The Status Quo Can Be our Biggest Competitor

Steven Koles

President & CEO

Hifi Engineering

Steven Koles has over 20 years of operational and executive experience in technology companies. He has been involved as an executive and corporate director with such organizations as Steeper Energy, Qwick Media, Route 1, Aksys Networks and the Canadian Association of Internet Providers (CAIP). From 2006 to 2012, Mr. Koles was President and CEO of Hemisphere GPS. Under his leadership, Hemisphere GPS achieved numerous awards including the Deloitte Green 15, Alberta Venture Fast 50, ASTech Outstanding Commercial Achievement in Science and Technology, and Branham’s Top 300 Canadian ICT companies. Steven has also served in management positions with AOL / Time Warner Canada, Group Telecom, and TELUS Corporation. He is a graduate from the Faculty of Business at the University of Alberta, and the Executive Management Program at the University of Western Ontario’s Richard Ivey School of Business.
Hifi Engineering provides the most advanced and reliable distributed dynamic sensing system in the world. It builds world-class fiber optic sensing and monitoring technology for wellbores, pipelines and critical infrastructure, which provide energy companies confidence in the performance and safety of their oil and gas assets.


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Takeaways:

 

1- 100% safety is attainable as an oil pipeline industry goal.

2- If we think about Canada as a predominantly natural resource, industrial and very capital intensive economy, which it will be for the foreseeable future, these industries we have talked about are ripe for innovation.

3- While government programs for innovation and entrepreneurship have been historically challenging to navigate, we need to help educate both entrepreneurs and companies about their ability to de-risk innovation challenges.

Action:

 

The necessary paradigm shift in business comes from two sides. On the company side, we need to find more people in big natural resource industries that are willing to challenge the status quo. On the entrepreneur side, we need to be patient, stay committed, and not question our value proposition just based on the first feedback.

 



What do you see as the main barriers to innovation, entrepreneurship and commercialization in Canada today?

 

What is interesting is that the status quo can be our biggest competitor. It is not like we are bidding against some other technology, we are bidding against an attitude of “Look, we already do a good job with the way we do things. We have been doing it for a long time.” And frankly, there is no incentive for some of the big companies – those in the resource industries especially – to challenge that status quo. It is a funny scenario: no one wants to be the first; everyone wants to be the first to be second. You get this perception issue that comes along with that, of what is leading edge versus ‘bleeding edge’ as it relates to technology. It is easy to say, “Well, that is just not proven yet, it is too ‘bleeding’ edge a technology so we will stick to what we have been doing here or what we have,” which could be a 20 or 25-year old process or piece of technology.

“We need to find more people in big natural resource industries that are willing to challenge the status quo.”

The whole notion of “a rising tide raises all boats” can make any company think they are great when they may only be good. We have seen this many times before in a variety of industries: tech and telecom, financial services, agriculture, and oil and gas, too. So my concern is these conditions that generate a complacency and a sense of entitlement. Good conditions may not really be normal, yet we want to believe that they will continue on perpetually. We need to think smarter about this. Smarter approaches can then drive to efficiencies and productivity gains that are ultimately going to trickle down to the bottom line.

The necessary paradigm shift in business comes from two sides. On the company side, we need to find more people in big natural resource industries that are willing to challenge the status quo. They need to ask the tough questions: “Why do we do it this way? Is there not a better way, a better tool, a better approach that allows us to be more effective, more efficient, more productive and ultimately, more competitive?” On the entrepreneur side, we need to be patient, stay committed, and not question our value proposition just based on the first feedback. Entrepreneurs need to be mindful of someone not willing to say yes versus someone outright saying no, because there is a big difference between those two. We need to be flexible with our business models, be easy to do business with and avoid the adage of “we just do not do things like that around here.” We need to prepare to be frustrated and pivot from any losses or learnings that we generate along the way. We also need to profile wins when we do have success and figure out a way to work with these customers.


While pipelines transport large volumes of liquid around the world, there are periodical spills that remind us the technology is not 100% fail proof. Why is it so difficult to manage something as seemingly simple as a pipeline?

 

We consider ourselves a part of the pipeline industry, and as a result, we have learned that the management and monitoring of anything on a distributed basis can be very difficult. Take the analogy of surveilling a highway to prevent anybody from breaking the speed limit at any time at any location along the highway. It is next to impossible. This is the type of challenge we are dealing with.

The industry does a very good job of limiting pipeline incidents. The Canadian Energy Pipeline Association (CEPA) has some great stats on their website: 99.999% of all product carried through Canadian pipelines successfully reaches its destination. What that does say is that “it is not 100%.” Incidents can happen, and when they do, they generate a lot of attention and a lot of memory.

“No one wants to be the first; everyone wants to be the first to be second.”

With that said, we do believe 100% safety is attainable as an industry goal and we can deliver that, in part, through using our technology at Hifi Engineering. At Hifi, we utilize a specialized and fully distributed fiber optic sensing technology called high-fidelity dynamic sensing (HDS), which is very sensitive to acoustics, temperature, vibration and strain. We can use this technology for preventative leak detection in pipelines by determining the exact location and time of an incident. Incidents such as a pipeline leak, an excavator digging too close to a pipeline or a geo-technical event like an earthquake can be identified by HDS. Ultimately, through the distributed properties of our HDS technology, we can sense every centimeter of the pipeline asset. We are using the speed of light 24/7, so we can help solve space and time for pipeline operators, which is a major issue in achieving pipeline safety.


Your organization is a great example of entrepreneurship and innovation, and the success that can be had through difficult times. What do you attribute this to?

 

Number one, we have gone to market with a very turnkey approach. Nobody likes not having the full solution or being nickel-and-dimed to death because they need to purchase additional components like hard drives or a piece of networking equipment. With all that uncertainty, what we do is come to market and explain that we take care of everything. Even if you want us to bring in subcontractors, you just deal with us and we will take care of the rest. We even provide 24/7 technical support, so if your control room has an incident at 2:00am in the morning, you can reach one of our engineers in real time to be able to discuss the data and confirm what they might be seeing.

“We do believe 100% safety is attainable as a [pipeline] industry goal.”

Number two, is we have a flexible business plan. In the past two years in the oil and gas industry, capital budget availability has been at a premium. We have gone to market with a platform as a service (PaaS) business model so we could support an operating budget investment when capital budgets were not available. Our ability to turn this scenario into an operating investment rather than a capital investment has been a major factor in our success.

The third element is focus. We have industry competitors that are chasing everything – railway monitoring, infrastructure monitoring, slope monitoring, wind turbine monitoring, or even virtual security walls. Certainly, there are a vast number of applications that can leverage distributed acoustics, vibration and strain sensed through fiber optic technology. However, we have remained very focused as our product is not vanilla, it is very specialized and therefore very well suited for our focus on pipelines and other sorts of high-fidelity oil and gas applications.


Do you believe Canadian governments, both federal and provincial, are supporting the transition of the oil and gas industry enough, and supporting Canadian innovation in general?

 

We have seen great programs come out of both the Federal and Provincial governments that support new innovations and help de-risk those innovations or industries that are known to be more conservative and safe. For example, we recently announced a program with Alberta Innovates called the Alberta Small Business Innovation and Research Initiative (ASBIRI). It is a partnership with industry to help test new innovations and enhancement technologies into real world deployment platforms.

“While they have been historically challenging to navigate, we need to help educate both entrepreneurs and companies about the existence of the government programs and their ability to de-risk innovation challenges.”

Some deployments that we will be working on with both Enbridge and TransCanada are part of that program. It helps stimulate entrepreneurs and companies like Hifi Engineering to continue providing enhancements and innovations that are required for more mission critical applications, such as pipeline safety. So I do think those programs are out there. While they have been historically challenging to navigate, we need to help educate both entrepreneurs and companies about the existence of these government programs and their ability to de-risk innovation challenges.


How do you envision the future of Canada’s economy and its key industries?

 

If we think about Canada as a predominantly natural resource, industrial and very capital intensive economy, which it will be for the foreseeable future, these industries we have talked about are ripe for innovation. There are opportunities for driving more efficiency and productivity out of capital and operating investments, and ultimately more competitiveness. With that, I think we should expect many opportunities are going to emerge from challenging the status quo through innovation – whether that is in technology, human, or process innovation. I suspect we will see the larger businesses from these industries becoming better and better at embracing change. They will have to if they are going to remain healthy and competitive.

“Many opportunities are going to emerge from challenging the status quo through innovation – whether that is in technology, human, or process innovation.”

So we assume that change is coming. It may take longer than we want or hope, but entrepreneurs should be prepared to pursue these innovation-based opportunities. We need to learn from big, capital-intensive natural resource industries where we are ripe for boom and bust cycles. We also need to think about more cultural strategies that focus on how we can be more efficient, productive and competitive. Canada has the great intellectual and executive talent to pursue these future challenges. Just like Hifi is pursuing pipeline safety, our nation has great opportunities to generate some ‘made in Canada’ solutions to our very relevant Canadian problems.

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