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Osmosis effect

Osmosis effect

How a father’s flair for problem solving inspired a son’s passion for entrepreneurial experimentation

Pat Whalen remembers it as a “fight or flight” moment. It was 2008, and his father had just been diagnosed with terminal brain cancer.

Philip Whalen was Pat’s father, but not just his father. He was also his employer, his entrepreneurial inspiration, his engineering mentor. Pat had absorbed by “osmosis” his own passion for the intricacies of engineering while listening to the dinner table chat of his father and older brother Tony (both chemical engineers). That’s probably also where he first learned about the importance of getting everything right. He remembers coming home from school, “proud” of his latest high-nineties mark in a school test only to have his father ask what happened to the other one or two per cent? “It was frustrating as a kid,” Pat says today, “but you learn from it.”

His father Phil, born in Moncton in 1949, had been a “math wizard who was exceptionally creative, always looking at different ways to solve problems.” Phil became the first child in his family to graduate from university, then the first to get a master’s degree, then the first ever environmental engineer at New Brunswick Power.

Pat says his father spent a dozen years convincing his bosses at NB Power that the “black smoke coming out of their stacks” was not a sign of progress but of unburned coal dust that needed to be dealt with. “He first improved efficiency in the air, then he turned to water and wastewater.”

In 1985, Phil struck out on his own, launching P. J. Whalen & Associates, a Fredericton-based consulting engineering firm. For the next hectic decade, he traveled all over North America, including to Alberta’s tar sands, undertaking assignments for various clients.

In 1995, recognizing that consultants only earn money when they’re consulting while creators of products can keep the cash flowing even when they’re not personally on the clock, Phil set out to create his own cash-flow-generating product. He and a Toronto-based friend and colleague, microbiologist Jim Cairns, set their sights on developing a portable testing kit to identify bacteria in water, something that simply wasn’t then commercially available.

It was a good—and necessary—idea. Microorganisms are “ubiquitous” in our world, Pat Whalen explains. “Think 10, and then add 20 zeros for every person,” he tells me, and you’ll begin to understand just how ubiquitous they are. Most are benign, or useful, many even essential, but others can be “a nuisance and worse,” such as illness-causing bacteria in water. Or corrosion-causing microbes coursing through wastewater pipes.

The problem was that testing for them was cumbersome and time-consuming; troubleshooting complicated. “You’d open a fire hydrant and take a sample of water,” Pat Whalen explains. “Then you’d have to send it back to the lab where someone else would test it. If there was a problem, someone would then have to figure out what caused the problem, try to fix it, and then take another sample and bring that back to the lab. If that didn’t work, you’d have to start the process all over…”

Phil Whalen’s idea was to create a kit that would allow all that testing to be done, and results returned, in real time.

Simple?

Not so much.

Which is where Phil’s son, Pat, officially entered the picture. He was only 15 years old at the time but had already earned his metaphorical five-year pin with the family engineering firm, having started out earning some pocket money by performing janitorial duties at the office when he was 10. As he had around the kitchen table, Pat listened and learned. “I’d hear bits and pieces,” he recalls, “lab experiments, computer-assisted drawing…” He heard enough to convince him to put aside his first boyish dream of becoming a doctor and follow his father and brother into the world of engineering. “I didn’t want to listen to people complain,” he jokes.

As his father and Jim Cairns began to focus on developing their prototype test kit, “they needed someone to do the grunt work. I happened to be there.” Pat was promoted from janitor to lab technician. “I didn’t think much about it at the time,” he admits. “I was just starting high school, and this was how I earned my allowance.”

By the time he was 18 and ready to start university, however, Pat’s career trajectory already seemed well and truly mapped. He remembers his father saying to him one day: “You’re going to have a really great career.”

“I didn’t understand what he meant at the time,” Pat says now. “I told him, ‘I don’t want to be a lab technician forever.’ He said to me, ‘You don’t know what you don’t know.’” Phil Whalen was already grooming his son to succeed him.

In 2003, eight years after they first began tinkering with the testing-kit idea (coincidentally, the same year Pat Whalen graduated from the University of New Brunswick with his own freshly minted engineering degree), LuminUltra Microbial Monitoring, as the new company was known, was finally ready to bring its first test kits to market.

And…?

Things didn’t go quite as Phil Whalen had hoped. Or expected. “He figured the kits would fly off the shelves,” Pat says today with a laugh. “We thought we’d produce the kits and sell them, and people would know what to do with them.” The company’s initial projections were that it would have thousands of customers within a few years; in reality, there were two.

To complicate matters, the company wasn’t able to attract venture capital investors to goose its growth. While provincial and federal government business-boosting agencies did come aboard with muchneeded debt financing, debts have to be paid back. “And we weren’t seeing the revenues ramp up, while the expenses kept increasing.”

By the time Pat’s father was diagnosed with brain cancer, the future for LuminUltra looked bleak.

“We had talked about succession,” Pat remembers, “but as a ‘some day’ thing. I was only 27.” Pat remembers one of the last times he sat with his father in palliative care early in 2009. “I could see the fear in his eyes. I said, ‘don’t worry. I’ll take care of it.’”

But what did that even mean? Well, for starters, he says now, it meant not thinking—in the moment—about the emotional, personal side of losing his father. “It was, ‘oh, shit. What do I do now?’… I found myself at the helm of a company with eight employees, a mountain of debt, negative cash flow and an unproven product line. Though we had been in business for five years, we had yet to convince the market that our products should be a universal standard operating procedure.”

But he had learned the right mantra from watching—and working with—his father: “Solve the problem, keep the train running, see this through.”

Pat came up with “a four-point plan that included where we should focus to increase our revenues, where we needed to become more efficient in our expenses, what we needed for operating cash and how to manage our debt. After consulting all of the various stakeholders— existing customers, distributors, employees, debtors—the plan was put into action. We focused on high-return, ‘pain aware’ customers, acquired the necessary working capital, delayed debt payments and shed some extraneous expenses.”

It worked.

Within two years, LuminUltra’s annual revenues had doubled and cash flow was positive. Since then, growth has not just been steady but often spectacular: 60 per cent revenue growth over the last three years. Contrast anemic early annual sales numbers of just $2–300,000 a year with the robust, more-than-$5-million in annual revenues LuminUltra boasted in 2017. The company now has 3,000 customers in close to 75 countries and is planning to open offices in the United States and the European Union within the next two years. LuminUltra now has 53 employees (and counting—“I’m expecting we’ll have 60 by the end of the year”). LuminUltra has not only paid off all its debt but last year also finally attracted a multi-million- dollar investment from “the number one” global, water-focused private equity firm—an important industry validation of the company’s potential.

The wider world has noticed too. In addition to being named a Top 50 CEO of the Year by Atlantic Business Magazine in 2016, Whalen won a BDC Young Entrepreneur of the Year Award for New Brunswick and a Fredericton Chamber of Commerce Business Person of the Year Award, both in 2014, and was a finalist for the Ernest & Young Entrepreneur of the Year Award for 2017.

And now, of course, Pat Whalen has been chosen as Atlantic Business Magazine CBC Innovator of the Year for 2018. And he’s just 37—far from ready to rest on those laurels.

How did Pat Whalen manage to accomplish all he’s accomplished so far?

In part, it had to do with seeing his test kit’s potential market as much bigger than traditional water and wastewater industries. “The water sector itself is extremely slow to change,” he says.

As we talk on the phone one morning, Whalen tells me, “I’m holding my iPhone. You don’t think of water when you think of your iPhone, right?” Right. But it turns out water is essential to the manufacturing processes for all those sophisticated, precision-machined parts that make up our cell phones. Screw up the microbial composition of the water used in the manufacturing process, and… well, your call-making, data-processing, app-using won’t go very well.

Water quality matters in all sorts of industries: pulp and paper, oil and gas, power generation, paint-making, on and on. All of them needed what LuminUltra was selling.

In addition to understanding that LuminUltra needed to think beyond the world of water and wastewater industries, Pat knew the company also had to see the larger global world as its marketplace too. And he understood that much of that world still didn’t understand what his company does.

“Traditionally,” he explains, “water and wastewater treatment and management have been looked at as an ‘art form.’ Of all the elements of water treatment, microbiology has traditionally been the most abstract.” It isn’t really, he insists. “Its degree of abstractness,” he points out, “is directly proportional to how much effort you want to put into analyzing the inputs and outputs from the process to develop a mathematical model.”

That meant that educating customers as to how accurate, efficient and timely water-testing could impact their own business also became one of his jobs as the company’s president, CEO and chief salesman.

Teaching is a skill Pat may have learned by osmosis as well—this time from his mother, Dolores, who was a well-known junior high art teacher in Fredericton for 30 years. “If we’re walking down the street and we pass 10 people, five of them will know my mother,” Pat marvels. His mother still works for the company parttime, including occasionally serving as her son’s executive assistant.

Educating potential customers and networking with existing ones have become essential aspects of his job. “A wise man once told me that a CEO has three primary responsibilities,” Whalen says: “evangelizing, alignment and recruiting. Networking, or more simply communication, is the key to all three of these elements… Treat networking like dating insofar as listening twice as often as you speak,” he advises. “Ask questions and let the other person tell you about themselves and their perspectives.”

Given that his potential customers can be almost literally anywhere—and the reality that, “so far, we’ve only achieved five per cent market penetration”— Whalen spends 100-days-plus a year on the road. “Air Canada loves me,” he jokes.

The day of his father’s funeral, Pat Whalen returned to his desk in the afternoon. “I wasn’t focused all that well,” he acknowledges now. It was only later he realized “I had not taken the time to grieve my father.” So he took two or three days off “to reflect.”

At the time, there was (as his father would probably have been the first to point out) still much work to be done. In his early days at the helm of the company, “I grew accustomed to ‘doing it all,’” Pat says, but as the company evolved and prospered, “I have transformed the way we operate to (be more inclusive of) my executives and their subordinates, resulting in a more traditional pyramid structure.

“I consider myself a leader by example,” he says today of his own style. “I am unafraid to get down to the most detailed levels and get my hands dirty. My preference is to show people how things can and should be done, and that there is always opportunity to improve a product, process or system. This is perhaps the most important element of leadership,” he notes, but then adds: “I am actively changing the way that I lead to not only lead by example but to also inspire others to invest the same passion that I do on a day-to-day basis. I have realized over the past few years that my traditional style of outworking the competition is not going to cut it, because I literally run out of extra hours in the day.”

At one level, LuminUltra’s central concept—real-time testing of water for micro-organisms—hasn’t changed at all. “We’ve never changed the fundamentals of our test kits,” he says. But everything around that central concept has.

As computing evolved and data moved to the cloud, the company began to focus more and more on software and analytics. “I think my father would be really surprised to realize we now have 15 software engineers on staff.”

The software they’ve developed not only makes it easier for users to understand testing—translating the result numbers into colours (green for OK, yellow, red) to guide their immediate response—but the cloud also allows LuminUltra to analyze results and suggest appropriate responses based on the ever-increasing bits and bytes of data the company has vacuumed up in its cloud. In 2016, the company launched its fifth-generation software, code-named LuminUltra Cloud, “to enable realtime collaboration between water and wastewater operators and engineers alike from anywhere in the world. This is an industry first,” Pat says proudly.

But far from a last. With its cloud platform in place, thousands of customer test results already in its database and their numbers growing daily, LuminUltra can “mine the anonymized ‘big data’” it collects “to crack the code of how to best control different processes in different sectors and geographies,” a feat he says has “never before been possible in the industry. Our flagship products have become something of a household name in industries such as drinking water provision and oil and gas production.”

And even that will not be the end of the innovation to come. This year, for example, the company plans to build out its platform and incorporate “new industry- leading tools such as metagenomic (DNA) profiling of microbial populations, in addition to creating predictive modeling for proactive control.” Essentially, that means using the evolving art and science of artificial intelligence to predict and avoid problems before they can become problems.

“In the future,” Pat Whalen says, “I envision LuminUltra being a product/ service hybrid company, offering solutions from basic test kits to remote monitoring through automated testing equipment, and everything in between.”

More than reason enough to choose Pat Whalen as Atlantic Business Magazine’s CBC Innovator of the Year for 2018.

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