always have the title president. In fact. he didn't take that title until much later on. So the company was very well managed but he was not what I would call a hands-on day-to-day manager as I have been for nearly 20 years.

David: I see. I have some more questions about you but since we're talking about this, why did you choose to have a more hands-on role in the company?

Steve: I was a young lawyer, practicing law. It was '96, and I specifically recall the summer of '96 where my wife and I, we didn't have kids at the time. I had been practicing law for five years, doing civil litigation work. I practiced at the law firm Fillmore Riley. I really enjoyed the firm and I enjoyed what I was doing.

I was at a stage where if I want to make a move either I was going to continue to be a litigator for my career or I was going to make a move. It was right around the same time that ag-biotech was really starting to take off. My father and I started talking about the business. I have a brother and a sister but they're both in the States and did their education in the States. I was the one here and I was getting more and more interested in the business. As my mother says, we did a dance through the summer and fall of '96. Then over Christmas of that year decided, “You know what? I'd like to give it a shot.” He was very happy to have me get involved. I moved over in '97.

It was a great time because, as I said, the nature of the business was changing a bit, the equipment. The companies that today are sort of the ag-biotech companies, back then were chemical companies. They were making fertilizers and herbicides. Today they're science companies, they're developing seed and it was the beginning of that transition. It was an interesting time. Then as it turns out, I joined the company in March of '97. In the fall of '98 my father was appointed to the Senate by Prime Minister Chretien. I didn't have the title president, he did. It became a question sort of who becomes president of the company. I think the executives at the company felt that I was ready, I wasn't going to do it unless others felt that I was ready. I transitioned sort of from new guy, learning about plant growth chambers to president of the company in about 18 months. It wasn't as any of us had planned but it was an interesting and fun time, continues to be.

David: Were there some social challenges to being the person who kind of jumped in and became president in such a short amount of time?

Steve: I probably perceived it was more worried about it then than others were. I made a real point when I came of not being that person who thinks they know everything. In fact, I knew nothing. I admitted I knew nothing. I still managed by the philosophy that as long as I surround myself with people who are smarter than I am things will work out, and it has worked out. I really listened as much as I could. I attended every meeting I could. Things that I had no training, how does a refrigeration system work? How do control systems work? I remember I took a course on financial management for non-accountants. My learning curve was steep but I think what helped were a couple of things. First of all, I acknowledged that I needed to learn. So I asked a lot of questions. I worked hard, put in a lot of time but I also came from another career. I wasn't sort of the son that needed a job. I was developing a career as, I think, a pretty successful young lawyer. So I had some credibility from that standpoint but really what I had was the benefit of an incredibly strong family dynamic at Conviron.

The idea of succession was actually a relief a relief to many of the people here. My father wasn't getting any younger and the question was what happens next? I think actually for a lot of our people the fact that I joined the business to some extent was a relief.

David: It kind of absolved them of the niggling question at the back of their mind.

Steve: Yeah. Exactly.

David: Interesting. Let's rewind a little bit. Did you say you grew up in Ottawa? Your dad was working…

Steve: We moved to Ottawa in '67 and were home by, I guess, the end of ‘6…call it 1970. We were there for three years. I was three years old when I moved back.

David: You did all of you grade school here?

Steve: Yeah.

David: I believe you said you went to university here, is that correct?

Steve: Yeah, I did, I went to St. John's-Ravenscourt school. I did my undergrad in Politics and Economics at the U of M. Then I went to UBC and did my law degree and then moved back here and articled and practiced for five years.

David: At that point, when you were going to university, did you really not think at all that you were interested in the business or was there something that was kind of at the back of your mind?

Steve: I didn't go into university knowing really what I wanted to do. I can tell you that my family, my immediate family, my cousins, my uncle is a judge, we're all lawyers. One thing I never had was pressure from my parents to go into any particular field, which I think is a great thing. I try to practice with my kids as well. I guess just because of the family history, law seemed like a good thing to do.

As I said, I really enjoyed practicing law but I was never programmed, nor were my siblings, to join the family business. My father never pushed us at all. It just really evolved that way. I was attracted to the international dynamic. I was attracted to the science, to some degree, even though I was never a real science kid in that respect. It seemed like a very interesting business, so took a shot at it.

David: Speaking of the approach your father took in terms of not pushing you towards the family business, and you said you tried to take that same approach with your kids, you're not at a point yet where you need to think about this necessarily too much but at some point there's going to be a succession that happens at Conviron. In your mind, is this a family business? Are you hoping that it's going to continue to be led by someone in your family, or are you not really approaching it that way?

Steve: I make a point of not really thinking in those terms. The statistics, first of all, on even second-generation family businesses and the failure rate…the failure rate of second-generation businesses is quite high. Third-generation businesses is extremely high. Not to say that there aren't some that are very successful.

We've never taken the approach that, as some do, this is family business it will always be a family business. Don't ever talk to me about selling my business. I have no clue what my kids want to do. I have two boys in grade 10 and 12. I don't know where they want to live. I don't know what they want to do. They're two very different kids with very different interests. I'm 48 years old, so I'm not in a space now of thinking about retirement or those kinds of things. Sometimes the best thing you can do for your family actually or for your employees is to have someone else that perhaps because they have more capital or because of strategic reasons to have someone else take the business. Those are not really on my radar screen. I love what I do. I love our company. I love working with the people that…we're now at about, between all of our sites we're getting close to 250 employees. Great people. I have learned a lot from them. At this point we have some pretty ambitious plan and developing some good strategies and that's what I'm focused on.

David: Basically the succession question is something that you're not super worried about right now and you're keeping your options open.

Steve: That's correct.

David: All right. Jumping back into when you took over the business, obviously there was a ton of lessons to learn. What were some of the most important ones to learn right away?

Steve: What I came to realize fairly quickly is that a huge part of business is about the people. This notion that human resources is just a little piece of a business. I've talked to other CEOs about this as well, especially as CEO, remember I took over CEO a lot sooner than I that I might have. I really do think that good CEOs are the company's top recruiter, the top cheerleader. I walk around the office. I go through the shop at least once a day. I want to know what people are doing. I want them to know that I'm accessible. My job of course is to sort of set the direction for the company but in large part it's to remove hurdles for people and let them do their thing. I would say that the biggest eye-opener for me was that whole human resources, the amount of time spent on people issues.

In some ways it was all so new to me. To go from commercial litigation to plant growth chambers and agriculture is a pretty big leap. There was just a lot to learn in every area of the business. What I did make a point of doing was to get out on the road with some of our people as soon as I could because I knew that if I could spend time with clients and understand what's important to them and gain an appreciation for their thought process, that that would really help me with everything else leading up to the delivery of product. To this day I make a point of traveling and meeting with clients as much as I can.

David: I guess two questions kind of in one. I'm trying to get a sense for the market for Conviron. What is important to your clients for one thing and also what does the competition look like?

Steve: I'll answer the competition question first. Oddly enough, the competitors we have today are largely the same competitors we had 30-40 years ago. There are a few new ones in certain places in the world but a large part it's the same companies. What's interesting about our businesses is that in any niche market, one of the benefits of a niche market is that it's big enough for those who are in it to build a good business and to build, generate a very nice livelihood but they're not necessarily so big that the biggest companies are interested in the heavy investment of money and time to get into it.

The barriers to entry in our business are very significant. When you add up the experience…one of my colleagues a few years ago added up the years of service at our company alone of our 50 longest-serving employees, and it was over a thousand hours. You do the math and there's a lot of experience that's wrapped in this and so it is tough to get into. So the competition is sort of a pretty narrow group of competitors. There might be five or six companies that we see over and over and we don't see all of them in every region of the world. When you look at the clients, the pie is increasing. The application of our equipment is certainly increasing, and it's not a surprise. When you look at what the challenges in the world are today, feeding the planet more than anything else and climate change and of course they're related, our equipment plays a critical role in that work. We approach our clients as partners and they approach us as partners because when they're looking at the science and they have an enormous challenge to squeeze more and more food out of less and less arable land, they are trying to develop solutions and their equipment is a key part of that discovery process. So we're as much an engineering firm as we are manufacturing.

Almost everything we do has a custom element to it and it's an iterative process with our clients. It's a consultative process. They explain to us what they're trying to achieve. Our challenge is to develop solutions. We also happen to build and install and service what we design. It's a little bit of a different relationship than many “manufactures” have with their clients where they're delivering a product and then saying, “See you later, call me when you need something else.” We are working with them throughout because technology changes, lighting changes and we're there to really be their partner throughout.

David: This is probably a question I should have asked earlier. It occurs to me that I often make the assumptions that are wrong about this point, so I'm going to ask it now. What is the business part that actually look like for you guys? Are you building bespoke projects with your clients or do you have a series of products that are set in stone and they get to pick them up or shelf?

Steve: Certainly not the latter. We have products, models of products what we refer to as reach-in…

David: Kind of like a refrigerator.

Steve: Yeah, like a very large refrigerator. We have certain models but how those get fitted out in terms of options and not just right door/left door, but CO2 or humidity or dehumidification. There's HID lighting. There's LED lighting. There's HPS lighting, incandescence, fluorescence, combinations of all of those, the controls, all of that is sort of how you build up a product. On the room side, it's very much sitting down with a sheet of paper doing layouts, paying attention to things like material handling, containment issues, if they're doing genetic work they've got to, for example, treat their water, they've got HEPA filtration, all kinds of things.

So, we do not go to a client, open a catalog and say, “Which one do you want?” The process is very much, “What you trying to achieve? Here are some ideas.” It may be that a model that we've produced over and over is a good fit. But if it's not, we can essentially design almost anything. So, that's the process.

David: Why does a sales process look like for something like that where you're really looking for people who want to partner with you to build something?

Steve: Well, typically, people know who we are. In this space, in fact, there're places in the world where growth chambers are referred to as Convirons which is… any time you get to that Frisbee or Kleenex sort of a status, I think it's…

David: You're the Kleenex of growth chambers.

Steve: We're the Kleenex of growth chambers, right. So, most of our businesses, a lot of our businesses is recurrent clients. Now, it's changing because the use of plants is changing. They are now producing pharmaceuticals and plants and all kinds of things. So, we can never take for granted the fact that people know who we are. But generally speaking, people would come to us and they would say, “Look, this is what I'm looking for. We've got a grant.” Or, “I'm going to apply for a grant.” So, they need help from the very early stages in terms of whether it's budgeting or even just getting a sense of what the technology is that's available.

Our salespeople are highly technically trained. So, they understand the product very well. We'll often bring engineers in at that stage to help develop the solutions. Depending on the client, either it has to go through a bit process or it doesn't. Then there's usually a back and forth, so the design gets sorted out. And then if we get the order, there's a whole further process of now more detailed design, lot of questions. Often people are building buildings around our product. So, builders and architects need to know amp draws, how high ceilings need to be, where drains need to be poured. So, there's a lot of cooperation. There's a lot of project management involved in the process.

And then it moves through. We have long lead-site lead-times just because of the nature of the work. And there're some projects that we worked with clients on, it was five, six, seven years until it was funded, and then the process goes. So, it takes a lot of patience. But we've been at it for 51 years and it seems to be working.

David: How is the sales team broken up? Do you have regional reps or…

Steve: Well, we have what I guess would fairly be described as a pretty complex sales structure. So, in North America we sell direct, we have our own…because it's a niche market, you can get your arms around the market. You don't need hundreds of people in every corner of the continent. So, we do have people strategically located at various places in the US, and then of course we have a team based in Winnipeg as well. So, we do everything direct in North America. We have the same model in Western Europe. So, we have an office in Berlin and we have our own people in the UK. So, we serve that part of the world directly. Actually, we've had a distributor in Australia but we've decided to go direct there. We've got a couple of people there who service our clients very well. So, we're direct in Australia. Everywhere else, we sell through distributors. So, these are typically distributors of scientific equipment, but it can range from consumables like latex gloves and test tubes to very complex equipment like ours. In some cases, they've small organizations, maybe they represent 10 or 15 companies, and other cases they represent 100 or 150 principles. It really depends on the location. So, we've got a different model. But for a relatively small company, we sell in five currencies; we export all over the world. We're dealing with issues of tariff, of different regulatory environments, all the shipping challenges that come with. So, we have a big company issues despite our size.

David: How on earth does the shipping work, by the way?

Steve: Well, it's pretty much as you would expect. I mean you build something, a truck pulls up, it takes it to a port or puts in on a train, or it takes it…

David: Are all the chambers you're building manufactured here in Winnipeg?

Steve: Right. I see where you're going. So, it depends on the equipment. So, the reach-ins that we talked about are built, tested and crated as a complete unit. Occasionally, they're in two pieces. We also have a line of entry-level reach-in chambers that we have made in China and those will go to our various warehouses either in Australia for the Australasia region, Germany for Europe, or Winnipeg for pretty much anywhere else.

But the larger projects, the rooms, etc. we build all the subassemblies here. We'll often set up one room. If maybe there's a project, it's got five rooms, we'll set up one because we have very thorough testing here. We do both design validation, so we want to validate the actual performance of the chamber to make sure it meets specification. And then we do functional testing where we put power to all of the components, and make sure that things turn on and off the way they're supposed to, that the control panels are working the way they're supposed to.

So then, those subassemblies will get crated and shipped wherever they go in the world. And sometimes you can have six, seven, eight trailer loads, depending on the project. And then we have installation crews that can range from three people to six or seven people, and they are our road warriors. They travel all over the world. And they put everything together, and do the testing, and commissioning, and turnover. So, they can be on a site for sometimes a few months. And in a way, it's a hard life but the people who do it are great at it, they love it and get to see the world.

David: No kidding. That's pretty neat, being like a deployed engineer.

Steve: Yeah, exactly. And we also tried to get some of our shop people on those crews, because one of the things we've come to realize is that when people are building things in the shop, they rarely get a chance to see the whole thing put together on a site and how it's being used. And it's great experience for people to go out, actually interact with clients and with the sites, understand even a little bit of research that will be done in the equipment, and then to bring that experience back into the shop. It's a great teaching tool, and it's a great way for us to help people who might not otherwise get to see other parts of the world to travel a little bit. I think it's sort of a win-win.

David: In light of that, circling back to what you said earlier about the importance of HR, how on earth do you recruit specialized people that you need to work here?

Steve: Well, we don't find people who are experienced plant growth chamber designers or builders. That's a fact.

David: That's a little too niche for what you're looking for?

Steve: Yeah. But we have a lot of different types of expertise. So, on the shop floor, we want people…there're people with electrical expertise, there're people with refrigeration expertise, there are people who can work CNC equipment and sheet-metal specialists, and then there're a lot of introductory positions that we've got a very extensive training program here. And so we bring them along. The toughest positions tend to be the engineering positions. It's just a tough market. We work with the universities and the colleges to try to get the people we can get. But there's always a time… it takes time from the time we bring someone in to the time that they have the confidence, I guess, and the knowledge to really on their own design the different elements of the chamber. So, we work a lot in teams and we've got great people, but it's a lot of on-the-job training.

David: Right. What does the training program look like? How do you coordinate all the training that needs to happen?

Steve: Well, we realized a few years ago that technical training is not enough. So, getting someone to understand, doing some couple hours of welding, training, or sending people to take some class, some refrigeration classes or the apprenticeship program is certainly important. But there's a lot of elements that go into training. I'm a big believer that the best way to find capacity in a business is to extract it from the people you have through training.

So, we started Conviron College a few years ago, which is a program that has different curriculum for different employees. So, if you're a management employee, we've got courses on how to lead, how to prepare a budget, how to deal with stressful environment. We've got all kinds of healthy living classes, all kinds of things that really everyone can benefit from.

David: Where does that course content come from, by the way?

Steve: Well, we use an external resource to help us develop it. And we bring in external resources to help us teach the courses, depending on the course. So, we budget a minimum of 20 hours of training per employee per year. That can be much higher but we never want to go lower than that. So, it is a commitment to take people out. That's roughly the equivalent of three full days of training. They may not do it all once, it may be half a day on a certain course. We take safety and health very seriously here, so there's always training. We had forklift training not long ago, all those kinds of things go on. We're spending a lot of time on our training curriculum.

David: I see. How does it work to manage a team of people that are spread out, like you said, you've got four locations now? I imagine that's a little bit different than if you've got everyone in one office somewhere.

Steve: Yeah. And it changed significantly for us a couple years because we acquired a business in BC, a controls business, Argus Control. So, I think we're at about 45 employees out there. So, we've got a good manager managing the facility. Our chief operating officer schedules regular weekly phone meetings with all of our leaders of all of the different offices. On the sales side, we've got, again, good management. For example, the North American sales manager is based here. And she is in regular contact with her sales force in the US. We'll do annual sales training where everyone will come together on a site and we'll do some training. All of our quotes are generated from here, from head office. Our project managers are largely based here, although we have a project manager based in Europe as well.

Certainly, today's tools have made it a lot easier to communicate. There is nothing like in person communications. So, we make a point of traveling and having them come here. But it's not easy, and I would say that one of the things that we have to keep reminding ourselves is that sometimes you take for granted being in the head office that everyone knows what's going on. And you have to make a point of communicating regularly and updating the people who are in remote offices what's going on because you can quickly forget that they don't have the same perspective that you have. So, it's work.

David: In terms of making sure that you communicate properly with the offices, is it just a question of sending off a few emails or do you have some systems in place to make sure that they're in loop?

Steve: Oh, yeah. We have all kinds of systems, from ERP and CRM systems where there're entering data so that we have history of all calls and everything with clients. So, we're in the loop in that sense. A day doesn't go by that our team here isn't speaking on the phone with people in other offices. On a softer side, we've got newsletters and things that get distributed. So, there're a lot of touch points with our people in other offices. We meet, myself included, quarterly. We'll have conference calls with our salespeople, if they're here in person but otherwise on a call, where we'll go through on last quarter what have they seen, what have they picked up from maybe a competitive standpoint, what are the big leads, what can we be doing here in head office to improve the odds of getting some projects that we're working on. So, we try to really…which imposes a bit of accountability on them as well. So, it works well but it's something you always have to work on, that communication is always something we have to work on.

David: I'll pose this as two questions in one. What are the challenges and the opportunities on the horizon for Conviron?

Steve: Well, I would say that we're growing. Our challenges are sort of…we can always improve our operations in terms of the way we move things through our supply chain. We have some bottlenecks in our organization that we're continuing to work out. There're things that worked when we were a small company. That is you get bigger, and there's just a higher volume of work orders going through that don't work as you get bigger.

Informal, I remember being in meetings where the head of purchasing would say, “Yeah. Those bulbs came in on Thursday, we're good to go.” Well, today you just have no way of knowing what's coming in because there's just such a high volume. So, it does require more systems and more processes which can be interpreted initially as taking away the some of the relaxed nature of the business. But just by necessity, you have to get a little more rigid in your processes and systems. So, I'll call it a challenge.

We're making progress. We have some really good people who are working on those things. The opportunities are…as I said, the profile for our equipment has increased significantly just because of the challenges in world that we're facing. So, where agricultural research may have been third or fourth on a country's list of priorities, you go to China or India or places like that, it's way up there now. They know that if they can't feed their people, they're in serious trouble. So, the pie for us, even though we're in a niche market, is growing.

The other opportunities really, I think, are on the production side where equipment is being used increasingly for high-value production. We know about medical cannabis as an example. But on phytopharmaceutical side, we've got clients that are producing vaccines in plants. So, there're all kinds of other opportunities that we're paying very close attention to that we're involved in. So, it's exciting in that respect. Plants are being used for so many things beyond just food: textiles, energy, medicines, and we think are our equipment has an application throughout.

David: Yeah, no kidding. Interesting. We're coming up on time here and I don't want to overrun it, but there's one question that I'm going to finish with. And I finish almost all the interviews with this question. Are there any people that either you've known in your life or that you've observed from afar who have influenced your approach to life and to business?

Steve: Yeah, there are. I'm not sure for me to start naming names. I don't know if I'll do that because I would miss on some. But I'll answer it this way, one person I will name is my father. Certainly, my dad has been a constant source of support, as a father, but also as a businessman. I'd say he's a conservative guy by nature but a true entrepreneur and a very responsible, conscientious entrepreneur. But more than anything, my dad has a moral compass and respect for people, his employees, and others. And I think I've been able to learn from him. So, he's been a huge influence, and my mum as well. My mum's been my dad's partner in every sense of the word. In terms of other mentors, I would say I have a number who've taught me things that are not necessarily business per se. I think someone in particular who taught me that, “Never take yourself too seriously. At the end of the day, business should be fun. And if you're having fun, it's likely that your team is having fun, which means that they'll perform better. So, recognizing your own weaknesses and filling in the gaps with other people is something that I think you've always got to do.”

And others, the importance of listening. I think listening is a bit of a lost art. It's something that I have to keep reminding myself of, but listening is so critical. We all know the people who when you're saying something, you get the feeling like they're just preparing for what they're going to say next. But I learn so much from so many people and admire so many people, which is why I can't start giving names.

There're a lot of great businesspeople in this city, in this province, really good people, and I think one of the things that binds everyone is love of community, respect for others, and are willing to cooperate and share their experiences. So, I benefited from that and I hope I can do that for other people as well.

David: That's a really good perspective to keep in mind, just the approach of always trying to give back to the community, which you've done today. Thanks so much for your time.

Steve: Thank you. Thanks for having me.

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