A war-time effort: How Montreal’s CAE pivoted from aerospace to ventilators … in 11 days

Transcript:

Marc Parent:

In every war, industry has always played a key part as a partner to the government in fighting the fight, and this one was no different. And we said, “we can contribute. Industry can put our resources, our facilities to help the government to accelerate the vaccination effort.”

Goldy Hyder:

Welcome to Speaking of Business. I’m Goldy Hyder, President and CEO of the Business Council of Canada. Over the past year, we’ve all learned how to adapt to changing circumstances. For some, it’s involved working from home. In some cases, it’s meant moving businesses to online marketplaces, but for others, the COVID-19 pandemic has led to a significant pivot.

Goldy Hyder:

Take for example, Montreal based CAE. The technology company is known around the world for its digital training tools and services in civil aviation, defense, security, and healthcare. When the Federal government called on businesses to help in the fight against COVID-19, CAE answered the call. It developed a ventilator prototype in 11 days and started manufacturing it soon thereafter.

Goldy Hyder:

It created online training to teach healthcare workers how to protect themselves from infection. It started manufacturing air sanitizers for use in healthcare settings, workplaces and schools. And it did all of this at a time when CAE’s core industry, the aerospace sector, suffered significant financial losses due to the pandemic.

Goldy Hyder:

Now, CAE has pivoted again, opening Quebec’s first workplace vaccine center. They expect to vaccinate 50,000 people by August. Talk about a wartime effort. So how did they do it? To talk about how CAE managed through a year of change, I’m joined by Marc Parent, President and CEO of CAE. Welcome to the podcast Marc.

Marc Parent:

Happy to be here Goldy.

Goldy Hyder:

Now, you and I are speaking at the end of April, and earlier this week, CAE opened the first workplace vaccination center in Quebec. How’s that going?

Marc Parent:

It’s going swimmingly. I’m so proud and I can tell you, our employees are so proud. It’s really given a real fantastic shot of pride for everyone. It’s like a, pardon the pun, a real shot in the arm for everybody. We’re vaccinating our employees and their families, as well as those of our partner companies that are helping us here at CAE, as well as the… we’ll be doing the surrounding community.

Marc Parent:

So look, everyone’s involved. And to me what’s exciting about this is that everybody wants to contribute in some way, in this fight against the crisis. And now what we’re doing here is allowing more people to get involved. And I can’t tell you how proud I am of the reaction that we’re seeing. We’re making a difference.

Goldy Hyder:

Well, it’s interesting you say that because the #inthistogether, I hear a lot from people to say, “What can I do to help?” And I think it’s great that you and CAE have stepped up the way that you have. I’m assuming though, knowing how Canada works, this would have taken a lot of effort on your part. You would have had to have collaborated and coordinated with governments and other businesses. How did you manage to get that done?

Marc Parent:

Well, look, as you say, it’s not without its challenges, but overall, I’m very happy about what we’ve been able to achieve. And I think at the outset, and of course, you know that this is not about CAE. We started… actually, I started back in the… you and I had calls around Christmas time, where based on the experience that we saw in the United States, which of course led the effort overall, at least here in North America on the vaccination, there were some clear lessons learned there.

Marc Parent:

And based on those lessons learned, I made some calls and letters that again, you were part of it, to governments saying, “We, the private sector need to help you in this fight.” In every war, and this is a biological war as we know it, in every war, industry has always played a key part as a partner to the government in fighting the fight.

Marc Parent:

And this one was no different. And we said, “We can contribute. Industry can put our resources, our facilities to help the government to accelerate the vaccination effort.” And we’ve been working on that since December, and personally, before I did that, I contacted many business leaders in Quebec, and literally across Canada to see if they’d be interested in contributing to the vaccination effort.

Marc Parent:

And everybody said, “Absolutely, absolutely. We’ll contribute our resources, our facilities, and we will do it free. We’ll offer it because it’s the right thing to do. And if we can help make people safe quicker and restart our economy,” everybody said, “Mark us down.” So we’ve been having these discussions with the government ever since then. And I could talk about how we did it, but look, I’ll stop there. I’m just telling you, overall, it’s working pretty well, particularly here in Quebec where it’s actually one of the key ways that the vaccination effort is occurring i.e through private companies like ourselves.

Goldy Hyder:

I listen to you and I know you’re an eternal optimist and you’ve painted a good picture, but I know it was difficult. And I want to dig down into that to say, why do you think it’s gotten to a place where that relationship between governments and business, the industry sector, it seems to be more separate or adversarial than perhaps in the old days. What do you think is behind that?

Marc Parent:

I don’t know. To me, it’s necessity is the mother of invention, as we always say.

Goldy Hyder:

Mm-hmm (affirmative).

Marc Parent:

And look, this is the mother of all crises, as we know. So it requires us to do things differently, both in government, both in industry. And these things are never easy, and the timeframe that we’re doing them in is very, very tight. So yeah, it hasn’t been easy everywhere, but it’s always inevitable. And I personally have been impressed with the way that the government has responded. We can always criticize all kinds of things, and sure we can, but let me say that I’ll never be one to throw the first stone.

Marc Parent:

So look, you look at how programs are put together, not with perfect information, but sometimes we criticize actions for not occurring because we wait for perfect information. But if I look overall, we now are in a period of time where vaccination doses are going to come in, in millions of doses a month. Now is the time where we need to have the network.

Marc Parent:

As Prime Minister Trudeau quoted when I talked to him about the effort, he said, “Wow, what a great idea, opening up all kinds of different spigots all around. Industry, companies vaccinating our employees, vaccinating our families.” We will be able to distribute those doses in parallel to the effort from the public safety, and that will get Canadians vaccinated faster. And for all our benefit, obviously from a health standpoint, not only for people affected with COVID, but people that are being left without care or critical illnesses, that because our hospitals are full. And at the same time, of course, restarting our economy, which is what we actually need to do. We certainly can’t take that for granted.

Goldy Hyder:

Well, it’s interesting that the point you made about your conversation with the Prime Minister. In some ways, if you look back at the last 13 months, really, the government has reached out to industry when it had a problem to solve. And early out of the gate, a significant problem was the issue of ventilators. How did you decide, “You know what, I want to be a problem solver, I want to get this done?”

Marc Parent:

It started by… I was looking on TV, as we all were back last March. And you could see these horrifying situations like in Italy. I remember it vividly on the five o’clock news, where you see these doctors pleading, pleading for support and telling us to, “Be prepared, be prepared. This is coming your way.” And they were making the life and death choices based on the access to critical equipment, specifically ventilators.

Marc Parent:

So when we looked at that, we were looking how to get involved? How do we participate in this fight against COVID? And through actually suggestions of employees, a number of employees actually said, “Hey, we think we can do that. We think we could manufacture, not only manufacture, but develop a ventilator that could save lives from scratch based on our CAE healthcare business, where we had the subject matter expertise on things like intubation.” But also, with the unique core competencies of CAE, system engineering, electronics, electrics, a global supply chain’s ability to source parts, and our unique manufacturing capabilities where we are vertically integrated says, “Hey, we think we can do this.” And we developed a prototype literally in 11 days.

Goldy Hyder:

That’s amazing.

Marc Parent:

And within a month, we were demonstrating it to a panel of… I remember 33 experts at Health Canada. Literally, I think we blew them away because not a week later, as you well know, there was an announcement that morning in the briefing by the Prime Minister that we were one of the companies that were given a contract to deliver ventilators to the Federal government, to PHAC, Public Health Association of Canada or Agency of Canada.

Marc Parent:

And we delivered 8,200 ventilators. I’ll bet, some of those are going towards the effort in India. So I’m very, very proud of what we were able to do and what our employees were able to do.

Goldy Hyder:

Look, I’ve seen not just you in action, but as you mentioned, we’ve had a chance to work with some of your colleagues to help bring this about. And so much of this is about knowing the capabilities and strengths of your team. You mentioned suggestions from employees, for example. Tell me more about that, how did you create a culture at CAE that allows for the creativity and the capacity, and the desire to want to do what you were able to do through this crisis?

Marc Parent:

Well, I think it starts with our values. Our values at CAE, the first and foremost value, the most important one is we talk about one CAE. That’s one company, everyone in the company, no matter where you are, no matter which division you are, no matter which geography you are, because we are a global company, we are totally aligned with the same overall objectives. And everybody contributes together, towards the success of the company, and the success in the ultimate judge of success in business, your ability to delight your customers.

Marc Parent:

And that’s what we do. And we applied that to what we do here. We ask employees all the time for their input and we call that open innovation. We put people together and we create Shark Tank exercises, where people literally have a live TV show where people sell their ideas and we judge them. We actually incorporate their ideas into our products and services. That generates a huge flow of ideas and input from our employees. Not only our employees, actually, our customers, our suppliers, as well as our other partners.

Marc Parent:

So the system allows us to capture and flesh out ideas in a collaborative way, and leading to meet sustained innovation and leading to ideas like develop.

Goldy Hyder:

It’s so great to see that culture that you speak about, because I wonder whether that can be transformed into the Canadian culture. You and I have talked a lot about our desire to see Canada be much more competitive in the world. What do you think we need to do to help Canada seize the moment about this innovation that we’re doing?

Goldy Hyder:

We’ve talked about in our Business Council budget letter, for example, trying to be very deliberate and intentional in having a robust innovation policy, something like we heard President Biden speak to at Congress when he did his a 100-day State of the Union address, if you will. Do we compete well as Canadians, or have we had it easy Marc?

Marc Parent:

Well, I don’t know that we’ve had it easy. I don’t think anybody’s throwing any easy soft ball our way. I could tell you that as a company, of course, I’ll talk about our own company, but we compete every day in an open playing field around the world. We’re actually the only real pure play in our business. So we compete with giants and not only in our markets here in Canada, which actually, Canada is only about 10% of our market because we’re a very big exporter.

Marc Parent:

So we compete in every continent. We compete against giants, world wide we’re held as a public company. So we don’t have any, if you like, big brother protecting us. So we win and lose every day. We mostly win based on the investments that we make, both in technology, both in human resources. So to me, like I said, I won’t talk too much about other companies, but at CAE, the recipe that we have pays off, and we apply innovation on a sustained basis for different sectors across, civil aviation, defense, and healthcare.

Marc Parent:

And I would think that if you ask the question as you are, overall to Canada, I think as you know, Canada’s business expenditure on R&D as a share of GDP are way below that of countries like the United States, and actually well below OECD companies. I know you’re an expert at that and actually, that’s been falling since 2001.

Marc Parent:

So I think that’s an area clearly that we have to invest in. And at CAE, we do that in earnest. Exact number, I think we’ve consistently invested in innovation at the rate of one point seven billion dollars in R&D over the past 10 years. We’ve had the governments of Quebec and Canada as partners, and that’s key. That’s key for us and I think that’s going to be key for the future for Canada as a whole. I am very optimistic about Canada, as we have in Canada

Marc Parent:

to me, the ingredients for us to succeed. We have the talent, we have the knowledge hubs, we have the institutions for higher education. Maybe sometimes the climate’s a bit tough depending on where we are, but it’s a great place to live. People want to come to Canada and I think that’s a great asset, but sometimes I think the frustration I would have sometimes, I tell this to people all the time in government. I say, we have to continue to remember that our prosperity in Canada is not our God given right.

Marc Parent:

We have to continue to invest in innovation and we have to… For government, they have to continue to do what they need to do, which is to create the environment for the country to succeed, for companies to succeed just like what we do. When you’re talking about the culture at CAE, we invest in creating this culture where innovation can occur, where collaboration can occur. I think the trick is how do we do this as a country?

Marc Parent:

We managed to do it. So going back to the example we talked about vaccination and ventilator. At the time of extreme crisis, we were able to do it. Yes, it wasn’t easy, but we got it done and we’re getting it done. I think we’ve got to remember those lessons and transport them in a time where we’re not necessarily in a crisis. And perhaps we have to create what… I always use two dictums that I would say is that, first of all this one, look, a crisis is a terrible thing to waste.

Marc Parent:

And this is a terrible crisis obviously, but we use it at CAE to make sure that we use the opportunity to take the lessons and become better. As a country, I think we need to do the same thing. We need to take the lessons out of this crisis and take them to the next level, and create an environment where we don’t have to wait for a crisis to do great things.

Goldy Hyder:

Mm-hmm (affirmative) I want to pivot to a couple of other topics here. One is leadership itself. You’re an engineer by training and engineers are designed to solve problems, and leaders are also problem solvers. With everything going on, you had to contain, obviously that you had to respond to what was taking place with COVID. You had to pivot your employees to work from home. Your aerospace vertical is in total decline here. You had to pivot your health units and others to start doing the innovation that you spoke about.

Goldy Hyder:

And you did a big acquisition in the United States. All of these things were going on. What is it that you can say about yourself as a leader that allowed you to do these things?

Marc Parent:

Well, maybe I’ll just correct one thing. You said we did one acquisition, which is true. One acquisition in the United States, actually the largest one in our history. We actually, this is the fifth one we’ve announced in a row, fifth one in five months. And so, especially to me, noteworthy because as you were saying, when we started back in March, 80% of our profit of the company came from civil aviation.

Marc Parent:

And as you said, from one day to the next, 95% of civil airliners are grounded. So you can imagine for us, it was cataclysmic. And from one day to the next, we had to move 10,000 employees to work from home. The one business that we have in civil aviation that’s a bit recurrent, it’s training. Training is an essential service because it’s regulatory, but still, the utilization, our training centers dropped from about 70% to 80% in utilization. So with the occupancy in our training centers suddenly went down from 70%-80% to 20%, because even though training is essential, you have to be able to get there. If the borders are closed and everything is shut down, well, obviously that is a bit of a problem.

Marc Parent:

So for us, we had to adapt very quickly. So we did… Well, everybody did. We managed our costs. We extended our credit lines. We did everything, what we had to do, but very quickly, we turned our eyes to, “Okay. Well, when is civil aviation going to come back? Well, it will come back. There’s no doubt that it will come back. I’m very optimistic about that. To me, there’s no chance here that people are going to suddenly decide that they don’t want to travel.

Marc Parent:

It might change in some ways, maybe business aircraft. But I think all of us are a little bit tired of doing this video thing. And I don’t think we’ll ever take for granted our ability to freely travel, travel the world, travel to see our loved ones. That’s not lost on people. So I think civil aviation should come back. But going back to leadership. To me, it’s about saying, “Okay, what do we do now? What do leaders do?”

Marc Parent:

Leaders always pick a direction. At my level, it’s called the vision, vision flows down to priorities at group levels, civil aviation and our defence sector. And it flows down to every single individual, and that to me is very, very important. So we looked at this, said, “Hey, civil aviation is not going to come back. Let’s not be Pollyanna here. Civil aviation is going to take a while.” Pick IATA, their forecast, maybe four years, five years before it really comes back to the same level.

Marc Parent:

So are we going to sit around and wait for the market to come back? No, we’re not about to do that. We have people’s livelihoods at stake. We have all of stakeholders, our shareholders. We could possibly be excused to say, “Hey, look at this crisis. How can we absolutely deal with this?” Well, we said, “Hey, no, this is going to take a while, but what do we do in the interim?”

Marc Parent:

And it comes back to looking, and again, we did this together in communication with our employees, looking for suggestions and taking inventory of what do we do well at CAE? What are our… What your people call our core competencies? And when we reflect on what we are really good at, no surprise, it’s reflected on what allows us to not only manufacture, but develop from scratch of critical care ventilators when we have never done medical equipment in our history, and do that in a matter of a couple of months, and build 8,200 of them. Well, we’ve never done that before.

Marc Parent:

Okay. What’s going to change in COVID, but post COVID? What will be the industries and the sectors that will be driven? And no surprise, we come to things like everything is digital. And what do we do? Training, training becomes even more vital. Future training is digital. So for us, the fact that we’ve been investing for years in digital, gave us the opportunity to be able to pivot and change the vision and the mission of the company towards what was only purely a training vision to a high technology vision, where we basically aspire.

Marc Parent:

And then when I say aspire, because to me, a vision is always, what do you want to be when you grow up? To be an expert in creating immersive environments, using technology, using big data, using artificial intelligence, all the things we excel at and say, “Okay, let’s focus on that while our markets are coming back.”

Marc Parent:

And when we do that, but what does it do? It yields a future where we have basically sown the seed by five different acquisitions in this past five months, literally. And again, finally, going back to leadership, we set a new vision and we made sure that every single employee in the company knows his or her role in achieving that vision on a day-to-day basis. Because I think people want to make a difference in their lives.

Marc Parent:

When they come to work, they want to know that what they do is important. If you could harness that as a leader, and everybody is a leader, anybody in management is a leader. If you can make sure by communicating the priorities of the company, making them personal and touching people on the shoulder and saying, “You John, you Mary, you contribute to the success of this company, to making people safe because that’s what at the heart of what we do everywhere in our business.”

Marc Parent:

That’s what you do. You give them that and you give them the feedback, focused feedback. And most importantly, you get out of the way because when you do that, people always achieve more.

Goldy Hyder:

I’m so glad I asked that question because so many of our listeners Marc are aspiring leaders, are current leaders, or many of them are in school doing their MBAs or others. And if they listen to this one answer alone, I think they’ve got a prototype of what it takes to get to being a really successful leader. And I’m so glad that you shared that in depth as you did.

Goldy Hyder:

Look, I made a list of all the things that you had to do and congratulations on all those acquisitions. I know how hard those are to do, but on top of all of that, there’s one other thing that has been occupying the minds of business leaders. And I just want to end with that if I can. And that is the issue of… Because as you said, this crisis is going to end. It’s going to end, but there’s a crisis that isn’t going to end in the near term. And that is the climate crisis. And you effectively in September announced that you had reached carbon neutrality. So congratulations on that. How did you do it?

Marc Parent:

Well, it started with setting a goal to do that. I can tell you how it occurred. Of course, like you, I’m sure I have three children and I want the future of their world to be bright. And I think this is an issue of our time. So I was coming home from work just before COVID obviously, and near my house I was getting stuck in traffic just literally because of hundreds of thousands of marchers of all ages going through the streets of Montreal on the whole climate change marches that we had.

Marc Parent:

And I looked at that and I said… We were already doing a lot of things, but I immediately got on my cell phone and I actually wrote an email to every one of my leaders. I said, “Hey, we’re doing a lot. Let’s do more. Let’s go ask questions, ask input from our employees. And I want a list of stuff we can do. Let’s get back together next week.”

Marc Parent:

So we did that and we found that the most single important thing that we could do is set a goal to become carbon neutral. It was easier for us to a certain extent because we’re not a great pollution emitter, but nevertheless, we thought that we could set that goal and we could have an immediate impact. And that’s what I would tell other companies; set the goal. And when you do it, you’re going to have an immediate impact with your employees, with all your stakeholders and stick to that, and make it happen.

Marc Parent:

And for us, I committed that we would be carbon neutral last summer. And I don’t need to tell you, obviously we are within COVID. We had a lot of our things, our minds, including basically make sure the company gets through COVID unscathed, but we made it a priority and we stuck to it, and we’ve made it happen.

Marc Parent:

And I can tell you how great a source of pride it is for everyone at CAE. And it shows that we care about the environment. And I can tell you, I gave a little speech answering questions from children of our employees. I’m sure you can imagine how much that contributes to employee engagement when they see something like that.

Goldy Hyder:

Those are the tougher questions from the kids I bet.

Marc Parent:

Absolutely. Yeah, absolutely. And we did it. Look, it’s real. For us, even though, as I mentioned, we’re not at the top of the list of polluters from emissions, but for what emissions we do emit, first of all, we contribute, take measures to reduce our overall emissions around the globe, I just need to tell you. And we found ways to reduce the fuel use for our training flights because we’re known for simulators, but actually we have a fleet of training aircraft.

Marc Parent:

We have over 250 training aircraft around the world, and I made a commitment that over the next five years, even though we don’t have all the answers right now, I want at least half of our training fleet of aircraft converted to hybrid or electric power. That’s a goal that is set and I can tell you, our R&D teams are working hard on that.

Marc Parent:

And at the same time, we can’t reduce our emissions to zero. So we’ve invested in carbon offsets, renewable energy certificates, all the countries where we operate, to offset the use of electricity that we have that’s not renewable. And when I talk about specific carbon offset projects, just to give you a couple, we invested in wind energy projects in India, and actually forest conservation projects in Western Canada.

Marc Parent:

So it’s tangible and we’re making it happen and I’m confident. And going to, again, your question that through the offsets that we invest in, there will be innovation and I’m an optimist on innovation. Innovation and that money that is put in focusing on renewable energy, on capturing the carbon, all these things to me are going to be the answer. We don’t know the answer right now, but for a lot of things, we didn’t know the answer just a few years ago. And that’s the answer, it’s innovation.

Goldy Hyder:

It turns out you did know the answer to my final question, because you’ve just answered it. I was going to ask you what makes you the most optimistic about the future? But it sounds like it’s innovation.

Marc Parent:

Well, absolutely. And constantly reinventing ourselves. And one of the things I wrote in my letter to investors last July is that I entitled it tough times requires new thinking. And new thinking, new innovation, that’s what we have. That’s always the way forward.

Goldy Hyder:

Great note to end on Marc. I really appreciate you doing this. Thanks so much for sharing what really is a rich insights on how not just to manage the crisis, but how to be a leader. Thank you for doing this.

Marc Parent:

Thank you Goldy. It’s a pleasure.

Goldy Hyder:

Marc Parent is President and CEO of CAE. Marc talked about how tough times require new thinking and that’s something we’re going to explore in our next podcast. I hope you’ll join me when I speak with Guy Cormier, President and CEO of the Desjardins Group, when we discuss learning from the past as we rebuild for the future. Join me on June 3rd for this engaging conversation. If you would like to hear more of our Speaking of Business conversations with innovators, leaders, and entrepreneurs, why not subscribe to our podcast. Search for Speaking of Business, wherever you get your podcasts, or go to our website, @thebusinesscouncil.ca. Until next time, I’m Goldy Hyder. Thanks for joining us, stay safe everyone.