How DIRTT has built a successful green manufacturing business in Calgary
Walk into the head office of Calgary based DIRTT Environmental Solutions and you feel as if you’ve stepped into the office building of the future, complete with wall mounted, interactive display screens, hipster lighting, and living walls that climb with plants.
That’s probably no surprise given that the office acts as a product showcase for DIRTT, a manufacturer of modular office spaces that was named one of the “Rock Stars of the New Economy” by Fast Company in 2012. With 2012 revenue of almost $140 million and annualized revenue growth registering about 41.5% in the past five years, DIRTT’s success is largely an anomaly in a Canadian manufacturing industry that has largely been in decline since 2004, according to Statistics Canada.
But then colourful Calgary entrepreneur Mogens Smed, chief executive of DIRTT (an acronym for Do It Right This Time), has beaten the odds before.
The key to building a successful business this time around, says Mr. Smed: “We don’t hire lawyers or MBAs.” They’d have shut DIRTT down before it even started, he contends. The reasoning: A) the manufacturing industry in North America is dead; B) building green costs more than conventional construction; and C) the labour cost in Calgary is too high to sustain a manufacturing business. And yet, he points out, “we’ve managed to build a business that has proven the opposite. We did it by reinventing the way that manufacturing is done in North America.”
No one, Mr. Smed freely admits, can compete with the Chinese at making widgets. So DIRTT doesn’t try. Instead it makes exactly what its customers want, when they want it, using cutting edge technology to keep operations lean and mean. “China can’t make this stuff,” says the serial entrepreneur, of his design savvy, modular and reconfigurable office spaces that fit together like Lego. Although the Chinese provide some of the components for DIRTT, ultimately, it is high design and customization that sets DIRTT apart and has helped it succeed when other manufacturers are increasingly heading off shore.
For that, DIRTT relies on Calgary’s highly skilled and trained workforce and entrepreneurial culture, as well as a high tech manufacturing process that allows for intense customization, combined with a rapid turnaround.
RelatedMade in North America, once again, with lean manufacturing strategiesManufacturing activity suffers surprise contraction in March as slowdown persists
“Our designs are specifically built to meet each individual customer’s needs,” explains Mr. Smed. What’s more, while a conventional consultant might take four to six months just to complete a design from start to finish, DIRTT does the same thing in two to four weeks.
The key is its sophisticated 3D software (called ICE) that allows customers to play around with the various options on a computer screen, creating and moving walls of glass, wood or high gloss plastic and adding features. That same software then spits out all the information needed to produce the design for parts, pieces and connections and automatically tallies the cost. “It’s an end to end system,” says Mr. Smed. “The turnaround is very quick,” says Mr. Smed. “When something hits the floor, it’s out the back end fast. There are no storage costs. It’s completely on demand.”
Smaller plants result in a lower carbon footprint than typical manufacturing facilities. But that’s just the beginning when it comes to DIRTT’s green cred. The finishes on the pre manufactured moveable are water based and non toxic. And the solutions eliminate future construction waste because when a building’s tenants change, or a client company needs to expand or contract, they can simply reconfigure the space using most of the same materials, rather than sending loads of studs and drywall to the landfill.
In addition, DIRTT has “virtually zero” manufacturing waste, according to Houston Peschl, director of operations and sustainability “We have tripled our total recycling in the past four years,” says Mr. Peschl, an a michael kors handbags vid cyclist and outdoorsman with a surfer dude vibe and a mop of curly hair. Even better, it has found ways to do so and still make money. “We used to use fiberglass as sound proofing insulation in our wall panels,” says Peschl, by way of example. “But now we use recycled denim. It can be reused. It doesn’t itch and it’s significantly cheaper.”
Such innovations often come from employees at DIRTT, says Mr. Peschl. The culture encourages people to speak up if they have suggestions. Job titles tend to be eschewed and instead of having a human resource department, DIRTT has a ‘talent agency.’ It’s a distinction that highlights the value DIRTT puts on finding and keeping good staff. “Being in Alberta, we’re very cognizant of the value of people,” says Mr. Smed. “I think that’s spawned by the oil companies. They pay a lot of money and treat their people real special because there’s such competition for michael kors handbags employees. We do the same thing.”
DIRTT employees have access to a free cafeteria, where a chef makes a range of healthy entrees such michael kors handbags as grilled pesto chicken breast, and chili lime tilapia daily. Although plastic water bottles are banned, there’s sparkling water on tap. In addition, DIRTT bags (as they sometimes refer to themselves) have weekly lounge nights (with pub style food prepared by the company chefs) that encourage them to come together and talk to each other.
The result: people aren’t afraid to speak up when they have something to say. And management listens to the insights of line workers. Recently, for instance, the company faced a bottleneck in production. Workers regularly had to wait for an expensive wing punch machine to be free. An informal brainstorming session with the machine operators turned up the fact that although the $250,000 machine had multiple functions the big hold up was the time it took to punch six small holes. “Why don’t we build a machine that just punches holes,” suggested another staffer. “Lightbulb,” says Mr. Peschl. One new $60,000 machine solved the problem handily, increasing the original machine’s capacity threefold.
That said, the working atmosphere at DIRTT wouldn’t suit everyone, admits Mr. Smed. It requires people to be proactive, think on their feet and take responsibility for their decisions. “We hire a lot of A types that insist on being challenged, but also on being empowered,” Smed explains. “That poses a different dynamic than being a top to bottom organization. We’re very flat.”
No one at DIRTT’s headquarters has an office including Mr. Smed resulting in the kind of situation where “a parent can be singing goodnight to a child on the telephone, only to have 10 workmates join in,” says Scott Jenkins, the company’s president. Claustrophobic? Maybe to some people. And the fact that employees are s michael kors handbags till sometimes there at bedtime says something too. But “you could shoot a canon through the place on Saturdays,” says Mr. Smed. And there’s no doubt the culture is working for DIRTT, which boasts a roster of Fortune 500 clients including Google, Apple, Levi Strauss, LinkedIn and Bank of America.
“The truth is,” asserts Smed, “the Chinese can’t compete with a lot of manufacturing in North America.” They lack the service, marketing and administrative infrastructure, he points out. “And it comes at a price when you deal with factories in China. Time is one of them. Flexibility is another unless you want to buy a thousand units, don’t even think of dealing with them.” Finally, “you have to expect that the first couple of rounds are going to be questionable in terms of quality.”
The DIRTT advantage, he contends, is ultimately that it doesn’t mass produce. Instead, it pumps out top quality product that meets each customer’s exact specifications. And it does that quickly and at a reasonable price. “We’re extremely cost competitive,” asserts Smed. “We’ll do over $20 million out of Saudi Arabia this year and we just got into that market. If they could buy the same thing in Europe or Asia cheaper, better or faster, they would be doing it.” In the end, he says: “We don’t compete with China. We do it differently.”