Steve Panyko. (Photo supplied)

Companies founded by engineers often have an "innocence that's really charming, but not financially attractive," says Steve Panyko, CEO of Sciemetric Instruments.

The American tech executive took the spotlight at OCRI's Technology Executive Breakfast Thursday morning at Scotiabank Place. While most of his time behind the mike was taken up by telling the Sciemetric story, he didn't hesitate to offer some blunt opinions about what he has observed in the local tech community.

Mr. Panyko's reiterated the often heard criticism about what Ottawa's tech community lacks in terms of being able to build world-class companies that don't simply end up a branch plant or R&D facility of some U.S.-based concern. It's all about making certain there is a market for what you want to make before you make it.

He cited the U.S. example, where the norm among tech companies is to spend three to four times as much on sales and marketing than on R&D. In Ottawa, he says, it's the reverse. Too much emphasis is placed on the sophistication of the tool rather than on the value of the solution. What that inevitably produces are companies with great technology that doesn't have a sound marketing or distribution strategy behind it. Consequently, these companies end up undercapitalized with poor revenue prospects. Smart U.S. companies look north and realize that "if you wait long enough, you can get great technology at a great price," he said.

The solution? Get more money in the pipeline for commercialization, which means sales and marketing, NOT more R&D. Mr. Panyko proposed the idea of a an investment fund for Ottawa companies that would be managed by successful entrepreneurs, rather than bankers. Bankers' emphasis on minimizing risk, he said, too often conflicts with what the focus of such an investment fund should be – maximizing return.

For such a fund to generate the necessary momentum to produce results, he threw out the figure of about $500 million. One way to raise that cash would be with a public bond issue, he suggested, such as the PEI Energy Savings Bonds issued by that province's government to fund wind power development.

Mr. Panyko said the time is ripe, with the city in the unique situation of having a businessman in the mayor's chair and a large number of entrepreneurs trying to make a go of it following the tech wreck. He threw down the challenge to organizations like OCRI and CATA to run with this idea and help make it happen.

When it comes to the importance of sales and marketing, his own track record demonstrates that he knows of what he speaks. Mr. Panyko first came to Ottawa from California to take over the chief executive position at CML Emergency Services in Gatineau. He had held a number of executive positions with various U.S. technology companies and served as CEO of Echopass Corp. and Onix Microsystems.

What he found at CML was a company with an outstanding market opportunity with technology to improve the reliability of 9-1-1 emergency services. He had experienced firsthand during 9-11 how ill-prepared existing telecommunications infrastructure was to deal with an emergency such as a major terrorist attack. Despite CML's potential, what he saw at the company was a team that "worked extremely hard, (was) extremely dedicated, but couldn't sell its way out of a paper bag."

With a new approach that focused on driving awareness of the company in the U.S. market, Mr. Panyko led a turnaround that ultimately resulted in a lucrative merger deal with U.S. Plant Equipment to create a new company called Plant CML.

His efforts at CML attracted the attention of Sciemetric founder Nathan Sheaff, who, despite the unique market opportunity for his company and big customers in the auto industry, was having trouble breaking through a revenue ceiling after more than 20 years in business.

Sciemetric's value proposition to manufacturers is simple, "identify a problem so you can shut down the line and fix the problem before you start making junk," said Mr. Panyko. In other words, monitor the process of manufacturing to identify any defects as they are happening to reduce the number of faulty products and the costs of recalls, warranty repairs and wasted materials. Its technology does this through a process of Process Signature Verification, where everything from the force needed to press-fit parts together, temperature, welds, the colour of materials as they are heated or cooled, etc. are tracked. If any of these parameters start to differ from the norm, it's an early indication that there is a problem. The company often draws a comparison with an electrocardiogram that tracks blood flow and heart rate to identify heart problems.

In Mr. Panyko's view, Sciemetric has a multi-billion dollar market opportunity before it. The trick, of course, is to make that case to manufacturers who have largely been reluctant to introduce IT solutions into their manufacturing processes.

For Sciemetric and every other tech company in town, Mr. Panyko boiled down the key ingredients for success to three things – articulate the value to potential customers, build distribution, obtain adequate funding to build that distribution.