Ballard Power Systems Inc. - Text Version

Interview with Firoz Rasul, Chairman, Ballard Power Systems, Burnaby, B.C.
Host Interviewer: Dave Byron

Dave Byron: Good afternoon ladies and gentlemen. Today our guest is a man who has led a company from thirteen to thirteen hundred employees, he's raised over a billion dollars in funding and financing and if their innovation becomes pervasive, then certainly they are going to change the world. From a crowded small shop he's built one of the world's first fuel cell manufacturing facilities in Burnaby, BC. Ladies and gentlemen, please welcome Firoz Rasul, Chairman of Ballard Power Systems.

Dave Byron: Welcome.

Firoz Rasul: Thank you.

Dave Byron: Firoz, you have come a long way, you have quite a journey to talk about, I think. Tell us a little bit about that journey.

Firoz Rasul: I grew up in Africa and then went to high school in the UK and I was very interested in engineering at the time. As I was coming to the end of my engineering program I realized that I wasn't really cut out to be an engineer. A little late by that time. I went through engineering school and, more by accident, I was introduced to marketing and really enjoyed it. So I worked in marketing for consumer marketing companies, General Foods, Black and Decker and so on.

Then when my family decided to move to Vancouver in 1981, I started there with a small start up. I was employee number seven in a company called MDI Mobile Data International, which was in wireless data communications. It's sort of the pre-cursor to the RIM technology, if you like. In the next eight years or so it grew to be a world leader in wireless data communications and we were a publicly-traded company and, in 1988, there was a takeover bid for the company from our biggest competitor, Motorola.

So we went through the acquisition and then I left the company because I was not interested in being part of a branch plant of a company. I've done it in Europe with General Foods and Black and Decker and I'd become accustomed to making decisions rather than having decisions handed down. I took some time off and was introduced to a number of companies, but came across Ballard and really was intrigued by a number of things. I was intrigued by the people. Quality of the people was very important and there were really excellent people there who were passionate about what they did.

I'd never heard about a fuel cell! I did my own due diligence...I travelled around the world. The second thing that occurred to me was, in that due diligence, the quality of the technology — everybody kept saying 'this is the best there is, what Ballard is doing is better than anybody else'. So that validation was very important. Finally, I'd learned in my previous business life, it was all about timing. If you are in the right place at the right time, it doesn't matter how smart you are, serendipity has a big role to play in success.

That was interesting because, about that time, the editor of the LA Times came up. And California had just introduced some regulations for emission regulations and he had come up to see if this is doable. Regulation is one thing, but is there a solution? And he came up to Vancouver...we were in a garage literally...came to see what we were doing. Went back and wrote the editorial and he said, I visited Vancouver, Canada and I have seen the technology that's going to meet the requirements. Cause the California Air Resources Board gave fifteen years notice to the industry. In 1988 they said, in 2003 we are going to bring in these regulations. So that's when the editor came up and wrote in the LA Times and said 'I have just seen the technology that I believe will be the solution to what California is trying to do'. That obviously got my attention.

So I joined the company as CEO and I was employee number thirteen and they didn't have any money to pay me either. It's like the first company that I joined. We had to go out and raise some money. It took us six months to raise money. And it was very interesting because there was a time when cold fusion was around and I remember we were on the road talking to potential investors and from time to time we would get somebody who would say....let me get this right, you take a bit of hydrogen and take a bit of oxygen and you sort of mix it together and you make electricity, right? I said, yeah, sort of. And he said, yeah, we had some guys come here earlier who were trying to sell us something similar — making electricity out of nothing basically, in their minds. These were financial people, they did not understand technology, so it was a tough time to be raising money, but in 1989, we were able to raise some money. That's how the company started to gain some momentum.

Dave Byron: How would you describe what Ballard does today?

Firoz Rasul: We are in the business of power, power generation, power for many different applications, power that is more efficient, power that is cleaner and more environmentally benign, but also power that is enabling. And that's the last piece that a lot of people haven't understood — is that a fuel cell, because of it's nature and the way it makes electricity, will enable products that we haven't seen yet.

If you think about the micro-processor, which is the closest analogy that I like to use. Thirty years ago when the micro-processor came out, there was no way the inventors at Bell Labs would have ever imagined it would be powering an automobile, it would be in automobiles, it would be in washing machines. It created a fax machine. A cellular phone would have not been possible, microwave ovens. All of these technologies would never have been possible. Maybe a microwave through other reasons, but certainly a fax machine and cell phones, the advancements in computer technology — none of these would have been possible. So that's what I mean by enabling technology.

The fuel cell is a similar type of technology. Today we think about applications that it will do with things that we are familiar with, but it's real uses....I don't think have yet been understood. We constantly find people that come to us and say, have you thought about using it here or in this way or that way, and I think that's going to be very interesting.

Dave Byron: I can't help but think with your new facility in Burnaby... you go to this facility and it's this huge palace like glass building and it just intrigues me to no end to think of when you first started. Thirteen people in a small shop, how could you have ever envisioned where you were going to go from that day?

Firoz Rasul: We thought we would develop the technology up to a point where we could then start to either licence it or deliver it to users. And we'd always decided we were only going to focus on the fuel cell component, the core piece, and when we started to do that, many people came to us and said, well, what do I do with one of these things because it looks like a brick. I can't put it in my home or in my car. No, you actually you build an engine around it. This provides the power and you need the pump and you need all these things. People said, well, can you bring me a small demonstration system so I can try it out and take it to my engineers and we could test it out. I said, yes, we can do that.

So we built a small demonstration system and then we realized that what we thought was the product wasn't the product. The product was the system, not the fuel cell. People wanted a solution. So that started to change our own thinking. So we had to then start to focus on...okay, the capabilities we need are broader than just this piece of brick that makes the electricity. And that started to cause us to start to look at strategic relationships, complementary technologies and also manufacturing capabilities and also access to market, because at the end of the day we are a component supplier.

Dave Byron: How did you deal with this whole idea that you are going into an organization that's primarily science and engineer driven?

Firoz Rasul: It was a difficult step I think for the company, more than for me, because I've been through a start up and I'd been through that phase. And I remember meeting with the employees and I said, look we are here to create some success, but success is going to be measured in how we build this company, how we deliver this product, how much money we make for our shareholders, which was an alien concept for them. I said, that's going to be the measure of success and not how many Nobel Prizes we win. That was really tough for some scientists who were there that came from universities, and for me it was almost heresy to say a Nobel Prize was less important than making money.

That was the first step. And the second step we started to look at was, okay, so we are developing this technology. Can we put it on a roadmap so that we can demonstrate to the customers or the shareholders how much progress we are making, because they won't accept the fact that, here is some money, you go in behind a curtain and work for five years and then come up with this eureka moment and they are going to see something. They're not going to buy that. So what can we show, and how do we validate that we are on the right track? That we can actually have the user say, yes, that's what we need, this isn't right or change it, or it's too big, too small, whatever. And bringing the customer into our technology development path and process was a big problem. There's no other way. You have to have the customer there with us. That was a difficult one for some people.

And then to say, we are going to put this technology prototype into the field, we are going to run cars around and buses, and put them in power plants so we can get feedback. And they were very concerned about this. They said, no, no, no, we can't, it's too early. I remember one time there was a system we were building for customers and the engineers were really protective and babying the system. So I instituted a rule. I said, when that system goes to a customer, you can't go with it. So now they had to write a manual, they had to write instructions, they had to write how do you connect it up, what are the safety issues and so on. So that was a revelation. They said, they won't understand, and I said, you are right but you can't go with it so you figure out how they can install it without you being there. So that was part of the customer sensitivity that Mike [Brown] is talking about, that we needed to bring into the company.

Dave Byron: What would you consider one of your first milestones in the beginning?

Firoz Rasul: There were several. Earlier milestones had to do with demonstrating how much power we actually got out of this thing. Because the fuel cell had been around in the space program. We didn't invent the technology; it was invented actually by a lawyer in the 1830's. I was saying this to some of my people in the oil business....'you know, this technology was not invented by an engineer, it was invented by a lawyer'. I was trying to make the point that engineers are not the only ones that invent things. I remember the head of R&D from Mercedes Benz laughed at me and said, that's why it's taken so long.

So it was done in 1830, but it was in the space program and we started working with it. I think the first one came about when we were actually....we built a bus and it looked like a plumber's nightmare with all the pipes and everything else. And we wanted to show this technology could do something because everybody said, what does it do? It could be in a bus....well, really? People were incredulous that this would look like a series of bricks and could power a bus. So we built a bus.

Then right after that I went to Germany to a place that I know, Ulm. Ulm is where DaimlerChrysler had one of their R&D facilities. And they had actually built a van with the same fuel cells and they had the press out and the Chancellor was there and showed this vehicle. It was astonishing, the reaction that we received.

That was a major milestone. It actually...and the credibility of Mercedes Benz, because they were the first ones to bring out a car. The first vehicle was ten years before Ford — it was in Germany, by Daimler. And so they understood this, so that credibility was very important. If Mercedes Benz thought this was important, that gave us huge credibility and that started to get people to understand it and excited about that.

Dave Byron: In 1993, that was a big year for you going public. Talk to us a little bit about what was involved there.

Firoz Rasul: We struggled with the decision — should we or shouldn't we go public at the time. Was the time right? Did people understand the technology? And we did go out with the issue but it was a very unsuccessful public offering, which is interesting because we've raised a billion dollars. We actually wanted to raise 25 million and we only raised 15 in the first public offering, and then we subsequently raised some more money. Because the market just didn't understand what we were doing. People had no concept of this.

So, over time, we were able to then set out a way for them to measure our progress. Because people think, you are not making any money, how do I know you are successful? Can't do it with the financial statements, I can't see the earnings, how do I tell that? And over time, we were able to, in our annual report, lay out goals and people look at those goals, the analysts look at and evaluate those goals and say, these are meaningful, and then at the end of each year we get evaluated by how we did against those goals. So that was an attempt to help people understand progress...are we moving forward or not.

Dave Byron: Did you find that changed the culture in the company?

Firoz Rasul: Yes it did, very much so because...it did a number of things. When we did the IPO [initial public offering], people who had been with the company for many years who had shares, all of a sudden had liquidity, which changes the psyche somewhat. When the price went up we had lots of people who could cash in and become millionaires and spend their time on the beach. How do you keep them motivated, continue to keep them motivated? That was a challenge that we hadn't seen before going public, if you like. People watching the stock price. And we kept saying don't watch the stock price.

I remember somebody came in with the suggestion, we should put a ticker in the lobby, and I said, why would we want to do that? So we know the stock prices, I said, you don't run the business by watching the stock price. That's the last thing you do is. You run the business by knowing what we want to achieve and working to achieve the goals. If we do that the stock price takes care of itself. So that was another different way of dealing with it.

Also dealing with shareholders coming through the building, analysts coming through...us having to be accountable to analysts and being evaluated by somebody outside other than your board, and people passing opinions about what you are doing. Sometimes to which you disagree. But I think that was a whole different process that people had to understand. Also the fact that there were things that we had to do to satisfy our shareholders, because you took money from them and there are things that we have to do. The idea is not to do something different, it's what you are doing for them to accept and understand what you are doing. Because you don't want to be running two businesses, one for you and one for your shareholders. That can't work. But that understanding was a big change.

Dave Byron: I was just wondering Firoz, do you have an alliance strategy or perhaps maybe take us through where you started with your alliances? Did you develop strategies?

Firoz Rasul: I think the Mercedes Benz relationship was pursued. We had a plan and we pursued that. The relationship with Ford happened a lot quicker. As soon as we did the relationship with Mercedes, Ford came to us and said, look we are interested in joining this party. Mercedes Benz and we had decided that at the time before Chrysler....Mercedes is a very successful company, but a small company in terms of number of cars that they make, like number eight or ten in the world in volume... and we collectively decided, without a U.S. player we weren't going to be successful. We needed a major U.S. player. So Ford came forward, which was a bit serendipitous, and we capitalized on that.

We also created another alliance, which was a stationary power alliance, which is a different set of players where we had ALSTOM in France and EBARA in Japan and a company called GPU, now FirstEnergy in the US, and they were also...we had to nurture that alliance as well. It's interesting, we have actually reversed that alliance. We undid it. All the alliance that we had created, we realized that it was....it didn't achieve all the things that we wanted to have it do, so we've actually just gone through a process of unwinding it.

Dave Byron: You've gone through as much increase in people, you have also had to do some cutbacks. What I'm wondering about is how that affects innovation, the motivation to innovate within a firm when you have to reach these very difficult decisions?

Firoz Rasul: A number of things drove that. Firstly, the need to eliminate duplication and overlap which was upfront. From the time we did the acquisition to now, a couple of other things changed. One, is the economy started to slow down so two of our major markets, the automotive business and the power generation business, were seeing some softening in their business demand and that obviously affected their ability to do business with us.

The capital markets were also becoming softer and we realized that in the plan to be able to raise money, given the uncertainty that I just described, we needed to change and retrench much and consolidate much more than we had imagined before we started the process. So that's what we did. As you said, going through this, this is really tough on the people, on morale, on how people think. There are fewer people to do now the same amount of work. That's the first reaction that people have.

So we actually sat down and genuinely cut back programs, in some cases.... I'll give you an idea. We were pursuing two or three paths for the same technology — if this doesn't work, we can do this one or this one. We couldn't afford to do that. We had to narrow it down to either one and, in some cases, maybe two, but we had to choose early. This is what I meant by methodology. If you don't have the methodology, you can't pick early. So you have to unnecessarily spend money on more than one technology path — if you have the methodology, you can narrow it down very quickly.

Dave Byron: So you have seen tremendous change since you've started and it's been a long journey. Where do you see Ballard in the next, what's your vision in the next five or ten years looking out?

Firoz Rasul: Our objective...today, we have six out of the top ten auto companies. We may not get all ten of the top ten auto companies, but our objective is to deliver more than half the vehicles that people will use.

Dave Byron: Six out of ten is not bad when you are talking about the automakers around the world. I'm going to ask you a few questions, just for fun, to wrap up and help us understand a little bit about the man, Firoz Rasul. Who is your hero?

Firoz Rasul: It would be....if a business hero, would be Fred Smith, the person who started Federal Express. In my previous company, when we were suppliers to Federal Express, it was unbelievable to see this individual, who would come up with this paper at Yale that he got a C on, create a company out of that paper. And I remember in the early days when we were suppliers to him where we were dealing with his people...drivers were using their personal credit cards to buy gas because the company didn't have financing, and he was buying air planes from Canadair then, before Bombardier, and the deal that he made. Just the thought process. And talk about innovation, it was really innovative how Federal Express was created and all of its service philosophy...even people saying, if you don't get it by 10:30, you don't pay. We take it for granted today, but at the time it was pretty phenomenal, pretty unusual.

Dave Byron: What do you admire most in people?

Firoz Rasul: Integrity has to be on top of the list; intellect, which is the second thing I look for; and attitude, understanding that anything is possible. I think one of the philosophies we have at Ballard... the value set is very important to us, and integrity and mutual respect is high up on the list... but also the belief that you only get spectacular results from unreasonable demands. And some people have difficulty with that. As a leader, if you make reasonable demands you get average performance and you have to decide if that's what you want. 'Unreasonable' doesn't mean cruel, it means the ability to make people understand that they are capable of more than they think. That's what I mean by 'unreasonable'. It's stretching their level of comfort, the line of comfort if you like, and it's amazing. And there are lots of examples that you have seen when people are pushed or pulled in that way, that they will generally perform beyond what they thought was their capability or capacity. That's what I mean by 'unreasonable' and that's an unreasonable demand for a spectacular performance. I think that's what makes companies and I think that's contributed to a large extent to a company like Ballard.

Dave Byron: Based on your experience with Ballard what advice would you give to potential innovators and entrepreneurs of tomorrow?

Firoz Rasul: I think a lot of it's been said. First is, you've got to have a vision, a clear view of what you want and where you want to be. And then, a pathway as to how you are going to get there. That's the first piece. Then you've got to find the team of people who share that, believe in that, and who can bring that to reality. I think be bold, be audacious. One thing that I've learned is think big and act small. Some people get that the other way around, so that's dangerous...in terms of expenditures, the amount of money you spend and so on. Part of our relationships came from us thinking big and feeling that we could actually do some of the things most people thought were not possible. For us, it's have fun and make money. Those two go together. One without the other is not worthwhile. I think it's creating an environment in a company where people who are there can't wait to get out of bed.

Dave Byron: Well, Firoz, thank you kindly for sharing with us today.

Firoz Rasul: Thank you.

Audience Question: I'd like to ask the question, the relationship between Ballard and Mercedes. There's a lot of talk in the innovation community about the importance of management versus the importance of technology, and management is usually given the upper hand in that ratio. I guess my feeling is that the technology was very good and ultimately sold the deal for you, but I'd like to hear your view on that. Which part of it was management and which part of it was technology? Could somebody else, could another team, have sold the same technology to Mercedes? I think that's an important knowledge for entrepreneurs that are here in attendance.

Firoz Rasul: My view is that they are not mutually exclusive. You can't say it's more technology and less management or less technology and more management, I don't believe that. I think it's an appreciation that it takes a whole bunch of different skills and different capabilities to make a successful venture. One of the questions that Dave asked me earlier, was about when I first came to the company and I explained to the people at Ballard...you've done a great deal, you've done a lot, you are demonstrating the technology to where you have...and there's lots of studies about this I'm sure you can read. But, you've only done ten percent. There's another ninety percent to go, which has to do with taking the technology and converting it into a product, creating a marketing organization, a distribution system, financing, human resources, all of the pieces have to come together. And how do you get from where we are to a successful business? There's still ninety percent to go, and it was in the context of, how much of our stock should we give up to all the new people we are bringing in, because we've already created this technology, we could just get some money and get some financing and so on. There's a lot of studies about this, you can read about it, that most start-ups don't appreciate that when they start, it's with seed financing in terms of what they have achieved. There's a whole bunch that hasn't been done yet. I think that was one of the things that I had to share when I came. There was a revelation for a lot of people.

So to answer your question, I think it was a combination of.....the technology up to that point hadn't been developed. We did a deal with DaimlerChrysler in 1993 and I joined the company in 1988, so those five years of technology development — that was done by people who joined after we raised the money. So you can't separate how, whether a different team could have done the same job with the same technology. It wasn't like here's a product let's see how well you guys can do in negotiating a deal. You can't separate those pieces. It is an integral part of an overall team. That's a good question because I think it illustrates that for a successful venture to take place it can't just be what the technology looks like.

Audience Question: Let's just talk about the automotive industry. Can you talk about your efforts to convince them about this new technology, how much lobbying for instance was necessary on your part to convince them to go this way and not more towards internal combustion engines or gas turbines or some other alternate mode?

Firoz Rasul: I think lobbying itself is not sufficient. They had their own multiple programs so they were doing their own developments in different engines, different types of technologies and they came to the conclusion themselves that the fuel cell was the only candidate for the replacement of the internal combustion engine and that's not unique to one or two auto companies. Several of them, through their own independent work, came to that conclusion which is what drew them to us. So I'd like to believe it was our salesmanship but it wasn't necessarily. It was their realization that this technology was the only technology that could be a mass produced, all purpose technology rather than a niche special purpose technology.

As far as the point about the scepticism, I think this is a competitive business. The chairman of Ford, Bill Ford Junior, the CEO, is an avid environmentalist. He personally believes in this stuff. It's not just something that he does. There's a famous quote that he had a couple of years ago in a presentation. His great-grandfather said, you can have any colour you want as long as it's black. It was a Ford Model T. Well, Bill Ford Junior said, you can have any car you want as long as it's green. So that's their belief. Toyota, the chairman has said, this is the technology of the future. The president of Honda, in December, when they handed the cars over, which are powered by Ballard, to the Mayor of Los Angeles said, this is the technology of the future. This is what we will be making. So, whereas previously, there may have been some scepticism, even within, or doubts within the auto companies, we are past that point. This is about competitive positioning now and our job is to make sure we have the best technology to be in those cars because this is a very competitive business. If we don't have the best technology we won't be in those cars.

Dave Byron: Again I want to thank you so much for joining us today. It's been wonderful having you here. Thank you.

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