Iridian Spectral Technologies Ltd.
LOCATION: Ottawa
WHAT IT DOES: Manufactures optical filters
PRESIDENT: George Laframboise

OF TURNING ON DIMES AND WATCHING ALL PENNIES

For a growing player in 3D cinema, selling abroad requires being prepared for the trappings of success

The next time you head to the cinema for a 3D blockbuster, it’s possible the action will be brought to you in part by Iridian Spectral Technologies Ltd. The Ottawa-based firm has done brisk business making optical filters for the telecommunications and biomedical industries since 1998, but the firm has almost tripled its annual revenue over the past two years due primarily to its more recent foray into 3D cinema technology. And one more thing: Iridian’s ability to win the trust of the highly demanding foreign firms that were responsible for more than 99% of the company’s $17.4 million in sales in the year ending June 30, 2010.

Looking beyond Canada’s borders was necessary from the outset simply to secure Iridian’s survival, says president George Laframboise. “There is not much of an optical industry in Canada,” he says. Since the decline of the telecom industry in 2000, Laframboise says, more and more telecommunications manufacturing—for which Iridian produces components—has moved to U.S.-owned plants in Asia. This trend has pushed Iridian to export its technology, not only to American fibre-optic cable makers operating in China but, increasingly, to the Chinese-owned firms that have sprung up over the past decade.

Iridian’s export and growth strategies have always been inextricably linked, being based on identifying hot new markets for its technology, such as 3D entertainment. Today, half of Iridian’s revenue comes from 3D glasses and projector parts for a U.S. company that distributes the products to theatres around the world.

But, as any Hollywood starlet can tell you, getting into show business isn’t easy. “We went from showing samples to having to produce hundreds of thousands of 3D glasses within a few months,” says Laframboise. This required Iridian to call in favours to source manufacturing equipment and large quantities of input materials on short notice. Having good relationships with those in your supply chain is essential before tapping high-growth export markets, because “you have to be prepared to ramp up quickly,” advises Laframboise.

You must also prove to prospective new clients that you can scale up—which Iridian does by presenting customer case studies and testimonials. For instance, Iridian is the top choice of Thermo Fisher Scientific, a producer of lab equipment. “Our business is unpredictable and driven by large orders,” says Daniel Lydon, supply chain manager at the Walt­ham, Mass.-based company. “Iridian’s ability to work with its own supply chain to accommodate that is a huge differentiator.”

As much as any company wants export success, it often comes with such growing pains as cash-flow crunches. Iridian has suffered some of its sharper pangs in China, where payment terms adopt a nebulous aura. (China accounts for 19% of the firm’s exports.) Laframboise says that when he first started doing business in the Middle Kingdom, he was puzzled as to why his customers would agree to 30-day payment terms but often not come up with the money until months later. In the case of one client with a $300,000 order, Laframboise says, Iridian “had to understand why they weren’t paying us, and work with them to come up with a solution.” The customer turned out to be doubling its production to meet higher than expected demand, prompting Iridian to quadruple its standard payment terms to 120 days—a painful but ultimately profitable move, as the customer later rewarded the firm with “huge amounts” of new business.

Iridian has learned how to guard against cash crunches over its years of activity in the Chinese market. Laframboise says his firm carefully budgets for and manages its expenses to build cash reserves that ameliorate the effects of long payment delays. While he has seen other Canadian suppliers deal with long-outstanding invoices by halting delivery of current orders, Laframboise warns this approach should be a last resort, suggesting that flexibility, patience and communication are important to growing in the Far East: “If you’re too rigid, you can quickly kill the business.”

Iridian’s senior management and sales teams schedule in-person visits to foreign customers at least annually to help build trust and understanding. Meanwhile, Iridian’s technical staff schedules face-to-face meetings on an as-needed basis. The payoff? Clients, especially the ones who require looser payment terms, become repeat customers. “By working with them to help them overcome their challenges,” says Laframboise, “you establish a high degree of trust, and often get first kick at the can on other opportunities.”

Although modern 3D film technology is still in its infancy, Iridian already has its sights set on other opportunities, such as defence and environmental applications for its optical filters. But Laframboise knows that capturing them will take time: “We’re not yet known in these fields. We have to convince these customers to trust us.”