Ferranti packard flip dot display

Entreprenurship Strategy Questions

Introduction
As students and apprentices, each of the five future partners in Teklogix had given some thought to starting their own technology company. And why not? While most people remember the 1960’s as an era of free thinking in the social and political domains, it was also a time of tremendous change and opportunity in the digital world. The 1960’s brought the introduction of the mini-computer, the concept of worldwide digital communications, and a reduction in cost /performance ratios within the industry that continue to this day. While the founders’ initial objectives differed considerably from their company’s ultimate place in the digital world, they did hold true to the name Teklogix; a fusion of two Greek roots, loosely referring to the art of building logic.

The vision of wireless communications in the industrial and commercial world came to these men through observing the needs of mechanized material handling equipment operators and associated mobile workers. While much had been done in the world of real time data capture in the 1970’s, nothing was available for the mobile worker; specifically those employed in the physical movement of goods within warehouses and shipping terminals. And while terminal equipment had been developed for batch applications, real time data capture and response were left to batch data entry and the latent printing of instructional information. Teklogix saw a need to capture such data in real time and provide instantaneous instructional information to increase productivity. And the rest, they might say, is history.

No story about Teklogix would be complete without reference to the Ferranti Company, headquartered in England. Teklogix’ five partners had met while working at FerrantiInternational's Canadian division, Ferranti-Packard Electronics (FP). In the 1950’s Ferranti-Packard had, amongst other things:

· Bounced digital data off of meteorites as a prelude to current satellite communications techniques.

· Developed and produced a bar code based order entry system for Spiegel Inc. of Chicago.

· Developed and produced one of the first automated cheque readers.

· Developed and produced the first Air Canada reservation system called RESERVEC I.

· Developed and manufactured what is believed to be the first fully solid state commercial computer system in the world: the FP 6000. This was to be sold in 1963 to ICL of England and became the ICL 1900 and its ancestral linage now resides in the Fujitsu organization.

And Ferranti-Packard had become one of the two major suppliers of drum memory systems of the time.

Setting the Stage for the Technological Revolution
After WWII, the Canadian Government had made it a policy to fund the development of technology oriented organizations in order to deploy the large numbers of ex-servicemen and the related military workforce into commercial enterprises. It was a traditional guns-to-butter economic policy shift with an attempt to rationalize the 20th century meaning of “butter”. Unfortunately they only got it half right; they should have studied the marketing finesse of margarine.

Significant funds were made available for the development of new ideas and related products, but the grand planners seem to have failed to understand the three primary legs of industrial success; Operations (including Development and Manufacturing), Marketing and Finance. They assumed that the Canadian financial community would look after the third (that would still be a wrong assumption even today); they didn’t understand the necessity for the second (Ottawa had bought everything heretofore; who needed Sales and Marketing); but they were prepared to fund the first. In that culture Canada created a number of organizations with world class technical competence in product development, and the Electronics Division of Ferranti-Packard was among them. Others include A.V. Rowe and its Avro-Arrow and Canadair, creators of the Challenger aircraft.

Ferranti’s greatest contribution was perhaps the FP-6000 general purpose computer, completed in 1962. Only six FP 6000’s were built; one for Saskatchewan Power; one for the Naval Research Establishment in Halifax; another for the Toronto Stock Exchange and another which ran FP’s data processing operations for many years. Two were assigned development duties and became part of the ultimate sale of the Ferranti computer operations to ICT UK in 1963 for $1 million. This ultimately became International Computers Limited (ICL) of UK and the first ICL 1900’s were in fact re-named FP 6000’s.

The Founding Fathers

Teklogix was the creation of five partners, opening its doors in 1967 in Mississauga, Ontario. The founding and development of a company such as Teklogix, one that survived long enough to flourish, relates as much to the people as it does to the products. And the five partners were about as much alike as they were unalike. This combination of similarity on one plane and complementarity on several others seems to have permitted them to stay glued long enough to create a strong and valuable organization that, to this day, provides many careers and supports thousands of customers.

Teklogix’ first president, and mastermind behind the new venture was Lawrence ‘Lawrie’ Cragg. Lawrie was born in 1928 in London England. After working for a few years at the BBC, Lawrie was called up to the Air Force in 1946 and went through a selection board for the air crew. However, at that time the RAF had plenty of air crew. He was offered a commission but had to commit to 10 years. Instead, he became an electrician for the service and left after 2 years.

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In 1948, Lawrie returned to the BBC and now found himself surrounded by rooms full of toys – largely electronics devoted to this emerging phenomenon known as television. The old outside broadcast department was full of older men who were great teachers. It is here that Lawrie got his head stuck into electronics. The tech joyride continued until 1953 when he left the BBC for good and emigrated to Canada.

Once in Canada, Lawrie began working at AV Rowe. They were building the CF-100 and using Hughes Radar, but needed technicians to make them work together (for instance, when firing the machine guns, the radar would quit). Soon after, he left Rowe and joined the CBC. With his experience in television, he was highly valued, but soon hated working there, as he puts it in impeccably British fashion, because of all those dastardly commercials. While at CBC, he met someone who had a relative working at Ferranti-Packard. One thing led to another, and Lawrie joined FP in 1954. There he met his future business partner and great friend Al Vanderburgh. It was an exciting place to be for Lawrie, full of young engineers who had studied at university, not as common a phenomenon as it is today. The company was headed by Dr. Arthur Porter and British inventor Kenyon Taylor, who held several patents.

Ferranti was very hierarchical, and Lawrie didn’t have the iron ring of the university-trained engineer. That made things a bit tougher to start, but over time, his keen ability to design emerged, permitting him to lead many great design/build projects .Under the leadership of Lawrie’s great friend and mentor, Fred Longstaff, Ferranti developed the FP6000 minicomputer and sold it to Ferranti of England, who eventually sold it to ICT (International Computers and Tabulators). The computer was revolutionary, and led to the creation of the PDP-8; a device that became fundamental to Teklogix’ creation and success.

But by the early 1960’s, decline was quite apparent at FP. Lawrie left FP for ICT Australia in 1964, and while there, wrote a major proposal for QANTAS Airlines for a new reservation system. He returned to Canada, and FP a year later. Still not satisfied with what he saw, Lawrie developed a keen desire to take his experience with the minicomputer and create his own company.

Al “Van” Vanderburgh was born in Toronto in 1924. Shortly after his 18th birthday he received his military conscription. At that point, his impression of the army (he suspects from his dad's experience) was sleeping between blankets with no sheets. That was not for Van, and so he volunteered for the Air Force instead.

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Van was initially posted in Brandon, Manitoba. Then, near the end of the war he volunteered for Pacific Duty, and was sent out to Prince Edward Island. He found it pretty boring (not surprising - imagine wanting to support the Pacific effort and ending up in a small town in the Atlantic), until he helped create CFRA, the base’s somewhat clandestine radio station – the call letters formed by rearranging RCAF. True to Van’s spirit, he and his conspirators just put up an antenna and went on the air.

Van was fortunate to receive some radio training while in the Air Force. Shortly after leaving the forces, he entered the University of Toronto’s faculty of Engineering. He managed to get his ham license during his stay at U of T. The program was located at a little-remembered ‘campus’ in Ajax, Ontario – an old munitions plant that the university took over after the war. Van studied there for two years, and in his final year, came to the main campus to complete his degree - electrical engineering with the communications option.

In 1950 Van went to work at Ferranti-Packard; his first real job. Initially, he worked on magnetic memory drums and paper tape readers. Van left Ferranti in 1963 and spent the next year with Kent (from England) which supplied water meters for pumping stations. But the company was shut down by the English parent. Van had stayed in touch with his good friend Lawrie Cragg, and in 1967 decided to join the fledgling Teklogix as a full partner. Immediately, Van was hired out by Teklogix to T-Scan, a company started by Lyman Richardson, an ex-Air Canada executive who had been a driving force behind Air Canada’s passenger reservation system known as RESERVEC. Among other things, Van helped develop card readers with optics, paving the way for electronic bar codes.

Cliff Bernard was born in 1938 in FlinFlon Manitoba. He graduated from the Radio College of Canada as a technician before entering the armed forces. As was the case with the other partners, Cliff spent a good part of his early career with Ferranti, largely in the maintenance department.

Before joining Teklogix, he spent some time as a salesman for Digital Electronics Corporation. As a salesman of PDP-8’s and DEC’s line of logic cards, Cliff developed his early appreciation of the mini computer. Cliff remained at DEC until he joined Teklogix in 1970, though he was a full partner from its inception in 1967. Early on, he took over the management of Teklogix’ mining systems from Lawrie (including major projects with mining giants Falconbridge and Noranda). Lawrie had designed the hardware and IP Sharpe the software… but with Cliff Teklogix could do it all. Cliff then moved on to design much of the I/O (input-output) systems for the Calgary Post Office, a pivotal new customer for the company.

As the 1970s were coming to a close, Cliff looked to move on from his hardware role. Teklogix was developing and marketing data processing systems, and they needed maintenance, so Cliff created Teklogix’ first maintenance department. Then, as the company engaged in a series of projects for Canada Post, Cliff took on the role of Contracts Administrator (ECN’s – engineering change notices etc. with customers and third-parties). He worked on CPC until early 80s, then helped to secure a major project with the DGSC and managed those contracts. At the same time, Teklogix’ terminal maintenance business was growing, with terminals coming back across the border.

Cliff handled the maintenance portfolio until 1987 and then agreed to open the Teklogix US hub in Kentucky. He built a small team so that all the US terminal repair, site surveys and field installation then occurred from Kentucky. Cliff was a diligent and conscientious partner but he was adamant that clear lines of demarcation, usually defined by him and within his comfort level, should be “drawn in the sand” with respect to expectations and responsibility. As an example, as part of his agreement to set up the US operation in Kentucky he allowed that while he would set up and run the maintenance operation he wanted no part in the management of the US sales and marketing operation. He was not comfortable outside his self -defined area of expertise.

Perhaps a bit bored by the shifting focus of the company, Cliff retired in 1992 but remained on the Board until 2000.

Peter Halsall was born in Toronto in April of 1940 making him one of the two young’uns among the partners. He recalls always being interested in technology, ending up at the University of Toronto and graduating in 1962 with a degree in Electrical Engineering.

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Upon graduation he joined Burroughs Business Machines, installing radar signal processing computers on the Pinetree Line - a military radar system across northern Canada. Here he met his first digital computer – a huge behemoth using thousands of vacuum tubes that required more space than a three car garage. Although its processing powers were slight, and its unreliability huge, it lured Peter into a career in computing hardware and software.

In the Spring of 1963, the Pinetree project was winding down and Pete’s services were no longer needed. His manager at Burroughs provided the name of Bill Lower at Ferranti Electronics and said Bill was expecting Pete’s call. He started right away as an engineer in the Sales dept. Pete’s early work at Ferranti revolved around marketing systems using “flipping dot” display modules. These jobs included the construction of an entire facsimile of the Montreal Stock Exchange in an old warehouse, and a scrolling banner display of the world’s population. Later projects included hardware development projects supporting Ferranti’s FP6000 computer.

Early in 1965, Pete was relocated to Ottawa to work as liaison engineer between researchers at the Defense Research Establishment at Shirley’s Bay and a hardware development team at Ferranti. Two years later this project culminated in a six month sea-trial of an innovative ship/shore communication system. Cliff Bernard was looking after things at the shore station close to Halifax (Lower East Chezzetcook), while Pete got the mobile end on a Canadian Navy frigate sailing the North Atlantic. Working together through some challenging problems throughout the project provided the basis for their future business partnership.

As the sea trials ended, Pete returned to a role with Ferranti on a follow-up study project for Defense Research Telecommunications Establishment. Meanwhile, Cliff had moved on to Teklogix. One evening, Pete got a call from Cliff, and introduced Pete to Lawrie. Lawrie and Cliff were, at the time, the only personnel at TK (Rod was back at FP). Lawrie had sold a system to CN Telegraph, and needed someone to help implement. Pete was ready to move - the new job sounded interesting, and since much of his work had, up until now been secret, Pete was pretty isolated from the tech community of FP. Helping create a new company from the ground up sounded good, and he didn’t mind investing to become a partner.

Pete’s first actual job at Teklogix was helping Lawrie Cragg move the PDP8 out of his basement and into the first real office in Streetsville, Ontario, just outside of Toronto. Subsequent work was usually less physically demanding, but continued to provide the interest and challenges that fulfilled the next 30 years.

J.R. Rod Coutts was born in Cookstown, Ontario in March of 1940. Though he wasn’t born talking, his parents just simply stated that they couldn’t quite remember a time when he wasn’t. Most people who have met him since may say the same thing about laughter.

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The University of Waterloo had had its beginnings in 1957 as part of the Waterloo Lutheran College but by the time Rod arrived in the fall of 1959 it had parted company with the College and had gone its separate way. It had been the “brain child” of a number of visionaries in the Kitchener-Waterloo area and was to be the first Cooperative Education School in Canada, modeled after North Western in the US, and it did not come into this world without a political fight. The University of Toronto and The University of Western Ontario, each just an hour’s drive from Waterloo, were quite less than supportive of a competitor in their midst; but it was the 1950’s and Ontario needed schools to educate the baby boomers. And so it came to pass.

In May of 1962, Rod joined the Ferranti Packard organization in Downsview, Ontario for his last work term. Here he was to learn about the imperfect world of “bleeding edge” technology. The assignment also introduced him to project scheduling deficiencies - as the project to which he was initially assigned was about a year late and management was less than happy about the matter.

By 1964, the new graduate of the University of Waterloo’s engineering program joined the Ferranti team full time in to help commission a drum memory system for the US military project called Back-Up Interceptor Control (BUIC). It was part of the North American early warning radar system developed in the 50’s and 60’s that protected us from a surprise attack by the Soviet Union over the North Pole. For the benefit of the techies reading this, this behemoth was 12” in diameter, 36” in height and, at the leading edge bit density of 550 bpi, it stored just over 1 megabyte.

Along with its associated control electronics, it occupied a full 19” NEMA rack 6’ high and in today’s dollars it cost about $350,000. Today we can buy 100 gigabytes in something the size of two cigarette packs for less than $350; that’s five orders of magnitude more storage for three orders of magnitude less money.

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Off the Ground
During the summer of 1967, Rod met Lawrie Cragg who had just returned from Australia. Lawrie expressed his interest in forming a company and to do something with the new Digital Equipment Corp PDP-8; the first mini-computer of its kind at a price point under $20,000. His thought was that they could deploy this machine in process/communications control system applications and build a business. Perhaps many reading this have never heard of the PDP-8, but this now-seemingly weakling of a computer was in fact revolutionary. It cost a small fraction of the mainframe of the day and fit into a closet, not a room. It allowed small shops like the fledgling Teklogix to develop applications that automated the functions of a myriad of industrial and commercial organizations.

Through the early summer of 1967, many meetings were held, and a number of participants were discussed. All agreed that each partner should bring diversity to the mix and in the end Lawrie Cragg, Al Vanderburgh, Cliff Bernard and Rod Coutts emerged from the discussions as the founding partners. Al was still employed, as was Cliff, and they agreed to act as silent partners until the company could afford to employ them. So it was off to Tom Byrne’s office, an old war time lawyer friend of many of the original people at Ferranti, to incorporate the company. Some years before this, another group had formed a company known as ESE – Electronic Systems Engineering. Lawrie was an initial part of this group but elected to opt out when he decided that their direction was not to his liking. He had however suggested the name of Teklogix at that time but it was rejected in favour of ESE. He raised the suggestion again with his newfound partners, and it was unanimously accepted. By mid- summer Lawrie and Rod resigned from FP and on September 20, 1967 Teklogix Limited received its articles of incorporation. The initial investment was $2500 each for a grand total of $10,000. Peter Halsall would join the group as the 5th partner shortly thereafter.

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Over the years, the five partners were called a lot of things, but probably never dreamers. They tended to see things, not as they should be in some ideal poetic world, but rather what they might turn into with a bit of creativity and a whole lot of sweat.

Questions for Discussion
1.What was it about the PDP-8 that would likely have struck the partners as being so important to create a business around? Can you think of any current technologies or tech trends that may reshape the way we do business? Give an example of one and discuss how it might revolutionize the way people work, play or live.

2.Other than knowing each other, why do you think each of these 5 men chose to work with each other? How does that connect to the impressive fact that they stayed together until each was ready to retire?

3.Looking at their backgrounds, what do you think were some of the factors that may have led them to take on the risk of starting their own company?

Off to Work
The company’s first office was located in the basement of Lawrie’s house. After a few months, Lawrie’s wife voiced that she was tired of seeing Rod all the time, so she went out and found them a modest 400 square foot location to work out of. The team’s first job was a contract from I.P. Sharpe and Associates (another FP off-spring) - a per diem job - with Lawrie the income generator. Rod began his new career trying to drum up new business – as he puts it, initially not as successfully as history might assume. The task at this initial job was to semi-automate a copper and zinc mill connected to the Lake Dufault mine owned by Falconbridge. Lawrie designed the hardware required to interface a PDP-8 with an x-ray spectrometer (the input), sample stream selection solenoids (control) and several reagent feeders (the output). A researcher at the University of Toronto had developed a series of algorithms with an industry partner and sold them to IP Sharpe, who used them to develop applications that would run on the PDP8. Based on the head of the mill, the system would add reagents to more efficiently recover the mineral. Teklogix created manifolds, programmed the algorithms, interfaced to the x-ray spectrometer, converted output to digital, then use the values to run through the algorithm to drive the reagent feeders.

Soon, IP Sharpe lost interest in the system and the overall project was taken over by Teklogix, now with Cliff Bernard as project manager. He had to build the product as well as upgrade and adapt it to different emerging circumstances of the mine. Meanwhile, Rod was attempting to sell similar solutions in this space but with little success. In the spring of 1968, Van joined Teklogix and was deployed on another per diem contract with a company called Transduction, while Lawrie continued on with the I P Sharpe contract work. But, by the summer of 1968, things were starting to feel rather tight at the new company. And of course, when things are bad, they can’t get any worse, right?

Well, then came what was affectionately referred to as “Black Friday”; on one day, the three most promising projects on the prospect list, including an exciting job to create a computer generated periodic table for the Ontario Science Centre, vanished. They were either cancelled (as was the Science Centre project) or awarded to competitors. The team was devastated, and what ensued was some gut wrenching discussions about survival. Their burn rate with Van on board was about $3,000 per month, their per diem income was less than certain and the company had about $5,000 in cash and receivables. The conclusion was that if all three stuck it out they could last about two months; if only two stayed, particularly the prime income earners, then they might be able to hang on for three or four months, perhaps longer. The partners discussed Rod’s offer from FP and it was agreed that he should take it and perhaps the little enterprise would live to see another day. And so by 1968, though he remained an owner, Rod had quit Teklogix and returned to Ferranti.

Over the course of the next five years, a half dozen or so mining projects and a few other ‘one-off’s’ kept Teklogix alive, albeit barely. The remaining lads performed a number of jobs for friends, associates and anybody else who would listen to their story. Other projects included the design and building of a number of units to control the temperature profile of a process to anneal pipeline welds. Later the team took on the arpsichord project – a music synthesizer made by the Arp Company, that required Teklogix to create an electronic loop based on what was then the revolutionary microprocessor. With this arpsichord, a musician would play a sequence and the device would record it and then be able to play it back endlessly. One of the first music synthesizers on earth!

Questions for Discussion
4.What was the value of taking and completing the kinds of jobs the team found in these early years? Were they good decisions? What value did they provide

5.Other than the general idea of creating applications for the PDP-8 and selling a solution, the team really didn’t have a formal business plan. Did that seem to hinder the company? What would have been different if the company had, and relied upon a formal business plan?

The Post Office: Their First Corporate Account
When Rod arrived back at Teklogix in April of 1972, he found Lawrie involved in another project involving a “tilt-tray-sorter”. This was a complete surprise and unfamiliar territory for Rod. Through other projects, Lawrie had made contact with the engineering consulting firm of Cole Sherman & Associates in Scarborough, Ontario. They had been awarded a contract for the design and project management of a new postal processing facility in Calgary, Alberta. The facility included a tilt-tray-sorter that was to sort parcels based on the new Canadian postal code. The lads spent most of the summer learning about the new postal code, how it was to be incorporated into their sortation philosophy and how a computer control system could be applied. The Canadian postal code schema is a hybrid of the English system which uses an alpha-numeric code as opposed to the pure numeric code deployed in the US. It does however divide the postal delivery function into about 14 million segments in the country and the sortation of letters and parcels required new automated equipment.

Many days were spent in Ottawa with Canada Post engineers, trying carefully to plot their approach to the project. They learned that a bid request for the complete mechanization of the facility would be issued in the fall and that it would likely be addressed by the Canadian conveyor industry. There were a number of potential prime bidders, including Mathews Conveyors in Port Hope and several others, mostly from Ontario. Rod spent a good part of the summer introducing Teklogix to these people and explaining the company’s interest and capability; to Rod, it seemed a little like talking to your son about puberty; a supposedly knowledgeable force in contact with a disoriented object. The introduction of computer control methodology to an industry that had, for many years, relied on relay logic to control their mechanical gismos, was a bit of a stretch; but at least they came to know a bit about Rod and the company. The effort was to pay off in spades.

During the summer Teklogix prepared an unsolicited technical proposal for supply of such a system and submitted it to the technical authorities at Canada Post; it was a way to demonstrate that their requirements were understood and it allowed them to critique any concerns that had been overlooked. It was a most strategic play that may not have been totally realized by either Lawrie or Rod at the time; they were just trying to get their ideas in front of a potential customer.

By the fall of 1972, Teklogix was awarded a $360,000 contract to control a tilt-tray sorter to sort parcels. That was more than 50 % of their yearly sales at the time and was one of six times over the years that they came close to going under - if they hadn’t won that contract, it may have been over for them. The company went on to be a primary supplier of sortation and conveyor control systems for Canada Post over the next decade. Through the process, they learned (and there were many times in the development of these special projects that such a resolve was tested) that you never, ever give up trying. Rod recalls a procurement officer at the time, who he had asked how they fared as a supplier, responded with the following verbatim; “Well Rod, based on my experience to-date, in my humble opinion, you guys are the best of a bad bloody lot”.

Questions for Discussion
6.What is the significance of gaining a corporate, or national account? How might that help a company such as Teklogix develop its unique and compelling resources and capabilities?

7.What might be some of the dangers of fast growth as the company deals with this new customer?