It wasn’t long ago—less than 10 years—that Norsat International Inc., a B.C. tech firm, was floundering. Established in 1977, the company had bet the farm on a single client: the U.S. military. But a deal to supply custom-made communications equipment fell through, and Norsat—which manufactures portable modules that allow users to send and receive data, audio and video from remote locations using satellite signals—found itself facing steep losses.
At the time, the company was generating about $13 million a year in revenue. So when veteran Norsat engineer Amiee Chan stepped in as CEO in 2006, she knew that geographic diversification would be key not simply to the company’s growth, but its very survival. In the seven years since, Chan focused on broadening the company’s reach well beyond its traditional military customers.
For instance, while most people assume that relief agencies hustle to provide food, water and medical supplies to areas in crisis, Chan realized that communications equipment actually tops the priority list because aide workers need to relay messages out to the world in order to do their humanitarian work.
Norsat, Chan says, supplied the communications equipment to local and international TV crews covering the 2010 Chilean mine collapse, allowing them to broadcast from their location high in the mountains. The firm’s products have also been used in a number of disaster zones such as Haiti and Japan during the earthquakes that knocked out their telecommunications networks.
These days, the publicly traded firm—which earned $5 million on $42 million in revenues for fiscal 2012—derives about 95% of its gross revenues from exports. (PROFIT and Chatelaine named Chan one of Canada’s Top Female Entrepreneurs in 2013.) The country’s products can be found in more than 100 countries, and Norsat’s client roster includes 16 national militaries. Chan claims Norsat controls about 85% of the microwave communications equipment market, and ranks among the top tier firms in the mobile land radio sector. Since 2010, the firm’s gross revenues and net earnings have more than doubled due to the acquisition of Sinclair Technologies, an Ontario firm; another acquisition is planned for this year.
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A satellite engineer by training, Chan joined Norsat in 1995 and worked her way up the ladder. When she took over, she told the board of directors and investors that the company needed to make important strategic changes.
First, she said, Norsat had to diversify. They began pursuing “low-hanging fruit” contracts in Europe, as well as with NATO. The company targeted industries like the resource sector and media companies. They also went after markets in developing countries, where the creation of network infrastructure can’t keep up with rural demand for Internet connectivity and wireless service. Many of Norsat’s new customers wanted the firm to customize their equipment and provide translated support materials. “When they asked for something, we were very, very responsive.”
After getting the company back into the black, Chan began to boost investment in R&D.
Lastly, the firm adopted a highly targeted growth strategy—it sought to dominate certain product niches, expand globally in these areas, and then find opportunities to cross-sell its other equipment offerings to the same clients.
As the firm noted in a recent report to shareholders, “we believe customers in challenging environments would benefit from an end-to-end solution provider approach, enabling them to purchase all of their secure communication requirements from a single vendor. Customers could then be confident that all elements would be configured to work well together, and that they would receive comprehensive product support. Norsat, in turn, would benefit from stronger customer relationships, higher sales, and the long-term development of a stable, recurring revenue stream.”
As Chan explains, the niche approach—something every MBA student learns—reflects the company’s recognition that it would not aspire to be a low-cost, high volume supplier. For Norsat, she said, the key to broadening its international presence lay in providing higher value, differentiated products. To that end, the company aggressively recruited engineers, PhDs, and software developers to work in Norsat’s Vancouver and Toronto offices. As the tech teams adapt Norsat’s products to the particular needs of individual clients, those improvements are incorporated for all customers.
Chan recalls how Norsat had a customer in Ireland, an aid organization that was flying into Chad on behalf of NATO as part of a peacekeeping effort. The conditions on the ground were challenging—the airport was little more than a strip of dirt, and pilots were worried about landing safely. The first time the client flew in, they brought with them a bulky package of Norsat equipment. Chan says her engineers worked to make their products smaller and lighter, and thus better suited for such missions. The result: all of Norsat’s equipment is now more compact—perfect for an international market that demands mobility and portability.